<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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: 0-26580
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)
5660 CENTRAL AVENUE, BOULDER, COLORADO 80301
(Address of principal executive offices)
(Zip Code)
(303) 444-2559
(Registrant's telephone number)
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 proceeding 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.
<TABLE>
<CAPTION>
OUTSTANDING AT
CLASS AUGUST 1, 1997
----- --------------
<S> <C>
Common Stock, $0.01 par value 5,447,904 shares
</TABLE>
<PAGE> 2
AMERICAN COIN MERCHANDISING, INC.
INDEX
<TABLE>
<CAPTION>
PART 1 FINANCIAL INFORMATION. PAGE
----
<S> <C> <C>
Item 1. Financial Statements
Condensed Balance Sheets
June 30, 1997 and December 31, 1996.......................................... 3
Condensed Statements of Earnings for the Three Months and
Six Months Ended June 30, 1997 and 1996...................................... 4
Condensed Statement of Stockholders' Equity for the
Six Months Ended June 30, 1997............................................... 5
Condensed Statements of Cash Flows for the
Six Months Ended June 30, 1997 and 1996...................................... 6
Notes to Condensed Financial Statements........................................ 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................................... 8
PART II OTHER INFORMATION.
Item 4. Submission of Matters to a Vote of Security Holders................................. 11
Item 6. Exhibits and Reports on Form 8-K.................................................... 11
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN COIN MERCHANDISING, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................................................ $ 826,000 $ 771,000
Trade accounts and other receivables ............................................. 726,000 673,000
Inventories ...................................................................... 4,559,000 4,329,000
Prepaid expenses and other assets ................................................ 315,000 164,000
------------ ------------
Total current assets ......................................................... 6,426,000 5,937,000
------------ ------------
Property and equipment, at cost:
Vending machines ................................................................. 16,590,000 12,446,000
Vehicles ......................................................................... 3,102,000 2,095,000
Office equipment, furniture and fixtures ......................................... 909,000 527,000
------------ ------------
20,601,000 15,068,000
Less accumulated depreciation .................................................... (5,859,000) (4,697,000)
------------ ------------
Property and equipment, net .................................................. 14,742,000 10,371,000
------------ ------------
Placement fees, net of accumulated amortization ..................................... 322,000 183,000
Deferred income taxes ............................................................... 42,000 42,000
Cost in excess of assets acquired, net of accumulated amortization .................. 3,125,000 3,209,000
Other assets ........................................................................ 38,000 16,000
------------ ------------
Total assets ................................................................. $ 24,695,000 $ 19,758,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ................................................ 427,000 435,000
Current portion of notes payable to Control Group................................. 674,000 674,000
Income taxes payable ............................................................. 227,000 279,000
Accounts payable ................................................................. 1,820,000 544,000
Accrued commissions .............................................................. 728,000 747,000
Other accrued expenses ........................................................... 592,000 344,000
------------ ------------
Total current liabilities .................................................... 4,468,000 3,023,000
------------ ------------
Long-term debt, net of current portion .............................................. 6,423,000 4,384,000
Notes payable to Control Group, net of current portion .............................. 337,000 675,000
------------ ------------
Total liabilities ............................................................ 11,228,000 8,082,000
------------ ------------
Stockholders' equity:
Preferred stock, $.10 par value (Authorized 500,000 shares; none issued) ......... -- --
Common stock, $.01 par value (Authorized 7,000,000 shares; issued 5,447,904 shares
in 1997 and 5,123,274 in 1996) ............................................... 54,000 51,000
Additional paid-in-capital ....................................................... 8,414,000 8,407,000
Unearned stock option compensation ............................................... (33,000) (49,000)
Retained earnings ................................................................ 5,032,000 3,267,000
------------ ------------
Total stockholders' equity ................................................... 13,467,000 11,676,000
------------ ------------
Total liabilities and stockholders' equity ................................... $ 24,695,000 $ 19,758,000
============ ============
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE> 4
AMERICAN COIN MERCHANDISING, INC.
