##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2005
 o
    
    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
  Oregon
    
    93-0809419(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 (Address of principal executive offices) (Zip Code)
 (Registrants telephone number, including area code)
  þ o
  o þ
  o þ
  CLASS
    
    OUTSTANDING AT SEPTEMBER 30, 2005Common Stock
    
    14,067,714




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TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESITEM 5. OTHER INFORMATIONPART II  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGSITEM 6. EXHIBITSSIGNATUREEMPLOYMENT AGREEMENT DATED NOVEMBER 11, 2005RETAINER AGREEMENT DATED NOVEMBER 11, 2005FIRST AMENDMENT AND WAIVER TO CREDIT AGREEMENTCERTIFICATION OF CHIEF EXECUTIVE OFFICERCERTIFICATION OF CHIEF FINANCIAL OFFICERCERTIFICATION OF PRINCIPAL ACCOUNTING OFFICERCERTIFICATION OF CHIEF EXECUTIVE OFFICERCERTIFICATION OF CHIEF FINANCIAL OFFICERCERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER    Table of Contents  
 PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 TRM Corporation
Consolidated Balance Sheets
(unaudited)
(In thousands)
 December 31,
    
    
    September 30,2004
    
    
    2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    5,576
    
    
    $
    3,132Accounts receivable, net
    
    
    12,251
    
    
    
    17,522Income tax receivable
    
    
    115
    
    
    
    393Inventories
    
    
    7,319
    
    
    
    2,332Prepaid expenses and other
    
    
    5,011
    
    
    
    3,695Deferred tax asset
    
    
    58
    
    
    
    399Total current assets
    
    
    30,330
    
    
    
    27,473Equipment, less accumulated depreciation and amortization
    
    
    72,265
    
    
    
    75,721Restricted cash  TRM Inventory Funding Trust
    
    
    75,547
    
    
    
    93,985Goodwill
    
    
    118,444
    
    
    
    118,846Other intangible assets, less accumulated amortization
    
    
    51,241
    
    
    
    44,922Deferred tax asset
    
    
    
    
    
    
    703Other assets
    
    
    9,473
    
    
    
    3,021Total assets
    
    $
    357,300
    
    
    $
    364,671Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    18,234
    
    
    $
    10,169Accrued expenses
    
    
    8,891
    
    
    
    7,289Accrued expenses of TRM Inventory Funding Trust
    
    
    154
    
    
    
    176Current portion of long-term debt
    
    
    10,059
    
    
    
    10,045Current portion of obligations under capital leases
    
    
    2,195
    
    
    
    1,033Total current liabilities
    
    
    39,533
    
    
    
    28,712TRM Inventory Funding Trust note payable
    
    
    74,105
    
    
    
    92,844Long-term debt
    
    
    120,177
    
    
    
    115,653Obligations under capital leases
    
    
    1,644
    
    
    
    876Deferred tax liability
    
    
    8,168
    
    
    
    9,739Other long-term liabilities
    
    
    241
    
    
    
    103Preferred dividends payable
    
    
    220
    
    
    
    Total liabilities
    
    
    244,088
    
    
    
    247,927Minority interest
    
    
    1,500
    
    
    
    1,500Shareholders equity:Preferred stock, no par value -
5,000 shares authorized; no shares issued and outstanding
(1,044 at December 31, 2004)
    
    
    11,620
    
    
    
    Common stock, no par value -
50,000 shares authorized;14,068 shares issued and
outstanding (13,139 at December 31, 2004)
    
    
    81,075
    
    
    
    93,181Additional paid-in capital
    
    
    63
    
    
    
    63Accumulated other comprehensive income:Accumulated foreign currency translation adjustments
    
    
    4,474
    
    
    
    2,934Unrealized gain on securities
    
    
    28
    
    
    
    Other
    
    
    
    
    
    
    (69
    )Retained earnings
    
    
    14,452
    
    
    
    19,135Total shareholders equity
    
    
    111,712
    
    
    
    115,244Total liabilities and shareholders equity
    
    $
    357,300
    
    
    $
    364,671
  2




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##### Table of Contents



TRM Corporation
Consolidated Statements of Operations
(unaudited)
(In thousands, except per share data)
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Sales
    
    $
    28,981
    
    
    $
    59,237
    
    
    $
    83,737
    
    
    $
    179,454Less discounts
    
    
    6,495
    
    
    
    27,885
    
    
    
    17,722
    
    
    
    81,542Net sales
    
    
    22,486
    
    
    
    31,352
    
    
    
    66,015
    
    
    
    97,912Cost of sales
    
    
    12,406
    
    
    
    18,856
    
    
    
    35,116
    
    
    
    53,030Gross profit
    
    
    10,080
    
    
    
    12,496
    
    
    
    30,899
    
    
    
