<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1996
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ____________ to ____________
Commission file number: 0-26580
AMERICAN COIN MERCHANDISING, INC.
(Exact Name of Registrant as specified in its charter)
DELAWARE 84-1093721
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
4870 STERLING DRIVE, BOULDER, COLORADO 80301
(Address of Principal Executive Offices) (Zip Code)
(303) 444-2559
(Registrant's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
OUTSTANDING AT
CLASS May 1, 1996
----- --------------
Common Stock, $0.01 par value 5,081,608 shares
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE> 2
AMERCIAN COIN MERCHANDISING, INC.
10-QSB
PART 1 FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements
Condensed Balance Sheets
March 31, 1996 and December 31, 1995 ................... 3
Condensed Statements of Income for the
Three Months Ended March 31, 1996 and 1995 ............ 4
Condensed Statement of Stockholders' Equity for the
Three Months Ended March 31, 1996 ..................... 5
Condensed Statements of Cash Flows for the
Three Months Ended March 31, 1996 and 1995 ............ 6
Notes to Condensed Financial Statements ................. 7
Item 2. Management's Discussion and Analysis or Plan of Operation . 10
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K .......................... 13
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN COIN MERCHANDISING, INC.(a)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ...................................... $ 555,000 $ 1,590,000
Trade accounts and other receivables ........................... 742,000 768,000
Inventories .................................................... 3,229,000 3,411,000
Prepaid expenses and other assets .............................. 260,000 190,000
------------ ------------
Total current assets ........................................ 4,786,000 5,959,000
------------ ------------
Property and equipment, at cost:
Vending machines ............................................... 8,291,000 7,051,000
Vehicles ....................................................... 1,160,000 938,000
Office equipment, furniture and fixtures ....................... 359,000 306,000
------------ ------------
9,810,000 8,295,000
Less accumulated depreciation .................................. (3,340,000) (3,037,000)
------------ ------------
Property and equipment, net .................................. 6,470,000 5,258,000
------------ ------------
Other assets ..................................................... 29,000 20,000
Deferred income taxes ............................................ 350,000 350,000
Cost in excess of assets acquired, net of
accumulated amortization ....................................... 2,188,000 2,115,000
------------ ------------
Total assets ................................................. $ 13,823,000 $ 13,702,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank revolving line of credit .................................. $ 78,000 $ 406,000
Current portion of long-term debt .............................. 224,000 151,000
Income taxes payable ........................................... 317,000 188,000
Accounts payable ............................................... 1,807,000 1,580,000
Accrued expenses ............................................... 110,000 104,000
Distribution payable ........................................... -- 634,000
------------ ------------
Total current liabilities .................................... 2,536,000 3,063,000
------------ ------------
Long-term debt, net of current portion ........................... 421,000 283,000
Notes payable to Control Group ................................... 1,349,000 1,349,000
------------ ------------
Total liabilities ............................................ 1,770,000 4,695,000
------------ ------------
Stockholders' equity:
Preferred stock, $.10 par value
(Authorized 500,000 shares; none issued) ....................... -- --
Common stock, $.01 par value (Authorized
7,000,000 shares; issued 5,081,608 shares) ..................... 51,000 51,000
Additional paid-in-capital ..................................... 8,355,000 8,275,000
Unearned stock option compensation ............................. (73,000) --
Retained earnings .............................................. 1,184,000 681,000
------------ ------------
Total stockholders' equity ................................... 9,517,000 9,007,000
------------ ------------
Total liabilities and stockholders' equity ................... $ 13,823,000 $ 13,702,000
============ ============
</TABLE>
(a) Through August 31, 1995, represents combined financial statements of
American Coin Merchandising, Inc. and Affiliates (see note 1).
See accompanying notes to condensed financial statements.