CONDENSED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Vending .................................. $11,892,000 $6,268,000 $22,648,000 $12,192,000
Product and services ..................... 1,253,000 1,369,000 2,266,000 2,625,000
Franchise royalties ...................... 318,000 268,000 743,000 642,000
Equipment sales and other ................ 327,000 498,000 490,000 958,000
----------- ---------- ----------- -----------
Total revenue ........................ 13,790,000 8,403,000 26,147,000 16,417,000
----------- ---------- ----------- -----------
Cost of revenue:
Vending .................................. 8,443,000 4,524,000 16,042,000 8,639,000
Product and services ..................... 1,027,000 1,090,000 1,813,000 2,142,000
Equipment sales .......................... 330,000 471,000 496,000 929,000
----------- ---------- ----------- -----------
Total cost of revenue ................ 9,800,000 6,085,000 18,351,000 11,710,000
----------- ---------- ----------- -----------
Gross profit ......................... 3,990,000 2,318,000 7,796,000 4,707,000
General and administrative expenses ......... 2,429,000 1,671,000 4,725,000 3,203,000
Interest expense, related parties ........... 20,000 27,000 45,000 54,000
Interest expense, other, net ................ 136,000 18,000 222,000 37,000
----------- ---------- ----------- -----------
Earnings before income taxes ......... 1,405,000 602,000 2,804,000 1,413,000
Provision for income taxes .................. 521,000 229,000 1,039,000 537,000
=========== ========== =========== ===========
Net earnings ......................... $ 884,000 $ 373,000 $ 1,765,000 $ 876,000
=========== ========== =========== ===========
Net earnings per share of common stock $ 0.16 $ 0.07 $ 0.33 $ 0.16
Weighted average common shares ....... 5,439,000 5,449,000 5,368,000 5,449,000
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE> 5
AMERICAN COIN MERCHANDISING, INC.
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, 1996 ...................... $ 51,000 $8,407,000 $(49,000) $3,267,000 $11,676,000
Amortization of deferred
compensation ...................... -- -- 12,000 -- 12,000
Exercise of employee stock
options ........................... 3,000 12,000 -- -- 15,000
Termination of employee
stock options ..................... (5,000) 4,000 (1,000)
Net earnings ........................ -- -- -- 1,765,000 1,765,000
-------- ---------- -------- ---------- -----------
JUNE 30, 1997 .......................... $ 54,000 $8,414,000 $(33,000) $5,032,000 $13,467,000
======== ========== ======== ========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
5
<PAGE> 6
AMERICAN COIN MERCHANDISING, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1997 1996
---- ----
<S> <C> <C>
Operating activities:
Net earnings ...................................................... $ 1,765,000 $ 876,000
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization ................................. 1,359,000 762,000
Compensation expense related to stock options ................. 11,000 13,000
Loss on sales of assets ....................................... 15,000 3,000
Changes in operating assets and liabilities:
Trade accounts and other receivables ...................... (53,000) (212,000)
Inventories ............................................... (230,000) (157,000)
Prepaid expenses and other assets ......................... (173,000) (95,000)
Income taxes payable ...................................... (52,000) 27,000
Accounts payable and accrued expenses ..................... 1,505,000 669,000
----------- -----------
Net cash provided by operating activities ................... 4,147,000 1,886,000
----------- -----------
Investing activities:
Acquisitions of property and equipment ............................ (5,666,000) (3,265,000)
Acquisition of franchisees ........................................ -- (613,000)
Proceeds from sales of property and equipment ..................... 81,000 20,000
Placement fees .................................................... (215,000) (113,000)
Payments received on notes receivable ............................. -- 7,000
----------- -----------
Net cash used in investing activities ....................... (5,800,000) (3,964,000)
----------- -----------
Financing activities:
Net borrowings on revolving line of credit ........................ 2,248,000 1,283,000
Principal payments on long-term debt .............................. (217,000) (185,000)
Principal payments on notes payable to Control Group .............. (338,000) --
Proceeds from issuance of long-term debt .......................... -- 24,000
Distributions ..................................................... -- (634,000)
Exercise of employee stock options ................................ 15,000 --
----------- -----------
Net cash provided by financing activities ................... 1,708,000 488,000
----------- -----------
Net increase (decrease) in cash and cash equivalents ........ 55,000 (1,590,000)
Cash and cash equivalents at beginning of period ..................... 771,000 1,590,000
=========== ===========
Cash and cash equivalents at end of period ........................... $ 826,000 $ --
=========== ===========
</TABLE>
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. At June 30, 1997, the Company had 29 field offices
operating in 37 states and there were 26 Company franchises in operation. The
Company sells product to its franchisees and collects continuing royalties
ranging from 2% to 5% of the franchisees' gross machine revenue.
