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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For Quarter Ended: September 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the Transition Period from to
Commission file number: 0-15159
RENTRAK CORPORATION
(Exact name of registrant as specified in its charter)
OREGON 93-0780536
(State or other jurisdiction of (IRS Employer
incorporation or organization) (Identification no.)
7700 NE Ambassador Place, Portland, Oregon 97220
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 284-7581
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (x) No ( )
As of October 31, 2002, the Registrant had 9,521,416 shares of Common Stock
outstanding.
1
PART I - FINANCIAL INFORMATION Page #
Item 1 Financial Statements
Consolidated Balance Sheets as of September 30, 2002
and March 31, 2002 3
Consolidated Statements of Income for the three-month
periods ended September 30, 2002 and September 30, 2001 5
Consolidated Statements of Income for the six-month
periods ended September 30, 2002 and September 30, 2001 6
Consolidated Statements of Cash Flows for the six-month
period ended September 30, 2002 and September 30, 2001 7
Notes to Consolidated Financial Statements 9
Item 2 Management's Discussion and Analysis of Financial
Condition and Result of Operations 17
Item 3 Quantitative and Qualitative Disclosures About Market Risk 24
Item 4 Controls and Procedures 24
Part II OTHER INFORMATION
Item 1 Legal Proceedings 25
Item 2 Changes in Securities and Use of Proceeds 25
Item 6 Exhibits Index 26
Signatures 27
Certifications 28
2
RENTRAK CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED)
September 30, March 31,
2002 2002
---------------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $ 11,115,210 $ 12,028,684
Accounts receivable, net of allowance for doubtful
accounts of $1,059,223 and $1,086,143 9,748,975 11,237,396
Advances to program suppliers 1,938,570 1,042,768
Inventory 311,641 575,792
Income tax receivable 116,428 70,000
Deferred tax asset 2,201,470 2,295,567
Other current assets 1,677,753 3,084,665
Current assets of discontinued operations 1,126,924 2,180,360
---------------------------------------------------
Total current assets 28,236,971 32,515,232
---------------------------------------------------
PROPERTY AND EQUIPMENT, net 2,947,175 3,879,819
DEFERRED TAX ASSET 1,002,882 1,002,882
OTHER ASSETS 1,959,533 1,214,394
---------------------------------------------------
TOTAL ASSETS $ 34,146,561 $ 38,612,327
===================================================
The accompanying notes are an integral
part of these consolidated statements.
3
RENTRAK CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(UNAUDITED)
September 30, March 31,
2002 2002
------------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 15,716,260 $ 18,192,630
Accrued liabilities 290,925 549,277
Accrued compensation 873,999 1,338,748
Deferred revenue 189,554 379,106
Current liabilities of discontinued operations 309,240 379,298
------------------------------------------------
Total current liabilities 17,379,978 20,839,059
------------------------------------------------
LONG-TERM LIABILITIES:
Lease obligations and customer deposits 606,166 495,586
------------------------------------------------
Total long-term liabilities 606,166 495,586
------------------------------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value;
Authorized: 10,000,000 shares - -
Common stock, $.001 par value;
Authorized: 30,000,000 shares
Issued and outstanding: 9,538,186 shares
at September 30, 2002 and 9,866,283 at
March 31, 2002 9,538 9,866
Capital in excess of par value 40,144,040 41,730,216
Notes receivable - (377,565)
Cumulative other comprehensive income (loss) 180,725 180,453
Accumulated deficit (23,848,886) (23,910,288)
Less - Deferred charge - warrants (325,000) (355,000)
------------------------------------------------
Total stockholders'equity 16,160,417 17,277,682
------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 34,146,561 $ 38,612,327
================================================
The accompanying notes are an integral part
of these consolidated statements.
4
RENTRAK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended, September 30,
2002 2001
--------------------------------------------
REVENUES:
PPT $ 17,976,338 $ 19,252,975
Other 2,798,144 2,793,364
--------------------------------------------
20,774,482 22,046,339
--------------------------------------------
OPERATING COSTS AND EXPENSES:
Cost of sales 17,010,953 17,439,666
Selling, general, and administrative 3,555,807 3,790,366
--------------------------------------------
20,566,760 21,230,032
--------------------------------------------
INCOME FROM OPERATIONS 207,722 816,307
--------------------------------------------
OTHER INCOME (EXPENSE):
Interest income 71,500 112,872
-------------------------------------------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAX
PROVISION 279,222 929,179
INCOME TAX PROVISION 106,107 362,379
--------------------------------------------
INCOME FROM CONTINUING
OPERATIONS 173,115 566,800
LOSS FROM DISCONTINUED
OPERATIONS, NET OF TAX BENEFIT
OF $169,293 AND $107,847 (276,216) (168,686)
--------------------------------------------
NET INCOME(LOSS) $ (103,101) $ 398,114
============================================
EARNINGS PER SHARE:
Basic:
Continuing operations $ 0.02 $ 0.05
Discontinued operations $ (0.03) $ (0.01)
--------------------------------------------
Total $ (0.01) $ 0.04
============================================
Diluted:
Continuing operations $ 0.02 $ 0.05
Discontinued operations $ (0.03) $ (0.01)
--------------------------------------------
Total $ (0.01) 0.04
============================================
The accompanying notes are an integral part of these
consolidated statements.
