<PAGE>
FORM 10-Q
UNITED STATES
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 June 30, 2000
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 CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
OREGON 93-0809419
------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporationor organization) Identification No.)
5208 N.E. 122nd Avenue
PORTLAND, OREGON 97230
---------------------------------------------------
(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 JUNE 30, 2000
----- ----------------------------
Common Stock 7,063,190
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRM CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1999 2000
--------- ---------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 16,775 $ 4,297
Accounts receivable, net 7,362 8,835
Income tax receivable 378 1,456
Inventories 3,771 4,465
Prepaid expenses and other 2,188 3,446
Deferred tax asset 1,243 1,243
--------- ---------
Total current assets 31,717 23,742
Equipment and vehicles, less accumulated depreciation 62,648 73,705
Other assets 1,541 5,282
--------- ---------
$ 95,906 $ 102,729
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 2,880 7,497
Accrued expenses 3,539 6,222
--------- ---------
Total current liabilities 6,419 13,719
Long Term Debt 23,192 26,485
Deferred income taxes 5,016 4,953
--------- ---------
Total liabilities 34,627 45,157
--------- ---------
Minority Interest -- 222
Shareholders' equity:
Preferred stock, no par value. Authorized
5,000 shares; 1,778 shares issued
and outstanding 19,798 19,798
Common stock, no par value. Authorized
50,000 shares; issued and
outstanding 7,071 and 7,063 shares, respectively 19,095 19,032
Accumulated other comprehensive income (427) (1,492)
Retained earnings 22,813 20,012
--------- ---------
Total shareholders' equity 61,279 57,350
--------- ---------
$ 95,906 102,729
========= =========
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
TRM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1999 2000 1999 2000
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales $ 17,268 $ 19,337 $ 34,216 $ 37,418
Less discounts 3,098 3,213 6,187 6,382
-------- -------- -------- --------
Net sales 14,170 16,124 28,029 31,036
Cost of sales 7,287 10,085 14,396 19,017
-------- -------- -------- --------
Gross profit 6,883 6,039 13,633 12,019
Selling, general and administrative expense 5,604 7,423 11,029 14,262
-------- -------- -------- --------
Operating income (loss) 1,279 (1,384) 2,604 (2,243)
Other (income) expense:
Interest 64 545 94 1,018
Other, net (78) 65 (228) 88
-------- -------- -------- --------
Income (loss) before minority interest in earnings
of a consolidated subsidiary 1,293 (1,994) 2,738 (3,349)
Minority interest 28 28
Income (loss) before income taxes 1,293 (1,966) 2,738 (3,321)
Provision (benefit) for income taxes 505 (722) 1,069 (1,266)
-------- -------- -------- --------
Net income (loss) $ 788 $ (1,244) $ 1,669 $ (2,055)
======== ======== ======== ========
Earnings per share computation:
Net income (loss) $ 788 $ (1,244) $ 1,669 $ (2,055)
Preferred stock dividends (374) (373) (744) (746)
-------- -------- -------- --------
Net income (loss) available to common
Shareholders $ 414 $ (1,617) $ 925 $ (2,801)
======== ======== ======== ========
Basic net income (loss) per share:
Shares outstanding 7,096 7,069 7,099 7,072
-------- -------- -------- --------
Net income (loss) per share $ .06 $ (.23) $ .13 $ (.40)
======== ======== ======== ========
Diluted net income (loss) per share:
Shares outstanding 7,276 7,069 7,314 7,072
-------- -------- -------- --------
Net income (loss) per share $ .06 $ (.23) $ .13 $ (.40)
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
TRM CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(unaudited)
(In thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive Preferred Stock Common Stock Comprehen- Retained
Income Shares Amounts Shares Amounts sive Income Earnings Total
------------- ------- ----------- -------- ---------- --------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, DECEMBER 31, 1999 1,778 $ 19,798 7,071 $ 19,095 $ (427) $ 22,813 $61,279
Comprehensive income
Net loss $ (2,055) (2,055) (2,055)
Other comprehensive
income (loss), net of tax
Foreign currency
translation adjustment (1,065) (1,065) (1,065)
----------
Comprehensive income $ (3,120)