The accompanying 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 condensed or omitted pursuant to such rules and
regulations. Certain amounts for prior periods have been reclassified to
conform to the June 30, 1997 presentation. 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, 1996.
In the opinion of the Company, the accompanying condensed financial
statements include all adjustments (consisting of normal recurring accruals and
adjustments) required to present fairly the Company's financial position at
June 30,1997 and December 31,1996, and the results of its operations for each
of the three month and six month periods ended June 30, 1997 and 1996, and the
cash flows for each of the six month periods then ended.
The operating results for the six months ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997.
2. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
A schedule of supplemental cash flow information follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1997 1996
---- ----
<S> <C> <C>
Cash paid during the period:
Interest paid ...................................................... $ 282,000 $ 95,000
Income taxes paid .................................................. 1,092,000 510,000
Significant noncash investing and financing activities:
Equipment purchases financed with debt ............................. -- 54,000
Notes payable issued for acquisition of franchisee ................. -- 363,000
</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 5,438,747 and 5,448,244 for the
three months ended June 30, 1997 and 1996 and 5,367,659 and 5,448,379 for the
six months ended June 30, 1997 and 1996, respectively.
4. INCOME TAXES
Income taxes are computed using the anticipated effective tax rate for the
year. Deferred income taxes are not adjusted quarterly.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
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
registration statement on Form SB-2 and Form 10-KSB for the year ended December
31,1996.
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.
RESULTS OF OPERATIONS
Total revenue for the first six months of 1997 increased 59.3% to
$26,147,000 from $16,417,000 for the same period in 1996. Net earnings for the
first half of 1997 were $1,765,000 compared to net earnings of $876,000 in the
first six months of 1996. For the second quarter of 1997, total revenue
increased 64.1% to $13,790,000 as compared to $8,403,000 for the same period in
1996. Net earnings for the quarter were $884,000 as compared to net earnings of
$373,000 for the second quarter of 1996.
Vending revenue increased $10,456,000 or 85.8% in the first half of 1997
to $22,648,000 from $12,192,000 for the comparable period in 1996 as a result
of a 76.6% increase in the average number of Shoppes in place during the first
half of 1997 compared to the average number in place during the same period in
1996. For the second quarter of 1997, vending revenue increased $5,624,000 or
89.7% to $11,892,000 as compared to the same period in 1996. The average number
of machines in place during the second quarter of 1997 increased by 75.2% as
compared to the second quarter of 1996.
The Company's ability to generate increased vending 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 new agreements with
national and regional supermarket and mass merchandise chain accounts covering
the placement of Shoppes within the locations of such accounts. In August 1996,
the Company signed an agreement with Wal-Mart Stores, Inc. which expires
January 1, 2000. At June 30, 1997, the Company had installed more than 1,460
skill-crane machines in approximately 840 Wal-Mart stores nationwide. Under the
terms of the agreement, an estimated 1,250 Wal-Mart stores will be installed
with skill-crane machines by the Company and its franchisees. In January 1997,
the Company signed a three-year agreement with Safeway Inc. that will make the
Company and its franchisees Safeway's domestic skill-crane operator. At June
30, 1997, the Company and its franchisees had installed more than 450
skill-crane machines in approximately 340 Safeway stores nationwide. In April
1997, the Company signed a three-year agreement with Safeway Inc. that will
make the Company and its franchisees Safeway's domestic coin-operated "Kiddy
Ride" operator. 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 $359,000 or 13.7% for the first six
months of 1997 as compared to the same period in 1996. During the first six
months of 1996, the Company had combined product sales of $367,000 to
franchisees that were subsequently acquired by the Company throughout the
balance of 1996. Franchise royalties for the first six months of 1997 increased
$101,000 or 15.7% over royalties earned for the same period during 1996.