5
RENTRAK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Six Months Ended Six Months Ended
September 30, 2002 September 30, 2001
----------------------------------------------------
REVENUES:
PPT $ 35,842,448 $ 35,510,691
Other 7,359,475 13,612,526
----------------------------------------------------
43,201,923 49,123,217
----------------------------------------------------
OPERATING COSTS AND EXPENSES:
Cost of sales 35,300,572 33,954,378
Selling, general, and administrative 7,556,255 11,520,483
Net gain from litigation settlement (361,847) -
----------------------------------------------------
42,494,980 45,474,861
----------------------------------------------------
INCOME FROM OPERATIONS 706,943 3,648,356
----------------------------------------------------
OTHER INCOME (EXPENSE):
Interest income 71,500 189,963
Interest expense - (8,976)
Other - 5,350,737
----------------------------------------------------
71,500 5,531,724
----------------------------------------------------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAX
PROVISION 778,443 9,180,080
INCOME TAX PROVISION 295,811 3,580,230
----------------------------------------------------
INCOME FROM CONTINUING
OPERATIONS 482,632 5,599,850
LOSS FROM DISCONTINUED
OPERATIONS, NET OF TAX BENEFIT
OF $258,174 AND $324,033 (421,230) (506,823)
----------------------------------------------------
NET INCOME $ 61,402 $ 5,093,027
====================================================
EARNINGS (LOSS) PER SHARE:
Basic:
Continuing operations $ 0.05 $ 0.50
Discontinued operations $ (0.04) $ (0.04)
----------------------------------------------------
Total $ 0.01 $ 0.46
====================================================
Diluted:
Continuing operations $ 0.05 $ 0.50
Discontinued operations $ (0.04) $ (0.04)
----------------------------------------------------
Total $ 0.01 $ 0.46
====================================================
The accompanying notes are an integral part of
these consolidated statements.
6
RENTRAK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended September 30,
-----------------------------------------------
2002 2001
-----------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 61,402 $ 5,093,027
Adjustments to reconcile income to net cash
provided by operating activities
Loss on discontinued operations 421,230 506,823
Compensation expense related to stock repurchase 342,625 -
Gain on disposition of assets - (5,546,915)
Depreciation and amortization 562,253 623,603
Amortization of warrants 30,000 30,000
Provision (recovery) for doubtful accounts and other assets (570,000) 883,239
Reserves on advances to program suppliers 697,007 437,395
Deferred income taxes 94,097 3,221,574
Change in specific accounts:
Accounts receivable 2,058,421 (321,613)
Advances to program suppliers (1,592,809) (1,260,843)
Inventory 264,151 364,775
Income tax receivable (46,428) (9,776)
Other current assets 1,631,912 (530,829)
Accounts payable (2,476,370) (639,877)
Accrued liabilities & compensation (723,101) (21,409)
Deferred revenue and other liabilities (78,700) (1,187,393)
-----------------------------------------------
Net cash provided by operations 675,690 1,641,781
-----------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (402,842) (935,963)
Proceeds from sale of investments in Rentrak Japan - 1,714,614
Reductions in (additions to) of other assets and intangibles (196,906) 541,970
-----------------------------------------------
Net cash provided by (used in) investing activities (599,748) 1,320,621
-----------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under line of credit - (1,917,705)
Repurchases of common stock (1,799,970) (469,545)
Issuance of common stock 248,406 163,547
Issuance of common stock to non-employees - 150,560
-----------------------------------------------
Net cash used in financing activities (1,551,564) (2,073,143)
-----------------------------------------------
NET CASH PROVIDED BY (USED IN) CONTINUING OPERATIONS (1,475,622) 889,259
NET CASH PROVIDED BY DISCONTINUED OPERATIONS 562,148 67,867
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (913,474) 957,126
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 12,028,684 3,322,917
-----------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,115,210 $ 4,280,043
===============================================
7
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for -
Interest $ - $ 28,929
Income taxes paid, net of refunds received 61,059 58,025
NON-CASH TRANSACTIONS
Change in unrealized gain (loss) on investment
securities, net of tax - 858
Exchange of investment in Rentrak Japan for
Rentrak common stock - 3,890,500
Forgiveness of note receivable in exchange for stock (377,565) (7,350,624)
Disposal of property and equipment through finance
lease 900,000 -
The accompanying notes are an integral
part of these consolidated statements.
8
RENTRAK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A: Basis of Presentation
The accompanying unaudited Consolidated Financial Statements of RENTRAK
CORPORATION (the "Company") have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC). Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles in the United States
have been condensed or omitted pursuant to such rules and regulations. The
results of operations for the three-month and six-month periods ended September
30, 2002 are not necessarily indicative of the results to be expected for the
entire fiscal year ending March 31, 2003. The Consolidated Financial Statements
should be read in conjunction with the Consolidated Financial Statements and
footnotes thereto included in the Company's 2002 Annual Report to Shareholders.
The Consolidated Financial Statements reflect, in the opinion of management, all
material adjustments (which include only normal recurring adjustments) necessary
to present fairly the Company's financial position and results of operations.
The Consolidated Financial Statements include the accounts of the Company, its
majority owned subsidiaries, and those subsidiaries in which the Company has a
controlling interest after elimination of all inter-company accounts and
transactions. Investments in affiliated companies owned 20 to 50 percent are
accounted for by the equity method.
In June 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 143. "Accounting for Obligations
Associated with Retirement of Long-Lived Assets." SFAS No. 143 requires the
accrual, at fair value, of the estimated retirement obligation for tangible
long-lived assets if the Company is legally obligated to perform retirement
activities at the end of the related asset's life and is effective for fiscal
years beginning after June 15, 2002. The Company is evaluating the impact of
adopting SFAS No. 143 on its consolidated financial position, but does not
believe SFAS No. 143 will have a material impact on the Company's financial
statements.
In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated with
Exit or Disposal Activities." The statement requires that a liability for all
costs be recognized when the liability is incurred with exit or disposal
activities as opposed to when the entity commits to an exit plan under EITF No
93-4, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." The statement will be applied prospectively to activities
exited from or disposed of initiated after December 31, 2002.
9
NOTE B: Net Income Per Share
Basic earnings per common share is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the
periods. Diluted earnings per common share is computed on the basis of the
weighted average shares of common stock outstanding plus common equivalent
shares arising from dilutive stock options and warrants.
