----

----

**FORM10-Q**

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**
| **ý** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|------------|----------------------------------------------------------------------------------------------|

**For the quarterly period ended June 30, 2001**

**OR**
| **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**                                     |
|---------------------------------------------------------|
| ****                                                    |
| (Exact name of  registrant as specified in its charter) |

 
| **Oregon**                                                      |   | **93-0809419**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| ****                                                            |   | ****                                  |
| (State  or other jurisdiction of incorporation or organization) |   | (I.R.S.  Employer Identification No.) |
|                                                            |   |                                  |
| **5208  N.E. 122nd Avenue Portland, Oregon**                    |   | **97230**                             |
| ****                                                            |   | ****                                  |
| (Address  of principal executive offices)                       |   | (Zip  Code)                           |

 
| **(503) 257-8766**                                         |
|------------------------------------------------------------|
| ****                                                       |
| (Registrant’s  telephone number, including area code) |

 

(Former name, former address and former fiscal year, ifchanged since last report)

             Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. YESý  NO o

             Indicatethe number of shares outstanding of each of the issuer’s classes of commonstock, as of the latest practicable date:

| CLASS         |   | OUTSTANDING AT JUNE 30, 2001 |
|---------------|--------|------------------------------|
|               |   |                              |
| Common  Stock |   | 7,063,190                    |

 

----

----

 

 

** **

**PART I- FINANCIAL INFORMATION**

**ITEM 1.**           **FINANCIALSTATEMENTS**

TRMCORPORATION

CONSOLIDATEDBALANCE SHEETS (In thousands)

 

|                                                  | December  31,  2000                                                                                 |    | June  30,  2001 |   |
|-------------------------------------------------------|-----------------------------------------------------------------------------------------------------|---------|-----------------|--------|
|                                                  |                                                                                                |    | (unaudited)     |   |
|                                                  |                                                                                                |    |            |   |
|                                                  | ASSETS                                                                                              |    |            |   |   |
|                                                  |                                                                                                |    |            |   |
| Current assets:                                       |                                                                                                |    |            |   |
|                                                  | Cash and cash equivalents                                                                           | $       | 6,012           |   | $ | 2,825 |   |
|                                                  | Accounts receivable, net                                                                            | 10,703  |            | 9,441  |   |
|                                                  | Income tax receivable                                                                               | 101     |            | 101    |   |
|                                                  | Inventories                                                                                         | 3,616   |            | 2,803  |   |
|                                                  | Prepaid expenses and other                                                                          | 1,843   |            | 643    |   |
|                                                  | Deferred tax asset                                                                                  | 1,328   |            | 1,432  |   |
|                                                  |                                                                                                |         |            |        |   |
|                                                  | Total current assets                                                                                | 23,603  |            | 17,245 |   |
| Equipment and vehicles, less accumulated depreciation | 80,478                                                                                              |    | 76,184          |   |
| Restricted Cash                                       | 1,780                                                                                               |    | 1,780           |   |
| Other Assets                                          | 5,059                                                                                               |    | 5,096           |   |
|                                                  |                                                                                                     |    |                 |   |
|                                                  | $                                                                                                   | 110,920 |            | $      | 100,305 |   |
|                                                  |                                                                                                     |    |                 |   |
| LIABILITIES AND  SHAREHOLDERS’ EQUITY            |                                                                                                |    |            |   |
|                                                  |                                                                                                |    |            |   |
| Current liabilities:                                  |                                                                                                |    |            |   |
|                                                  | Accounts payable                                                                                    | 11,406  |            | 7,724  |   |
|                                                  | Accrued expenses                                                                                    | 7,286   |            | 7,594  |   |
|                                                  | Current portion of long-term debt                                                                   | 8,360   |            | 25,241 |   |
|                                                  |                                                                                                |         |            |        |   |
|                                                  | Total current liabilities                                                                           | 27,052  |            | 40,559 |   |
| Long term debt                                        | 21,285                                                                                              |    | 1,136           |   |
| Deferred income taxes                                 | 3,053                                                                                               |    | 3,306           |   |
| Other long-term liabilities                           | 228                                                                                                 |    | 0               |   |
|                                                  |                                                                                                     |    |                 |   |
|                                                  | Total liabilities                                                                                   | 51,618  |            | 45,001 |   |
|                                                  |                                                                                                     |    |                 |   |
| Minority interest                                     | 4,755                                                                                               |    | 4,125           |   |
| Shareholders’ equity:                            |                                                                                                |    |            |   |
|                                                  | Preferred  stock, no par value.  Authorized 5,000  shares; 1,778 shares issued and outstanding | 19,798  |            | 19,798 |   |
|                                                  | Common  stock, no par value. Authorized 50,000 shares; 7,063 shares issued and outstanding          | 19,032  |            | 19,032 |   |
|                                                  |                                                                                                |    |            |   |
| Accumulated  other comprehensive income               | (1,697                                                                                              | )       | (3,154          | )      |
| Retained  earnings                                    | 17,414                                                                                              |    | 15,503          |   |
|                                                  |                                                                                                     |    |                 |   |
|                                                  | Total shareholders’ equity                                                                     | 54,547  |            | 51,179 |   |
|                                                  |                                                                                                     |    |                 |   |
|                                                  | $                                                                                                   | 110,920 |            | $      | 100,305 |   |
|                                                  |                                                                                                     |    |                 |   |
|                                                       |                                                                                                     |         |                 |        |  |  |  |  |  |  |

See accompanying notes to consolidated financialstatements.

