##### 



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 June 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.)
 
 
   
   þ o
  o þ
  CLASS
    
    OUTSTANDING AT JUNE 30, 2005Common Stock
    
    13,986,704
      PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS
 TRM Corporation
Consolidated Balance Sheets
(unaudited)
(In thousands)
 December 31,
    
    
    June 30,2004
    
    
    2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    5,576
    
    
    $
    2,040Accounts receivable, net
    
    
    12,251
    
    
    
    19,678Income tax receivable
    
    
    115
    
    
    
    344Inventories
    
    
    7,319
    
    
    
    6,987Prepaid expenses and other
    
    
    5,011
    
    
    
    4,263Deferred tax asset
    
    
    58
    
    
    
    877Total current assets
    
    
    30,330
    
    
    
    34,189Equipment, less accumulated depreciation and amortization
    
    
    72,265
    
    
    
    72,136Restricted cash  TRM Inventory Funding Trust
    
    
    75,547
    
    
    
    84,461Goodwill
    
    
    118,444
    
    
    
    118,127Other intangible assets, less accumulated amortization
    
    
    51,241
    
    
    
    46,500Other assets
    
    
    9,473
    
    
    
    10,694Total assets
    
    $
    357,300
    
    
    $
    366,107Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    18,234
    
    
    $
    12,713Accrued expenses
    
    
    8,891
    
    
    
    7,558Accrued expenses of TRM Inventory Funding Trust
    
    
    154
    
    
    
    161Current portion of long-term debt
    
    
    10,059
    
    
    
    10,045Current portion of obligations under capital leases
    
    
    2,195
    
    
    
    1,368Total current liabilities
    
    
    39,533
    
    
    
    31,845TRM Inventory Funding Trust note payable
    
    
    74,105
    
    
    
    83,212Long-term debt
    
    
    120,177
    
    
    
    123,635Obligations under capital leases
    
    
    1,644
    
    
    
    1,072Deferred tax liability
    
    
    8,168
    
    
    
    10,133Other long-term liabilities
    
    
    241
    
    
    
    219Preferred dividends payable
    
    
    220
    
    
    
    Total liabilities
    
    
    244,088
    
    
    
    250,116Minority 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; 13,987 shares issued and outstanding
(13,139 at December 31, 2004)
    
    
    81,075
    
    
    
    92,853Additional paid-in capital
    
    
    63
    
    
    
    63Accumulated other comprehensive income:Accumulated foreign currency translation adjustments
    
    
    4,474
    
    
    
    1,380Unrealized gain on securities
    
    
    28
    
    
    
    1,493Other
    
    
    
    
    
    
    (115
    )Retained earnings
    
    
    14,452
    
    
    
    18,817Total shareholders equity
    
    
    111,712
    
    
    
    114,491Total liabilities and shareholders equity
    
    $
    357,300
    
    
    $
    366,107
  2
      TRM Corporation
Consolidated Statements of Operations
(unaudited)
(In thousands, except per share data)
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Sales
    
    $
    28,840
    
    
    $
    61,405
    
    
    $
    54,755
    
    
    $
    120,217Less discounts
    
    
    6,328
    
    
    
    28,250
    
    
    
    11,227
    
    
    
    53,657Net sales
    
    
    22,512
    
    
    
    33,155
    
    
    
    43,528
    
    
    
    66,560Cost of sales
    
    
    12,091
    
    
    
    16,675
    
    
    
    22,710
    
    
    
    34,174Gross profit
    
    
    10,421
    
    
    
    16,480
    
    
    
    20,818
    
    
    
    32,386Selling, general and administrative expense
    
    
    6,297
    
    
    
    11,277
    
    
    
    12,416
    
    
    
    22,540Operating income
    
    
    4,124
    
    
    
    5,203
    
    
    
    8,402
    
    
    
    9,846Interest expense
    
    
    249
    
    
    
    2,519
    
    
    
    493
    
    
    
    4,747Other expense (income), net
    
    
    74
    
    
    
    (718
    )
    
    
    227
    
    
    
    (811
    )Income from continuing operations before income taxes
    
    
    3,801
    
    
    
    3,402
    
    
    
    7,682
    
    
    
    5,910Provision for income taxes
    
    
    1,033
    
    
    
    540
    
    
    
    2,320
    
    
    