The weighted average number of shares of common stock equivalents and net income
used to compute basic and diluted earnings per share for the three-month and
six-month periods ended September 30, 2002 and 2001 were as follows:
10
Note B: Net Income Per Share
3-Months Ended 6-Months Ended
September 30, 2002 September 30, 2002
----------------------------------- -----------------------------------
Basic Diluted Basic Diluted
----- ------- ----- -------
Weighted average number of shares of
common stock outstanding used to
compute basic earnings (loss) per
common share 9,646,711 9,646,711 9,766,764 9,766,764
Dilutive effect of exercise of stock
options - 130,773 - 275,788
----------------------------------- -----------------------------------
Weighted average number of shares of
common stock used to compute diluted
earnings (loss) per common share
outstanding and common stockequivalents 9,646,711 9,777,484 9,766,764 10,042,552
=================================== ===================================
Net income (loss) used in basic and
diluted earnings (loss) per common share:
Continuing operations $ 173,115 $ 173,115 $ 482,632 $ 482,632
Discontinued operations (276,216) (276,216) (421,230) (421,230)
----------------------------------- -----------------------------------
Net income (loss) $ (103,101) $ (103,101) $ 61,402 $ 61,402
=================================== ===================================
Earnings (loss) per common share:
Continuing operations 0.02 0.02 0.05 0.05
Discontinued operations (0.03) (0.03) (0.04) (0.04)
----------------------------------- -----------------------------------
Earnings (loss) per common share $ (0.01) $ (0.01) $ 0.03 $ 0.02
=================================== ===================================
3-Months Ended 6-Months Ended
September 30, 2001 September 30, 2001
----------------------------------- -----------------------------------
Basic Diluted Basic Diluted
----- ------- ----- -------
Weighted average number of shares of common
stock outstanding used to compute basic
earnings (loss) per common share 11,005,323 11,005,323 11,110,515 11,110,515
Dilutive effect of exercise of stock
options - 42,926 - 45,517
----------------------------------- ----------------------------------
Weighted average number of shares of
common stock used to compute diluted
earnings (loss) per common share 11,005,323 11,048,249 11,110,515 11,156,032
outstanding and common stock equivalents=================================== ==================================
Net income (loss) used in basic and
diluted earnings (loss) per common share:
Continuing operations $ 566,800 $ 566,800 $ 5,599,850 $ 5,599,850
Discontinued operations (168,686) (168,686) (506,823) (506,823)
----------------------------------- ----------------------------------
Net income (loss) $ 398,114 $ 398,114 $ 5,093,027 $ 5,093,027
=================================== ==================================
Earnings (loss) per common share:
Continuing operations 0.05 0.05 0.50 0.50
Discontinued operations (0.01) (0.01) (0.04) (0.04)
----------------------------------- ----------------------------------
Earnings (loss) per common share $ 0.04 $ 0.04 $ 0.46 $ 0.46
=================================== ==================================
Options and warrants to purchase approximately 1,900,000 and 3,000,000 shares of
common stock for the quarters ended September 30, 2002 and 2001, respectively,
and approximately 1,600,000 and 2,800,000 shares for the six-month periods ended
September 30, 2002 and 2001, respectively, were outstanding but were not
included in the computation of diluted EPS because the exercise prices of the
options and warrants were greater than the average market price of the common
shares.
11
NOTE C: Business Segments, Significant Suppliers and Major Customer
The Company classifies its services in three segments, PPT, 3PF.COM, Inc.
("3PF") and Other. The PPT business segment includes the following business
activities: the PPT System whereby under its Pay-Per-Transaction (PPT) revenue
sharing program, the Company enters into contracts to lease videocassettes and
digital videodiscs ("DVD's"') from program suppliers (producers of motion
pictures and licensees and distributors of home video cassettes) which are then
leased to retailers for a percentage of the rentals charged by the retailers;
data tracking and reporting services provided by the Company to Studios; and
internet services provided by formovies.com, Inc., a subsidiary. 3PF is a
subsidiary of the Company, which provides order processing, fulfillment and
inventory management services to Internet retailers, wholesalers and to other
businesses requiring just-in-time fulfillment. Other includes amounts received
pursuant to previous royalty agreements, primarily from Rentrak Japan. The Other
segment formerly included BlowOut Video, Inc. (BlowOut Video), a video retailer,
which the Company elected to discontinue during the three-month period ended
June 30, 2002 (See Note D).
12
Business Segments
Following are the revenues, income (loss) from continuing operations, and
identifiable assets of the Company's continuing business segments for the
periods indicated (unaudited):
Six Months Ended Six Months Ended Three Months Ended Three Months Ended
September 30, 2002 September 30, 2001 September 30, 2002 September 30, 2001
--------------------------------------------------------------------------------------
REVENUES: (1)
PPT $37,656,116 $36,851,611 $18,815,138 $20,092,472
3PF.COM, Inc. (2) 6,471,228 7,276,327 2,401,318 2,503,845
OTHER 530,785 6,871,331 272,932 76,632
--------------------------------------------------------------------------------------
$44,658,129 $50,999,269 $21,489,388 $22,672,949
======================================================================================
INCOME (LOSS) FROM
OPERATIONS: (1)
PPT 2,646,479 2,457,132 1,358,982 2,008,756
3PF.COM, Inc. (1,907,665) (4,420,029) (1,112,264) (1,271,633)
OTHER 23,297 5,532,069 16,172 -
--------------------------------------------------------------------------------------
$762,111 $3,569,172 $262,890 $737,123
======================================================================================
IDENTIFIABLE ASSETS:
PPT $39,362,550 $38,941,471
3PF.COM, Inc. 5,689,627 9,331,929
OTHER 20,920 35,417
--------------------------------------------
$45,073,097 $48,308,817
============================================
(1) Total amounts differ from those reported on the consolidated financial
statements, as intercompany transactions are not eliminated for segment
reporting purposes.
(2) 3PF's revenues related to the shipment of cassettes to PPT customers were
$522,961 and $433,958 for the three-month periods ended September 30, 2002
and 2001, respectively, and were $1,086,020 and $1,207,771 for the
six-month periods ended September 30, 2002 and 2001, respectively.