Equipment sales to franchisees during the first six months of 1997
amounted to $499,000 as compared to $958,000 in equipment sales to franchisees
in 1996. The Company processes shoppes purchased by franchisees from the
Company's primary supplier of equipment 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. As a result of this structure,
the Company was able to reduce the cost to purchase Shoppes in 1996. Prior to
1996, franchisees purchased only Treasure and Fun Shoppes from the Company's
primary manufacturer.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED).
The cost of vending operations for the first six months of 1997 increased
$7,403,000 or 85.7% to $16,042,000 from $8,639,000 for the comparable period in
1996. The vending operation's contribution to gross profit for the first six
months of 1997 increased to $6,606,000, which represents a 85.9% increase over
gross profit from vending operations realized in the same period in 1996. The
vending gross profit achieved in the first half of 1997 was 29.2% of vending
revenue, as compared to 29.1% for the same period in 1996. For the second
quarter of 1997, the cost of vending increased $3,919,000 or 86.6% to
$8,443,000 from $4,524,000 for the comparable period in 1996. Vending gross
profit realized during the second quarter of 1997 was $3,449,000 or 29% of
vending revenue as compared to $1,744,000 or 27.8% for the second quarter of
1996.
Substantially all the Company's plush toys and certain other products
dispensed in the Company's SugarLoaf Toy Shoppes are produced by 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 services revenue for the first six months of
1997 decreased to $453,000 or 20% of product and services revenue, which is 1.6%
higher than the gross margin achieved for the same period in 1996. For the
second quarter of 1997, gross profit on product and services revenue decreased
to $226,000 or 18% of product and services revenue, as compared to $279,000 or
20.4% of product and services revenue for the second quarter of 1996. The
decrease in product margin for the second quarter of 1997 results primarily
from higher discounts taken by franchisees on product purchased during the
quarter and higher direct costs associated with the pre-pack program resulting
from a change in the product mix.
General and administrative expenses for the first six months of 1997
increased $1,522,000 to $4,725,000 or 18.1% of revenue, as compared to
$3,203,000 or 19.5% of revenue for the comparable period in 1996. The increase
in general and administrative expenses results primarily from the additional
operating and satellite offices opened by the Company during the past year.
Interest expense for the first six months of 1997 increased $176,000 to
$267,000 as compared to the same period in 1996. 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 and borrowings under the
Company's bank credit facility. 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 $4,147,000 and $1,886,000
for the six months ended June 30, 1997 and 1996, 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 be funded by existing cash or borrowings under the Company's credit
facility.
Net cash used in investing activities was $5,800,000 and $3,964,000 for
the six months ended June 30, 1997 and 1996, respectively. Capital expenditures
for the six months ended June 30, 1997 and 1996 amounted to $5,666,000 and
$3,265,000, respectively, of which $4,064,000 and $2,660,000 was represented by
the acquisition of skill-crane machines. The acquisition of franchisees in 1996
used $613,000.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED).
Net cash provided by financing activities was $1,708,000 and $488,000 for
the six months ended June 30, 1997 and 1996, respectively. Financing activities
consist of advances and repayments on the Company's credit facility and other
debt obligations. During 1996, the Company made S corporation distributions to
owners related to 1995 earnings.
Under its current revolving credit agreement, the Company may borrow up to
the lesser of $9,000,000 or a borrowing base defined by agreement, at the
bank's prime interest rate. The revolving line of credit is available through
July 5, 1999, and at June 30, 1997 there was a principal amount of
approximately $6,035,000 outstanding. The credit agreement provides that
certain financial ratios be met 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 June
30, 1997.
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 and the Company's ability to negotiate additional and enhanced
credit agreements will be sufficient to meet the Company's foreseeable
operating and capital expenditure needs.