3
<PAGE> 4
AMERICAN COIN MERCHANDISING, INC.(a)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1996 1995
---------- ----------
<S> <C> <C>
Revenue:
Vending ............................................... $5,924,000 $3,670,000
Product and services .................................. 1,256,000 1,586,000
Franchise royalties ................................... 374,000 290,000
Equipment sales and other ............................. 460,000 50,000
---------- ----------
Total revenue ....................................... 8,014,000 5,596,000
---------- ----------
Cost of revenue:
Vending ............................................... 4,115,000 2,531,000
Product and services .................................. 1,052,000 1,247,000
Equipment sales ....................................... 458,000 37,000
---------- ----------
Total cost of revenue ............................... 5,625,000 3,815,000
---------- ----------
Gross profit ........................................ 2,389,000 1,781,000
General and administrative expenses ..................... 1,532,000 899,000
Commissions and royalties, related parties .............. -- 137,000
Interest expense, related parties ....................... 27,000 44,000
Interest expense, other, net ............................ 19,000 31,000
Minority interest in income of combined affiliates ...... -- 23,000
Share of loss of equity affiliate ....................... -- 11,000
---------- ----------
Income before taxes ................................. 811,000 636,000
Provision for income taxes .............................. 308,000 --
---------- ----------
Net income .......................................... $ 503,000 $ 636,000
========== ==========
Net income per share of common stock ................ $ 0.09
Weighted average common shares ...................... 5,449,000
Pro forma information:
Historical income before taxes ........................ $ 636,000
Pro forma adjustments to income before taxes .......... 475,000
----------
Pro forma income before taxes ......................... 1,111,000
Pro forma income tax expense .......................... 422,000
----------
Pro forma net income .................................. $ 689,000
==========
Pro forma earnings per common and common equivalent share
Pro forma net income per share of common stock ........ $ 0.15
Weighted average common shares ........................ 4,669,000
</TABLE>
(a) Through August 31, 1995, represents combined financial statements of
American Coin Merchandising, Inc. and Affiliates (see note 1).
See accompanying notes to condensed financial statements.
4
<PAGE> 5
AMERICAN COIN MERCHANDISING, INC.(a)
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNEARNED
STOCK TOTAL
ADDITIONAL OPTION STOCK-
COMMON PAID-IN COMPEN- RETAINED HOLDERS'
STOCK CAPITAL SATION EARNINGS EQUITY
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1995 ............................... $ 51,000 $8,275,000 $ -- $ 681,000 $9,007,000
Issuance of employee stock
options ..................................... -- 80,000 (80,000) -- --
Amortization of deferred
compensation ................................ -- -- 7,000 -- 7,000
Net income .................................... -- -- -- 503,000 503,000
---------- ---------- ---------- ---------- ----------
MARCH 31, 1996 .................................. $ 51,000 $8,355,000 $ (73,000) $1,184,000 $9,517,000
========== ========== ========== ========== ==========
</TABLE>
(a) Through August 31, 1995, represents combined financial statements of
American Coin Merchandising, Inc. and Affiliates (see note 1).
See accompanying notes to condensed financial statements.