=========
Issuance of stock to
employees 8 35 35
Repurchase of common stock (16) (98) (98)
Preferred stock dividends (746) (746)
------- ----------- -------- ---------- --------------- ---------- ---------
BALANCES, JUNE 30, 2000 1,778 $ 19,798 7,063 $ 19,032 $ (1,492) $ 20,012 $57,350
======= =========== ======== ========== =============== ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
TRM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------
1999 2000
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,669 $ (2,055)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 4,136 5,363
Other -- (28)
(Gain) loss on disposal of equipment
and vehicles 52 (35)
Changes in items affecting operations:
Accounts receivable 881 (1,220)
Inventories 16 (635)
Income tax receivable 389 (1,055)
Prepaid expenses and other 28 (1,530)
Accounts payable (7,119) 4,461
Accrued expenses 166 2,609
Deferred income tax (90) (63)
-------- --------
Cash provided by operating activities 128 5,812
-------- --------
Cash flows from investing activities:
Proceeds from sale of equipment 435 234
Capital expenditures (10,533) (16,430)
Other (890) (1,104)
Acquisition of a business, net of cash acquired (799)
-------- --------
Cash used in investing activities (10,988) (18,099)
-------- --------
Cash flows from financing activities:
Net borrowings on notes payable 6,783 1,618
Net proceeds from issuance of common stock 65 35
Repurchase of common stock (36) (98)
Dividends on preferred stock (744) (746)
-------- --------
Cash provided by financing activities 6,068 809
-------- --------
Effect of exchange rate changes (507) (1,000)
-------- --------
Net increase (decrease) in cash and cash equivalents (5,299) (12,478)
Cash and cash equivalents at beginning of period 14,285 16,775
-------- --------
Cash and cash equivalents at end of period $ 8,986 $ 4,297
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
TRM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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:
Basic and diluted net income per share are based on the weighted average
number of common shares outstanding during each year, with diluted
including the effect of potentially dilutive securities. For the three
months and six months ended June 30, 1999 and June 30, 2000, the weighted
average number of common shares for basic net income per share
computations were 7,096,000 and 7,099,000, and 7,069,000 and 7,072,000,
respectively. For diluted net income per share, 180,000 and 215,000 shares
were added to weighted average shares outstanding for the three and six
months ended June 30, 1999, representing potential dilution for stock
options outstanding, calculated using the treasury stock method. In
calculating basic net income per share, dividends for preferred stock are
deducted to arrive at income available for common stockholders. For
diluted net income per share, the calculation assumes the conversion of
common stock equivalents including the conversion of preferred stock to
common unless such conversion is anti-dilutive. For the three and six
months ended June 30, 2000, no shares were added to the weighted average
shares outstanding because the addition of shares would be anti-dilutive.
3. Inventories (in thousands):
<TABLE>
<CAPTION>
December 31, June 30,
1999 2000
--------------- ---------------
<S> <C> <C>
Paper $ 696 $ 693
Toner and developer 550 495
Parts 2,525 3,277
--------------- ---------------
$ 3,771 $ 4,465
=============== ===============
</TABLE>
4. Segment Reporting (in thousands):
In fiscal 1998, the Company adopted SFAS No. 131 - "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131"). This
statement establishes new standards for the manner in which companies
report operating segment information, as well as disclosures about products
and services and major customers. Prior to 1999, the Company had only one
business segment.
6
<PAGE>
The Company has three reportable segments: CopyCenters, ATM and e-Commerce.
CopyCenters owns and maintains self-service photocopiers in retail
establishments. ATM owns and operates ATM machines in retail
establishments. The e-commerce business develops software to deliver
products and services to ATMs.
The Company evaluates each segment's performance based on income or loss
before interest and income taxes, excluding non-recurring charges.