 

TRM CORPORATION

CONSOLIDATEDSTATEMENTS OF OPERATIONS(unaudited)(In thousands, except per share data)

 

|                                                                                                                 | Three  Months Ended June 30,                  |   | Six  Months Ended June 30, |   |
|----------------------------------------------------------------------------------------------------------------------|----------------------------------------------------|--------|---------------------------------|--------|
|                                                                                                                 |                                                    |   |                                 |   |
|                                                                                                                 | 2000                                               |   | 2001                            |   | 2000 |   | 2001 |   |
|                                                                                                                 |                                                    |   |                                 |   |  |   |  |   |
|                                                                                                                 |                                               |   |                            |   |   |   |   |   |
| Sales                                                                                                                | $                                                  | 19,337 |                            | $      | 20,429 |   | $ | 37,418 |   | $ | 39,285 |   |
| Less discounts                                                                                                       | 3,213                                              |   | 3,375                           |   | 6,382 |   | 6,369 |   |
|                                                                                                                 |                                                    |   |                                 |   |  |   |  |   |
|                                                                                                                 | Net sales                                          | 16,124 |                            | 17,054 |   | 31,036 |   | 32,916 |   |
| Cost of sales                                                                                                        | 9,517                                              |   | 9,929                           |   | 17,921 |   | 19,681 |   |
|                                                                                                                 |                                                    |   |                                 |   |  |   |  |   |
|                                                                                                                 | Gross profit                                       | 6,607  |                            | 7,125  |   | 13,115 |   | 13,235 |   |
| Selling, general and administrative expense                                                                          | 7,423                                              |   | 7,471                           |   | 14,262 |   | 14,920 |   |
|                                                                                                                 |                                                    |   |                                 |   |  |   |  |   |
|                                                                                                                 | Operating income (loss)                            | (816   | )                               | (346   | ) | (1,147 | ) | (1,685 | ) |
| Other (income) expense:                                                                                              |                                               |   |                            |   |   |   |   |   |
|                                                                                                                 | Interest                                           | 545    |                            | 577    |   | 1,018 |   | 1,291 |   |
|                                                                                                                 | Other, net                                         | 66     |                            | (562   | ) | 88 |   | (1,521 | ) |
|                                                                                                                 |                                                    |   |                                 |   |  |   |  |   |
|                                                                                                                 |                                               |   |                            |   |   |   |   |   |
|                                                                                                                 | Income  (loss) before minority interest            | (1,427 | )                               | (361   | ) | (2,253 | ) | (1,455 | ) |
| Minority interest in earnings of consolidated  subsidiary                                                            | 28                                                 |   | 341                             |   | 28 |   | 630 |   |
| Income (loss) before income taxes and cumulative  effect of accounting change                                        | (1,399                                             | )      | (20                             | )      | (2,225 | ) | (825 | ) |
| Provision (benefit) for income taxes                                                                                 | (495                                               | )      | 359                             |   | (827 | ) | 342 |   |
|                                                                                                                 |                                                    |   |                                 |   |  |   |  |   |
| Income (loss) before cumulative effect of accounting  change                                                         | (904                                               | )      | (379                            | )      | (1,398 | ) | (1,167 | ) |
| Cumulative effect of change in accounting  principle                                                            | 0                                                  |   | 0                               |   | 856 |   | 0 |   |
|                                                                                                                 |                                                    |   |                                 |   |  |   |  |   |
|                                                                                                                 | Net income (loss)                                  | $      | (904                            | )      | $ | (379 | ) | $ | (542 | ) | $ | (1,167 | ) |
|                                                                                                                 |                                                    |   |                                 |   |  |   |  |   |
|                                                                                                                 |                                               |   |                            |   |   |   |   |   |
| Earnings per share computation:                                                                                      |                                               |   |                            |   |   |   |   |   |
|                                                                                                                 | Net income (loss)                                  | $      | (904                            | )      | $ | (379 | ) | $ | (542 | ) | $ | (1,167 | ) |
|                                                                                                                 | Preferred stock dividends                          | (373   | )                               | (374   | ) | (746 | ) | (744 | ) |
|                                                                                                                 |                                               |        |                            |        |   |  |   |  |   |
|                                                                                                                 | Net income (loss) available to common Shareholders | $      | (1,277                          | )      | $ | (753 | ) | $ | (1,288 | ) | $ | (1,911 | ) |
|                                                                                                                 |                                               |        |                            |        |   |  |   |  |   |
| Basic net income (loss) per share:                                                                                   |                                               |   |                            |   |   |   |   |   |
|                                                                                                                 | Shares outstanding                                 | 7,069  |                            | 7,063  |   | 7,072 |   | 7,063 |   |
|                                                                                                                 |                                                    |   |                                 |   |  |   |  |   |
|                                                                                                                 | Net income (loss) per share                        | $      | (0.18                           | )      | $ | (0.11 | ) | $ | (0.18 | ) | $ | (0.27 | ) |
|                                                                                                                 |                                                    |   |                                 |   |  |   |  |   |
| Diluted net income (loss) available to common  shareholders per share before cumulative effect of accounting change: |                                               |   |                            |   |   |   |   |   |
|                                                                                                                 | Shares outstanding                                 | 7,069  |                            | 7,063  |   | 7,072 |   | 7,063 |   |
|                                                                                                                 |                                               |        |                            |        |   |  |   |  |   |
|                                                                                                                 | Net income (loss) per share                        | $      | (0.18                           | )      | $ | (0.11 | ) | $ | (0.18 | ) | $ | (0.27 | ) |
|                                                                                                                 |                                               |        |                            |        |   |  |   |  |   |
| Cumulative effect of accounting change per share                                                                     | 0.00                                               |   | 0.00                            |   | 0.12 |   | 0.00 |   |
|                                                                                                                 |                                                    |   |                                 |   |  |   |  |   |
| Net income per share before cumulative effect of  accounting change                                                  | $                                                  | (0.18  | )                               | $      | (0.11 | ) | $ | (0.30 | ) | $ | (0.27 | ) |
|                                                                                                                 |                                                    |   |                                 |   |  |   |  |   |
|                                                                                                                      |                                                    |        |                                 |        |  |  |  |  |  |  |  |  |  |  |

Seeaccompanying notes to consolidated financial statements.