5
<PAGE> 6
AMERICAN COIN MERCHANDISING, INC.(a)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1995
----------- -----------
<S> <C> <C>
Operating activities:
Net income ................................................................... $ 503,000 $ 636,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ............................................ 350,000 185,000
Share of loss of equity affiliate ........................................ -- 11,000
Minority interest in income of combined affiliates, less distributions ... -- 23,000
Compensation expense related to stock options ............................ 7,000 --
Gain on sales of assets .................................................. -- (5,000)
Changes in operating assets and liabilities:
Trade accounts and other receivables ................................... 2,000 (188,000)
Inventories ............................................................ 236,000 (169,000)
Prepaid expenses and other assets ...................................... (70,000) (95,000)
Income taxes payable ................................................... 129,000 --
Accounts payable and accrued expenses .................................. 233,000 649,000
----------- -----------
Net cash provided by operating activities ................................ 1,390,000 1,047,000
----------- -----------
Investing activities:
Acquisitions of property and equipment ....................................... (1,131,000) (308,000)
Acquisition of franchisee .................................................... (297,000) --
Proceeds from sales of property and equipment ................................ 11,000 5,000
Other ........................................................................ (8,000) --
Payments received on notes receivable from related parties ................... -- 40,000
Payments received on notes receivable ........................................ 3,000 5,000
----------- -----------
Net cash used in investing activities .................................... (1,422,000) (258,000)
----------- -----------
Financing activities:
Net borrowings (payments) on revolving line of credit ........................ (328,000) 123,000
Principal payments on notes payable to related parties ....................... -- (15,000)
Proceeds from issuance of notes payable to related parties ................... -- 15,000
Principal payments on long-term debt ......................................... (41,000) (215,000)
Proceeds from issuance of long-term debt ..................................... -- 20,000
Distributions ................................................................ (634,000) (136,000)
Issuance of common stock ..................................................... -- 5,000
----------- -----------
Net cash used in financing activities .................................... (1,003,000) (203,000)
----------- -----------
Net increase (decrease) in cash and cash equivalents ..................... (1,035,000) 586,000
Cash and cash equivalents at beginning of period ............................... 1,590,000 357,000
----------- -----------
Cash and cash equivalents at end of period ..................................... $ 555,000 $ 943,000
=========== ===========
</TABLE>
(a) Through August 31, 1995, represents combined financial statements of
American Coin Merchandising, Inc. and Affiliates (see note 1).
See accompanying notes to condensed financial statements.
6
<PAGE> 7
AMERICAN COIN MERCHANDISING, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
American Coin Merchandising, Inc., d/b/a Sugarloaf Creations, Inc. (the
"Company") and its franchisees own and operate coin-operated skill-crane
machines ("Shoppes") that dispense stuffed animals, plush toys, watches,
jewelry and other items. The Company's Shoppes are placed in supermarkets, mass
merchandisers, bowling centers, bingo halls, bars, restaurants, warehouse clubs
and similar locations. The Company currently has 20 field offices located in 15
states. The Company also sells products to franchisees. At March 31, 1996 there
were 29 Company franchises in operation.
Prior to August 31, 1995, the date of the Reorganization described below,
certain stockholders of the Company, who collectively own a controlling
interest of the Company (the "Control Group"), owned interests in the eight
affiliated entities (the "Affiliated Entities") which were franchisees of the
Company. Except as noted below, each of the Affiliated Entities began
operations prior to January 1, 1993. The Control Group owned greater than 50%
of the outstanding common stock or partnership interests of seven of the
Affiliated Entities and less than 50% of the eighth, as follows:
Affiliated Entities:
Combined affiliates:
Chicago Toy Company
Georgia Toy Company
Inland Merchandising, Inc. (began operations in June 1993)
Lehigh Valley Toy Company
Performance Merchandising, Inc.
Southwest Coin Company
Sugarloaf, Ltd. (began operations in January 1993)
Equity affiliate:
Sugarloaf Marketing, Inc.
Due to the common controlling ownership, the accompanying financial
statements include the accounts of the Company and the combined affiliates
(collectively referred to as the "Combined Companies") through August 31, 1995.
All material intercompany balances and transactions have been eliminated.
Through August 31, 1995 the Control Group's interest has been accounted for as
equity of affiliates and the other stockholders' interest has been reflected as
minority interest. As such, the assets and liabilities of Combined Companies
have been accounted for in the financial statements based upon their historical
costs through August 31, 1995. The financial statements account for the Control
Group ownership interest in Sugarloaf Marketing, Inc. using the equity method
of accounting through August 31, 1995.
