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 December 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 (I.R.S. Employer
of 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 DECEMBER 31, 1996
----- --------------------------------
Common Stock 6,529,091
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
<TABLE>
<CAPTION>
TRM COPY CENTERS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
1996 1996
-------------- --------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 873 $ 1,989
Accounts receivable, net 7,264 7,619
Inventories 5,253 5,258
Prepaid expenses and other 1,580 2,047
-------- --------
Total current assets 14,970 16,913
Equipment and vehicles, less accumulated 39,172 38,849
depreciation
Other assets 109 165
-------- --------
$ 54,251 $ 55,927
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Checks in transit $ 938 $ 1,455
Accounts payable 1,799 1,919
Accrued expenses 3,373 3,415
-------- --------
Total current liabilities 6,110 6,789
Long-term debt 8,128 5,000
Deferred income taxes 4,569 5,091
-------- --------
Total liabilities 18,807 16,880
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 6,529 and 6,484 shares 16,214 16,407
Retained earnings 19,704 21,904
Cumulative translation adjustment (474) 736
-------- --------
Total stockholders' equity 35,444 39,047
-------- --------
$ 54,251 $ 55,927
======== ========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
TRM COPY CENTERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended Six Months Ended
December 31, December 31,
-------------------- -------------------
1995 1996 1995 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales $16,727 $17,347 $32,444 $33,924
Less discounts 2,916 2,920 5,627 5,656
------ ------ ------ ------
Net sales 13,811 14,427 26,817 28,268
Cost of sales 7,548 7,630 14,766 15,035
------ ------ ------ ------
Gross profit 6,263 6,797 12,051 13,233
Selling, general and administrative
expense 4,357 4,656 8,424 9,143
------ ------ ------ ------
Operating income 1,906 2,141 3,627 4,090
Other expense:
Interest 271 119 549 266
Other, net 113 100 153 188
------ ------- ------ ------
Income before income taxes 1,522 1,922 2,925 3,636
Provision for income taxes 612 759 1,171 1,436
------ ------- ------ ------
Net income $ 910 $ 1,163 $ 1,754 $ 2,200
====== ======= ====== ======
Net income per share $ 0.13 $ 0.16 $ 0.25 $ 0.30
====== ======= ====== ======
Weighted average common and
common equivalent shares
outstanding 7,245 7,328 7,159 7,332
====== ======= ====== ======
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
TRM COPY CENTERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
Common Stock Cumulative
------------------ Retained Translation
Shares Amount Earnings Adjustment Total
------- ------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1996 6,484 $16,214 $19,704 $ (474) $ 35,444
Exercise of stock options 45 193 -- -- 193
Net income for the
six months ended
December 31, 1996 -- -- 2,200 -- 2,200
Foreign currency translation
adjustment -- -- -- 1,210 1,210
------ ------ ------ ------- ------
Balances at December 31, 6,529 $16,407 $21,904 $ 736 $39,047
1996 ====== ====== ====== ======= ======
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
TRM COPY CENTERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
December 31,
-------------------------
1995 1996
---- ----
<S> <C> <C>
Operating activities:
Net income $ 1,754 $ 2,200
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 2,547 2,858
Loss on disposal of equipment
and vehicles 21 50
Changes in items affecting operations:
Accounts receivable (871) (355)
Inventories 1,043 (5)
Prepaid expenses and other (7) (467)
Accounts payable (237) 120
Accrued expenses (592) 42
Deferred income tax 410 522
------- -------
Total operating activities 4,082 4,965
------- -------
Investing activities:
Proceeds from sale of equipment 45 180
Capital expenditures (2,957) (1,824)
Other 18 (56)
------- --------
Total investing activities (2,894) (1,700)
------- -------
Financing activities:
Increase in checks in transit, net (193) 517
Principal payments on long-term debt (7,504) (3,128)
Proceeds from long-term debt 6,465 --
Net proceeds from issuance of common stock 105 193
------- -------
Total financing activities (1,127) (2,418)
------- -------
Effect of exchange rate changes (104) 269
------- -------
Net increase (decrease) in cash and
cash equivalents (43) 1,116
Cash and cash equivalents at beginning
of period 755 873
------- -------
Cash and cash equivalents at end of period $ 712 $ 1,989
======= =======
</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):
June 30, December 31,
1996 1996
----- ----
Paper $1,505 $1,539
Toner and developer 828 894
Parts 2,920 2,825
----- -----
$5,253 $5,258
===== =====
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<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
56 to 66 from June 30, 1995 to June 30, 1996. The number of TRM Centers grew
from 28,995 to 31,719 over the same period. This expansion has continued into
the first six months of fiscal 1997 with the opening of five new market areas
and 1,037 TRM Centers. As of December 31, 1996, the Company had 71 market areas
with 32,756 TRM Centers.