Information regarding the operations in these reportable segments is as
follows:
<TABLE>
<CAPTION>
(Dollar Amounts in Thousands)
Three months ended Six months ended
June 30, June 30, June 30, June 30,
1999 2000 1999 2000
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales:
CopyCenters $ 17,079 $ 17,052 $ 34,027 $ 34,008
ATM 189 2,225 189 3,350
e-Commerce 60 60
-------- -------- -------- --------
$ 17,268 $ 19,337 $ 34,216 $ 37,418
======== ======== ======== ========
Depreciation and
amortization:
CopyCenters $ 2,162 $ 2,396 $ 4,103 $ 4,911
ATM 33 273 33 419
e-Commerce 33 33
-------- -------- -------- --------
$ 2,195 $ 2,702 $ 4,136 $ 5,363
======== ======== ======== ========
Income (loss) before
interest and taxes &
minority interest:
CopyCenters $ 1,580 $ 517 $ 3,055 $ 1,076
ATM (223) (1,404) (223) (2,845)
e-Commerce (562) (562)
-------- -------- -------- --------
$ 1,357 $ (1,449) $ 2,832 $ (2,331)
======== ======== ======== ========
Capital expenditures:
CopyCenters $ 6,491 $ 1,283 $ 8,988 $ 3,928
ATM 1,225 8,476 1,545 12,502
e-Commerce 0 0
-------- -------- -------- --------
$ 7,716 $ 9,759 $ 10,533 $ 16,430
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
As of As of
Dec 31, June 30,
1999 2000
-------- --------
<S> <C> <C>
Assets:
CopyCenters $ 71,984 $ 79,671
ATM 23,922 21,023
e-Commerce 2,035
-------- --------
$ 95,906 $102,729
======== ========
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
During the quarter ending June 30, 2000, the Company continued the
expansion of its new ATM services business while its CopyCenters services
business generated solid cash flow. The Company's financial position remains
sound, offering it flexibility to meet its aggressive growth strategy.
Also in the second quarter of 2000, iATMglobal.net, the San Francisco based
e-commerce infrastructure subsidiary of the Company acquired Strategic Software
Solutions Limited, a leading developer of custom Internet solutions for
automated teller machines (ATMs) for $2.7 million, most of which was recorded as
goodwill. Strategic Software Solutions develops custom Internet and software
solutions for ATMs manufactured by NCR (NYSE: NCR). Strategic Software Solutions
and NCR jointly market @tmLink, the only Internet-based ATM uploading and
notification product for NCR-built ATMs. Strategic Software Solutions'
proprietary product, offered through a strategic alliance with PSINet (NASDAQ:
PSIX), an Internet Super Carrier offering global e-commerce infrastructure,
leverages its global Internet communications backbone. Together, Strategic
Software Solutions and iATMglobal.net plan to build a Web-based distribution
channel to deliver convenient access to e-commerce goods and services through
the existing worldwide network of approximately one million ATMs. Strategic
Software Solutions is located in Alloa, Scotland. iATMglobal.net intends to
relocate its technology development headquarters to Alloa.
As of June 30, 2000, the Company had a total of 1,537 ATM operating units
installed, with 920 and 617 deployed in the United States and United Kingdom
respectively, as compared to 141 in the United States at June 30, 1999, an
overall increase of 1,396 units. The ATM business contributed $2.2 million to
quarterly gross revenues and $3.4 million year to date compared to $189,000 for
both the quarter and year to date ended June 30, 1999. The Company believes that
revenues generated from services delivered through its ATM network will become
an increasingly higher percentage of its overall revenue in the future as it
expands the product offerings through its ATM network, and pursues new
geographic opportunities.
As a result of the Company's development of its ATM services business
and start up of its e-commerce subsidiary, the Company expects to record
quarterly losses for at least the balance of the current fiscal year.
In the CopyCenters business, as of June 30, 2000, the Company had 36,200
TRM Copy Centers in operation compared to 31,461 at June 30, 1999, an increase
of 4,739 centers (15.06%). In the second quarter of 2000, the CopyCenters
business generated $2.9 million earnings before interest, taxes, depreciation,
amortization and minority interest, compared to $3.7 million in the same quarter
of 1999.
In the second quarter of 2000, iATMglobal.net and Strategic Software
Solutions, the Company's e-commerce business, generated $60,000 in gross
revenues from contracted software engineering services.