The Company currently offers substantially all of the titles of a number of
Program Suppliers, including Buena Vista Pictures Distribution, Inc., a
subsidiary of The Walt Disney Company, Paramount Home Video, Inc., Universal
Studios Home Video, Inc., Twentieth Century Fox Home Entertainment (formerly Fox
Video), a subsidiary
13
of Twentieth Century Fox Film Corporation and MGM Home Entertainment, a
subsidiary of Metro Goldwyn Mayer, Inc. For the three-month period ended
September 30, 2002, the Company had one program supplier whose product generated
19 percent, a second that generated 17 percent, a third that generated 16
percent, and a fourth that generated 13 percent of Rentrak revenue. No other
program supplier provided product which generated more than 10 percent of
revenue for the three-month period ended September 30, 2002. No customer
accounted for more than 10 percent of the Company's revenue in the three-month
period ended September 30, 2002. For the six-month period ended September 30,
2002, the Company had one program supplier whose product generated 18 percent, a
second that generated 17 percent, a third that generated 15 percent and a fourth
that generated 12 percent of Rentrak revenue. No other program supplier provided
product which generated more than 10 percent of revenue for the six-month period
ended September 30, 2002. No customer accounted for more than 10 percent of the
Company's revenue in the six-month period ended September 30, 2002.
For the three-month period ended September 30, 2001, the Company had one program
supplier whose product generated 25 percent, a second that generated 17 percent,
a third that generated 14 percent, and a fourth that generated 10 percent of
Rentrak revenue. No other program supplier provided product that generated more
than 10 percent of revenue for the three-month period ended September 30, 2001.
No customer accounted for more than 10 percent of the Company's revenue in the
three-month period ended September 30, 2001. For the six-month period ended
September 30, 2001, the Company had one program supplier whose product generated
19 percent and a second and third that each generated 14 percent of Rentrak
revenue. No other program supplier provided product that generated more than 10
percent of revenue for the six-month period ended September 30, 2001. No
customer accounted for more than 10 percent of the Company's revenue in the
six-month period ended September 30, 2001.
NOTE D: Discontinued Operations
Management has analyzed the business of BlowOut Video, the Company's retail
subsidiary. Currently BlowOut Video has two stores; one each operating in Ohio
and Pennsylvania; the New York store operations were discontinued as a result of
the store closure in September 2002. Due to the significant increase in sell
through activity throughout the industry, the operations of BlowOut Video have
not continued to meet the expectations of management. As a result, during the
three-month period ended June 30, 2002, management initiated a plan to
discontinue the retail store operations of BlowOut Video. The plan calls for an
exit from the stores by the end of fiscal 2003, either through cancellation of
the lease commitments and liquidation of assets, or through sale of the stores
to a third party. Rentrak plans to continue selling its contractually available
end-of-term PPT revenue sharing product through BlowOut internet and broker
channels.
BlowOut Video generated revenues of $0.9 million and a net loss of $276,216, or
$0.03 per share, in the three-month period ended September 30, 2002, compared
with revenues of $1.7 million and a net loss of $168,686, or $0.01 per share,
14
during the three-month period ended September 30, 2001, during which it operated
six stores.
BlowOut Video generated revenues of $1.9 million and a net loss of $421,230, or
$0.04 per share, in the six-month period ended September 30, 2002, compared with
revenues of $3.6 million and a net loss of $506,823, or $0.05 per share, during
the six-month period ended September 30, 2001, during which it operated seven
stores.
NOTE E: Related Party Transactions
On June 16, 2000, the Company loaned a total of $8,097,636 to two of its
officers to purchase 1,663,526 shares of stock upon exercise of their employee
stock options. During the three-month period ended December 31, 2000, the
Company and one of these officers terminated his stock exercise agreement for
301,518 shares of stock and corresponding loan in the amount of $1,468,250. At
various times during the three-month period ended September 30, 2000, the
Company loaned an additional $1,343,743 to some of its officers to purchase
283,277 shares of stock upon exercise of their employee stock options. During
the three-month period ended December 31, 2000, the Company and one of these
officers terminated his stock exercise agreement for 50,535 shares of stock and
corresponding loan in the amount of $244,940. During fiscal 2002, a former
officer of the Company, who was loaned a total of $7,350,621 during the period
from June through September 2000 to purchase 1,495,750 shares of stock upon
exercise of his employee stock options, terminated his agreements with the
Company. Accordingly, the common stock and related notes receivable covered by
the terminated agreements noted above have been reversed in non-cash
transactions. During the three-month period ended September 30, 2002, one of the
remaining officers exercised his right to have the Company purchase from him his
shares of stock associated with his loan. The proceeds from the purchase of his
stock by the Company were partially used to pay the remaining balance of his
loan associated with these shares. Additionally, during this three-month period
the other remaining officer allowed his right to have the Company purchase from
him his shares of stock associated with his loan to expire. The shares
associated with both of these officers' loans have been cancelled and the
related notes have been terminated. As a result, all common stock and related
notes receivable covered by all agreements associated with this officer loan
program noted above have been cancelled or terminated.
The loans bore interest at the federal funds rate in effect on the date of the
loan (6.5 percent) and interest was payable annually. The Company was not
accruing interest on the loans. The principal amount of the loans was due on the
earliest to occur of: (1) one year prior to the expiration of the term of the
borrower's current employment agreement with Rentrak, (2) one year after the
borrower left Rentrak's employment unless such departure followed a "change of
control" (as defined in the loan agreements), (3) five years from the date of
the loan, or (4) one year from the date of the borrower's death. The loans were
secured by the stock purchased. The loans were without recourse (except as to
the stock securing the loans) as to principal and were with full recourse
against the borrower as to
15
interest. In accordance with generally accepted accounting principles, the notes
receivable arising from these transactions were presented as deductions from
stockholders' equity.
Note F: Rentrak Japan Agreement
Effective April 2, 2001, the Company entered into an agreement with Rentrak
Japan amending a former agreement. As a result of the amended agreement, the
Company granted Rentrak Japan PPT operating rights in Japan, the Philippines,
Singapore, Taiwan, Hong Kong, the Republic of Korea, the Democratic People's
Republic of Korea, the People's Republic of China, Thailand, Indonesia,
Malaysia, and Vietnam. In addition, the royalty agreement was terminated.