 

TRMCORPORATION

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY(unaudited)(In thousands)

 

|                                           | Comprehensive ** **Income |       | Preferred Stock |       | Common Stock |       | Accumulated Other Comprehensive Income |       | Retained Earnings |       |    |   |
|------------------------------------------------|--------------------------------|------------|-----------------|------------|--------------|------------|----------------------------------------|------------|-------------------|------------|---------|--------|
|                                           |                           | Shares     |            | Amounts    |         | Shares     |                                   | Amounts    |              |       |    | Total  |   |
|                                           | ****                           |       |                 |       |              |       |                                        |       |                   |       |         |   |  |   |  |   |
|                                           |                           |       |            |       |         |       |                                   |       |              |       |    |   |   |   |   |   |
| **Balances, December 31, 2000**                |                           |       | 1,778           |       | $19,798      |       | 7,063                                  |       | $19,032           |       | $(1,697 | )      | $17,414 |   | $54,547 |   |
| Comprehensive income                           |                           |       |            |       |         |       |                                   |       |              |       |    |   |   |   |   |   |
| Net loss                                       | $(1,167                        | **)**      |            | ** ** |         | ** ** |                                   | ** ** |              | ** ** |    |   | (1,167 | ) | (1,167 | ) |
| Other comprehensive  income (loss), net of tax |                           |       |            |       |         |       |                                   |       |              |       |    |   |   |   |   |   |
| Foreign currency  translation adjustment       | (1,457                         | **)**      |            | ** ** |         | ** ** |                                   | ** ** |              |       | (1,457  | **)**  |   |   | (1,457 | ) |
|                                           |                                |       |            |       |         |       |                                   |       |              |       |    |   |   |   |   |   |
| Comprehensive income                           | $(2,624                        | )          |            |       |         |       |                                   |       |              |       |    |   |   |   |   |   |
|                                           |                                |       |            |       |         |       |                                   |       |              |       |    |   |   |   |   |   |
| Issuance of stock to  employees                |                           |       |            |       |         |       |                                   |       |              |       |    |   |   |   |   |   |
| Repurchase of common  stock                    |                           |       |            |       |         |       |                                   |       |              |       |    |   |   |   |   |   |
| Preferred stock  dividends                     |                           | ** ** |            | ** ** |         | ** ** |                                   | ** ** |              | ** ** |    |   | (744 | ) | (744 | ) |
|                                           |                           |       |                 |       |              |       |                                        |       |
| **Balances, June 30, 2001**                    |                           |       | 1,778           |       | $19,798      |       | 7,063                                  |       | $19,032           |       | $(3,154 | )      | $15,503 |   | $51,179 |   |
|                                           |                           |       |                 |       |              |       |                                        |       |                   |       |         |   |  |   |  |   |

 

 

See accompanying notes to consolidatedfinancial statements.

 

TRMCORPORATION

CONSOLIDATEDSTATEMENTS OF CASH FLOWS(unaudited)(In thousands)