    44,882Selling, general and administrative expense
    
    
    6,640
    
    
    
    11,537
    
    
    
    19,056
    
    
    
    34,077Asset retirements
    
    
    69
    
    
    
    
    
    
    
    69
    
    
    
    Operating income
    
    
    3,371
    
    
    
    959
    
    
    
    11,774
    
    
    
    10,805Interest expense
    
    
    141
    
    
    
    2,494
    
    
    
    635
    
    
    
    7,242Other income, net
    
    
    (270
    )
    
    
    (1,402
    )
    
    
    (43
    )
    
    
    (2,214
    )Income (loss) from continuing operations before
income taxes
    
    
    3,500
    
    
    
    (133
    )
    
    
    11,182
    
    
    
    5,777Provision (benefit) for income taxes
    
    
    1,257
    
    
    
    (451
    )
    
    
    3,577
    
    
    
    947Income from continuing operations
    
    
    2,243
    
    
    
    318
    
    
    
    7,605
    
    
    
    4,830Loss from discontinued operations, net of income tax
benefit of $37 for the three months and $106 for
the nine months ended September 30, 2004
    
    
    (77
    )
    
    
    
    
    
    
    (218
    )
    
    
    Net income
    
    $
    2,166
    
    
    $
    318
    
    
    $
    7,387
    
    
    $
    4,830Basic and diluted per share information:Income from continuing operations
    
    $
    2,243
    
    
    $
    318
    
    
    $
    7,605
    
    
    $
    4,830Preferred stock dividends
    
    
    (355
    )
    
    
    
    
    
    
    (1,100
    )
    
    
    (147
    )Excess of cash paid over carrying value of
preferred stock redeemed
    
    
    (46
    )
    
    
    
    
    
    
    (46
    )
    
    
    Income allocated to Series A preferred shareholders
    
    
    (216
    )
    
    
    
    
    
    
    (902
    )
    
    
    (57
    )Net income from continuing operations available to
common shareholders
    
    $
    1,626
    
    
    $
    318
    
    
    $
    5,557
    
    
    $
    4,626Weighted average common shares outstanding
    
    
    9,070
    
    
    
    14,041
    
    
    
    7,915
    
    
    
    13,809Dilutive effect of stock options
    
    
    867
    
    
    
    730
    
    
    
    1,012
    
    
    
    803Dilutive effect of warrants
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    32Weighted average common shares outstanding,
assuming dilution
    
    
    9,937
    
    
    
    14,771
    
    
    
    8,935
    
    
    
    14,644Basic income (loss) per share:From continuing operations
    
    $
    .18
    
    
    $
    .02
    
    
    $
    .70
    
    
    $
    .33Discontinued operations
    
    
    (.01
    )
    
    
    
    
    
    
    (.03
    )
    
    
    Net income
    
    $
    .17
    
    
    $
    .02
    
    
    $
    .67
    
    
    $
    .33Diluted income (loss) per share:From continuing operations
    
    $
    .17
    
    
    $
    .02
    
    
    $
    .63
    
    
    $
    .32Discontinued operations
    
    
    (.01
    )
    
    
    
    
    
    
    (.03
    )
    
    
    Net income
    
    $
    .16
    
    
    $
    .02
    
    
    $
    .60
    
    
    $
    .32
  3




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TRM Corporation
Consolidated Statement of Shareholders Equity
(unaudited)
(In thousands)
 AccumulatedAdditional
    
    
    otherComprehensive
    
    
    Preferred
    
    Common
    
    paid-in
    
    comprehensive
    
    Retainedincome
    
    
    Shares
    
    
    Amounts
    
    
    Shares
    
    
    Amounts
    
    
    capital
    
    
    income
    
    
    earnings
    
    
    TotalBalances, December 31, 2004
    
    
    
    
    
    
    1,044
    
    
    $
    11,620
    
    
    
    13,139
    
    
    $
    81,075
    
    
    $
    63
    
    
    $
    4,502
    
    
    $
    14,452
    
    
    $
    111,712Comprehensive income:Net income
    
    $
    4,830
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,830
    
    
    
    4,830Other comprehensive income:Foreign currency
translation adjustment
    
    
    (1,540
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,540
    )
    
    
    
    
    
    
    (1,540
    )Unrealized gain on securities
    
    
    (28
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28
    )
    
    
    
    
    
    
    (28
    )Other, net of tax
    
    
    (69
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (69
    )
    
    
    
    
    
    
    (69
    )Comprehensive income
    
    $
    3,193Conversion of Series A preferred
stock
    
    
    
    
    
    
    (1,044
    )
    
    
    (11,620
    )
    
    
    783
    
    
    
    11,620
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92
    
    
    
    213
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    213Exercise of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37Tax benefit of options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    236
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    236Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (147
    )
    
