##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from  to
 Commission file number 0-19657
 TRM
CORPORATION
  Oregon
    
    93-0809419(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 
 (Address of principal executive offices) (Zip Code)
  (Registrants telephone number, including area code)
  þ o
  o þ o
  o þ




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TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIALITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II  OTHER INFORMATIONITEM 3. DEFAULTS UPON SENIOR SECURITIESITEM 6. EXHIBITSSIGNATUREFourteenth Amendment to Loan and Servicing AgreementCertification of Chief Executive OfficerCertification of Chief Financial OfficerCertification of Principal Accounting OfficerCertification of Chief Executive Officer, pursuant to Section 906Certification of Chief Financial Officer, pursuant to Section 906Certification of Principal Accounting Officer, pursuant to Section 906    Table of Contents  
 PART
I - FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 TRM Corporation
Consolidated Balance Sheets
(Unaudited)
(In thousands)
 December 31,
    
    
    September 30,2006
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    4,784
    
    
    $
    3,523Restricted cash
    
    
    
    
    
    
    4,064Accounts receivable, net
    
    
    4,328
    
    
    
    3,515Income taxes receivable
    
    
    215
    
    
    
    114Inventories
    
    
    674
    
    
    
    50Prepaid expenses and other
    
    
    1,579
    
    
    
    1,315Deferred financing costs
    
    
    5,270
    
    
    
    181Restricted cash  TRM Inventory Funding Trust
    
    
    73,701
    
    
    
    65,809Assets held for sale
    
    
    106,081
    
    
    
    Total current assets
    
    
    196,632
    
    
    
    78,571Equipment, less accumulated depreciation and amortization
    
    
    11,646
    
    
    
    6,078Goodwill
    
    
    16,748
    
    
    
    16,748Intangible assets, less accumulated amortization
    
    
    585
    
    
    
    644Other assets
    
    
    833
    
    
    
    866Total assets
    
    $
    226,444
    
    
    $
    102,907Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    5,988
    
    
    $
    6,578Accrued expenses
    
    
    8,811
    
    
    
    15,540Term loans and line of credit
    
    
    99,318
    
    
    
    1,966TRM Inventory Funding Trust note payable
    
    
    71,697
    
    
    
    62,544Liabilities related to assets held for sale
    
    
    13,437
    
    
    
    Total current liabilities
    
    
    199,251
    
    
    
    86,628Minority interest
    
    
    1,500
    
    
    
    1,500Commitments and contingencies (notes 9 and 11)Shareholders equity:Common stock, no par value -
50,000 shares authorized; 17,194 shares issued and
outstanding (17,126 at December 31, 2006)
    
    
    135,595
    
    
    
    136,023Additional paid-in capital
    
    
    63
    
    
    
    63Accumulated other comprehensive income -
Accumulated foreign currency translation adjustment
    
    
    4,692
    
    
    
    2,683Accumulated deficit
    
    
    (114,657
    )
    
    
    (123,990
    )Total shareholders equity
    
    
    25,693
    
    
    
    14,779Total liabilities and shareholders equity
    
    $
    226,444
    
    
    $
    102,907
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TRM Corporation
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Sales
    
    $
    26,414
    
    
    $
    23,327
    
    
    $
    83,483
    
    
    $
    69,772Less discounts
    
    
    16,702
    
    
    
    14,990
    
    
    
    51,132
    
    
    
    44,007Net sales
    
    
    9,712
    
    
    
    8,337
    
    
    
    32,351
    
    
    
    25,765Cost of sales:Cost of vault cash
    
    
    1,782
    
    
    
    1,394
    
    
    
    4,823
    
    
    
    4,184Other
    
    
    4,111
    
    
    
    4,233
    
    
    
    12,056
    
    
    
    13,360Gross profit
    
    
    3,819
    
    
    
    2,710
    
    
    
    15,472
    
    
    
    8,221Selling, general and administrative expense (including
non-cash stock compensation of $955 and $350 for the
nine-month periods ended September 30, 2006 and 2007,
respectively)
    
    
    7,150
    
    
    
    4,712
    
    
    
    22,529
    
    
    
    14,337Impairment charges (Note 10):Goodwill
    
    
    20,393
    
    
    
    
    
    
    
    20,393
    
    
    
    Other intangible assets
    
    
    22,918
    
    
    
    
    
    
    
    22,918
    
    
    
    Restructuring charges (Note 12)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    963Equipment write-offs
    
    
    18
    
    
    
    1,198
    
    
    
    74
    
    
    
    1,216Operating loss
    
    
    (46,660
    )
    
    
    (3,200
    )
    
    
    (50,442
    )
    
    
    (8,295
    )Interest expense and amortization of debt issuance costs
    
    
    
    
    
    
    116
    
    
    
    
    
    
    