    1,398Income from continuing operations
    
    
    2,768
    
    
    
    2,862
    
    
    
    5,362
    
    
    
    4,512Loss from discontinued operations, net of income tax
benefit of $30 for the three months and $69 for the six
months ended June 30, 2004
    
    
    (60
    )
    
    
    
    
    
    
    (141
    )
    
    
    Net income
    
    $
    2,708
    
    
    $
    2,862
    
    
    $
    5,221
    
    
    $
    4,512Basic and diluted per share information:Income from continuing operations
    
    $
    2,768
    
    
    $
    2,862
    
    
    $
    5,362
    
    
    $
    4,512Preferred stock dividends
    
    
    (371
    )
    
    
    
    
    
    
    (746
    )
    
    
    (147
    )Income allocated to Series A preferred shareholders
    
    
    (350
    )
    
    
    
    
    
    
    (686
    )
    
    
    (57
    )Net income from continuing operations available to
common shareholders
    
    $
    2,047
    
    
    $
    2,862
    
    
    $
    3,930
    
    
    $
    4,308Weighted average common shares outstanding
    
    
    7,509
    
    
    
    13,972
    
    
    
    7,331
    
    
    
    13,692Dilutive effect of stock options
    
    
    1,129
    
    
    
    788
    
    
    
    1,087
    
    
    
    840Dilutive effect of warrants
    
    
    25
    
    
    
    15
    
    
    
    12
    
    
    
    48Weighted average common shares outstanding, assuming
dilution
    
    
    8,663
    
    
    
    14,775
    
    
    
    8,430
    
    
    
    14,580Basic income (loss) per share:From continuing operations
    
    $
    .27
    
    
    $
    .20
    
    
    $
    .54
    
    
    $
    .31Discontinued operations
    
    
    (.01
    )
    
    
    
    
    
    
    (.02
    )
    
    
    Net income
    
    $
    .26
    
    
    $
    .20
    
    
    $
    .52
    
    
    $
    .31Diluted income (loss) per share:From continuing operations
    
    $
    .24
    
    
    $
    .19
    
    
    $
    .47
    
    
    $
    .30Discontinued operations
    
    
    (.01
    )
    
    
    
    
    
    
    (.02
    )
    
    
    Net income
    
    $
    .23
    
    
    $
    .19
    
    
    $
    .45
    
    
    $
    .30
  3
      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
    
    $
    4,512
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,512
    
    
    
    4,512Other comprehensive income:Foreign currency
translation adjustment
    
    
    (3,094
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,094
    )
    
    
    
    
    
    
    (3,094
    )Unrealized gain on securities
    
    
    1,465
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,465
    
    
    
    
    
    
    
    1,465Other, net of tax
    
    
    (115
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (115
    )
    
    
    
    
    
    
    (115
    )Comprehensive income
    
    $
    2,768Conversion of Series A preferred stock
    
    
    
    
    
    
    (1,044
    )
    
    
    (11,620
    )
    
    
    783
    
    
    
    11,620
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78Exercise of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37Tax benefit of options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (147
    )
    
    
    (147
    )Balances, June 30, 2005
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    13,987
    
    
    $
    92,853
    
    
    $
    63
    
    
    $
    2,758
    
    
    $
    18,817
    
    
    $
    114,491
  4
      TRM Corporation
Consolidated Statements of Cash Flows
(unaudited)
(In thousands)
 Six months endedJune 30,2004
    
    
    2005Operating activities:Net income
    
    $
    5,221
    
    
    $
    4,512Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    4,643
    
    
    
    10,028Loss on disposal of equipment
    
    
    322
    
    
    
    158Changes in items affecting operations, net of effect of business acquisitions:Accounts receivable
    
    
    741
    
    
    
    (7,640
    )Income tax receivable
    
    
    
    
    
    
    (229
    )Inventories
    
    
    (137
    )
    
    
    (99
    )Prepaid expenses and other
    
    
    (746
    )
    
    
    578Accounts payable
    
    
    1,216
    
    
    
    (5,129
    )Accrued expenses
    
    
    (2,032
    )
    
    
    (1,213
    )Deferred taxes
    
    
    2,176
    
    
    
    1,126Total operating activities
    
    
    11,404
    
    
    
    2,092Investing activities:Proceeds from sale of equipment
    
    
    49
    
    
    