    
    (147
    )Balances, September 30, 2005
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    14,068
    
    
    $
    93,181
    
    
    $
    63
    
    
    $
    2,865
    
    
    $
    19,135
    
    
    $
    115,244
  4




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TRM Corporation
Consolidated Statements of Cash Flows
(unaudited)
(In thousands)
 Nine months endedSeptember 30,2004
    
    
    2005Operating activities:Net income
    
    $
    7,387
    
    
    $
    4,830Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    7,107
    
    
    
    15,341Loss on disposal of equipment
    
    
    439
    
    
    
    210Gain on sale of investment in equity security
    
    
    
    
    
    
    (1,312
    )Changes in items affecting operations, net of effect of business acquisitions:Accounts receivable, net
    
    
    1,166
    
    
    
    (5,323
    )Income tax receivable
    
    
    
    
    
    
    (278
    )Inventories
    
    
    (1,170
    )
    
    
    4,708Prepaid expenses and other
    
    
    (1,317
    )
    
    
    1,183Accounts payable
    
    
    3,645
    
    
    
    (7,731
    )Accrued expenses
    
    
    (2,045
    )
    
    
    (1,650
    )Income taxes payable
    
    
    784
    
    
    
    Deferred taxes
    
    
    2,525
    
    
    
    527Total operating activities
    
    
    18,521
    
    
    
    10,505Investing activities:Proceeds from sale of equipment
    
    
    50
    
    
    
    41Capital expenditures
    
    
    (5,618
    )
    
    
    (14,064
    )Proceeds from sale of investment in equity security
    
    
    
    
    
    
    9,583Acquisition of businesses, net of cash acquired
    
    
    (7,153
    )
    
    
    Acquisition of intangible and other assets
    
    
    (5,617
    )
    
    
    (3,346
    )Total investing activities
    
    
    (18,338
    )
    
    
    (7,786
    )Financing activities:Borrowings on notes payable
    
    
    5,501
    
    
    
    7,359Repayment of notes payable
    
    
    (15,716
    )
    
    
    (11,004
    )Principal payments on capital lease obligations
    
    
    (1,823
    )
    
    
    (1,702
    )Increase in restricted cash
    
    
    (7,512
    )
    
    
    (18,438
    )Proceeds from issuance of TRM Inventory Funding Trust note, net of repayments
    
    
    7,521
    
    
    
    18,739Net proceeds from sale of common stock
    
    
    52,821
    
    
    
    Proceeds from exercise of stock options and warrants
    
    
    4,202
    
    
    
    249Redemption of Series A preferred stock
    
    
    (4,489
    )
    
    
    Preferred stock dividends
    
    
    (2,166
    )
    
    
    (367
    )Total financing activities
    
    
    38,339
    
    
    
    (5,164
    )Effect of exchange rate changes
    
    
    47
    
    
    
    1Net increase (decrease) in cash and cash equivalents
    
    
    38,569
    
    
    
    (2,444
    )Beginning cash and cash equivalents
    
    
    5,724
    
    
    
    5,576Ending cash and cash equivalents
    
    $
    44,293
    
    
    $
    3,132Supplemental disclosure of non-cash transactions:Conversion of preferred shares to common
    
    $
    3,545
    
    
    $
    11,620
  5




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TRM Corporation
 Notes to Condensed Consolidated Financial Statements (unaudited)
        6




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2004
    
    
    2005March 31
    
    
    June 30
    
    
    September 30
    
    
    March 31
    
    
    June 30
    
    
    September 30Thousands of shares of common stockOptions to purchase common stock
    
    
    
    
    
    
    15
    
    
    
    15
    
    
    
    
    
    
    
    15
    
    
    
    15Preferred shares convertible into common stock
    
    
    
    
    
    
    1,333
    
    
    
    796
    
    
    
    
    
    
    
    
    
    
    
    Warrants exercisable for common stock
    
    
    300
    
    
    
    
    
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    
   December 31,
    
    
    September 30,2004
    
    
    2005Parts
    
    $
    4,349
    
    
    $
    1,023ATMs held for resale
    
    
    2,896
    
    
    
    1,168Paper, toner and developer
    
    
    74
    
    
    
    141Total
    
    $
    7,319
    
    
    $
    2,332
  December 31,
    
    
    September 30,2004
    
    
    2005Syndicated loan facility:Term loan
    
    $
    120,000
    
    
    $
    112,500Domestic line of credit
    
    
    3,500
    
    
    
    Foreign line of credit
    
    
    6,687
    
    
    
    13,153Other
    
    
    49
    
    
    
    45130,236
    
    
    
    125,698Less current portion
    
    
    (10,059
    )
    
    
    (10,045
    )$
    120,177
    
    
    $
    115,653
      7




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Three months
    
    
    Nine monthsended
    
    
    endedSeptember 30, 2004
    
    
    September 30, 2004Net sales (in thousands)
    