10
<PAGE> 11
PART II. OTHER INFORMATION.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders was held on April 30 1997, at which the
stockholders elected seven directors to each serve until the next annual
meeting of stockholders and until his successor is elected and has qualified or
until such director's death, resignation or removal, and the ratification of
the selection of KPMG Peat Marwick LLP as independent auditors of the Company
for its fiscal year ending December 31, 1997. Votes were cast as follows:
<TABLE>
<CAPTION>
Votes Against
Votes For Or Withheld Votes Abstained Broker Non-Votes
--------- ----------- --------------- ----------------
<S> <C> <C> <C> <C>
Election of Directors:
Jerome M. Lapin......................... 3,339,279 1,800 Not Applicable Not Applicable
Randall J. Fagundo...................... 3,338,879 2,200 Not Applicable Not Applicable
Abbe M. Stutsman........................ 3,339,279 1,800 Not Applicable Not Applicable
Richard D. Jones........................ 3,339,279 1,800 Not Applicable Not Applicable
J. Gregory Theisen...................... 3,339,279 1,800 Not Applicable Not Applicable
Jim D. Baldwin.......................... 3,337,279 3,800 Not Applicable Not Applicable
John A. Sullivan........................ 3,339,279 1,800 Not Applicable Not Applicable
Ratification of KPMG Peat Marwick LLP as
independent auditors for the fiscal year
ending December 31, 1997................... 3,339,679 None 1,400 None
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
10.34 Modification Agreement, dated May 27, 1997,
between Registrant and Wells Fargo Bank
(Colorado), N.A.
11.1 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
11
<PAGE> 12
AMERICAN COIN MERCHANDISING, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN COIN MERCHANDISING, INC.
August 12, 1997 By: /s/ Jerome M. Lapin
- ---------------------- -------------------------------------------
Date Jerome M. Lapin
President and Chief Executive Officer
August 12, 1997 By: /s/ W. John Cash
- ---------------------- -------------------------------------------
Date W. John Cash
Vice President, Chief Financial Officer
12
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
<S> <C> <C>
10.34 Modification Agreement, dated May 27, 1997, between Registrant
and Wells Fargo Bank (Colorado), N.A............................... 14
11.1 Statement re: Computation of Per Share Earnings.................... 19
27 Financial Data Schedule............................................ 20
</TABLE>
13
<PAGE> 1
EXHIBIT 10.34
MODIFICATION AGREEMENT
BY THIS MODIFICATION AGREEMENT, made and entered into as of the 27th day of
May, 1997, AMERICAN COIN MERCHANDISING, INC., a Delaware corporation, whose
address is 5660 Central Avenue, Boulder, Colorado 80301 (hereinafter called
"Borrower"), and WELLS FARGO BANK (COLORADO), NATIONAL ASSOCIATION, whose
address is 633 Seventeenth Street, Denver, Colorado 80202 (hereinafter called
"Lender"), confirm and agree as follows:
SECTION 1. RECITALS.
1.1 Borrower and Lender entered into a Credit Agreement dated
September 23, 1996 (the "Credit Agreement"), which provides for a revolving
loan by Lender to Borrower in the maximum principal amount of $6,000,000.00
upon the terms and conditions contained therein (the "Loan").
1.2 The Loan is evidenced by a Promissory Note dated
September 23, 1996, executed by Borrower, payable to the order of Lender, in
the principal amount of $6,000,000.00 (the "Note").
1.3 The Loan is secured in part by a Continuing Security
Agreement dated September 23, 1996, executed by Borrower as the Debtor for the
benefit of Lender as the Secured Party (the "Security Agreement").
1.4 The Credit Agreement, the Note, the Security Agreement,
and all other documents and instruments executed and delivered in connection
with the Loan or that secure payment of the Loan, are hereinafter called the
"Loan Documents."
1.5 The total principal and accrued interest outstanding
under the Loan Documents as of May 23, 1997, is $5,964,240.18, comprised of
principal of $5,932,174.08 and interest of $32,066.10.
1.6 Borrower and Lender desire to make modifications to the
Credit Agreement and other Loan Documents as set forth herein.
SECTION 2. CREDIT AGREEMENT.