Results of Operations
- ---------------------
Sales for the second quarter were $17.3 million, up 3.7% from second
quarter sales of the previous year of $16.7 million. This growth is due to
increased numbers of installed units during the quarter offset by decreased
average sales per unit. The growth in the number of installed units reflects
expansion in both existing and recently opened service areas.
Sales discounts are the portion of revenue retained by customers. Sales
discounts as a percentage of sales continue to decline, from 17.4% to 16.8% 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 increased 1.1% compared to the prior quarter and 1.8%
compared to the prior six months. This was below the sales growth rates because
of lower paper and toner usage under the Company's higher copy price programs
and because of lower paper costs worldwide.
Selling, general and administrative costs over the most recent four fiscal
quarters have been relatively unchanged. However, compared to the prior year's
second quarter and first six months, selling, general and administrative costs
grew by 6.9% and 8.5%, respectively, reflecting earlier investments in people
and systems to support growth.
Interest costs are incurred because the Company uses bank borrowings to
help fund its expansion. The decrease in interest costs is primarily due to
lower debt levels, which decreased from $13.2 million as of December 31, 1995,
to $5.0 million as of December 31, 1996.
Liquidity and Capital Resources
- -------------------------------
During the six months ended December 31, 1996, cash flow from operations
fully funded capital expenditures of $1,824,000 and allowed for repayment of
$3.1 million in bank borrowings. This level of capital expenditures was below
the $2.9 million spent in the same period of the prior year because the Company
focused on removing and redeploying low-performing customer placements in North
America during the first six months.
The Company currently anticipates capital expenditures of approximately $7
to $8 million during fiscal 1997. The Company intends to finance these capital
expenditures with cash generated from operations and with bank borrowings. The
Company expects that these sources will provide adequate cash to fund its
expansion through at least June 30, 1997.
Information in this Management's Discussions and Analysis about the
Company's goals, plans and expectations regarding expansion and capital
expenditures constitutes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The following factors are among the factors that could
cause actual results to differ materially from the forward-looking statements:
business conditions in the market areas in which the Company operates,
competitive factors, customer demand for the Company's services, the Company's
ability to execute its plans successfully and the volatility of paper costs. Any
forward-looking statements should be considered in light of these factors.
-7-
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K during the three months
ended December 31, 1996.
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: February 14, 1996 By: ROBERT A. BRUCE
----------------- ------------------------------------
Robert A. Bruce
Secretary, Vice President, Finance
and Chief Financial Officer
-8-
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1996
<CASH> 1989
<SECURITIES> 0
<RECEIVABLES> 7902
<ALLOWANCES> (283)
<INVENTORY> 5258
<CURRENT-ASSETS> 16913
<PP&E> 59066
<DEPRECIATION> (20217)
<TOTAL-ASSETS> 55927
<CURRENT-LIABILITIES> 6789
<BONDS> 5000
16407
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 55927
<SALES> 14427
<TOTAL-REVENUES> 14427
<CGS> 7630
<TOTAL-COSTS> 12286
<OTHER-EXPENSES> 100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 119
<INCOME-PRETAX> 1922
<INCOME-TAX> 759
<INCOME-CONTINUING> 1163
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1163
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