On August 31, 1995, the Company acquired substantially all of the
inventories, property and equipment, and assumed certain facilities leases,
which are operating leases, and contracts of the Affiliated Entities in
exchange for promissory notes in the principle amount of $8,983,000 (the
"Reorganization"), of which $7,634,000 was paid from the proceeds of the
Company's initial public offering in October 1995. The remaining promissory
notes in the principle amount of $1,349,000 are payable in 1997 and 1998. As a
result of the Reorganization, assets attributable to the Control Group's
interest have been accounted for similar to the pooling-of-interests method of
accounting for business combinations. Assets and liabilities included in the
financial statements which were retained by the combined affiliates in the
Reorganization have been accounted for as distributions to the combined
affiliates. Amounts paid to the combined affiliates attributed to the Control
Group interest have been accounted for as a distribution for financial
reporting purposes. Assets transferred attributable to the non-Control Group
members (the minority interest in the combined affiliates and the majority
interest in the equity affiliate) have been accounted for using the purchase
method of accounting for business combinations. The Company has recorded
approximately $1,964,000 in costs in excess of assets acquired as a result of
the transfer of assets attributable to the non-Control Group. The
Reorganization was a taxable transaction for income tax purposes, and
accordingly, the Company has a tax basis in the transferred assets in excess of
that for financial reporting.
The accompanying unaudited condensed financial statements have been
prepared, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been
7
<PAGE> 8
AMERICAN COIN MERCHANDISING, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
condensed or omitted pursuant to such rules and regulations. Although the
Company believes that the disclosures are adequate to make the information
presented not misleading, it is suggested that these condensed financial
statements be read in connection with the financial statements and notes
thereto included in the Company's annual report on Form 10-KSB for the year
ended December 31, 1995.
In the opinion of the Company, the accompanying condensed financial
statements include all adjustments (consisting of normal recurring accruals)
required to present fairly the Company's financial position at March 31,1996
and December 31,1995, and the results of its operations for each of the three
month periods ended March 31,1996 and 1995, and the cash flows for each of the
three month periods then ended.
The operating results for the three months ended March 31,1996 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996.
2. SUPPLEMENTAL DISCLOURE OF CASH FLOW INFORMATION
A schedule of supplemental cash flow information follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1995
-------- --------
<S> <C> <C>
Cash paid during the period:
Interest paid ....................................... $ 74,000 $ 75,000
Income taxes paid ................................... 179,000 --
Significant noncash investing and financing activities:
Equipment purchases financed with debt .............. 54,000 --
Note payable issued for acquisition of franchisee ... 198,000 --
</TABLE>
3. EARNINGS PER SHARE
Earnings per share are computed based on the weighted average number of
common and common equivalent shares outstanding during the period. Common
equivalent shares include the dilution from the potential exercise of stock
options when the effect is dilutive. The weighted average number of shares used
in the computation of earnings per share were 5,448,549 for the three months
ended March 31,1996.
4. UNAUDITED PRO FORMA INFORMATION
The computation of pro forma total revenue, net income and net income per
share for the three months ended March 31, 1995 prepared on the basis as if the
Reorganization had occurred on January 1, 1995 with an adjustment in the level
of commissions and royalties to related parties that were not paid after the
Reorganization, an adjustment for interest expense related to shareholder loans
converted to common stock in conjunction with the Company's initial public
offering of common stock on October 12, 1995 and the recording of income tax
expense to reflect the conversion of the Company from an S corporation to a
taxable entity on October 12, 1995 follows:
<TABLE>
<S> <C>
Historical total revenue ................................... $ 5,596,000
Revenue of Sugarloaf Marketing through March 31,1995 ..... 1,602,000
Pro forma adjustment to eliminate intercompany revenue ... (293,000)
-----------
Pro forma total revenue .................................... $ 6,905,000
===========
</TABLE>
8
<PAGE> 9
AMERICAN COIN MERCHANDISING, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<S> <C>
Historical income before income taxes ......................... $ 636,000
Pro forma adjustments:
Net loss of Sugarloaf Marketing through March 31,1995 ....... (22,000)
Adjust for change in level of commissions and
royalties to related parties .............................. 477,000
Adjust for interest related to stockholder loans