2.1 The first sentence of subsection (a) of Section 1.1 of
the Credit Agreement is hereby deleted in its entirety and the following
inserted in lieu thereof:
"(a) Revolving Line of Credit. Subject to the terms and
conditions of this Agreement, and including, the conversion right set
forth in Section 1.2 hereof, Bank hereby agrees to make advances to
Borrower from time to time up to and including July 5, 1999, not to
exceed at any time the aggregate outstanding principal amount of Nine
Million Dollars ($9,000,000) ("Revolving Line of Credit"), the
proceeds of which shall be used for working capital, equipment
purchases, capital expenditures, letters of credit and retirement of
existing Bank debt."
2.2 The following paragraph is hereby added to Section 1.3
of the Credit Agreement, as subsection 1.3(e):
"(e) Unused Commitment Fee. Borrower shall pay to Bank a fee
equal to one-eighth of one percent (1/8%) per annum (computed on the
basis of a 360-day year, actual days elapsed) on the average daily
unused amount of the Revolving Line of Credit, which fee shall be
calculated on a quarterly basis by Bank and shall be due and payable
by Borrower in arrears on the last day of the month immediately
following the end of each fiscal quarter, commencing July 31, 1997."
2.3 Subsections (a) through (d) of Section 4.3 of the Credit
Agreement are hereby deleted in their entirety and replaced with the following:
14
<PAGE> 2
"(a) not later than 90 days after and as of the end of each
fiscal year, an unqualified financial statement of Borrower, prepared
by certified public accountants reasonably satisfactory to the Bank;
(b) not later than 45 days after and as of the end of each
fiscal quarter, a financial statement of Borrower, prepared in
accordance with GAAP by Borrower, to include accounts receivable
agings, income and profit and loss statements;
(c) not later than 45 days after and as of the end of each
fiscal quarter, a borrowing base certificate in the form attached
hereto as Exhibit A, an inventory collateral report, an aged listing
of accounts receivable, a reconciliation of accounts, Borrower's
internally prepared ratios described in paragraph 4.9 hereof and
immediately upon each request from Bank, a list of the names and
addresses of all of Borrower's account debtors;
(d) not later than 30 days prior to the end of each fiscal
year, a projection, prepared by Borrower for the upcoming year to and
including next fiscal year-end, to include projected income
statements, balance sheets and cash flows;"
2.4 Subsections (a) through (c) of Section 4.9 of the Credit
Agreement are hereby deleted in their entirety and replaced with the following:
"(a) Current Ratio at any quarter end not less than 1.15 to
1.0, with "Current Ratio" defined as total current assets divided by
total current liabilities.
(b) Total Liabilities to Tangible Net Worth ratio of not
greater than 1.5 to 1.0, as of each quarter end, with "Total
Liabilities" defined as the aggregate of current liabilities and
non-current liabilities, and with "Tangible Net Worth" defined as the
aggregate of total stockholders' equity less costs in excess of assets
acquired.
(c) Funded Debt to EBITDA ratio of not greater than 1.5 to
1.0 as of each quarter end, with "Funded Debt" defined as the sum of
all Bank debt, all amounts due to related parties and any
acquisition-related carryback debt, and with "EBITDA" defined as the
prior four quarters' net profit plus interest expense, income tax
expense, depreciation and amortization expense."
2.5 Section 2.1 of the Credit Agreement is amended to state
that the Borrower from time to time does business as Sugarloaf Creations, Inc.
SECTION 3. NOTE.
3.1 The header and first paragraph of the Note are hereby
deleted in their entirety and the following is inserted in lieu thereof:
"$9,000,000.00 Denver, Colorado
September 23, 1996
FOR VALUE RECEIVED, the undersigned AMERICAN COIN
MERCHANDISING, INC., ("Borrower") promises to pay to the order of
WELLS FARGO BANK (COLORADO), NATIONAL ASSOCIATION ("Bank") at its
office at 633 Seventeenth Street, Denver, Colorado, or at such other
place as the holder hereof may designate, in lawful money of the
United States of America and in immediately available funds, the
principal sum of NINE MILLION AND NO/100 DOLLARS ($9,000,000.00) or so
much thereof as may be advanced and be outstanding, with interest
thereon, to be computed on each advance from the date of its
disbursement (computed on the basis of a 360-day year, actual days
elapsed) at a fluctuating rate per annum equal to the Prime Rate in
effect from time to time. Each change in the rate of interest
hereunder shall become effective on the date each Prime Rate change is
announced within Bank."