The Company's balance sheet maintains a low debt to equity ratio. This
financial position offers TRM Corporation the flexibility to finance its
strategic expansion plans related to its ATM business. In the first quarter of
2000 the Company replaced its existing bank line of credit. The Company signed a
new Loan Agreement with Bank of America N.A. to provide a line of credit
commitment equal to $30 million through June 30, 2001, reducing to $25 million
through June 30, 2002. Also in the first quarter of 2000, the Company (through a
special purpose finance entity) established a $30.0 million Loan Facility to
provide vault cash for its ATM network. The financing
8
<PAGE>
was completed off the Company's balance sheet on a non-recourse basis. The
Company initially funded $23.6 million under the facility to supply its ATMs
with cash. See "Liquidity and Capital Resources."
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
statement of operations data, expressed as a percentage of sales, and the
percentage change in dollar amounts of each item on the Consolidated Statements
of Operations (see page 3 of this Form 10-Q).
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, Percentage Change June 30, Percentage Change
1999 2000 Increase (Decrease) 1999 2000 Increase (Decrease)
---- ---- ------------------- ---- ---- -------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 100.0% 100.0% 12.0% 100.0% 100.0% 9.4%
Sales discounts 17.9 16.6 3.7 18.1 17.1 3.2
Cost of sales 42.2 52.2 38.4 42.1 50.8 32.1
Selling, general and
Administrative 32.5 38.4 32.6 32.2 38.1 29.4
Special charges -- -- -- -- --
Operating income (loss) 7.4 (7.2) (208.0) 7.6 (6.0) (186.0)
Interest expense, net .4 2.8 751.6 .3 2.7 983.0
Other (income) expense
Net (.5) .3 (183.3) (.7) .2 (138.6)
Income (loss) before
Minority interest 7.5 (10.3) (254.2) 8.0 (8.9) (222.3)
Minority interest .1 N/A .1 N/A
Income (loss) before
Income taxes 7.5 (10.2) (252.0) 8.0 (8.8) (221.3)
Provision (benefit)
for income taxes 2.9 (3.8) (243.0) 3.1 (3.3) (218.5)
----- ----- ------ ----- ----- ------
Net income (loss) 4.6% (6.4)% (257.9)% 4.9% (5.5)% (223.1)%
===== ===== ====== ===== ===== ======
</TABLE>
THREE AND SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE AND SIX MONTHS ENDED
JUNE 30, 1999
For the three and six month period ended June 30, 2000, consolidated sales
increased by $2.1 million (12.0%) and $3.2 million (9.4%), respectively. The
$2.1 million increase in gross revenue for the second quarter and $3.2 million
year to date is primarily attributed to the Company's ATM business. CopyCenters
business revenues were unchanged in the second quarter of 2000 and year to date
were substantially the same as compared to the same periods in 1999.
Although CopyCenters sales were flat for the quarter and year ended June
30, 2000 as compared to the same period in 1999, there was an increase in billed
units of 14.9% and 12.7%, respectively. Most of these units were added to the
installed base in the fourth quarter of 1999 and the first quarter of 2000.
Revenue per billed unit decreased 13.0% for the quarter and 15.6% year to date,
resulting in no change in revenue on the higher installed base.
Revenue from the Company's new ATM business were $2.0 million and $3.4
million for the quarter and year to date ended June 30, 2000, respectively as
compared to $189,000 for both the quarter and year to date ended June 30, 1999.
The Company is expecting a significant increase in ATM revenue in 2000 over
1999's revenue because of the aggressive growth plans it has for the newly
established ATM services business.
In the second quarter of 2000, iATMglobal.net and Strategic Software
Solutions, the Company's e-commerce business, generated $60,000 in gross
revenues from contracted software engineering services with no revenue generated
last year.
9
<PAGE>
Sales discounts are the portion of revenue retained by retail customers.
Sales discounts generally vary at individual retail businesses depending on
volume - the higher the volume, the greater the discount. The increase in sales
discounts for the quarter and the year ended June 30, 2000 compared to the prior
year is $115,000 (3.7%) and $195,000 (3.2%), respectively, which is attributed
to the Company's ATM business.
