FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 0-19657
-----------------------------------------
TRM COPY CENTERS CORPORATION
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(Exact name of registrant as specified in its charter)
Oregon 93-0809419
- - ------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5208 N.E. 122nd Avenue
Portland, Oregon 97230
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(Address of principal executive offices) (Zip Code)
(503) 257-8766
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
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
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
CLASS OUTSTANDING AT MARCH 31, 1996
------------ -----------------------------
Common Stock 6,469,793
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
--------------------
<TABLE>
TRM COPY CENTERS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
June 30, March 31,
1995 1996
------------ -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 755 $ 515
Accounts receivable, net 6,735 7,725
Inventories 6,545 5,249
Prepaid expenses and other 1,726 1,495
-------- --------
Total current assets 15,761 14,984
Equipment and vehicles, less accumulated depreciation 39,823 39,335
Other assets 152 121
-------- --------
$ 55,736 $ 54,440
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Checks in transit $ 1,422 $ 1,116
Accounts payable 1,493 1,183
Accrued expenses 3,303 3,299
-------- --------
Total current liabilities 6,218 5,598
Long-term debt 14,238 10,553
Deferred income taxes 3,752 4,416
-------- --------
Total liabilities 24,208 20,567
Commitments -- --
Stockholders' equity:
Preferred stock, no par value. Authorized
5,000 shares; no shares issued
and outstanding -- --
Common stock, no par value. Authorized
10,000 shares; issued and
outstanding 6,432 and 6,470 shares 15,940 16,070
Retained earnings 15,580 18,411
Cumulative translation adjustment 8 (608)
-------- --------
Total stockholders' equity 31,528 33,873
-------- --------
$ 55,736 $ 54,440
======== ========
</TABLE>
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<PAGE>
TRM COPY CENTERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------- ---------------------
1995 1996 1995 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales $16,089 $17,394 $44,057 $49,838
Less discounts 2,983 3,027 8,123 8,654
------- ------- ------- -------
Net sales 13,106 14,367 35,934 41,184
Cost of sales 7,157 7,708 19,531 22,474
------- ------- ------- -------
Gross profit 5,949 6,659 16,403 18,710
Selling, general and administrative
expense 3,926 4,504 10,983 12,928
------- ------- ------- -------
Operating income 2,023 2,155 5,420 5,782
Other expense:
Interest 275 230 631 779
Other, net 144 122 381 275
------- ------- ------- -------
Income before income taxes 1,604 1,803 4,408 4,728
Provision for income taxes 641 726 1,749 1,897
------- ------- ------- -------
Net income $ 963 $ 1,077 $ 2,659 $ 2,831
======= ======= ======= =======
Net income per share $ 0.14 $ 0.15 $ 0.39 $ 0.39
======= ======= ======= =======
Weighted average common and
common equivalent shares
outstanding 7,000 7,317 6,899 7,234
======= ======= ======= =======
</TABLE>
-3-
<PAGE>
<TABLE>
TRM COPY CENTERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<CAPTION>
Common Stock Cumulative
--------------------- Retained Translation
Shares Amount Earnings Adjustment Total
------ ------ -------- ---------- -----
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1995 6,432 $15,940 $15,580 $ 8 $31,528
Exercise of stock options 29 76 76
Issuance of stock to employees 9 54 54
Net income for the
nine months ended
March 31, 1996 -- -- 2,831 -- 2,831
Foreign currency translation
adjustment -- -- -- (616) (616)
------ ------- ------- -------- -------
Balances at March 31, 1996 6,470 $16,070 $18,411 $ (608) $33,873
====== ======= ======= ======== =======
</TABLE>
-4-
<PAGE>
<TABLE>
TRM COPY CENTERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Nine Months Ended
March 31,
-------------------------------
1995 1996
--------- ---------
<S> <C> <C>
Operating activities:
Net income $ 2,659 $ 2,831
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 3,323 3,884
Loss on disposal of equipment
and vehicles 14 39
Changes in items affecting operations:
Accounts receivable (1,836) (990)
Inventories (1,936) 1,296
Prepaid expenses and other (56) 231
Accounts payable 2,768 (310)
Accrued expenses 326 (4)
Deferred income tax 612 664
--------- --------
Total operating activities 5,874 7,641
--------- --------
Investing activities:
Proceeds from sale of equipment 75 80
Capital expenditures (11,258) (4,355)
Other (10) 31
--------- --------
Total investing activities (11,193) (4,244)
--------- --------
Financing activities:
Increase in checks in transit, net (246) (306)
Principal payments on long-term debt (3,445) (10,150)
Proceeds from long-term debt 8,200 6,465
Net proceeds from issuance of common stock 85 130
--------- --------
Total financing activities 4,594 (3,861)
--------- --------
Effect of exchange rate changes 262 224
--------- --------
Net increase (decrease) in cash and
cash equivalents (463) (240)
Cash and cash equivalents at beginning
of period 663 755
--------- --------
Cash and cash equivalents at end of period $ 200 $ 515
========= ========
</TABLE>
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<PAGE>
TRM COPY CENTERS CORPORATION
Notes to Condensed Consolidated Financial Statements
----------------------------------------------------
1. Interim Financial Data:
The condensed financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission and reflect all adjustments,
consisting only of normal recurring adjustments, which, in the opinion
of management, are necessary for a fair statement of the results of
the interim periods. These condensed interim financial data should be
read in conjunction with the Company's latest annual report to
shareholders.
2. Net Income Per Share:
Net income per share is computed based on the weighted average number
of shares of common stock and common stock equivalents assumed to be
outstanding during the periods. Common stock equivalents consist of
options to purchase stock (using the treasury stock method).