    36Capital expenditures
    
    
    (3,255
    )
    
    
    (7,478
    )Acquisition of businesses, net of cash acquired
    
    
    (6,324
    )
    
    
    Acquisition of intangible and other assets
    
    
    (651
    )
    
    
    (1,028
    )Total investing activities
    
    
    (10,181
    )
    
    
    (8,470
    )Financing activities:Borrowings on notes payable
    
    
    3,915
    
    
    
    9,254Repayment of notes payable
    
    
    (6,074
    )
    
    
    (5,003
    )Principal payments on capital lease obligations
    
    
    (1,146
    )
    
    
    (1,194
    )Increase in restricted cash
    
    
    (11,003
    )
    
    
    (8,914
    )Proceeds from issuance of TRM Inventory Funding Trust note, net of repayments
    
    
    11,039
    
    
    
    9,107Proceeds from exercise of stock options and warrants
    
    
    3,576
    
    
    
    115Preferred stock dividends
    
    
    (750
    )
    
    
    (367
    )Other
    
    
    
    
    
    
    (13
    )Total financing activities
    
    
    (443
    )
    
    
    2,985Effect of exchange rate changes
    
    
    26
    
    
    
    (143
    )Net increase (decrease) in cash and cash equivalents
    
    
    806
    
    
    
    (3,536
    )Beginning cash and cash equivalents
    
    
    5,724
    
    
    
    5,576Ending cash and cash equivalents
    
    $
    6,530
    
    
    $
    2,040
  5
      TRM Corporation
 Notes to Condensed Consolidated Financial Statements (unaudited)
 1.
    
    Interim Financial Data
  2.
    
    Financial Statement Reclassifications
  3.
    
    Net Income Per Share
  6
      4.
    
    Inventories (in thousands):
 December 31,
    
    
    June 30,2004
    
    
    2005Parts
    
    $
    4,349
    
    
    $
    5,305ATMs held for resale
    
    
    2,896
    
    
    
    1,604Paper, toner and developer
    
    
    74
    
    
    
    78Total
    
    $
    7,319
    
    
    $
    6,987
 5.
    
    Long-Term Debt (in thousands):
 December 31,
    
    
    June 30,2004
    
    
    2005Syndicated loan facility:Term loan
    
    $
    120,000
    
    
    $
    115,000Domestic line of credit
    
    
    3,500
    
    
    
    5,300Foreign line of credit
    
    
    6,687
    
    
    
    13,335Other
    
    
    49
    
    
    
    45130,236
    
    
    
    133,680Less current portion
    
    
    (10,059
    )
    
    
    (10,045
    )$
    120,177
    
    
    $
    123,635
  6.
    
    Business Acquisitions
   7
      Three months
    
    
    Six monthsended
    
    
    endedJune 30, 2004
    
    
    June 30, 2004Net sales (in thousands)
    
    $
    35,662
    
    
    $
    70,570Net income (in thousands)
    
    $
    916
    
    
    $
    1,722Basic net income per share
    
    $
    .06
    
    
    $
    .11Diluted net income per share
    
    $
    .05
    
    
    $
    .10
 7.
    
    Shareholders Equity
   Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Net income, as reported
    
    $
    2,708
    
    
    $
    2,862
    
    
    $
    5,221
    
    
    $
    4,512Deduct total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects
    
    
    (256
    )
    
    
    (374
    )
    
    
    (342
    )
    
    
    (747
    )Pro forma net income
    
    $
    2,452
    
    
    $
    2,488
    
    
    $
    4,879
    
    
    $
    3,765Basic net income per share:As reported
    
    $
    .26
    
    
    $
    .20
    
    
    $
    .52
    
    
    $
    .31Pro forma
    
    $
    .24
    
    
    $
    .18
    
    
    $
    .48
    
    
    $
    .26Diluted net income per share:As reported
    
    $
    .23
    
    
    $
    .19
    
    
    $
    .45
    
    
    $
    .30Pro forma
    
    $
    .20
    
    
    $
    .17
    
    
    $
    .41
    
    
    $
    .24
 8
      8.
    
    Provision for Income Taxes
  9.
    