Finally, all intellectual property rights and trademarks of the PPT system were
agreed to be usable by Rentrak Japan.
Consideration for the above items included a cash payment from Rentrak Japan to
the Company of approximately $5.7 million, forfeiture by Rentrak Japan of any
right of return of the 1999 prepaid royalty of $0.7 million, and forgiveness by
Rentrak Japan of approximately $0.6 million of liabilities due to Rentrak Japan
from the Company. Of these amounts, $6.4 million was recorded as revenue
consistent with the historical treatment of royalty payments. The remaining $0.6
million was recorded as a gain and is included in other income in the
accompanying consolidated statement of operations.
In April and October 2001, the Company sold all of its 5.6 percent interest in
Rentrak Japan. In conjunction with the above agreements, the Company and Rentrak
Japan entered into stock purchase commitments to purchase stock as described
below.
The Company sold 300,000 shares of Rentrak Japan stock to a sister company of
Rentrak Japan on April 2, 2001, and its remaining 180,000 shares of Rentrak
Japan stock on October 2, 2001 to the sister company. Total proceeds from the
stock sales approximated $6.4 million. The resulting gain of $6.4 million
related to the sale of this stock is included in other income in the
accompanying consolidated statement of operations. Finally, Rentrak Japan
purchased 17,000 shares of 3PF common stock on April 27, 2001 for $1.0 million.
In return, Rentrak Japan sold 1,004,000 shares of the Company's common stock
back to the Company on April 2, 2001 for approximately $3.9 million.
Based upon the results of the transactions noted above occurring in the fiscal
year ended March 31, 2002, the Company has no further obligations to, or
ownership in, Rentrak Japan.
16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward Looking Statements
Certain information included in Management's Discussion and Analysis of
Financial Condition and Results of Operations constitute forward-looking
statements that involve a number of risks and uncertainties. Forward looking
statements are identified by the use of forward-looking words such as "may",
"will", "expects", "intends", "anticipates", "estimates", or "continues" or the
negative thereof or variations thereon or comparable terminology. The following
factors are among the factors that could cause actual results to differ
materially from the forward-looking statements: the Company's ability to
continue to market the Pay Per Transaction ("PPT") System successfully, the
financial stability of participating retailers and their performance of their
obligations under the PPT System, non-renewal of the Company's line of credit,
business conditions in the video industry and general economic conditions, both
domestic and international, competitive factors, including increased
competition, expansion of revenue sharing programs other than the PPT System by
program suppliers, new technology, and the continued availability of prerecorded
videocassettes ("Cassettes") and digital videodiscs ("DVD's") from program
suppliers. Such factors are discussed in more detail in the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 2002.
Results of Operations
Continuing Operations - Domestic PPT Operations and Other Continuing
- --------------------------------------------------------------------------------
Subsidiaries
- ------------
For the three-month period ended September 30, 2002, total revenue decreased
$1.2 million, or 5 percent, to $20.8 million from $22.0 million for the
three-month period ended September 30, 2001. For the six-month period ended
September 30, 2002, total revenue decreased $5.9 million, or 12 percent, to
$43.2 million from $49.1 million for the six-month period ended September 30,
2001. Total revenue includes the following PPT System fees in the PPT business
segment: order processing fees generated when Cassettes and DVD's ("Units") are
ordered by and distributed to retailers; transaction fees generated when
retailers rent Units to consumers; sell-through fees generated when retailers
sell Units to consumers; communication fees when retailers' point-of-sale
systems are connected to the Company's information system; and buy out fees
generated when retailers purchase Units at the end of the lease term. PPT
business segment revenues also include direct revenue sharing fees from data
tracking and reporting services provided by the Company to studios ("DRS"), as
well as charges for internet services provided by the Company's subsidiary
formovies.com, Inc. In addition, total revenue includes charges to customers of
the Company's subsidiary 3PF.COM, Inc. ("3PF"), which provides order processing,
fulfillment and inventory management services to Internet retailers and
wholesalers and other businesses
17
requiring just-in-time fulfillment, and other revenues which include royalty
payments primarily from Rentrak Japan (See Note F.).
The $1.2 million decrease in total revenues for the three-month period ended
September 30, 2002 is primarily due to the decrease in PPT System order
processing fees and transaction fees. PPT business segment revenues decreased
despite the fact that PPT Units shipped increased 13 percent during the
three-month period ended September 30, 2002 compared to the three-month period
ended September 30, 2001. Total order processing and transaction fees decreased
a combined $1.5 million during the three-month period ended September 30, 2002
compared to the three-month period ended September 30, 2001. Order processing
fees decreased due to a higher percentage of Units with lower revenue sharing
terms in the mix of various Units shipped during those periods creating a
difference in the order processing fees per Unit from period to period.
Transaction fees decreased due to fewer than expected rental turns of the Units,
a lesser title quality in the mix of Units, and a decrease in DRS fees during
the three-month period. These decreases in order processing and transaction fees
were partially offset by an approximate $0.2 million net increase in
sell-through and other revenues from the PPT business segment. 3PF revenues
decreased approximately $0.1 million during the same three-month period from
$2.5 million to $2.4 million.
The $5.9 million decrease in total revenues for the six-month period ended
September 30, 2002 is primarily due to the recognition of $6.4 million in
revenue related to an agreement between the Company and Rentrak Japan (See Note
F.) during the three-month period ended June 30, 2001. 3PF revenues decreased
approximately $0.8 million during this same six-month period, due to a loss of a
key customer during the three-month period ended June 30, 2001. The $0.8 million
increase in PPT business segment revenues for the six-month period ended
September 30, 2002 partially offset the decreases noted above.