    276Loss on early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    3,105
    
    
    
    4,059Other expense (income), net
    
    
    (133
    )
    
    
    (110
    )
    
    
    (928
    )
    
    
    240Loss from
continuing operations before provision (benefit) from income taxes
    
    
    (46,527
    )
    
    
    (3,206
    )
    
    
    (52,619
    )
    
    
    (12,870
    )Provision (benefit) for income taxes
    
    
    (2,395
    )
    
    
    59
    
    
    
    (4,598
    )
    
    
    59Loss from continuing operations
    
    
    (44,132
    )
    
    
    (3,265
    )
    
    
    (48,021
    )
    
    
    (12,929
    )Discontinued operations:Income (loss) from operations, including gains on sales
    
    
    (54,825
    )
    
    
    (1,624
    )
    
    
    (56,850
    )
    
    
    3,596Benefit for income taxes
    
    
    (102
    )
    
    
    
    
    
    
    (19
    )
    
    
    Income (loss) from discontinued operations
    
    
    (54,723
    )
    
    
    (1,624
    )
    
    
    (56,831
    )
    
    
    3,596Net loss
    
    $
    (98,855
    )
    
    $
    (4,889
    )
    
    $
    (104,852
    )
    
    $
    (9,333
    )Weighted average common shares outstanding
    
    
    17,102
    
    
    
    17,194
    
    
    
    17,007
    
    
    
    17,166Basic and diluted income (loss) per share:Continuing operations
    
    $
    (2.58
    )
    
    $
    (.19
    )
    
    $
    (2.82
    )
    
    $
    (.75
    )Discontinued operations
    
    
    (3.20
    )
    
    
    (.09
    )
    
    
    (3.35
    )
    
    
    .21Net loss
    
    $
    (5.78
    )
    
    $
    (.28
    )
    
    $
    (6.17
    )
    
    $
    (.54
    )
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TRM Corporation
Consolidated Statement of Shareholders Equity
(Unaudited)
(In thousands)
 AccumulatedAdditional
    
    
    otherComprehensive
    
    
    Common
    
    
    paid-in
    
    
    comprehensive
    
    
    Accumulatedloss
    
    
    Shares
    
    
    Amounts
    
    
    capital
    
    
    income
    
    
    deficit
    
    
    TotalBalances, December 31, 2006
    
    
    
    
    
    
    17,126
    
    
    $
    135,595
    
    
    $
    63
    
    
    $
    4,692
    
    
    $
    (114,657
    )
    
    $
    25,693Comprehensive loss:Net loss
    
    $
    (9,333
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,333
    )
    
    
    (9,333
    )Other comprehensive income
(loss) -Foreign currency
translation adjustment:Recognized in income
    
    
    (2,622
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,622
    )
    
    
    
    
    
    
    (2,622
    )Current period adjustment
    
    
    613
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    613
    
    
    
    
    
    
    
    613Comprehensive loss
    
    $
    (11,342
    )Other capital additions
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53Exercise of stock options
    
    
    
    
    
    
    18
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25Stock option expense
    
    
    
    
    
    
    
    
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11
    )Restricted stock expense
    
    
    
    
    
    
    
    
    
    
    361
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    361Restricted shares vested
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balances, September 30, 2007
    
    
    
    
    
    
    17,194
    
    
    $
    136,023
    
    
    $
    63
    
    
    $
    2,683
    
    
    $
    (123,990
    )
    
    $
    14,779
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TRM Corporation
Consolidated Statements of Cash Flows
Nine months ended September 30, 2006 and 2007
(Unaudited)
(In thousands)
 2006
    
    
    2007Operating activities:Net loss
    
    $
    (104,852
    )
    
    $
    (9,333
    )Adjustments to reconcile net loss to net cash used in operating activities:Impairment charges and asset write-downs
    
    
    96,062
    
    
    
    3,591Depreciation and amortization
    
    
    15,608
    
    
    
    2,542Non-cash stock compensation
    
    
    955
    
    
    
    350Loss on disposal of equipment
    
    
    366
    
    
    
    171Provision for doubtful accounts
    
    
    397
    
    
    
    72Loss on early extinguishment of debt
    
    
    2,560
    
    
    
    4,059Gain on sale of discontinued operations
    
    
    (362
    )
    
    
    (5,336
    )Cumulative foreign currency translation adjustments recognized in income
    
    
    (1,538
    )
    
    
    (2,622
    )Changes in items affecting operations, net of effects of business dispositions:Restricted cash
    
    
    
    
    
    
    (4,064
    )Accounts receivable
    
    
    2,143
    
    
    
    612Inventories
    
    
    608
    
    
    
    978Income tax receivable
    
    
    (4
    )
    
    
    101Prepaid expenses and other
    
    
    (295
    )
    