15
<PAGE> 3
3.2 The last sentence of paragraph C.1 of the Note is hereby
deleted in its entirety and the following is inserted in lieu thereof:
"The outstanding principal balance of this Note shall be due and
payable in full on July 5, 1999, or as otherwise provided in the
Credit Agreement of even date herewith executed by Borrower and Bank
as such Credit Agreement may be amended from time to time."
SECTION 4. OTHER MODIFICATIONS, RATIFICATIONS AND AGREEMENTS.
4.1 All references to the Credit Agreement in the other Loan
Documents are hereby amended to refer to the Credit Agreement as amended by
this Agreement.
4.2 All references to the Note in the other Loan Documents
are hereby amended to refer to the Note as amended by this Agreement.
4.3 All references to any other Loan Document in the other
Loan Documents are hereby amended to refer to that Loan Document as amended by
this Agreement.
4.4 Borrower acknowledges that the indebtedness evidenced by
the Note is just and owing, that the balance thereof is correctly shown in
Section 1.5 hereof, and Borrower agrees to pay the indebtedness evidenced by
the Note and secured by the Loan Documents, according to the terms thereof, as
modified by this Agreement.
4.5 Borrower reaffirms to Lender each of the representations,
warranties, covenants and agreements of Borrower set forth in all the Loan
Documents, with the same force and effect as if each were separately stated
herein and made as of the date of this Agreement.
4.6 Borrower ratifies, reaffirms, acknowledges, and agrees
that the Loan Documents, as amended by this Agreement, represent valid,
enforceable and collectible obligations of Borrower, and that there are no
existing claims, defenses, personal or otherwise, or rights of setoff
whatsoever with respect to any of these documents or instruments. In addition,
Borrower hereby expressly waives, releases and absolutely and forever
discharges Lender and its shareholders, directors, officers, employees and
agents, and their heirs, personal representatives, successors and assigns, from
any and all liability, claims, demands, damages, actions and causes of action
that Borrower may now have, or has had prior to the date hereof and, without
limiting the generality of the foregoing, from any and all liability, claims,
demands, damages, actions and causes of action arising out of, or in any way
connected with, the Loan. Borrower further acknowledges and represents that no
Event of Default (as defined in the Credit Agreement) or matter which, with the
giving of notice, passage of time, or both, would constitute an Event of
Default exists.
4.7 All terms, conditions and provisions of the Loan
Documents are continued in full force and effect and shall remain unaffected
and unchanged except as specifically amended by this Modification Agreement.
4.8 Borrower shall pay to Lender on the execution hereof by
Lender a loan modification fee of $5,000.00.
SECTION 5. GENERAL.
5.1 This Agreement in no way acts as a release or
relinquishment of those liens, security interests and rights securing payment
of the Loan, including, without limitation, the liens created by the Security
Agreement and the other Loan Documents. Such liens, security interests and
rights are hereby ratified, confirmed, renewed and extended by Borrower in all
respects.
5.2 Borrower shall execute and deliver such additional
documents and do such other acts as Lender may reasonably require to fully
implement the intent of this Agreement, including, but not limited to, the
execution of such financing statements or amendments thereto as Lender may
require to reflect Borrower's doing business as Sugarloaf Creations, Inc.
16
<PAGE> 4
5.3 Borrower shall pay all costs and expenses, including,
without limitation, recording fees and reasonable attorneys' fees incurred by
Lender in connection with this Agreement. Lender, at its option, but without
any obligation to do so, may advance funds to pay any such costs and expenses
that are the obligation of the Borrower, and all such funds advanced shall bear
interest at the Prime Rate provided in the Note, shall be due and payable upon
demand and shall be secured by all of the Loan Documents.