Total cost of sales for the three-month period ended September 30, 2002
decreased to $17.0 million from $17.4 million for the three-month period ended
September 30, 2001, a decrease of $0.4 million, or 2 percent. This decrease in
cost of sales is primarily attributable to the $1.3 million net decrease in PPT
business segment revenues noted above. Total cost of sales as a percent of total
revenues was 82% for the three-month period ended September 30, 2002 compared to
79% for the three-month period ended September 30, 2001. Total cost of sales for
the six-month period ended September 30, 2002 increased to $35.3 million from
$34.0 million for the six-month period ended September 30, 2001, an increase of
$1.3 million, or 4 percent. This increase is primarily attributable to the
overall increase in PPT business segment revenues as noted above combined with
increases in transaction fee and sell-through cost of sales as a percent of
associated revenues. Cost of sales as a percent of total revenues, excluding the
$6.4 million in revenue related to the Rentrak Japan business restructuring (see
Note F.), was 82% for the six-month period ended September 30, 2002 compared to
79% for the six-month period ended September 30, 2001.
18
Total selling, general and administrative expenses were $3.6 million for the
three-month period ended September 30, 2002, compared to $3.8 million for the
three-month period ended September 30, 2001, a decrease of $0.2 million, or 5
percent. The decrease in selling, general and administrative expenses for the
three-month period is primarily due to: (1) an approximate $0.3 million
reduction in 3PF selling, general and administrative expenses primarily due to
reduced compensation expense as the result of organizational restructuring and
reduced legal expenses related to the Reel.com litigation; (2) an approximate
net $0.1 million reduction in PPT overall selling, general and administrative
expenses, including the recognition of a $0.4 million dollar advertising credit
in the three-month period made available to the Company by one of its major
studio suppliers during this period relating to previous business transactions;
and (3) an approximate $0.2 million decrease in Rentrak UK's selling, general
and administrative expenses due to resizing of those operations to correspond to
lower business activity. These expense decreases were offset by a $0.3 million
charge to compensation expense during the three-month period ended September 30,
2002, as the result of a former officer of the Company exercising his right to
have the Company purchase from him his shares associated with his stock loan
(See Note E.).
Total selling, general and administrative expenses were $7.6 million for the
six-month period ended September 30, 2002, compared to $11.5 million for the
six-month period ended September 30, 2001, a decrease of $3.9 million, or 34
percent. The decrease in selling, general and administrative expenses is
primarily due to certain expenses occurring in the September 30, 2001 period
including: (1) a $0.9 million reserve established for a 3PF customer trade
account deemed uncollectible due to a Chapter 11 bankruptcy filing by the
customer in May 2001; (2) recognition of $0.8 million in expense related to the
closure of the 3PF administrative offices in Skokie, Illinois in April 2001; (3)
recognition of $0.2 million in commission expense related to the Rentrak Japan
restructuring; and (4) the recognition of $0.5 million in expense for a bonus
accrual related to the pre-tax financial results for the three-month period
ended September 30, 2001. Additionally, the decrease is due to an approximate
$1.3 million in expense reduction due to the implementation of better cost
controls across 3PF's organization and an approximate $0.4 million recovery of
bad debt.
Operating income from continuing operations for the three-month period ended
September 30, 2002 was $0.2 million compared to operating income from continuing
operations of $0.8 million for the three-month period ended September 30, 2001.
The decline for the 2002 three-month period was primarily due to the decrease in
PPT business segment revenues, associated gross margin and the $0.3 million
charge to compensation expense noted above. Operating income from continuing
operations for the six-month period ended September 30, 2002 was $0.7 million.
This compares to an operating loss of $2.1 million for the six-month period
ended September 30, 2001, excluding the effect of the $6.4 million in revenue
noted above and the selling, general and administrative expenses associated with
the Rentrak Japan relationship. The improvement for the 2002 six-month period
was primarily due to improved PPT revenues and decreased selling, general and
administrative expenses at 3PF as noted above and the gain recognized from the
Reel.com settlement.
19
Other income (expense) decreased from income of approximately $113 thousand for
the three-month period ended September 30, 2001 to $72 thousand for the
three-month period ended September 30, 2002, primarily due to the reduction in
interest income earned. Other income (expense) decreased from income of
approximately $5.5 million for the six-month period ended September 30, 2001 to
$72 thousand for the six-month period ended September 30, 2002, primarily due to
the recognition of $5.6 million in other income during the three-month period
ended June 30, 2001 related to the business restructuring agreement between the
Company and Rentrak Japan (See Note F.).
The effective tax rate during the three and six-month periods ended September
30, 2002 was 38% compared to 39% during the three and six-month periods ended
September 30, 2001.
As a result, for the three-month period ended September 30, 2002, the Company
recorded net income from continuing operations of $0.2 million, or 1 percent of
total revenue, compared to income from continuing operations of $0.6 million, or
3 percent of total revenue, in the three-month period ended September 30, 2001.
The decrease in net income from continuing operations is primarily attributable
to the decrease in revenues and associated gross margin from the PPT business
segment as noted above. For the six-month period ended September 30, 2002, the
Company recorded net income from continuing operations of $0.5 million, or 2
percent of total revenue, compared to income from continuing operations of $5.6
million, or 11 percent of total revenue, in the six-month period ended September
30, 2001. The decrease in net income from continuing operations is primarily
attributable to the business restructuring between the Company and Rentrak Japan
during the three-month period ended June 30, 2001 (See Note F), partially offset
by decreased selling, general and administrative expenses noted above.
Discontinued Operations
- -----------------------
As discussed in Note D, during the three-month period ended June 30, 2002, the
Company elected to discontinue store operations of its retail subsidiary BlowOut
Video, Inc. Total revenue from BlowOut decreased $0.8 million from $1.7 million
for the three-month period ended September 30, 2001, to $0.9 million for the
three-month period ended September 30, 2002. Cost of sales from BlowOut
decreased $0.4 million from $1.2 million for the three-month period ended
September 30, 2001, to $0.8 million for the three-month period ended September
30, 2002. Selling, general and administrative expenses, from BlowOut decreased
$0.3 million from $0.8 million for the three-month period ended September 30,
2001, to $0.5 million for the three-month period ended September 30, 2002. The
revenue, cost of sales, and selling, general and administrative expenses
decreases are primarily due to the closure of four of a total of six stores
operated in the three-month period ended September 30, 2002. Total revenue from
BlowOut decreased $1.7 million from $3.6 million for the six-month period ended
September 30, 2001, to $1.9 million for the six-month period ended September 30,
2002. Cost of sales from BlowOut decreased $1.1 million from $2.7 million for
20
the six-month period ended September 30, 2001, to $1.6 million for the six-month
period ended September 30, 2002. Selling, general and administrative expenses
from BlowOut decreased $0.7 million from $1.7 million for the six-month period
ended September 30, 2001, to $1.0 million for the six-month period ended
September 30, 2002. The revenue, cost of sales, and selling, general and
administrative expenses decreases are primarily due to the closure of four of a
total of seven stores operated in the six-month period ended September 30, 2002.