    
    412Accounts payable
    
    
    101
    
    
    
    884Accrued expenses
    
    
    (6,175
    )
    
    
    (182
    )Deferred income taxes
    
    
    (5,082
    )
    
    
    Cash provided by (used in) operating activities
    
    
    492
    
    
    
    (7,765
    )Investing activities:Proceeds from sale of equipment
    
    
    43
    
    
    
    52Capital expenditures
    
    
    (4,464
    )
    
    
    (41
    )Proceeds from sale of discontinued operations
    
    
    4,280
    
    
    
    103,671Acquisition of intangible and other assets
    
    
    (778
    )
    
    
    (428
    )Cash provided by (used in) investing activities
    
    
    (919
    )
    
    
    103,254Financing activities:Borrowings on notes payable
    
    
    116,431
    
    
    
    1,289Repayment of notes payable
    
    
    (114,001
    )
    
    
    (98,641
    )Debt financing costs
    
    
    (2,979
    )
    
    
    Principal payments on capital lease obligations
    
    
    (576
    )
    
    
    (26
    )Decrease (increase) in restricted cash  TRM Inventory Funding Trust
    
    
    (9,761
    )
    
    
    7,892Proceeds (repayments) of TRM Inventory Funding Trust note, net
    
    
    9,671
    
    
    
    (9,153
    )Proceeds from exercise of stock options
    
    
    91
    
    
    
    25Other
    
    
    (19
    )
    
    
    53Cash used in financing activities
    
    
    (1,143
    )
    
    
    (98,561
    )Effect of exchange rate changes
    
    
    (271
    )
    
    
    (1,491
    )Net decrease in cash and cash equivalents
    
    
    (1,841
    )
    
    
    (4,563
    )Beginning cash and cash equivalents, including $3,302 classified as assets held
for sale at December 31, 2006
    
    
    9,708
    
    
    
    8,086Ending cash and cash equivalents
    
    $
    7,867
    
    
    $
    3,523Supplemental cash flow information:Payments:Cash paid for interest
    
    $
    6,245
    
    
    $
    534Cash paid for income taxes
    
    $
    79
    
    
    $
    17
  5




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TRM Corporation
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 1. Interim Financial Data
  
  6




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2. Financial Statement Reclassifications
  3. Net Loss Per Share
  7




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4. Equipment
 December 31,
    
    
    September 30,2006
    
    
    2007(in thousands)Photocopiers
    
    $
    6,771
    
    
    $
    ATMs
    
    
    11,267
    
    
    
    10,416Furniture and fixtures
    
    
    1,307
    
    
    
    1,254Computer equipment
    
    
    7,116
    
    
    
    6,87726,461
    
    
    
    18,547Accumulated depreciation and amortization
    
    
    (14,815
    )
    
    
    (12,469
    )$
    11,646
    
    
    $
    6,078
 5. Term Loans and Line of Credit
 December 31,
    
    
    September 30,2006
    
    
    2007(in thousands)Term loans
    
    $
    92,808
    
    
    $
    1,966Lines of credit
    
    
    6,510
    
    
    
    $
    99,318
    
    
    $
    1,966
  8




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6. Stock-based Compensation
  9




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2006
    
    
    2007Modification of options previously granted
    
    $
    618
    
    
    $
    Amortization of:Option grants
    
    
    91
    
    
    
    (11
    )Restricted shares
    
    
    246
    
    
    
    361$
    955
    
    
    $
    350
  Number of
    
    Weighted averageshares
    
    exercise priceOutstanding January 1, 2007
    
    
    658,125
    
    
    $
    6.39Options granted
    
    
    30,000
    
    
    
    .98Options exercised
    
    
    (20,375
    )
    
    
    1.59Options forfeited
    
    
    (380,625
    )
    
    
    7.47Outstanding September 30, 2007
    
    
    287,125
    
    
    
    4.73
   Number ofsharesUnvested shares outstanding January 1, 2007
    
    
    258,040Shares granted
    
    
    500,000Shares vested
    
    
    (50,000
    )Shares forfeited
    
    
    (2,010
    )Unvested shares outstanding September 30, 2007
    
    
    706,030
  10




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7. Provision for Income Taxes
  8. Segment Reporting
   9. Discontinued Operations and Sales of Businesses
    11




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12




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Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Canada photocopy
    
    $
    750
    
    
    $
    
    
    
    $
    2,755
    
    
    $
    1,102United Kingdom photocopy
    
    
    
    
    
    
    
    
    
    
    1,646
    
    
    
    United States photocopy
    
    
    5,551
    
    
    
    
    
    
    
    17,457
    
    
    
    1,368Canada ATM
    
    
    1,852
    
    
    
    
    
    
    
    5,476
    
    
    
    United Kingdom ATM
    
    
    8,913
    
    
    