converted to equity ....................................... 20,000
Eliminate minority interest and equity interest through
March 31, 1995, as a result of acquiring remaining
ownership interest in affiliated entities ................. 34,000
Record amortization of cost in excess of
assets acquired ........................................... (25,000)
Increase depreciation for assets acquired from
non-control group ......................................... (9,000)
-----------
Total adjustments to income before taxes .................. 475,000
-----------
Pro forma income before income taxes .......................... 1,111,000
Pro forma income tax expense at 38% ........................... 422,000
-----------
Pro forma net income .......................................... $ 689,000
===========
Weighted average shares outstanding(1) ........................ 4,669,000
Pro forma net income per share ................................ $ 0.15
===========
</TABLE>
(1) Shares used in computing pro forma net income per share are based upon
3,503,102 weighted average shares outstanding, common equivalent shares of
370,332, and 96,571 shares issued in connection with the conversion of
certain stockholder loans at the initial public offering price of $7.00
per share and 699,149 shares issued to pay distributions in conjunction
with the Reorganization. Common equivalent shares consist of stock
options, determined using the treasury stock method. Pursuant to the
Securities and Exchange Commission Staff Accounting Bulletins, common and
common equivalent shares issued at prices below the anticipated public
offering price during a 12-month period prior to the proposed offering
have been included in the calculation as if they were outstanding for the
entire period (using the treasury stock method and the average price of
the common stock from October 16, 1995 through December 31, 1995) and the
shares issued in the initial public offering whose proceeds were used to
pay distributions to Control Group stockholders in connection with the
Reorganization have been included in the calculation (using the initial
public offering price) as if they were outstanding for the entire period.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Except for the historical information contained therein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include those discussed in this section, and those discussed in the Company's
Form 10-KSB for the year ended December 31, 1995.
GENERAL
Substantially all of the Company's revenue and gross profit is from
vending revenue and product and services revenue, which is derived from the
operation of Shoppes by the Company and its franchisees. As a result, the
Company's revenue and gross profit in a particular period is directly related
to the number of Shoppes in operation during the period.
THREE MONTHS ENDED MARCH 31, 1996 VS. THREE MONTHS ENDED MARCH 31, 1995
RESULTS OF OPERATIONS
Prior to October 13, 1995 the Company had elected tax treatment as an S
corporation, while the combined affiliates were each organized as S
corporations, except for Southwest Coin Company which was organized as a
partnership. Accordingly, through October 12, 1995, no provisions were made for
income taxes since all income, deductions, gains, losses and credits were
reported on the tax returns of the owners. The S corporation status of the
Company terminated on October 12, 1995 and, thereafter, the Company became a
taxable entity.
The Company's total revenue increased 43.2% from $5,596,000 in 1995 to
$8,014,000 in 1996. Vending revenue increased $2,254,000 or 61.4% in 1996 to
$5,924,000 as a result of an increase in the average number of Shoppes in use
during 1996, which increased 104.2% over the average number of Shoppes in use
during 1995. During the first quarter of 1996, offices acquired in connection
with the August 31, 1995 purchase of Sugarloaf Marketing contributed $1,329,000
in vending revenue. In conjunction with the purchase of Sugarloaf Marketing,
the Company added 492 Shoppes. Through the acquisition date, the Company
accounted for its ownership interest using the equity method of accounting. The
Company's ability to generate increased revenue and achieve higher levels of
profitability will depend on its success in continuing to increase the number
of Shoppes in operation. The continued growth in the number of Shoppes will
depend, in part, upon the Company's success in securing national and regional
supermarket, mass merchandise and restaurant chain accounts. The Company began
a concerted marketing effort in August 1994 to national and regional chain
accounts and has entered into six new agreements with national and regional
supermarket and mass merchandise chain accounts covering the placement of
Shoppes within the locations of such accounts. Although the Company intends to
enter into similar arrangements with other national and regional supermarket
and mass merchandise chain accounts and with national and regional restaurant
chain accounts, there can be no assurance that it will be able to do so or
that, to the extent it does so, it will be able to persuade a significant
number of managers within such chain accounts to place a Shoppe within their
store or other location.