|                                                 |                                                                                      | Six  Months EndedJune 30, |
|------------------------------------------------------|-------------------------------------------------------------------------------------------|---------------------------|
|                                                 |                                                                                      |                           |
|                                                 |                                                                                      | 2000                      |   | 2001 |   |
|                                                 |                                                                                      |                           |   |  |   |
| Cash flows from operating activities:                |                                                                                      |                      |   |   |   |
|                                                 | Net  income (loss)                                                                        |                      | $ | (542 | ) | $ | (1,167 | ) |
|                                                 | Cumulative effect of accounting change, net of tax                                        |                      | (856 | ) | 0 |   |
|                                                 | Adjustments  to reconcile net income (loss) to net cash provided by operating activities: |                      |   |   |   |   |
|                                                 | Depreciation and amortization                                                             |                      | 4,267 |   | 4,553 |   |
|                                                 | Other                                                                                     |                      | (28 | ) | (688 | ) |
|                                                 | (Gain)  loss on disposal of equipment and vehicles                                        |                      | (35 | ) | 43 |   |
|                                                 | Changes in items affecting operations:                                                    |                      |   |   |   |   |
|                                                 | Accounts receivable                                                                       |                      | (1,220 | ) | 1,224 |   |
|                                                 | Inventories                                                                               |                      | (635 | ) | 811 |   |
|                                                 | Income tax receivable                                                                     |                      | (1,055 | ) | 0 |   |
|                                                 | Prepaid expenses and other                                                                |                      | (1,530 | ) | 1,193 |   |
|                                                 | Accounts payable                                                                          |                      | 4,461 |   | (3,767 | ) |
|                                                 | Accrued expenses                                                                          |                      | 2,609 |   | (398 | ) |
|                                                 | Deferred income tax                                                                       |                      | 376 |   | (23 | ) |
|                                                 |                                                                                      |                      |  |   |  |   |
|                                                 | Cash provided by operating activities                                                     |                      | 5,812 |   | 1,781 |   |
|                                                 |                                                                                      |                      |  |   |  |   |
| Cash flows from investing activities:                |                                                                                      |                      |   |   |   |
|                                                 | Proceeds from sale of equipment                                                           |                      | 234 |   | 289 |   |
|                                                 | Capital  expenditures                                                                     |                      | (16,430 | ) | (1,423 | ) |
|                                                 | Other                                                                                     |                      | (1,104 | ) | (361 | )  |
|                                                 | Acquisition of a business, net of cash acquired                                           |                      | (799 | ) | 0 |   |
|                                                 |                                                                                      |                      |  |   |  |   |
|                                                 | Cash  used in investing activities                                                        |                      | (18,099 | ) | (1,495 | ) |
|                                                 |                                                                                      |                      |  |   |  |   |
| Cash flows from financing activities:                |                                                                                      |                      |   |   |   |
|                                                 | Net borrowings on notes payable                                                           |                      | 1,618 |   | (3,398 | ) |
|                                                 | Other  long-term liabilities                                                              |                      | 0 |   | (25 | ) |
|                                                 | Net  proceeds from issuance of common stock                                               |                      | 35 |   | 0 |   |
|                                                 | Repurchase of common stock                                                                |                      | (98 | ) | 0 |   |
|                                                 | Dividends  on preferred stock                                                             |                      | (746 | ) | 0 |   |
|                                                 |                                                                                      |                      |  |   |  |   |
|                                                 | Cash  provided by financing activities                                                    |                      | 809 |   | (3,423 | ) |
|                                                 |                                                                                      |                      |  |   |  |   |
|                                                 | Effect of exchange rate changes                                                           |                      | (1,000 | ) | (50 | ) |
|                                                 |                                                                                      |                      |  |   |  |   |
| Net increase (decrease) in cash and cash equivalents |                                                                                      | (12,478                   | ) | (3,187 | ) |
| Cash and cash equivalents at beginning of period     |                                                                                      | 16,775                    |   | 6,012 |   |
|                                                 |                                                                                      |                           |   |  |   |
| Cash and cash equivalents at end of period           |                                                                                      | $                         | 4,297 |   | 2,825 |   |
|                                                 |                                                                                      |                           |   |  |   |
|                                                      |                                                                                           |                           |  |  |  |  |  |  |  |  |  |  |  |

See accompanying notes to consolidated financialstatements.

 

TRM CORPORATION

Notesto Condensed Consolidated Financial Statements (unaudited)

 

1.           InterimFinancial Data:

              Thecondensed financial statements included herein have been prepared by theCompany, without audit, pursuant to the rules and regulations of the Securitiesand Exchange Commission and reflect all adjustments, consisting only of normalrecurring adjustments, which, in the opinion of management, are necessary for afair statement of the results of the interim periods.  These condensed interim financial data should be read inconjunction with the Company’s latest annual report to shareholders.

2.           NetIncome Per Share:

             Basicand diluted net income per share are based on the weighted average number ofcommon shares outstanding during each year, with diluted net income includingthe effect of potentially dilutive securities. For the three months and six months ended June 30, 2000 and June 30,2001, the weighted average number of common shares for basic net income pershare computations were 7,069,000 and 7,063,000, and 7,072,000 and 7,063,000,respectively. In calculating basic net income per share, dividends forpreferred stock are deducted to arrive at income available for commonstockholders.  For diluted net incomeper share, the calculation assumes the conversion of common stock equivalentsincluding the conversion of preferred stock to common unless such conversion isanti-dilutive.  For the three and sixmonths ended June 30, 2000 and June 30, 2001, no shares were added to theweighted average shares outstanding because the addition of shares would beanti-dilutive.

3.           Inventories(in thousands):

|                | December  31,  2000 |   | June  30, 2001 |   |
|---------------------|---------------------|--------|---------------------|--------|
|                |                     |   |                     |   |
|                |                |   |                |   |
| Paper               | $                   | 661    |                | 342    |   |
| Toner and developer | 482                 |   | 240                 |   |
| Parts               | 2,473               |   | 2,221               |   |
|                |                     |   |                     |   |
|                | $                   | 3,616  |                | 2,803  |   |
|                |                     |   |                     |   |

 

4.           SegmentReporting (in thousands):

The Company has three reportable segments: CopyCenters,ATM and e-Commerce.  CopyCenters ownsand maintains self-service photocopiers in retail establishments.  ATM owns and operates ATM machines in retailestablishments. The e-commerce business develops software to deliver productsand services to ATMs.

The Company evaluates each segment’s performance basedon income or loss before interest and income taxes, excluding non-recurringcharges.  Information regarding theoperations in these reportable segments is as follows:

 

|                                                              | (Dollar Amounts in Thousands) |   |
|-------------------------------------------------------------------|-------------------------------|--------|
|                                                              | Three  months ended           |   | Six  months ended |   |
|                                                              |                               |   |  |   |
|                                                              | June  30,   2000              |   | June  30,   2001 |   | June  30,   2000 |   | June  30,   2001 |   |
|                                                              |                               |   |  |   |  |   |  |   |
| Sales:                                                            |                          |   |   |   |   |   |   |   |
| CopyCenters                                                       | $                             | 17,052 |   | $ | 15,604 |   | $ | 34,008 |   | $ | 30,525 |   |
| ATM                                                               | 2,225                         |   | 4,536 |   | 3,350 |   | 8,213 |   |
| e-Commerce                                                        | 60                            |   | 289 |   | 60 |   | 547 |   |
|                                                              |                               |   |  |   |  |   |  |   |
|                                                              | $                             | 19,337 |   | $ | 20,429 |   | $ | 37,418 |   | $ | 39,285 |   |
|                                                              |                               |   |  |   |  |   |  |   |
| RESTATED                                                          |                          |   |   |   |   |   |   |   |
|                                                              |                          |   |   |   |   |   |   |   |
| Depreciation and  amortization:                                   |                          |   |   |   |   |   |   |   |
| CopyCenters                                                       | $                             | 1,828  |   | $ | 1,706 |   | $ | 3,815 |   | $ | 3,433 |   |
| ATM                                                               | 273                           |   | 470 |   | 419 |   | 924 |   |
| e-Commerce                                                        | 33                            |   | 90 |   | 33 |   | 196 |   |
|                                                              |                               |   |  |   |  |   |  |   |
|                                                              | $                             | 1,634  |   | $ | 2,266 |   | $ | 4,267 |   | $ | 4,553 |   |
|                                                              |                               |   |  |   |  |   |  |   |
| Income (loss) before  interest and taxes & minority interest: |                          |   |   |   |   |   |   |   |
| CopyCenters                                                       | $                             | 1,821  |   | $ | 2,541 |   | $ | 3,672 |   | $ | 3,674 |   |
| ATM                                                               | (2,141                        | )      | (1,207 | ) | (4,345 | ) | (1,763 | ) |
| e-Commerce                                                        | (562                          | )      | (1,118 | ) | (562 | ) | (2,075 | ) |
|                                                              |                               |   |  |   |  |   |  |   |
|                                                              | $                             | (882   | ) | $ | 216 |   | $ | (1,235 | ) | $ | (164 | ) |
|                                                              |                               |   |  |   |  |   |  |   |
| AS REPORTED IN FORM  10-Q                                         |                          |   |   |   |   |   |   |   |
|                                                              |                          |   |   |   |   |   |   |   |
| Depreciation and  amortization:                                   |                          |   |   |   |   |   |   |   |
| CopyCenters                                                       | $                             | 2,396  |   | $ | 1,706 |   | $ | 4,911 |   | $ | 3,433 |   |
| ATM                                                               | 273                           |   | 470 |   | 419 |   | 924 |   |
| e-Commerce                                                        | 33                            |   | 90 |   | 33 |   | 196 |   |
|                                                              |                               |   |  |   |  |   |  |   |
|                                                              | $                             | 2,702  |   | $ | 2,266 |   | $ | 5,363 |   | $ | 4,553 |   |
|                                                              |                               |   |  |   |  |   |  |   |
| Income (loss) before  interest and taxes & minority interest: |                          |   |   |   |   |   |   |   |
| CopyCenters                                                       | $                             | 517    |   | $ | 2,541 |   | $ | 1,076 |   | $ | 3,674 |   |
| ATM                                                               | (1,404                        | )      | (1,207 | ) | (2,845 | ) | (1,763 | ) |
| e-Commerce                                                        | (562                          | )      | (1,118 | ) | (562 | ) | (2,075 | ) |
|                                                              |                               |   |  |   |  |   |  |   |
|                                                              | $                             | (1,449 | ) | $ | 216 |   | $ | (2,331 | ) | $ | (164 | ) |
|                                                              |                               |   |  |   |  |   |  |   |

** **

 

| **ITEM 2.** | **MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  AND RESULTS OF OPERATIONS** |
|-------------|-------------------------------------------------------------------------------------------------|

 

General

As of June 30, 2001, the Company had atotal of 1,847 ATM operating units installed, with 659 and 1,188 deployed inthe United States and United Kingdom respectively, as compared to 1,537 totalunits installed at June 30, 2000, an overall increase of 310 unitsprimarily in the United Kingdom.  Duringthe last nine months, the Company has very actively managed its United StatesATM account base, removing ATMs which were not generating adequate transactionvolumes to be profitable. The ATM business contributed $4.5 million toquarterly gross revenues and $8.2 million year to date compared to $2.2 millionfor the quarter and $3.4 million year to date ended June 30, 2000, anincrease of 104% and 145% respectively. The Company believes that revenues generated from services deliveredthrough its ATM network will become an increasingly higher percentage of itsoverall revenue in the future as it expands the product offerings through itsATM network, and pursues new geographic opportunities.

             Inthe first quarter of 2001, the CopyCenters business conducted a consolidationof its United States service areas in order to achieve greater operationalefficiencies.  This consolidationresulted in a decrease to 31 service centers from 47 at December 31, 2000 inthe United States.  The service areasthe Company operates in include 31 in the United States, 5 in Canada, 15 in theUnited Kingdom and 3 in France.  Inaddition, third party service supports the Company’s customers in over 100additional locations. As of June 30, 2001, the Company had 31,665 TRMCopyCenters compared to 36,200 at June 30, 2000, a decrease of 4,535CopyCenters (12.5%).  Over the lastthree quarters, the Company has phased out locations which were using older liquidtoner technology based photocopiers.  Inthis process, a number of CopyCenters locations were either eliminated orconverted to a minimum monthly charge pricing program.

             Inthe second quarter of 2001, iATMglobal.net and Strategic Software Solutions,the Company’s e-commerce business, generated $289,000 and $547,000 year to datein gross revenues from contracted software engineering services.