    Segment Reporting
   Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Net sales:ATM
    
    $
    11,489
    
    
    $
    23,966
    
    
    $
    21,094
    
    
    $
    48,492Photocopy
    
    
    11,023
    
    
    
    9,189
    
    
    
    22,434
    
    
    
    18,068$
    22,512
    
    
    $
    33,155
    
    
    $
    43,528
    
    
    $
    66,560Operating income excluding unallocated costs:ATM
    
    $
    1,243
    
    
    $
    4,954
    
    
    $
    2,678
    
    
    $
    10,847Photocopy
    
    
    2,881
    
    
    
    2,115
    
    
    
    5,724
    
    
    
    2,604$
    4,124
    
    
    $
    7,069
    
    
    $
    8,402
    
    
    $
    13,451Reconciliation of segment data to income from
continuing operations before income taxes:Operating income excluding unallocated costs
    
    $
    4,124
    
    
    $
    7,069
    
    
    $
    8,402
    
    
    $
    13,451Unallocated costs
    
    
    
    
    
    
    1,866
    
    
    
    
    
    
    
    3,605Interest expense
    
    
    249
    
    
    
    2,519
    
    
    
    493
    
    
    
    4,747Other (income) expense, net
    
    
    74
    
    
    
    (718
    )
    
    
    227
    
    
    
    (811
    )Income from continuing operations before income
taxes
    
    $
    3,801
    
    
    $
    3,402
    
    
    $
    7,682
    
    
    $
    5,910
 9
      ATM (including goodwill of $118.1 million)
    
    $
    317,043Photocopy
    
    
    49,064$
    366,107
 10.
    
    New Accounting Standards
   10
      11.
    
    Insurance Settlement
  12.
    
    Interest Rate Cap
  13.
    
    Subsequent Event
  11
      ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
   Overview
    12
      Consolidated Results of Operations
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Less discounts
    
    
    22.0
    
    
    
    46.0
    
    
    
    20.5
    
    
    
    44.6Net sales
    
    
    78.0
    
    
    
    54.0
    
    
    
    79.5
    
    
    
    55.4Cost of sales
    
    
    41.9
    
    
    
    27.2
    
    
    
    41.5
    
    
    
    28.5Gross profit
    
    
    36.1
    
    
    
    26.8
    
    
    
    38.0
    
    
    
    26.9Selling, general and administrative expense
    
    
    21.8
    
    
    
    18.3
    
    
    
    22.7
    
    
    
    18.7Operating income
    
    
    14.3
    
    
    
    8.5
    
    
    
    15.3
    
    
    
    8.2Interest expense
    
    
    .9
    
    
    
    4.1
    
    
    
    .9
    
    
    
    3.9Other (income) expense, net
    
    
    .2
    
    
    
    (1.2
    )
    
    
    .4
    
    
    
    (.7
    )Income from continuing operations before
income taxes
    
    
    13.2
    
    
    
    5.6
    
    
    
    14.0
    
    
    
    5.0Provision for income taxes
    
    
    3.6
    
    
    
    .9
    
    
    
    4.2
    
    
    
    1.2Income from continuing operations
    
    
    9.6
    
    
    
    4.7
    
    
    
    9.8
    
    
    
    3.8Loss from discontinued operations
    
    
    (.2
    )
    
    
    
    
    
    
    (.3
    )
    
    
    Net income
    
    
    9.4
    %
    
    
    4.7
    %
    
    
    9.5
    %
    
    
    3.8
    %
 13
      Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004
  Three months ended June 30,% of
    
    
    
    
    
    
    % of2004
    
    
    sales
    
    
    2005
    
    
    sales(in thousands, except operating and percentage data)Transaction-based sales
    
    $
    14,602
    
    
    
    94.7
    %
    
    $
    46,739
    
    
    
    93.0
    %Service and other
    
    
    562
    
    
    
    3.6
    
    
    
    2,651
    
    
    
    5.2Sales of ATM equipment
    
    
    256
    
    
    
    1.7
    
    
    
    889
    
    
    
    1.8Total sales
    
    
    15,420
    
    
    
    100.0
    %
    
    
    50,279
    
    
    
    100.0
    %Less discounts
    
    
    3,931
    
    
    
    25.5
    
    
    
    26,313
    
    
    
    52.3Net sales
    
    
    11,489
    
    
    
    74.5
    
    
    
    23,966
    
    
    
    47.7Cost of sales
    
    
    6,624
    
    
    
    43.0
    
    
    
    11,470
    
    
    
    22.8Gross profit
    
    $
    4,865
    
    
    