Product and services revenue decreased $330,000 or 20.8% in 1996 as
compared to 1995. Product sales to Sugarloaf Marketing in the first quarter of
1995 amounted to $273,000. The Company also had combined product sales of
$129,000 during the first quarter of 1995 to two franchisees that were
purchased by the Company during the third quarter of 1995 and first quarter of
1996, respectively. This decline was partially offset by products sold to
remaining franchisees whose average machines on location increased 40.3% in the
first quarter of 1996 compared to 1995. Franchise royalties in 1996 increased
$84,000 or 29% over amounts realized during 1995.
Equipment sales to franchisees during 1996 amounted to $460,000 as
compared to $41,000 in equipment sales to franchisees in 1995. In 1996, all
Shoppes purchased by franchisees from the Company's primary supplier of
equipment are processed by the Company on a pass through basis. The Company's
charge to its franchisees for this service is minimal and intended to cover the
processing cost of coordinating the purchase. The Company did negotiate a lower
cost for Shoppes in 1996 as a result of this change in procedure. Prior to
1996, franchisees purchased only Treasure and Fun Shoppes from the Company.
There were no initial franchise fees in 1996 as compared to $4,000 in 1995.
The cost of vending operations increased $1,584,000 in 1996 to $4,115,000.
The vending operations' contribution to 1996 gross profit increased to
$670,000, which represents a 58.8% increase over gross profit from vending
operations realized in 1995. The vending gross profit achieved in 1996 was
30.5% of vending revenue, as compared to 31% in 1995. During 1996, the
Sugarloaf Marketing offices contributed $468,000 of vending gross profit.
Substantially all the Company's plush toys and certain other products dispensed
in the Company's SugarLoaf Toy Shoppes are produced by
10
<PAGE> 11
foreign manufacturers and a majority are purchased directly by the Company from
manufacturers in the People's Republic of China ("China"). The Company also
purchases a substantial portion of the products for its other Shoppes from
vendors who obtain product from domestic and foreign manufacturers. As a
result, the Company is subject to changes in governmental policies, the
imposition of tariffs and import and export controls, transportation delays and
interruptions, political and economic disruptions and labor strikes which could
disrupt the Company's supply of products from foreign manufacturers. China
currently enjoys "most favored nation" ("MFN") status under U.S. tariff laws,
which allows for the most favorable category of U.S. import duties. The loss of
MFN status for China could result in a substantial increase in the import duty
of certain products manufactured in China, which could result in substantially
increased costs for certain products purchased by the Company. Although the
Company would attempt to mitigate any such increased cost by procuring its
product from other countries, it would likely incur substantially higher costs
and temporary disruptions in supply in the event that it becomes necessary to
do so.
Gross profit on product and service revenue in 1996 decreased to $204,000,
or 16.2% of product and service revenue, which is 5.2% lower than the gross
margin achieved in 1995. The decrease in margin results primarily from
increased freight costs associated with import product and pre-pack inventory.
In addition, sales discounts taken by franchisees on product sold during the
first quarter of 1996 were higher than the comparable period in 1995.
General and administrative expenses increased $496,000 in 1996 to
$1,532,000, primarily as a result of the acquisition of Sugarloaf Marketing,
additional payroll and other costs associated with being a public company.
General and administrative expenses increased to 19.1% of revenue in 1996 as
compared to 18.5% in 1995. General and administrative expenses for 1995
includes $137,000 of commissions paid to the Company's two major stockholders.
Interest expense decreased $29,000 to $46,000 in 1996 as compared to 1995.
The Company's interest expense is directly related to its level of borrowings
and changes in the underlying interest rates applicable to the borrowings.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity and capital resources
historically have been cash flow from operations, borrowings under the
Company's bank credit facility and borrowings from the Company's majority
stockholders. These sources of cash flow have been offset by cash used for
investment in skill-crane machines and payment of long-term borrowings.
Net cash provided by operating activities was $1,390,000 and $1,047,000 in
1996 and 1995, respectively. The Company anticipates that cash will continue to
be provided by operations as additional skill-crane machines are placed in
service. Cash required in the future is expected to by funded by existing cash
or borrowings under the Company's credit facility.