Net loss from BlowOut increased $0.1 million from $0.2 million for the
three-month period ended September 30, 2001, to $0.3 million for the three-month
period ended September 30, 2002. Net loss from BlowOut decreased $0.1 million
from $0.5 million for the six-month period ended September 30, 2001, to $0.4
million for the six-month period ended September 30, 2002.
Financial Condition
- -------------------
At September 30, 2002, total assets were $34.1 million, a decrease of $4.5
million from $38.6 million at March 31, 2002. As of September 30, 2002, cash
decreased $0.9 million to $11.1 million from $12.0 million at March 31, 2002
(see the Consolidated Statements of Cash Flows in the accompanying Consolidated
Financial Statements). Net accounts receivable decreased $1.5 million from $11.2
million at March 31, 2002 to $9.7 million at September 30, 2002, primarily due
to a reduction in revenues. At September 30, 2002, advances to program suppliers
were $1.9 million, an increase of $0.9 million from $1.0 million at March 31,
2002, primarily due to the timing of release dates for certain titles. At
September 30, 2002, Other current assets were $1.7 million, a decrease of $1.4
million from $3.1 million at March 31, 2002, primarily due to the receipt,
during May 2002, of the Reel.com cash settlement, as to which agreement was
reached in March 2002. Current assets of discontinued operations decreased $1.1
million from $2.2 million at March 31, 2002 to $1.1 million at September 30,
2002, primarily due to a reduction of inventory including the closure of the New
York BlowOut store in September 2002. Property and Equipment decreased
approximately $1.0 million from $3.9 million at March 31, 2002 to $2.9 million
at September 30, 2002. Other assets increased approximately $0.8 million from
$1.2 million at March 31, 2002 to $2.0 million at September 30, 2002. Both the
decrease in property and equipment and the increase in other assets are
associated with a sale of equipment to a customer of 3PF as the result of a
financing lease.
At September 30, 2002, total liabilities were $18.0 million, a decrease of $3.3
million from $21.3 million at March 31, 2002. Accounts payable decreased $2.5
million from $18.2 million at March 31, 2002 to $15.7 million at September 30,
2002, primarily due to the timing of studio and other vendor payments, and as
the result of lower revenues and associated cost of sales. Accrued liabilities
decreased $0.2 million from $0.5 million at March 31, 2002, to $0.3 million at
September 30, 2002, primarily due to the processing of studio advertising
credits. Accrued compensation decreased $0.4 million from $1.3 million at March
31, 2002, to $0.9 million at September 30, 2002, in part due to the payout of
most of the bonus accrual related to the pre-tax financial results for the
fiscal year ended
21
March 31, 2002. Net current liabilities of discontinued
operations decreased $0.1 million from $0.4 million at March 31, 2002 to $0.3
million at September 30, 2002.
Accordingly, at September 30, 2002, total stockholders' equity was $16.2
million, a decrease of $1.1 million from the $17.3 million at March 31, 2002.
Common stock and capital in excess of par value decreased, on a combined basis,
$1.5 million from $41.7 million at March 31, 2002 to $40.2 million at September
30, 2002, primarily due to the repurchase of stock under the Company's stock
repurchase program. Notes receivable decreased $0.4 million from $0.4 million as
of March 31, 2002, to $0 as of September 30, 2002 (See Note E). Accumulated
deficit decreased $0.1 million from $23.9 million at March 31, 2002 to $23.8
million at September 30, 2002 due to net income from the six-month period.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2002, the Company had cash of $11.1 million compared to $12.0
million at March 31, 2002. The Company's current ratio (current assets/current
liabilities) was 1.62 at September 30, 2002 compared to 1.56 at March 31, 2002.
In May 2002, the Company entered into an agreement for a new secured revolving
line of credit. The line of credit carries a maximum limit of $4,500,000 and
expires in May 2003. The Company has the choice of either the bank's prime
interest rate or LIBOR +2 percent. The line is secured by substantially all of
the Company's assets. The terms of the credit agreement include financial
covenants requiring: (1) $16 million of tangible net worth to be maintained at
all times; (2) a consolidated net profit to be achieved each fiscal quarter
beginning with the quarter ending September 30, 2002 of a minimum of $1.00; (3)
minimum year to date profit of $1.00 (excluding certain exempted expenses)
beginning with the quarter ending September 30, 2002; and (4) achievement of
specified current and leverage financial ratios. Based upon the financial
results reported as of September 30, 2002 and for the three-month period then
ended, the Company has determined it is compliance with the net profit financial
covenant for the period ending September 30, 2002. The Company is in the process
of obtaining a waiver of non-compliance with this financial covenant for the
period ending September 30, 2002. At September 30, 2002 and November 13, 2002,
the Company had no outstanding borrowings under this agreement.
In 1992, the Company established a Retailer Financing Program whereby, on a
selective basis, it provided financing to Participating Retailers that the
Company believed had potential for substantial growth in the industry. The
underlying rationale for this program was the belief that the Company could
expand its business and at the same time participate in the rapid growth
experienced by the video retailers in which it invested. During fiscal 2001, the
Company discontinued new financings under this program and provided reserves of
$6.6 million representing the entire outstanding balance of the program loans.
The Company continues to seek enforcement of agreements entered into in
connection with this program in accordance with their terms to the extent
practicable.