    31.5
    %
    
    $
    12,496
    
    
    
    24.9
    %Operating Data:Average number of transacting ATMs
    
    
    4,264
    
    
    
    
    
    
    
    20,212Withdrawal transactions
    
    
    5,216,693
    
    
    
    
    
    
    
    20,174,298Average withdrawals per ATM per month
    
    
    408
    
    
    
    
    
    
    
    333Average transaction-based sales per
withdrawal transaction
    
    $
    2.80
    
    
    
    
    
    
    $
    2.31Average discount per withdrawal transaction
    
    $
    .75
    
    
    
    
    
    
    $
    1.30Net transaction-based sales per
withdrawal transaction
    
    $
    2.05
    
    
    
    
    
    
    $
    1.01
  Three months ended June 30,% of
    
    
    
    
    
    
    % of2004
    
    
    sales
    
    
    2005
    
    
    sales(in thousands, except operating and percentage data)Sales
    
    $
    13,420
    
    
    
    100.0
    %
    
    $
    11,126
    
    
    
    100.0
    %Less discounts
    
    
    2,397
    
    
    
    17.9
    
    
    
    1,937
    
    
    
    17.4Net sales
    
    
    11,023
    
    
    
    82.1
    
    
    
    9,189
    
    
    
    82.6Cost of sales
    
    
    5,467
    
    
    
    40.7
    
    
    
    5,205
    
    
    
    46.8Gross profit
    
    $
    5,556
    
    
    
    41.4
    %
    
    $
    3,984
    
    
    
    35.8
    %Operating Data:Average number of photocopiers
    
    
    25,477
    
    
    
    
    
    
    
    24,119Average photocopies per machine per month
    
    
    2,128
    
    
    
    
    
    
    
    1,821Average sales per photocopier per month
    
    $
    175.58
    
    
    
    
    
    
    $
    153.77Average sales per photocopy
    
    $
    .083
    
    
    
    
    
    
    $
    .084Average discount per photocopy
    
    $
    .015
    
    
    
    
    
    
    $
    .015Average net sales per photocopy
    
    $
    .068
    
    
    
    
    
    
    $
    .069Average gross profit per photocopy
    
    $
    .034
    
    
    
    
    
    
    $
    .030
 Sales
  14
      ATM sales.
  
    
    Expansion of our ATM networks  The average number of transacting ATMs in
our networks during the second quarter of 2005 increased to nearly five times the
average in the same period in 2004. The increase of 15,948 average transacting ATMs
has resulted primarily from the acquisition between June 30, 2004 and November 19, 2004
of approximately 16,000 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:
 
    
    An 18.4% decrease in average withdrawals per ATM per month, to 333 from
408 in the second 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 17.5% decrease in average transaction-based sales per withdrawal
transaction, to $2.31 from $2.80 in the second 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.
  15
      Photocopier sales.
 
    
    Declining photocopy volume  Continuing a trend, photocopy volume declined
by 19.0% for the second quarter of 2005 compared to the same period in 2004, to 132
million copies from 163 million copies, due to a combination of:
 
    
    A decline in installed photocopiers to an average of 24,119 in the
second quarter of 2005 from an average of 25,477 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 1,821 for the second quarter of 2005 from 2,128 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 second quarter of 2005 compared to the
same period in 2004, resulting in a $133,000 increase in photocopier sales. This
increase was substantially offset by exchange rate-related increases in costs.
 Sales Discounts
  Cost of Sales
  16
      ATM cost of sales.
 
    
    Expansion of our ATM networks to an average of 20,212 transacting ATMs in
the second quarter of 2005 compared to an average of 4,264 in the second quarter of
2004.
    
    Exchange rate effects  The ATM segment reported approximately $210,000
more in cost of sales in the second quarter of 2005 than it would have reported had the
exchange rate for the British pound and Canadian dollar remained at the average for the
second quarter of 2004.
  Photocopier cost of sales.
  Selling, General and Administrative Expense
  
    
    Amortization expense increased by $2.1 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 employees necessary to accommodate our expanding business, including
integration and operation of businesses acquired in 2004.
    
    The cost of outsourced services increased by $977,000, 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.
    