5.4 Notwithstanding anything to the contrary contained herein
or in any other instrument executed by Borrower or Lender or in any other
action or conduct undertaken by Borrower or Lender on or before the date of
this Agreement, the agreements, covenants and provisions contained herein shall
constitute the only evidence of Lender's consent to modify the terms and
provisions of the Loan Documents. Accordingly, no express or implied consent to
any further modifications involving any of the matters set forth in this
Agreement or otherwise shall be inferred or implied by Lender's execution of
this Agreement. Further, Lender's execution of this Agreement shall not
constitute a waiver (either express or implied) of the requirement that any
further modification of the Loan or of the Loan Documents shall require the
express written approval of Lender; no such approval (either express or
implied) has been given as of the date of this Agreement.
5.5 This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their heirs, personal representatives,
successors and assigns.
5.6 This Agreement is made for the sole protection and
benefit of the parties hereto, and no other person or entity shall have any
right of action hereon.
5.7 This Agreement shall be governed by and construed
according to the laws of the State of Colorado.
IN WITNESS WHEREOF, this Agreement is executed as of the date
indicated above.
BORROWER:
AMERICAN COIN MERCHANDISING, INC., a Delaware
corporation
By: /s/ Jerome M. Lapin
----------------------------------------
Title: President, Chief Executive Officer
LENDER:
WELLS FARGO BANK (COLORADO), NATIONAL
ASSOCIATION
By: /s/ Blake Peterson
----------------------------------------
Title: Vice President
17
<PAGE> 5
STATE OF COLORADO )
) ss.
COUNTY OF BOULDER )
The foregoing instrument was acknowledged before me this 27
day of May, 1997, by Jerome M. Lapin, the President, Chief Executive Officer of
American Coin Merchandising, Inc., a Delaware corporation.
My commission expires: November 13, 1998
Witness my hand and official seal.
/s/ Loretta La Terra
------------------------
Notary Public
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 27
day of May, 1997, by Blake Peterson, the Vice President of Wells Fargo Bank
(Colorado), National Association.
My commission expires: June 14, 2000
Witness my hand and official seal.
/s/ Diane C. Wagner
------------------------
Notary Public
18
<PAGE> 1
EXHIBIT 11.1
AMERICAN COIN MERCHANDISING, INC.
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------- ---------------------------
JUNE 30, JUNE 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
EARNINGS PER SHARE:
NET EARNINGS .......................................... $ 884,000 $ 373,000 $ 1,765,000 $ 876,000
------------ ------------ ------------ ------------
COMMON SHARES OUTSTANDING AT
BEGINNING OF PERIOD .............................. 5,284,923 5,081,608 5,123,274 5,081,608
EFFECT OF SHARES ISSUED DURING THE PERIOD ............. 108,840 -- 199,401 --
EFFECT OF SHARES ISSUABLE UNDER STOCK OPTIONS
USING THE TREASURY STOCK METHOD................... 44,984 366,636 44,984 366,771
------------ ------------ ------------ ------------
SHARES USED IN COMPUTING EARNINGS PER SHARE ........... 5,438,747 5,448,244 5,367,659 5,448,379
============ ============ ============ ============
EARNINGS PER COMMON SHARE ............................. $ 0.16 $ 0.07 $ 0.33 $ 0.16
============ ============ ============ ============
</TABLE>
(a) Primary and fully diluted earnings per share are the same.
19
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 826
<SECURITIES> 0
<RECEIVABLES> 726
<ALLOWANCES> 0
<INVENTORY> 4,559
<CURRENT-ASSETS> 6,426
<PP&E> 20,601
<DEPRECIATION> 5,859
<TOTAL-ASSETS> 24,695
<CURRENT-LIABILITIES> 4,468
<BONDS> 0
0
0
<COMMON> 54
<OTHER-SE> 13,413
<TOTAL-LIABILITY-AND-EQUITY> 24,695
<SALES> 25,391
<TOTAL-REVENUES> 26,147
<CGS> 6,980
<TOTAL-COSTS> 18,351
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 271
<INCOME-PRETAX> 2,804
<INCOME-TAX> 1,039
<INCOME-CONTINUING> 1,765
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,765
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