    $
    35,745
    
    
    $
    106,315Net income (in thousands)
    
    $
    577
    
    
    $
    2,299Basic net income per share
    
    $
    .02
    
    
    $
    .12Diluted net income per share
    
    $
    .02
    
    
    $
    .11
    8




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Three months ended
    
    
    Nine Months endedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Net income, as reported
    
    $
    2,166
    
    
    $
    318
    
    
    $
    7,387
    
    
    $
    4,830Deduct total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax
effects
    
    
    (533
    )
    
    
    (371
    )
    
    
    (875
    )
    
    
    (1,116
    )Pro forma net income (loss)
    
    $
    1,633
    
    
    $
    (53
    )
    
    $
    6,512
    
    
    $
    3,714Basic net income (loss) per share:As reported
    
    $
    .17
    
    
    $
    .02
    
    
    $
    .67
    
    
    $
    .33Pro forma
    
    $
    .12
    
    
    $
    .00
    
    
    $
    .58
    
    
    $
    .26Diluted net income (loss) per share:As reported
    
    $
    .16
    
    
    $
    .02
    
    
    $
    .60
    
    
    $
    .32Pro forma
    
    $
    .11
    
    
    $
    .00
    
    
    $
    .52
    
    
    $
    .24
          9




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Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Net sales:ATM
    
    $
    12,566
    
    
    $
    23,387
    
    
    $
    33,660
    
    
    $
    71,879Photocopy
    
    
    9,920
    
    
    
    7,965
    
    
    
    32,355
    
    
    
    26,033$
    22,486
    
    
    $
    31,352
    
    
    $
    66,015
    
    
    $
    97,912Operating income excluding unallocated costs:ATM
    
    $
    2,451
    
    
    $
    3,418
    
    
    $
    6,522
    
    
    $
    14,277Photocopy
    
    
    1,912
    
    
    
    82
    
    
    
    7,732
    
    
    
    2,686$
    4,363
    
    
    $
    3,500
    
    
    $
    14,254
    
    
    $
    16,963Reconciliation of segment data to income from
continuing operations before income taxes:Operating income excluding unallocated costs
    
    $
    4,363
    
    
    $
    3,500
    
    
    $
    14,254
    
    
    $
    16,963Unallocated costs
    
    
    992
    
    
    
    2,541
    
    
    
    2,480
    
    
    
    6,158Interest expense
    
    
    141
    
    
    
    2,494
    
    
    
    635
    
    
    
    7,242Other income, net
    
    
    (270
    )
    
    
    (1,402
    )
    
    
    (43
    )
    
    
    (2,214
    )Income (loss) from continuing operations
before income taxes
    
    $
    3,500
    
    
    $
    (133
    )
    
    $
    11,182
    
    
    $
    5,777
   December 31,
    
    
    September 30,2004
    
    
    2005ATM (including goodwill of $118.8 million)
    
    $
    309,180
    
    
    $
    316,439Photocopy
    
    
    48,120
    
    
    
    48,232$
    357,300
    
    
    $
    364,671
     10




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11




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12




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
   Overview
    13




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Consolidated Results of Operations
  Three months ended
    
    Nine months endedSeptember 30
    
    September 302004
    
    2005
    
    2004
    
    2005Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Less discounts
    
    
    22.4
    
    
    
    47.1
    
    
    
    21.2
    
    
    
    45.4Net sales
    
    
    77.6
    
    
    
    52.9
    
    
    
    78.8
    
    
    
    54.6Cost of sales
    
    
    42.8
    
    
    
    31.8
    
    
    
    41.9
    
    
    
    29.6Gross profit
    
    
    34.8
    
    
    
    21.1
    
    
    
    36.9
    
    
    
    25.0Selling, general and administrative expense
    
    
    22.9
    
    
    
    19.5
    
    
    
    22.7
    
    
    
    19.0Asset retirements
    
    
    .3
    
    
    
    
    
    
    
    .1
    
    
    
    Operating income
    
    
    11.6
    
    
    
    1.6
    
    
    
    14.1
    
    
    
    6.0Interest expense
    
    
    .5
    
    
    
    4.2
    
    
    
    .8
    
    
    
    4.0Other income, net
    
    
    (.9
    )
    
    
    (2.4
    )
    
    
    (.1
    )
    
    
    (1.2
    )Income (loss) from continuing operations
before income taxes
    
    
    12.0
    
    
    
    (.2
    )
    
    
    13.4
    
    
    
    3.2Provision (benefit) for income taxes
    
    
    4.3
    
    
    
    (.7
    )
    
    
    4.3
    
    
    
    .5Income from continuing operations
    
    
    7.7
    
    
    
    .5
    
    
    