22
On March 22, 1999 BlowOut Entertainment, Inc. ("BlowOut"), a former subsidiary
of the Company, filed a petition under Chapter 11 of the Federal Bankruptcy Code
in March 1999. In 1996, the Company agreed to guarantee any amounts outstanding
under BlowOut's credit facility. At March 31, 2002, there was no remaining
liability related to these discontinued operations. The payments, as made, were
recorded as a reduction of "net current liabilities of discontinued operations"
on the Company's balance sheet.
The Company's sources of liquidity include its cash balance, cash generated from
operations and its available credit resources. Based on the Company's current
budget and projected cash needs, the Company believes that its available sources
of liquidity will be sufficient to fund the Company's operations and other cash
requirements for the fiscal year ending March 31, 2003.
CRITICAL ACCOUNTING POLICIES
The Company considers as its most critical accounting policies those that
require the use of estimates and assumptions, specifically, accounts receivable
reserves and studio guarantee reserves. In developing these estimates and
assumptions, the Company takes into consideration historical experience, current
and expected economic conditions and other relevant data. Please refer to the
Notes to the 2002 Consolidated Financial Statements for a full discussion of the
Company's accounting policies.
Allowance for Doubtful Accounts
- -------------------------------
Credit limits are established through a process of reviewing the financial
history and stability of each customer. The Company regularly evaluates the
collectibility of accounts receivable by monitoring past due balances. If it is
determined that a customer may be unable to meet its financial obligations, a
specific reserve is established based on the amount the Company expects to
recover. An additional general reserve is provided based on aging of accounts
receivable and the Company's historical collection experience. If circumstances
change related to specific customers, overall aging of accounts receivable or
collection experience, the Company's estimate of the recoverability of accounts
receivable could materially change.
Studio Reserves
- ---------------
The Company has entered into guarantee contracts with certain program suppliers
providing titles for distribution under the PPT system. These contracts
guarantee the suppliers minimum payments. The Company, using historical
experience and year to date rental experience for each title, estimates the
projected revenue to be generated under each guarantee. The Company establishes
reserves for titles that are projected to experience a shortage under the
provisions of the guarantee. The Company continually reviews these factors and
makes adjustments to the reserves as needed. Actual results could materially
differ from these estimates and could have a material effect on the recorded
studio reserves.
23
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The Company has considered the provisions of Financial Reporting Release No. 48
"Disclosure of Accounting Policies for Derivative Financial Instruments and
Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative
Information about Market Risk Inherent in Derivative Financial Instruments,
Other Financial Instruments and Derivative Commodity Instruments." The Company
had no holdings of derivative financial or commodity instruments at September
30, 2002. A review of the Company's other financial instruments and risk
exposures at that date revealed that the Company had exposure to interest rate
risk. The Company utilized sensitivity analyses to assess the potential effect
of this risk and concluded that near-term changes in interest rates should not
materially adversely affect the Company's financial position, results of
operations or cash flows.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
- -------------------------------------------------
The Company's Chief Executive Officer and Chief Financial Officer have evaluated
the Company's disclosure controls and procedures, as defined by the Securities
and Exchange Commission, as of a date within 90 days of the filing date of this
report (the "Evaluation Date"). Based upon this evaluation, the Company's Chief
Executive Officer and Chief Financial Officer have concluded that the Company's
disclosure controls and procedures as of the Evaluation Date were effective to
ensure that information required to be disclosed by the Company is recorded,
processed, summarized and reported on a timely basis.
Change in Internal Controls
- ---------------------------
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance that transactions are properly recorded and
summarized so that reliable financial records and reports can be prepared and
assets safeguarded. There are inherent limitations in the effectiveness of any
system of internal controls including the possibility of human error and the
circumvention or overriding of controls. Additionally, the cost of a particular
accounting control should not exceed the benefit expected to be derived.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect internal controls subsequent to the
Evaluation Date.
24
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is from time to time a party to legal proceedings and claims that
arise in the ordinary course of its business, including, without limitation,
collection matters with respect to customers. In the opinion of management, the
amount of any ultimate liability with respect to these types of actions is not
expected to materially affect the financial position or results of operations of
the Company as a whole.
Item 2. Changes in Securities and Use of Proceeds - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See the Exhibit Index on page 26 hereof,
(b) Reports on Form 8-K - None
25
EXHIBIT INDEX
The following exhibit is filed herewith:
Exhibit
Number Exhibit
- ------ -------
10.1 Third Amendment to the 1997 Non-Officer Employee Stock Option
Plan
26
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated this 13th day of November, 2002
RENTRAK CORPORATION
By:/s/ Mark L. Thoenes
------------------------------------
Mark L. Thoenes
Chief Financial Officer
Signing on behalf of the registrant
27
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Paul A. Rosenbaum, certify that:
I have reviewed this quarterly report on Form 10-Q of Rentrak Corporation;
Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
Based on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report;
The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in
28
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: November 13, 2002
By:/s/ Paul A. Rosenbaum
- ------------------------
Paul A. Rosenbaum
Chairman and Chief Executive Officer
29
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Mark L. Thoenes, certify that:
I have reviewed this quarterly report on Form 10-Q of Rentrak Corporation;
Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
Based on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report;
The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
30
The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002
By: /s/ Mark L. Thoenes
- -----------------------
Mark L. Thoenes
Chief Financial Officer
31
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Rentrak Corporation (the "Company")
on Form 10-Q for the period ended September 30, 2002, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Paul A.
Rosenbaum, Chairman and Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the
Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Paul A. Rosenbaum
- ---------------------
Paul A. Rosenbaum
Chairman and Chief Executive Officer
Rentrak Corporation
November 13, 2002
In connection with the Quarterly Report of Rentrak Corporation (the "Company")
on Form 10-Q for the period ended September 30, 2002, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Mark L.
Thoenes, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that,
to the best of my knowledge:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Mark L. Thoenes
- -------------------
Mark L. Thoenes
Chief Financial Officer
Rentrak Corporation
November 13, 2002
32