Costs of sales on a consolidated basis increased $2.8 million (38.4%) for
the quarter and $4.6 million (32.1%) for the year ended June 30, 2000 compared
to the same periods in 1999. ATM related costs attributed to the increase of
$2.0 million for the quarter and $2.8 million year to date. CopyCenters' field
labor and other costs increased by $266,000 for the quarter and $396,000 year to
date, due mostly to the increase in the installed base. CopyCenters' Service
partner related costs increased $261,000 for the quarter and $447,000 year to
date. This cost is attributed to the increase in installed units located outside
a TRM service area and are serviced by a third party. Service partner units
installed were 1,757 and 1,127 for periods ended June 30, 2000 and June 30,
1999, respectively. The remaining increase in cost of sales of $278,000 for the
quarter and $801,000 year to date is due to copier machine depreciation, which
relates to the additional NextGen-TM- photocopiers in the Company's installed
base.
Selling, general and administrative expenses increased $1.8 million (32.6%)
and $3.2 million (29.4%) during the quarter and year ended June 30, 2000,
respectively, compared to the same periods in 1999. iATMglobal.net costs
contributed $578,000 of the increase for both periods. ATM direct costs
increased $391,000 for the quarter and $800,000 year to date. ATM indirect costs
contributed $854,000 for the quarter and $1.9 million year to date to the
increase. The core CopyCenters business's infrastructure is providing the
support for the iATMglobal start-up and the aggressive expansion of the
Company's ATM business.
Interest expense increased to $545,000 from $64,000 for the quarter ended
June 30, 2000, and increased to $1.0 million from $94,000 year to date ended
June 30, 2000 from the same periods in 1999, respectively. The increase was due
to an increase in borrowings on the Company's revolving line of credit during
2000 primarily as the result of increased borrowings to finance ATM machines
operated by the Company in its newly formed ATM business and the formation of
it's e-Commerce subsidiary. Borrowings to finance the cash needs of the ATM
network are not expected to be necessary for the remainder of the year as a
result of the establishment of a commercial paper facility. See the section on
"Liquidity and Capital Resources" in this Form 10-Q.
Other income decreased $143,000 during the quarter ended June 30, 2000 and
$316,000 year to date, compared to the same periods in 1999. The decrease was
primarily due to interest income generated from short-term investments in the
first six months of 1999, which investments were not outstanding in 2000.
The Company's effective tax rate for the quarter ended June 30, 2000 is
36.7 percent, resulting in an income tax benefit of $722,000, compared to an
effective rate of 39.1 percent and an income tax provision of $505,000 in 1999.
The Company's year to date effective tax rate is 38.1 percent year ended June
30, 2000 resulting in an income tax benefit of $1.3 million compared to 39.0
percent and an income tax provision of $1.1 million for June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 2000, TRM generated $5.8 million in
cashflows from operations and decreased its net working capital from $25.3
million at December 31, 1999 to $10.0 million at June 30, 2000 (including cash
and cash equivalents of $4.3 million). The Company also
10
<PAGE>
has a $30.0 million bank line of credit, with $24.8 million in borrowings
outstanding at June 30, 2000.
During the six months ended June 30, 2000, the Company funded capital
expenditures of $16.4 million primarily from bank borrowings on its line of
credit. Capital expenditures were primarily for NCR ATM machines, merchandising
signage and computer systems implementation costs.
The Company obtained a new source for vault cash inventory in its ATM
network during the first quarter of 2000. As of December 31, 1999, the Company
had a cash balance related to the ATM vault cash inventory of $16.1 million,
financed through its line of credit. In March of 2000, the Company established a
$30.0 million financing facility to access a commercial paper conduit to provide
vault cash for its ATM network. This agreement resulted in the removal of the
cash and underlying bank borrowings from the Company's balance sheet. The
financing was completed off the Company's balance sheet on a non-recourse basis.
As such, the ATM vault cash inventory and related debt financing was removed
from the balance sheet as of March 31, 2000. The Company anticipates increasing
this facility to $75 million before the end of the year to support expansion of
its ATM network.