Net cash used by investing activities was $1,422,000 and $258,000 in 1996
and 1995, respectively. Capital expenditures amounted to $1,131,000 and
$308,000 in 1996 and 1995, respectively, of which $914,000 and $226,000 was
represented by the acquisition of skill-crane machines. The acquisition of a
franchisee in 1996 used $297,000.
Net cash used by financing activities was $1,003,000 and $203,000 in 1996
and 1995, respectively. Financing activities consist of advances and repayments
on the Company's credit facility and other debt obligations and S corporation
distributions to owners.
Under its current revolving credit agreement, the Company may borrow up to
the lesser of $1,275,000 or a borrowing base defined by agreement, at the
bank's prime rate plus 1%. The revolving line of credit is available through
May 31, 1996, and at March 31, 1996 there was a principal amount of
approximately $78,000 outstanding. The credit agreement provides that certain
financial ratios and equity levels be maintained and places restrictions on,
among other things, the incurrence of additional debt financing and the payment
of dividends. The Company was in compliance with such financial ratios and
restrictions at March 31, 1996.
In January 1996, the Company acquired the Indiana-based operations,
including 156 skill-crane machines, and territory of one of its franchisees,
Hoosier Coin Company, Inc., d/b/a Sugarloaf of Indiana. Under the terms of a
definitive purchase agreement, consideration for the acquisition including
inventory totaled approximately $500,000. Of this amount, $297,000 was paid in
cash with the balance being paid over a three year period in accordance with a
promissory note.
11
<PAGE> 12
As acquisition opportunities arise, the capital resources of the Company
may be utilized to undertake such opportunities. The timing and nature of these
opportunities cannot be predicted; therefore, the financing of future
acquisitions may take a variety of forms.
Company management believes the Company's financial condition is strong
and that funds generated from operations and borrowings available under its
credit agreement will be sufficient to meet the Company's foreseeable operating
and capital expenditure needs.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
11.1 Statement re: Computation of Per Share Earnings.
27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
13
<PAGE> 14
AMERICAN COIN MERCHANDISING, INC.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
AMERICAN COIN MERCHANDISING, INC.
By: /s/ Jerome M. Lapin
----------------------------------------
Jerome M. Lapin
President and Chief Executive Officer
By: /s/ W. John Cash
----------------------------------------
W. John Cash
Vice President, Chief Financial Officer
(Principal Financial and Accounting
Officer)
Boulder, Colorado
May 13, 1996
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
11.1 Statement re: Computation of Per Share Earnings.
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11.1
AMERICAN COIN MERCHANDISING, INC.
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three
Months Ended
March 31, 1996
--------------
<S> <C>
PRIMARY EARNINGS PER SHARE:
NET INCOME ........................ $ 503,000
----------
COMMON SHARES OUTSTANDING ......... 5,081,608
EFFECT OF SHARES ISSUABLE UNDER
STOCK OPTIONS USING THE
TREASURY STOCK METHOD ........... 366,941
----------
SHARES USED IN COMPUTING
EARNINGS PER SHARE .............. 5,448,549
==========
EARNINGS PER COMMON SHARE ......... $ 0.09
==========
</TABLE>
(a) Net income per share for the three months ended March 31, 1995 has been
omitted because through August 31, 1995 the Combined Companies were not a
single entity with its own capital structure.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 555
<SECURITIES> 0
<RECEIVABLES> 742
<ALLOWANCES> 0
<INVENTORY> 3,229
<CURRENT-ASSETS> 4,786
<PP&E> 9,810
<DEPRECIATION> 3,340
<TOTAL-ASSETS> 13,823
<CURRENT-LIABILITIES> 2,536
<BONDS> 0
<COMMON> 51
0
0
<OTHER-SE> 9,466
<TOTAL-LIABILITY-AND-EQUITY> 13,823
<SALES> 7,615
<TOTAL-REVENUES> 8,014
<CGS> 2,972
<TOTAL-COSTS> 5,625
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51
<INCOME-PRETAX> 811
<INCOME-TAX> 308
<INCOME-CONTINUING> 503
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 503
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