    9.1
    
    
    
    2.7Loss from discontinued operations
    
    
    (.2
    )
    
    
    
    
    
    
    (.3
    )
    
    
    Net income
    
    
    7.5
    %
    
    
    .5
    %
    
    
    8.8
    %
    
    
    2.7
    %
 14




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##### Table of Contents



Three Months Ended September 30, 2005 Compared to Three Months Ended September 30, 2004
  Three months ended September 30,% of
    
    
    
    
    
    
    % of2004
    
    
    sales
    
    
    2005
    
    
    sales(in thousands, except operating and percentage data)Transaction-based sales
    
    $
    16,227
    
    
    
    95.2
    %
    
    $
    45,536
    
    
    
    91.7
    %Service and other
    
    
    457
    
    
    
    2.7
    
    
    
    3,157
    
    
    
    6.4Sales of ATM equipment
    
    
    357
    
    
    
    2.1
    
    
    
    935
    
    
    
    1.9Total sales
    
    
    17,041
    
    
    
    100.0
    
    
    
    49,628
    
    
    
    100.0Less discounts
    
    
    4,475
    
    
    
    26.3
    
    
    
    26,241
    
    
    
    52.9Net sales
    
    
    12,566
    
    
    
    73.7
    
    
    
    23,387
    
    
    
    47.1Cost of sales
    
    
    6,959
    
    
    
    40.8
    
    
    
    13,476
    
    
    
    27.1Gross profit
    
    $
    5,607
    
    
    
    32.9
    %
    
    $
    9,911
    
    
    
    20.0
    %Operating Data:Average number of transacting ATMs
    
    
    4,747
    
    
    
    
    
    
    
    19,776Withdrawal transactions
    
    
    5,722,042
    
    
    
    
    
    
    
    19,974,056Average withdrawals per ATM per month
    
    
    402
    
    
    
    
    
    
    
    337Average transaction-based sales per
withdrawal transaction
    
    $
    2.83
    
    
    
    
    
    
    $
    2.28Average discount per withdrawal transaction
    
    $
    .78
    
    
    
    
    
    
    $
    1.31Net transaction-based sales per
withdrawal transaction
    
    $
    2.05
    
    
    
    
    
    
    $
    0.97Photocopy Results of OperationsThree months ended September 30,% of
    
    
    
    
    
    
    % of2004
    
    
    sales
    
    
    2005
    
    
    sales(in thousands, except operating and percentage data)Sales
    
    $
    11,940
    
    
    
    100.0
    %
    
    $
    9,609
    
    
    
    100.0
    %Less discounts
    
    
    2,020
    
    
    
    16.9
    
    
    
    1,644
    
    
    
    17.1Net sales
    
    
    9,920
    
    
    
    83.1
    
    
    
    7,965
    
    
    
    82.9Cost of sales
    
    
    5,447
    
    
    
    45.6
    
    
    
    5,380
    
    
    
    56.0Gross profit
    
    $
    4,473
    
    
    
    37.5
    %
    
    $
    2,585
    
    
    
    26.9
    %Operating Data:Average number of photocopiers
    
    
    24,966
    
    
    
    
    
    
    
    23,629Average photocopies per machine per month
    
    
    1,913
    
    
    
    
    
    
    
    1,590Average sales per photocopier per month
    
    $
    159.42
    
    
    
    
    
    
    $
    135.55Average sales per photocopy
    
    $
    .083
    
    
    
    
    
    
    $
    .085Average discount per photocopy
    
    $
    .014
    
    
    
    
    
    
    $
    .014Average net sales per photocopy
    
    $
    .069
    
    
    
    
    
    
    $
    .071Average gross profit per photocopy
    
    $
    .031
    
    
    
    
    
    
    $
    .023
 Sales
  15




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##### Table of Contents



ATM sales.
   
    
    A 16% decrease in average withdrawals per ATM per month, to 337 from
402 in the third quarter of 2004. The decrease in average withdrawals per ATM per
month is due primarily to the acquisition of the eFunds ATM network in November
2004. The ATMs acquired from eFunds had substantially fewer withdrawals per ATM
per month than our historical averages.
    
    A 19% decrease in average transaction-based sales per withdrawal
transaction, to $2.28 from $2.83 in the third quarter of 2004. The decrease in
average transaction-based sales per withdrawal is due primarily to the acquisition
of the eFunds ATM network in November 2004. The ATMs acquired from eFunds had
substantially lower transaction-based sales per withdrawal transaction per ATM than
our historical averages, since most of the eFunds ATM network is processing only,
which is profitable at lower transaction volumes.
 16




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##### Table of Contents



Photocopier sales.
 