The Company currently anticipates capital expenditures of approximately $35
million during calendar 2000. Approximately $25 million will be used to acquire
ATM machines and the remainder will be used to acquire computer related systems
and other capital items. The Company expects to finance these capital
expenditures with cash generated from operations, bank borrowings and asset
leasing. The Company entered into a new bank line of credit arrangement which
will allow it greater flexibility in its use of proceeds. The line of credit
also will not encumber the Company's ATM assets, allowing it to refinance its
existing ATM assets and finance future ATM asset purchases, subject to limits
based on the Company's ratio of funded debt to EBIDTA. The Company expects that
these sources will provide adequate cash to fund its expansion through at least
December 31, 2000.
DISCLOSURE REGARDING EURO CONVERSION
On January 1, 1999, eleven member countries of the European Community began
a process to convert their existing sovereign currencies to a single common
denomination, the Euro. The process of conversion is gradual over the next three
years, culminating in the eventual removal from circulation of all existing
domestic currency for the participating countries. The Company presently
operates in the United Kingdom and France and transacts business in the local
currency of those countries. France will be subject to the Euro Conversion, and
the United Kingdom may become subject to the conversion. The Company believes
that it will be able to accommodate the conversion to the Euro without a
material impact on its financial statements.
FORWARD-LOOKING STATEMENTS
Information in "Management's Discussion and Analysis," in this Form 10-Q
about the Company's goals, plans and expectations regarding expansion, capital
expenditures, effectively using a third-party network of service providers,
expanding the ATM business, offering and providing e-commerce goods and services
through ATMs, 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 that could cause the 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
11
<PAGE>
considered in light of these factors as well as risk factors and business
conditions discussed in the Company's SEC Form 10-K for the year ended December
31, 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to minimal market risks. Sensitivity of results of
operations to these risks is managed by maintaining a conservative investment
portfolio, which is comprised solely of money market funds, and entering into
long-term debt obligations with appropriate price and term characteristics. The
Company does not hold or issue derivative commodity instruments or other
financial instruments for trading purposes. Financial instruments held for other
than trading purposes do not impose a material market risk.
The Company is exposed to interest rate risk, as additional financing will
be needed due to the capital expenditures associated with expanding the
Company's business operations. The interest rate that the Company will be able
to obtain on debt financing will depend on market conditions at that time, and
may differ from the rates the Company has secured on its current debt.
Additionally, the Company is exposed to interest rate risk related to its credit
facility as of June 30, 2000. Advances against the credit facility periodically
renew, at which point the borrowings are subject to the then current market
interest rates, which may differ from the rates the Company is currently paying
on its borrowings.
The Company is exposed to foreign currency exchange rate risk, as it has
operations in Canada, France and the United Kingdom. The relative amount of
business transacted in these countries is outlined in footnote 11 to the
Consolidated Financial Statements of the Company's 1999 Form 10-K.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 21, 2000 at the Company's Annual Meeting of shareholders, the
holders of the Company's outstanding Common Stock and Series A Preferred Stock
took the actions described below. As of the record date for the Annual Meeting,
7,074,440 shares of Common Stock and 1,777,778 shares of Series A Preferred
Stock were issued and outstanding. Each share of Preferred Stock is entitled to
one vote per share and votes together with the Common Stock as one class.
1. The shareholders elected each of Edward E. Cohen, Slavka Bachurova
Glaser, Frederick O. Paulsell, and Frederic P. Stockton, by the votes indicated
below, to serve on the Company's Board of Directors for the next three years:
EDWARD E. COHEN
6,237,216 shares in favor
1,882,956 shares against or withheld
SLAVKA BACHUROVA GLASER
6,237,256 shares in favor
1,882,916 shares against or withheld
FREDERICK O. PAULSELL
6,211,505 shares in favor
1,848,667 shares against or withheld
FREDERIC P. STOCKTON
6,001,609 shares in favor
2,058,563 shares against or withheld
Daniel G. Cohen, Joel R. Mesznik, Kenneth L. Tepper, Joseph G. Denton, Kent
B. Godfrey, and Debbi Hurd Baptist will continue their terms of office as
directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
10.11 Second Amended and Restated Business Loan Agreement dated as of
May 30, 2000, between TRM Corporation and Bank of America, N.A.
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the period.
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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 CORPORATION
Date: August 15, 2000 By: /s/ Daniel L. Spalding
---------------- --------------------------------------
Daniel L. Spalding
Vice President, Finance and
Chief Financial Officer
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