Results of Operations

             Thefollowing table sets forth, for the periods indicated, selected statement ofoperations data, expressed as a percentage of sales, and the percentage changein dollar amounts of each item on the Consolidated Statements of Operations(see page 3 of this Form 10-Q).

|                                    |                         |   | Percentage  Change Increase (Decrease) |   |    | Percentage  Change Increase (Decrease) |   |
|-----------------------------------------|------------------------------|--------|----------------------------------------|--------|---------|----------------------------------------|--------|
|                                    | Three  Months Ended June 30, |   | Six  Months Ended June 30,             |   |    |
|                                    | 2000                         |   | 2001                                   |   | 2000    |                                   | 2001   |   |   |
|                                    |                              |   |                                        |   |         |                                   |        |   |  |   |  |   |
| Sales                                   | 100.0                        | %      | 100.0                                  | %      | 5.6     | %                                      | 100.0  | % | 100.0 | % | 5.0 | % |
| Sales discounts                         | 16.6                         |   | 16.5                                   |   | 5.0     |                                   | 17.1   |   | 16.2 |   | (.2 | ) |
| Cost of sales                           | 49.2                         |   | 48.6                                   |   | 4.3     |                                   | 47.9   |   | 50.1 |   | 9.8 |   |
| Selling, general and  administrative    | 38.4                         |   | 36.6                                   |   | .6      |                                   | 38.1   |   | 38.0 |   | 4.6 |   |
| Operating income (loss)                 | (4.2                         | )      | (1.7                                   | )      | (57.6   | )                                      | (3.1   | ) | (4.3 | ) | 46.9 |   |
| Interest expense, net                   | 2.8                          |   | 2.8                                    |   | 5.9     |                                   | 2.7    |   | 3.3 |   | 26.8 |   |
| Other (income) expense  net             | .3                           |   | (2.8                                   | )      | (951.5  | )                                      | .2     |   | (3.9 | ) | (1,828.4 | ) |
| Income (loss) before  Minority interest | (7.4                         | )      | (1.8                                   | )      | (74.7   | )                                      | (6.0   | ) | (3.7 | ) | (35.4 | ) |
| Minority interest                       | .1                           |   | 1.7                                    |   | 1,117.9 |                                   | .1     |   | 1.6 |   | 2,150.0 |   |
| Income (loss) before  Income taxes      | (7.2                         | )      | (0.1                                   | )      | (98.6   | )                                      | (5.9   | ) | (2.1 | ) | (62.9 | ) |
| Provision (benefit)  for income taxes   | (2.6                         | )      | 1.8                                    |   | (172.5  | )                                      | (2.2   | ) | .9 |   | (141.4 | ) |
|                                    |                              |   |                                        |   |         |                                   |        |   |  |   |  |   |
| Net income (loss)                       | (4.7%                        | )      | (1.9%                                  | )      | (58.1%  | )                                      | (1.4%  | ) | (3.0% | ) | 115.3 | % |
|                                    |                              |   |                                        |   |         |                                   |        |   |  |   |  |   |

Three and Six Monthsended June 30, 2001 Compared to Three and Six Months ended June 30, 2000

             Forthe three and six month period ended June 30, 2001, consolidated salesincreased by $1.1 million (5.6%) and $1.9 million (5.0%), respectively ascompared to the same period in 2000. Revenues from the Company’s ATM business drove the revenue increase andcontributed $4.5 million of the totals for the quarter and $8.2 million year todate, up $2.3 million and $4.9 million respectively from the same periods lastyear.

             CopyCenterssales were down 8.5% and 10.3% for the quarter and six months ended June 30,2001, respectively, as compared to the same periods in 2000. The decrease isprimarily due to decreasing overall copy volumes and decreasing billed units ascompared to the same periods in 2000. Copy volumes decreased 9.2% for thequarter and 9.5% year to date. Billed units decreased 11.6% and 7.8%respectively. Although overall copy volumes and billed units decreased ascompared to the same periods in 2000, copies per billed unit remained constantover the quarter and six months ended June 30, 2001 and 2000. The overall number of copiers installed was31,665 and  36,200 at June 30, 2001 and2000 respectively.

             Revenuesfrom the Company’s ATM business were $4.5 million for the quarter and $8.2million for the quarter and six months ended June 30, 2001, an increase of 104%and 145% respectively. This increase is attributable to the expanded numberof  ATMs installed, 1,847 as of June 30,2001 versus 1,537 as of June 30, 2000 and increasing volumes per unit. Withdrawaltransactions generated by the ATM business for the three and six month periodsending June 30, 2001 were 1,865,000 and 4,138,000 as compared to 845,000 and1,318,000 for the same periods last year. During the last nine months, theCompany has actively managed its United States ATM account base, removing ATMswhich were not generating adequate transaction volumes to be profitable. TheATM units installed in the United Kingdom increased from  617 at June 30, 2000 to 1,188 as of 2001.

             iATMglobal.netand Strategic Software Solutions, the Company’s e-commerce business, generated$289,000 and $547,000 in gross revenues from contracted software engineeringservices for the quarter and six months ended June 30, 2001 compared with$60,000 generated for the same periods last year.

             Salesdiscounts are the portion of revenue retained by retail customers.  Sales discounts generally vary at individualretail businesses depending on volume – the higher the volume, the greater thediscount and are typically smaller in the ATM business as compared to the photocopybusiness.  The increase in salesdiscounts for the quarter ended June 30, 2001 compared to the prior yearis $162,000 (5.1%). Year to date discounts remained constant over the sameperiod last year and decreased from 17.1% of sales to 16.2% of sales year to date. The decrease as a percentage ofsales relates to the relative increase in ATM sales which generally have alower discount rate than that of the photocopy business.