    The increase in the value of the British pound and Canadian dollar caused
an increase of $126,000 in selling, general and administrative expense.
 17
      Interest Expense
   Other Expense (Income), Net
  Tax Rate
  Discontinued Operations
  Net Income
  18
      Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004
  Six months ended June 30,% of
    
    
    
    
    
    
    % of2004
    
    
    sales
    
    
    2005
    
    
    sales(in thousands, except operating and percentage data)Transaction-based sales
    
    $
    25,833
    
    
    
    94.3
    %
    
    $
    90,389
    
    
    
    91.8
    %Service and other
    
    
    1,169
    
    
    
    4.3
    
    
    
    5,548
    
    
    
    5.7Sales of ATM equipment
    
    
    400
    
    
    
    1.4
    
    
    
    2,454
    
    
    
    2.5Total sales
    
    
    27,402
    
    
    
    100.0
    
    
    
    98,391
    
    
    
    100.0Less discounts
    
    
    6,308
    
    
    
    23.0
    
    
    
    49,899
    
    
    
    50.7Net sales
    
    
    21,094
    
    
    
    77.0
    
    
    
    48,492
    
    
    
    49.3Cost of sales
    
    
    11,582
    
    
    
    42.3
    
    
    
    23,182
    
    
    
    23.6Gross profit
    
    $
    9,512
    
    
    
    34.7
    %
    
    $
    25,310
    
    
    
    25.7
    %Operating Data:Average number of transacting ATMs
    
    
    3,860
    
    
    
    
    
    
    
    20,341Withdrawal transactions
    
    
    9,239,903
    
    
    
    
    
    
    
    39,065,906Average withdrawals per ATM per month
    
    
    399
    
    
    
    
    
    
    
    320Average transaction-based sales per
withdrawal transaction
    
    $
    2.79
    
    
    
    
    
    
    $
    2.31Average discount per withdrawal transaction
    
    $
    .68
    
    
    
    
    
    
    $
    1.27Net transaction-based sales per
withdrawal transaction
    
    $
    2.11
    
    
    
    
    
    
    $
    1.04
  Six months ended June 30,% of
    
    
    
    
    
    
    % of2004
    
    
    sales
    
    
    2005
    
    
    sales(in thousands, except operating and percentage data)Sales
    
    $
    27,353
    
    
    
    100.0
    %
    
    $
    21,826
    
    
    
    100.0
    %Less discounts
    
    
    4,919
    
    
    
    18.0
    
    
    
    3,758
    
    
    
    17.2Net sales
    
    
    22,434
    
    
    
    82.0
    
    
    
    18,068
    
    
    
    82.8Cost of sales
    
    
    11,128
    
    
    
    40.7
    
    
    
    10,992
    
    
    
    50.4Gross profit
    
    $
    11,306
    
    
    
    41.3
    %
    
    $
    7,076
    
    
    
    32.4
    %Operating Data:Average number of photocopiers
    
    
    25,719
    
    
    
    
    
    
    
    24,110Average photocopies per machine per month
    
    
    2,103
    
    
    
    
    
    
    
    1,806Average sales per photocopier per month
    
    $
    177.26
    
    
    
    
    
    
    $
    150.88Average sales per photocopy
    
    $
    .084
    
    
    
    
    
    
    $
    .084Average discount per photocopy
    
    $
    .015
    
    
    
    
    
    
    $
    .014Average net sales per photocopy
    
    $
    .069
    
    
    
    
    
    
    $
    .070Average gross profit per photocopy
    
    $
    .035
    
    
    
    
    
    
    $
    .027
 Sales
  19
      ATM sales.
  
    
    Expansion of our ATM networks  The average number of transacting ATMs in
our networks during the first six months of 2005 increased to more than five times the
average in the same period in 2004. The increase of 16,481 average transacting ATMs
has resulted primarily from the acquisition between June 30, 2004 and November 19, 2004
of approximately 16,000 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 19.8% decrease in average withdrawals per ATM per month, to 320 from
399 in the first six 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.
    
    A 17.2% decrease in average transaction-based sales per withdrawal
transaction, to $2.31 from $2.79 in the first six 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.
  20
      Photocopier sales.
 