    
    Declining photocopy volume  Continuing a trend, photocopy volume declined
by 21% for the third quarter of 2005 compared to the same period in 2004, to 113
million copies from 143 million copies, due to a combination of:
 
    
    A decline in installed photocopiers to an average of 23,629 in the
third quarter of 2005 from an average of 24,966 for the same period in 2004, as we
continued a program of eliminating lower volume sites that were either unprofitable
or marginally profitable.
    
    A decline in the average number of photocopies made per unit per month
to 1,590 for the third quarter of 2005 from 1,913 for the same period in 2004 due
in part to competition from alternative media and copying services.
 Sales Discounts
  Cost of Sales
  ATM cost of sales.
 17




---



##### Table of Contents




    
    The cost of vault cash increased by $1.3 million, and the cost
of armored car services also increased by $1.3 million. These expense increases
are a direct result of the increase in full placement ATMs, mostly from the
acquisition of eFunds ATM business. Cost of cash has also been impacted by
increases in interest rates.
    
    Cash losses due to thefts from ATMs increased by $1.1 million. We have hired a risk
manager in the United Kingdom where a majority of these losses have occurred to help
limit these losses in the future.
    
    Processing and telephone costs have increased by $1.1 million due to the increase in
volume of ATM transactions and the increase in the number of our full placement ATMs.
 Photocopier cost of sales.
  Selling, General and Administrative Expense
  
    
    Amortization expense increased by $2.0 million, primarily due to the
amortization of intangible assets relating to ATM contracts acquired in 2004.
    
    Labor expense increased by $1.2 million due to an increase in
administrative and temporary employees necessary to accommodate our expanding business, including
integration and operation of businesses acquired in 2004 and a number of one-time special projects.
    
    Fees related to first year compliance with Section 404 of the
Sarbanes-Oxley Act of 2002 were approximately $567,000 in the third
quarter of 2005. Although we are required to continue to comply with
Section 404 in future years, we expect the cost of compliance
will be substantially lower after 2005.
    
    Changes in the value of the British pound and Canadian dollar caused a net
increase of $46,000 in selling, general and administrative expense.
 Interest Expense
   18




---



##### Table of Contents



Other Income, Net
  Tax Rate
  Discontinued Operations
  Net Income
  19




---



##### Table of Contents



Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004
  Nine months ended September 30,% of
    
    
    
    
    
    
    % of2004
    
    
    sales
    
    
    2005
    
    
    sales(in thousands, except operating and percentage data)Transaction-based sales
    
    $
    42,166
    
    
    
    94.9
    %
    
    $
    135,925
    
    
    
    91.8
    %Service and other
    
    
    1,520
    
    
    
    3.4
    
    
    
    8,704
    
    
    
    5.9Sales of ATM equipment
    
    
    757
    
    
    
    1.7
    
    
    
    3,389
    
    
    
    2.3Total sales
    
    
    44,443
    
    
    
    100.0
    
    
    
    148,018
    
    
    
    100.0Less discounts
    
    
    10,783
    
    
    
    24.3
    
    
    
    76,139
    
    
    
    51.4Net sales
    
    
    33,660
    
    
    
    75.7
    
    
    
    71,879
    
    
    
    48.6Cost of sales
    
    
    18,541
    
    
    
    41.7
    
    
    
    36,658
    
    
    
    24.8Gross profit
    
    $
    15,119
    
    
    
    34.0
    %
    
    $
    35,221
    
    
    
    23.8
    %Operating Data:Average number of transacting ATMs
    
    
    4,155
    
    
    
    
    
    
    
    20,153Withdrawal transactions
    
    
    14,961,945
    
    
    
    
    
    
    
    59,039,962Average withdrawals per ATM per month
    
    
    400
    
    
    
    
    
    
    
    326Average transaction-based sales per
withdrawal transaction
    
    $
    2.82
    
    
    
    
    
    
    $
    2.30Average discount per withdrawal transaction
    
    $
    .72
    
    
    
    
    
    
    $
    1.29Net transaction-based sales per
withdrawal transaction
    
    $
    2.10
    
    
    
    
    
    
    $
    1.01Photocopy Results of OperationsNine months ended September 30,% of
    
    
    
    
    
    
    % of2004
    
    
    sales
    
    
    2005
    
    
    sales(in thousands, except operating and percentage data)Sales
    
    $
    39,294
    
    
    
    100.0
    %
    
    $
    31,436
    
    
    
    100.0
    %Less discounts
    
    
    6,939
    
    
    
    17.7
    
    
    
    5,403
    
    
    
    17.2Net sales
    
    
    32,355
    
    
    
    82.3
    
    
    
    26,033
    
    
    
    82.8Cost of sales
    
    
    16,575
    
    
    
    42.2
    
    
    
    16,372
    
    
    
    52.1Gross profit
    
    $
    15,780
    
    
    
    40.1
    %
    
    $
    9,661
    
    
    