             Costsof sales on a consolidated basis increased $412,000 (4.3%) for the quarter and$1.8 million (9.8%) for the six months ended June 30, 2001 compared to thesame periods in 2000 but remained relatively stable as a percentage of sales.The ATM business contributed $1.1 million of the increase in cost of sales forthe quarter but cost of sales in the ATM business decreased  from 94% of ATM sales to 71% for thequarter. This reduction as a percentage of sales in the ATM business isprimarily attributable to reduced expenses related to third party maintenanceand service of the ATM units over last year. The increase in cost of sales fromthe ATM business was partially offset by a reduction in cost of sales from thephotocopy business which decreased by $783,000 for the quarter and $1.4 millionyear to date as a result of efficiencies gained from the consolidation ofservice center locations and reduced copy volumes.

             Selling,general and administrative costs increased $48,000 for the quarter and $658,000for the year to date on a consolidated basis. However, these costs as a percentageof sales fell from 38.4% to 36.6% for the quarter as compared to the sameperiod last year, primarily due to reductions in labor costs of $470,000 overthe same period last year. Year to date selling, general and administrativecosts on a consolidated basis remained at 2000 levels as a percentage of sales.Decreases in such costs for the photocopy and ATM businesses were offset byincreases in such costs for iATMglobal.net, which increased $747,000 and $2.0million to $1.3 million and $2.6 million the quarter and year to daterespectively.

             Interestexpense remained at 2000 levels for the quarter in 2001.  Year to date interest expense increased26.8% in 2001. This increase was related to higher interest recorded in thefirst quarter of 2001 as compared to 2000 due to a higher level of borrowingsunder the under the Company’s revolving line of credit and higher interestrates on those borrowings than existed during the same time period in 2000.

             Otherincome increased $628,000 during the quarter ended June 30, 2001 and $1.6million year to date, compared to the same periods in 2000. The increase forthe quarter is primarily due to income recorded as a result of a settlementreached with the State of Massachusetts related to sales tax issues dating backto 1997. Additionally, in the first quarter of 2001 the Company recorded incomeof $801,000 related to a contract termination settlement with the Woolwich,PLC. Woolwich provided cash inventory and cash management services for all ofthe Company’s ATMs located in England, Scotland, and Wales during 2000.  In addition, Woolwich provided sponsorshipinto the LINK cash delivery network in the United Kingdom.  In mid-2000, a change in regulation allowedTRM to be a direct member of LINK.  As aresult of this change, and Woolwich’s desire to exit the surcharging market inthe United Kingdom, TRM and Woolwich terminated their relationship effective atthe end of March 2001.

The Company’s effective tax rate foroperations excluding e-commerce for the quarter ended June 30, 2001, was 40percent, resulting in an income tax provision of $309,000. The Company’se-Commerce business recorded pre-tax losses in the second quarter 2001 of $1.1million but recorded an income tax expense of $49,000 related to profits earnedby Strategic Software Solutions, a subsidiary of iATMglobal.net, during thesame period. The Company’s consolidated effective tax rate is 41.4% percent forthe six months ended June 30, 2001 resulting in an income tax provision of$342,000 compared to 37.1 percent and an income tax benefit of $827,000 forJune 30, 2000.

Liquidityand Capital Resources

             AtDecember 31, 2000, the Company was not in compliance with all of its loancovenants.  In February 2001 the Companyexecuted an amendment to its loan agreement waiving past non-compliance andestablishing new covenants.  The Companyis in compliance with the revised covenants. The Company’s existing line of credit matures on January 4, 2002,and consequently, the $25.2 million outstanding at June 30, 2001, has all beenclassified as a current liability. The Company intends to replace its line ofcredit before the maturity date with a combination of longer term equipmentbased financing, term debt, and a new line of credit.

             During the six months endedJune 30, 2001, TRM generated $1.7 million in cashflows from operations andfunded $1.4 million in capital expenditures primarily from cash generated fromoperations. Capital expenditures were primarily for ATM machines, photocopyequipment and computer related expenditures in the e-commerce business.

             TheCompany currently anticipates approximately $8 million of capital expendituresfor calendar 2001, the majority of which will be used to acquire ATM machinesfor the expanding United Kingdom ATM business. The Company expects to finance these capital expenditures with cashgenerated by operations and equipment based financing.

Disclosure Regarding Euro Conversion

             OnJanuary 1, 1999, eleven member countries of the European Community began aprocess to convert their existing sovereign currencies to a single commondenomination, the Euro.  The process ofconversion is gradual over the next three years, culminating in the eventualremoval from circulation of all existing domestic currency for theparticipating countries.  The Companypresently operates in the United Kingdom and France and transacts business inthe local currency of those countries. France will be subject to the Euro Conversion, and the United Kingdommay become subject to the conversion. The Company believes that it will be able to accommodate the conversionto the Euro without a material impact on its financial statements.
Forward-Looking Statements 

Information in “Management’s Discussionand Analysis,” in this Form 10-Q about the Company’s goals, plans andexpectations regarding revenues from the ATM business becoming a higherpercentage of overall revenue, expansion of product offerings through theCompany’s ATM network, pursuing new geographic opportunities, replacing itsexisting line of credit with longer term equipment based financing, term debtand a new line of credit, capital expenditures and financing of capitalexpenditures, and, expanding the ATM business constitutes forward-lookingstatements within the meaning of Section 27A of the Securities Act of 1933 andSection 21E of the Securities Exchange Act of 1934.  The following factors that could cause the actual results todiffer materially from the forward-looking statements are:  business conditions in the market areas inwhich the Company operates, competitive factors, the Company’s ability toexpand its current relationships with retailers and broaden its distributionnetwork, successfully developing partnering arrangements and e-commerceproviders, the ability of the Company to enter into additional financingarrangements, customer demand for the Company’s services, the Company’s abilityto execute its plans in each of its business segments successfully, businessconditions in the geographic areas the Company targets for expansion, and the volatilityof paper costs, and the factors discussed in the Company’s Form 10-K for theyear ended December 31, 2000 as filed with the Securities and ExchangeCommission.  Any forward-lookingstatements should be considered in light of these factors .