    
    Declining photocopy volume  Continuing a trend, photocopy volume declined
by 19.4% for the first six months of 2005 compared to the same period in 2004, to 261
million copies from 324 million copies, due to a combination of:
 
    
    A decline in installed photocopiers to an average of 24,110 in the
first six months of 2005 from an average of 25,719 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 1,806 for the first six months of 2005 from 2,103 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 six months of 2005 compared to the
same period in 2004, resulting in a $258,000 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.
 21
      
    
    Expansion of our ATM networks to an average of 20,341 transacting ATMs in
the first six months of 2005 compared to an average of 3,860 in the first six months of
2004.
    
    Exchange rate effects  The ATM segment reported approximately $494,000
more in cost of sales in the first six 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 six months of 2004.
  Photocopier cost of sales.
  Selling, General and Administrative Expense
  
    
    Amortization expense increased by $4.3 million, primarily due to the
amortization of intangible assets relating to ATM contracts acquired in 2004.
    
    Labor expense increased by $3.0 million due to an increase in
administrative employees necessary to accommodate our expanding business, including
integration of businesses acquired in 2004.
    
    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.
    
    The increase in the value of the British pound and Canadian dollar caused
an increase of $282,000 in selling, general and administrative expense.
 22
      Interest Expense
   Other Expense (Income), Net
  Tax Rate
  Discontinued Operations
  Net Income
  23
      Liquidity and Capital Resources
 General
      Bank of America Credit Facility
  U.S. Vault Cash Facility
  24
      U.K. Vault Cash Facility
  Canadian Vault Cash Facility
  Capital Lease Facility
  Off-Balance Sheet Arrangements
  Contractual Commitments and Obligations
  25
      Payments Due by PeriodJuly 1 December 31,Contractual obligations
    
    Total
    
    
    2005
    
    
    2006-2007
    
    
    2008-2009
    
    
    After 2009TRM Corporation and subsidiariesLong-term debt
    
    $
    174,883
    
    
    $
    9,938
    
    
    $
    37,601
    
    
    $
    53,065
    
    
    $
    74,279Capital lease obligations
    
    
    2,611
    
    
    
    980
    
    
    
    1,551
    
    
    
    80
    
    
    
    Operating leases
    
    
    8,677
    
    
    
    1,299
    
    
    
    3,976
    
    
    
    1,753
    
    
    
    1,649Purchase obligations
    
    
    21,875
    
    
    
    2,500
    
    
    
    10,000
    
    
    
    9,375
    
    
    
    Total TRM Corporation and subsidiaries
    
    
    208,046
    
    
    
    14,717
    
    
    
    53,128
    
    
    
    64,273
    
    
    
    75,928TRM Inventory Funding Trust note payable
    
    
    90,824
    
    
    
    2,076
    
    
    
    88,748
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    298,870
    
    
    $
    16,793
    
    
    $
    141,876
    
    
    $
    64,273
    
    
    $
    75,928
  Critical Accounting Policies and Estimates
  New Accounting Standards and Effects on Earnings Per Share
  26
      ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
    27
      Foreign Currency Risk
   28
      ITEM 4. CONTROLS AND PROCEDURES
    29
      PART II  OTHER INFORMATION
 ITEM 1. LEGAL PROCEEDINGS
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   For
    
    WithheldDaniel G. Cohen
    
    9,689,990
    
    2,501,108Harmon S. Spolan
    
    9,742,923
    
    2,448,175Kenneth L. Tepper
    
    9,809,528
    
    2,381,570
    ITEM 6. EXHIBITS
 (a) Exhibits
 3.1(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)
 30
      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)10.1
    
    TRM Omnibus Stock Incentive Plan
(incorporated herein by reference to Appendix B to Notice of Annual
Meeting of Shareholders and Proxy Statement dated May 17, 2005)10.2(a)
    
    Form of Incentive Stock Option
Agreement under TRM Omnibus Stock Incentive Plan10.2(b)
    
    Form of Non Qualified Stock Option
Agreement under TRM Omnibus Stock Incentive Plan10.2(c)
    
    Form of Award Agreement under TRM
Omnibus Stock Incentive Plan10.7(f)
    
    Employment Agreement dated
August 12, 2005 by and between TRM Corporation and Daniel
E. OBrien.10.7(g)
    
    Employment Agreement dated August
12, 2005 by and between TRM Corporation and Amy B. Krallman.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 2002.31.3
    
    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.
 31
      SIGNATURE
  TRM CORPORATION
 Date: August 12, 2005
    
    By:
    
    Jon S. PitcherJon S. Pitcher
Principal Accounting Officer
 32