    30.7
    %Operating Data:Average number of photocopiers
    
    
    25,468
    
    
    
    
    
    
    
    23,950Average photocopies per machine per month
    
    
    2,041
    
    
    
    
    
    
    
    1,735Average sales per photocopier per month
    
    $
    171.43
    
    
    
    
    
    
    $
    145.84Average sales per photocopy
    
    $
    .084
    
    
    
    
    
    
    $
    .084Average discount per photocopy
    
    $
    .015
    
    
    
    
    
    
    $
    .014Average net sales per photocopy
    
    $
    .069
    
    
    
    
    
    
    $
    .070Average gross profit per photocopy
    
    $
    .034
    
    
    
    
    
    
    $
    .026
 Sales
  20




---



##### Table of Contents



ATM sales.
  
    
    Expansion of our ATM networks  The average number of transacting ATMs in
our networks during the first nine months of 2005 increased to nearly five times the
average in the same period in 2004. The increase of 15,998 average transacting ATMs
has resulted primarily from the acquisition during 2004 of
approximately 16,600
existing ATM contracts in addition to sales of new contracts by our sales force.
    
    The increase in the number of ATMs in our network was partially offset by:
 -
    
    A 19% decrease in average withdrawals per ATM per month, to 326 from
400 in the first nine months of 2004. The decrease in average withdrawals per ATM
per month is due primarily to the acquisition of the eFunds ATM network in November
2004. The ATMs acquired from eFunds had substantially fewer withdrawals per ATM
per month than our historical averages.-
    
    An 18% decrease in average transaction-based sales per withdrawal
transaction, to $2.30 from $2.82 in the first nine months of 2004. The decrease in
average transaction-based sales per withdrawal is due primarily to the acquisition
of the eFunds ATM network in November 2004. The ATMs acquired from eFunds had
substantially lower transaction-based sales per withdrawal transaction per ATM than
our historical averages, since most of the eFunds ATM network is processing
only, which is  profitable at lower transaction volumes.
  21




---



##### Table of Contents



Photocopier sales.
 
    
    Declining photocopy volume  Continuing a trend, photocopy volume declined
by 20% for the first nine months of 2005 compared to the same period in 2004, to 374
million copies from 468 million copies, due to a combination of:
 
    
    A decline in installed photocopiers to an average of 23,950 in the
first nine months of 2005 from an average of 25,468 for the same period in 2004, as
we continued a program of eliminating lower volume sites that were either
unprofitable or marginally profitable.
    
    A decline in the average number of photocopies made per unit per month
to 1,735 for the first nine months of 2005 from 2,041 for the same period in 2004
due primarily to price increases that became effective in late 2003, as well as
competition from alternative media and copying services.
  
    
    Exchange rate benefit  The value of the British pound and Canadian dollar
relative to the U.S. dollar increased for the first nine months of 2005 compared to the
same period in 2004, resulting in a $323,000 increase in photocopier sales. This
increase was substantially offset by exchange rate-related increases in costs.
 Sales Discounts
  Cost of Sales
  ATM cost of sales.
 22




---



##### Table of Contents




    
    Expansion of our ATM networks to an average of 20,153 transacting ATMs in
the first nine months of 2005 compared to an average of 4,155 in the first nine months
of 2004.
    
    Exchange rate effects  The ATM segment reported approximately $585,000
more in cost of sales in the first nine months of 2005 than it would have reported had
the exchange rate for the British pound and Canadian dollar remained at the average for
the first nine months of 2004.
   
    
    The cost of vault cash increased by $3.7 million, and
the cost of armored car services increased by $3.8 million.
These expense increases are a direct result of the increase in full
placement ATMs, mostly from the acquisition of eFunds ATM
business. Cost of cash has also been impacted by increases in
interest rates.
    
    The cost of ATM machines sold increased by $2.4 million
as a result of a $2.6 million increase in sales of ATM machines.
    
    Processing and telephone costs have increased by
$2.0 million due to the increase in volume of ATM transactions
and the increase in the number of our full placement ATMs.
    
    Cash losses due to thefts from ATMs increased by
$1.3 million. At the beginning of the third quarter of 2005, to
keep our insurance premiums at a reasonable level, we substantially
increased the deductible on our crime insurance policy, with the
result that we are now substantially self-insured for cash losses. We
have hired a risk manager in the United Kingdom where a majority of
these losses have occurred to help limit these losses in the future. Photocopier cost of sales.
  Selling, General and Administrative Expense
  
    
    Amortization expense increased by $6.4 million, primarily due to the
amortization of intangible assets relating to ATM contracts acquired in 2004.
    
    Labor expense increased by $4.2 million due to an increase in
administrative, and temporary employees necessary to accommodate our expanding business, including
integration of businesses acquired in 2004 and a number of one-time special projects.
    