**ITEM3. **      **QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK**

             TheCompany is exposed to minimal market risks. Sensitivity of results of operations to these risks is managed bymaintaining a conservative investment portfolio, which is comprised solely ofmoney market funds, and entering into long-term debt obligations withappropriate price and term characteristics. The Company does not hold or issue derivative commodity instruments orother financial instruments for trading purposes.  Financial instruments held for other than trading purposes do notimpose a material market risk.

             TheCompany is exposed to interest rate risk, as additional financing will beneeded due to the capital expenditures associated with expanding the Company’sbusiness operations.  The interest ratethat the Company will be able to obtain on debt financing will depend on marketconditions at that time, and may differ from the rates the Company has securedon its current debt.  Additionally, theCompany is exposed to interest rate risk related to its credit facility as ofJune 30, 2001.  Advances against thecredit facility periodically renew, at which point the borrowings are subjectto the then current market interest rates, which may differ from the rates theCompany is currently paying on its borrowings.

             TheCompany is exposed to foreign currency exchange rate risk, as it has operationsin Canada, France and the United Kingdom. The relative amount of business transacted in these countries isoutlined in footnote 12 to the Consolidated Financial Statements of theCompany’s 2000 Form 10-K.

 

**PART II - OTHER INFORMATION**

**ITEM 1.  LEGALPROCEEDINGS**

Mr. Frederick Paulsell, a director of theCompany, and certain members of his family have filed a lawsuit against Messrs.Edward Cohen and Daniel G. Cohen, also directors of the Company, ReadyCashInvestment Partners, LP, a significant shareholder of the Company, andReadyCash GP, Inc., the general partner of ReadyCash and others, claiming thatthe defendants agreed to purchase one million shares of the Company’s commonstock for $13 a share from Mr. Paulsell and his family members at or around thetime of the investment transaction between ReadyCash and the Company in thespring of 1998.  Mr. Paulsell and hisfamily also claim that Messrs. Edward Cohen and Daniel G. Cohen have breachedthis alleged agreement and the defendants are liable to Mr. Paulsell and hisfamily members for damages of at least $12 million for breach of contract,common law fraud and securities fraud.

In response, Messrs. Edward Cohenand Daniel G. Cohen and the other defendants have denied any wrongdoingand have filed a counterclaim alleging common law fraud and securities fraudagainst Mr. Paulsell arising out of (1) Mr. Paulsell’s failureto disclose his alleged agreement to sell his own stock to the defendants ineither the TRM Shareholder Voting Agreement or stock disclosure forms filedwith the U.S. Securities & Exchange Commission and(2) Mr. Paulsell’s failure to disclose various facts before theclosing of the investment in TRM by ReadyCash Investment Partners, L.P.  Mr. Paulsell has filed a motion todismiss the defendants’ counterclaims relating to the TRM Shareholder VotingAgreement and related SEC forms that is now before the Court.

Although this action does not directlyimplicate the Company, Messrs. Edward Cohen and Daniel G. Cohen, on the onehand, and Mr. Paulsell, on the other hand, have each sought indemnification bythe Company for any liability arising out of the claims described above,including the costs of defense, and have requested that the Company reimbursethem for expenses incurred to date.  TheCompany is considering these requests and has notified its insurance carrier.

**ITEM 4.  SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS**

             OnJune 7, 2001 at the Company’s Annual Meeting of shareholders, the holders ofthe Company’s outstanding Common Stock and Series A Preferred Stock took theactions described below.  As of therecord date for the Annual Meeting, 7,063,190 shares of Common Stock and1,777,778 shares of Series A Preferred Stock were issued and outstanding.  Each share of Preferred Stock is entitled toone vote per share and votes together with the Common Stock as one class.

             1.          The shareholders elected each ofJoseph G. Denton, Hersh Kozlov, and Henry Sun, by the votes indicated below, toserve on the Company’s Board of Directors for the next three years:
 Joseph G. Denton   6,185,815 shares  in favor 176,976 shares  against or withheld     Hersh  Kozlov   6,185,815 shares  in favor 176,976 shares against or withheld     Henry Sun   6,185,815 shares  in favor 176,976 shares  against or withheld
 

             EdwardE. Cohen, Daniel G. Cohen, Frederick O. Paulsell, Frederic P. Stockton, KennethL. Tepper, Joel R. Mesznik and Slavka B. Glaser will continue their terms ofoffice as directors.

**ITEM 6.**        **EXHIBITS AND REPORTS ON FORM 8-K.**

**                           (a)**         **Exhibits**

                                        None

                           **(b)**         **Reports on Form 8-K.**

                                        Noreports on Form 8–K were filed during the period.
****SIGNATURE**

 

Pursuant to the requirements of the Securities ExchangeAct of 1934, Registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized.

 
    **TRM CORPORATION**     Date:August 10, 2001 By:/s/ Daniel L. Spalding       Daniel L. Spalding    Senior Vice President  Chief Financial Officer     ** **** **
 **