3. Inventories (in thousands):
<TABLE>
<CAPTION>
June 30, March 31,
1995 1996
-------- ---------
<S> <C> <C>
Paper $ 2,740 $ 1,433
Toner and developer 1,533 1,023
Parts 2,272 2,793
------- -------
$ 6,545 $ 5,249
======= =======
</TABLE>
-6-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-------------------------------------------------
General
- - -------
The Company has continued to expand its business by opening TRM
Centers in new and existing market areas. The number of market areas served
increased from 50 to 54 from June 30, 1994, to June 30, 1995. The number of
TRM Centers grew from 25,563 to 28,995 over the same period. This expansion
has continued into the first nine months of fiscal 1996 with the opening of
an additional nine new market areas and 2,037 TRM Centers. As of March 31,
1996, the Company had 63 market areas with 31,032 TRM Centers.
Results of Operations
- - ---------------------
Sales for the third quarter were $17.4 million, up 8.1% from third
quarter sales of the previous year of $16.1 million. This growth is due
primarily to increased numbers of units. Average sales per unit also
improved for the fifth quarter in a row. The number of units billed during
the quarter increased 7.5% compared with the third quarter of the prior
year, reflecting continued expansion of service areas. Sales for the first
nine months of the year were $49.8 million, up 13.1% from the prior year.
The Company continued its aggressive program of removing and
relocating under-performing machines, which it began last year.
Accordingly, the 431 net TRM Centers installed in the third quarter were
consistent with levels in the prior five quarters, but below levels in
earlier periods. This emphasis is expected to continue throughout calendar
1996. TRM Centers were newly placed, during the quarter, in Columbia, South
Carolina and Columbus, Ohio, in the U.S. and in Bristol and New Castle, in
the U.K. These four service areas were opened using a low-cost opening
model first introduced in the fourth quarter of fiscal 1995. Under this
model, resources from an established TRM Service Center are used to open
the new area. Additional similar openings are planned over the coming
quarters.
Sales discounts are the portion of revenue retained by customers.
Sales discounts as a percentage of sales continues to decline, from 18.5%
to 17.4% in the comparable quarters. This reflects changes made in business
agreements with new customers. The discount rate generally varies between
individual retail businesses based on volume.
Cost of sales continues to be affected by higher paper costs, which
increased 9.8% compared to the prior quarter and 29.4% compared to the
prior nine months. Despite this, cost of sales as a percentage of sales
during the third quarter decreased slightly to 44.3% from 44.5% in the
prior year. This is primarily due to the Company's continued focus on
controlling costs and improving the profit performance of the installed
base of machines.
It is expected that the third quarter will be the last quarter
significantly affected by the inventory of higher-cost paper. The paper
cost impact in the fourth quarter is expected to be minor compared to the
fourth quarter of last year. Looking forward, management is optimistic but
cautious on the outlook for paper prices. Though prices have come down in
recent months, it appears the volatility is continuing with a slight price
increase announced in late April.
-7-
<PAGE>
Selling, general and administrative expense grew to 25.9% as a
percentage of sales during the third quarter as compared to 24.4% in the
same quarter of the prior year. This reflects efforts to enhance and add to
the management team and to the management information systems over the last
year.
Interest costs are incurred because the Company has used bank
borrowings to help fund its expansion. The decrease in interest costs
during the third quarter is primarily due to lower debt levels, which
decreased from $14.3 million as of March 31, 1995, to $10.6 million as of
March 31, 1996. These lower debt levels resulted from higher cash flow from
operations and lower capital expenditures.
Liquidity and Capital Resources
- - -------------------------------
During the nine months ended March 31, 1996, the Company spent $4.4
million on capital expenditures as it continued expanding its business. The
primary source of capital for this expansion was cash generated from
operations.
The Company currently anticipates capital expenditures of between
$6 and $8 million during fiscal 1996. The Company intends to finance these
capital expenditures primarily with cash generated from operations,
although bank borrowings are available to supplement expenditures if
needed. The Company expects that these sources will provide adequate cash
to fund its expansion through at least December 31, 1996.
Forward-looking Statements
- - --------------------------
The information in this report regarding the Company's program of
removing and relocating under-performing machines, service area openings,
paper costs and capital expenditures contain forward-looking statements and
actual results may materially differ. These statements involve risks and
uncertainties that could cause actual results to materially differ,
including the following: business conditions in the market areas the
Company operates in, competitive factors, consumer demand for the Company's
services, the Company's ability to execute its plans successfully and the
volatility of paper costs.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
--------------------------------
(B) REPORTS ON FORM 8-K.
There were no reports filed on Form 8-K during the three months
ended March 31, 1996.
-8-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRM COPY CENTERS CORPORATION
Date: May 15, 1996 By: ROBERT A. BRUCE
--------------------------- -------------------------------
Robert A. Bruce
Secretary, Vice President, Finance
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 515
<SECURITIES> 0
<RECEIVABLES> 8063
<ALLOWANCES> (338)
<INVENTORY> 5249
<CURRENT-ASSETS> 14984
<PP&E> 56296
<DEPRECIATION> (16961)
<TOTAL-ASSETS> 54440
<CURRENT-LIABILITIES> 5598
<BONDS> 10553
16070
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 54440
<SALES> 41184
<TOTAL-REVENUES> 41184
<CGS> 22474
<TOTAL-COSTS> 35402
<OTHER-EXPENSES> 275
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 779
<INCOME-PRETAX> 4728
<INCOME-TAX> 1897
<INCOME-CONTINUING> 2831
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2831
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