    The cost of outsourced services increased by $1.9 million, primarily due
to the selling, general and administrative portion of charges by eFunds Corporation
under the services agreement we entered into with eFunds in November 2004 as part of
our acquisition of its ATM business.
    
    Fees related to first year compliance with Section 404
of the Sarbanes-Oxley Act of 2002 were approximately $652,000 in the
first nine months of 2005.
    
    The increase in the value of the British pound and Canadian dollar caused
an increase of $327,000 in selling, general and administrative expense.
 23




---



##### Table of Contents



Interest Expense
   Other Income, Net
  Tax Rate
  Discontinued Operations
  24




---



##### Table of Contents



Net Income
  Liquidity and Capital Resources
 General
      25




---



##### Table of Contents



Bank of America Credit Facility
   U.S. Vault Cash Facility
  U.K. Vault Cash Facility
  Canadian Vault Cash Facility
  Off-Balance Sheet Arrangements
  26




---



##### Table of Contents



Contractual Commitments and Obligations
  Payments Due by PeriodOctober 1 December 31,Contractual obligations
    
    Total
    
    
    2005
    
    
    2006-2007
    
    
    2008-2009
    
    
    After 2009TRM Corporation and subsidiariesLong-term debt
    
    $
    164,430
    
    
    $
    5,015
    
    
    $
    37,516
    
    
    $
    47,389
    
    
    $
    74,510Capital lease obligations
    
    
    2,042
    
    
    
    433
    
    
    
    1,531
    
    
    
    78
    
    
    
    Operating leases
    
    
    7,990
    
    
    
    639
    
    
    
    3,969
    
    
    
    1,750
    
    
    
    1,632Purchase obligations
    
    
    20,625
    
    
    
    1,250
    
    
    
    10,000
    
    
    
    9,375
    
    
    
    Total TRM Corporation and subsidiaries
    
    
    195,087
    
    
    
    7,337
    
    
    
    53,016
    
    
    
    58,592
    
    
    
    76,142TRM Inventory Funding Trust note payable
    
    
    100,929
    
    
    
    1,277
    
    
    
    99,652
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    296,016
    
    
    $
    8,614
    
    
    $
    152,668
    
    
    $
    58,592
    
    
    $
    76,142
  Critical Accounting Policies and Estimates
  New Accounting Standards and Effects on Earnings Per Share
  27




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
    28




---



##### Table of Contents



Foreign Currency Risk
   29




---



##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
    
 ITEM
5. OTHER INFORMATION
  30




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 6. EXHIBITS
 (a) Exhibits3.1
    (a)
    
    Amendments to the Restated Articles of Incorporation (incorporated herein by
reference to Exhibit 3.1(a) of Form 10-K for the fiscal year ended June 30, 1998)3.1
    (b)
    
    Restated Articles of Incorporation (incorporated herein by reference to Exhibit
3.1(b) of Form 10-K for the fiscal year ended June 30, 1998)3.2
    
    
    Restated Bylaws (incorporated herein by reference to Exhibit 3.2 of
Form 10-K for the fiscal year ended June 30, 1998)4.1
    
    
    Specimen Stock Certificate (incorporated herein by reference to
Exhibit 4.1 of Form S-3/A filed on August 25, 2004 [No. 333-116748])4.2
    
    
    Investors Rights Agreement (incorporated herein by reference to
Exhibit 4.1 of Form 8-K dated July 9, 1998)4.3
    
    
    Articles V, VI and VII of the Restated Articles of Incorporation,
as amended (See Exhibit 3.1)4.4
    
    
    Articles I, II, V, VII and X of the Restated Bylaws (See Exhibit
3.2)10.7
    (h)
    
    Employment Agreement dated November 11, 2005 by and between TRM Corporation and
Kenneth L. Tepper.10.7
    (i)
    
    Retainer Agreement dated November 11, 2005 by and between TRM Corporation and
Daniel G. Cohen.10.8
    (a)
    
    First Amendment and Waiver to
Credit Agreement, dated as of November 14, 2005, among TRM
Corporation, TRM (ATM) Limited and certain subsidiaries, as
Guarantors, and Bank of America, N.A. and other lenders party thereto.31.1
    
    
    Certification of Chief Executive Officer of TRM Corporation pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Chief Financial Officer of TRM Corporation pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
 31




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##### Table of Contents



31.3
    
    
    Certification of Principal Accounting Officer of TRM Corporation
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer of TRM Corporation pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.32.2
    
    
    Certification of Chief Financial Officer of TRM Corporation pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.32.3
    
    
    Certification of Principal Accounting Officer of TRM Corporation
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
 
 SIGNATURE
  TRM CORPORATIONDate: November 14, 2005
    By:
    /s/ Jon S. PitcherJon S. PitcherPrincipal Accounting Officer 32