    
    
    
    
    24,346
    
    
    
    1,653Germany ATM
    
    
    48
    
    
    
    
    
    
    
    59
    
    
    
    130$
    17,114
    
    
    $
    
    
    
    $
    51,739
    
    
    $
    4,253
  Three months ended September 30,2006
    
    
    2007Gain on
    
    
    
    
    
    
    
    
    
    
    Gain onOperations
    
    
    sale
    
    
    Total
    
    
    Operations
    
    
    sale
    
    
    TotalCanada photocopy
    
    $
    (2,944
    )
    
    $
    
    
    
    $
    (2,944
    )
    
    $
    
    
    
    $
    
    
    
    $
    United Kingdom
photocopy
    
    
    (286
    )
    
    
    
    
    
    
    (286
    )
    
    
    
    
    
    
    
    
    
    
    United States photocopy
    
    
    (17,878
    )
    
    
    
    
    
    
    (17,878
    )
    
    
    
    
    
    
    (268
    )
    
    
    (268
    )Canada ATM
    
    
    (6,420
    )
    
    
    
    
    
    
    (6,420
    )
    
    
    
    
    
    
    (48
    )
    
    
    (48
    )United Kingdom ATM
    
    
    (27,112
    )
    
    
    
    
    
    
    (27,112
    )
    
    
    
    
    
    
    (1,308
    )
    
    
    (1,308
    )Germany ATM
    
    
    (185
    )
    
    
    
    
    
    
    (185
    )
    
    
    
    
    
    
    
    
    
    
    $
    (54,825
    )
    
    $
    
    
    
    $
    (54,825
    )
    
    $
    
    
    
    $
    (1,624
    )
    
    $
    (1,624
    )
 Nine months ended September 30,2006
    
    
    2007Gain on
    
    
    
    
    
    
    
    
    
    
    Gain onOperations
    
    
    sale
    
    
    Total
    
    
    Operations
    
    
    sale
    
    
    TotalCanada photocopy
    
    $
    (2,806
    )
    
    $
    
    
    
    $
    (2,806
    )
    
    $
    (2,975
    )
    
    $
    29
    
    
    $
    (2,946
    )United Kingdom
photocopy
    
    
    (787
    )
    
    
    1,900
    
    
    
    1,113
    
    
    
    
    
    
    
    
    
    
    
    United States photocopy
    
    
    (16,458
    )
    
    
    
    
    
    
    (16,458
    )
    
    
    398
    
    
    
    565
    
    
    
    963Canada ATM
    
    
    (6,591
    )
    
    
    
    
    
    
    (6,591
    )
    
    
    (113
    )
    
    
    2,313
    
    
    
    2,200United Kingdom ATM
    
    
    (31,492
    )
    
    
    
    
    
    
    (31,492
    )
    
    
    (1,617
    )
    
    
    5,051
    
    
    
    3,434Germany ATM
    
    
    (616
    )
    
    
    
    
    
    
    (616
    )
    
    
    (55
    )
    
    
    
    
    
    
    (55
    )$
    (58,750
    )
    
    $
    1,900
    
    
    $
    (56,850
    )
    
    $
    (4,362
    )
    
    $
    7,958
    
    
    $
    3,596
   13




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10. Impairment Charges
  
    
    ATM goodwill. Because of continuing decreases in sales and operating margins in the ATM
segments and other factors, we re-evaluated our financial forecasts in the third quarter of
2006 and concluded that it was necessary to review goodwill in our United States, Canadian
and United Kingdom ATM segments for impairment of value. The review, consisting of a
comparison of the carrying value of the goodwill to its implied fair value, resulted in
impairment charges of $20.4 million in the United States, $5.8 million in Canada and $17.5
million in the United Kingdom. Our estimate of the implied fair value of the United States
ATM segments goodwill was based on the quoted market price of our common stock and the
discounted value of estimated future cash flows over a six-year period with residual value,
using an 11% discount rate. Our estimate of the implied fair value of the Canadian and
United Kingdom ATM segments goodwill was based on the estimated selling prices of those
ATM segments.
    
    Finite-lived intangible assets associated with the ATM businesses. Because of faster
than anticipated attrition of customer contracts, operating losses and revised financial
forecasts, we concluded that it was necessary to review the carrying value of the
long-lived assets of our United States, Canadian and United Kingdom ATM segments. As a
result, we determined that the future cash flows from those assets were not adequate to
recover those assets, and we recorded impairment charges of $22.9 million in the United
States, $272,000 in Canada and $7.7 million in the United Kingdom, based on comparisons of
the carrying amounts of the assets to their estimated fair values. Our estimate of the
fair value of the United States assets was based on the discounted values of estimated
future cash flows over a seven-year period using an 11% discount rate. Our estimates of
the fair value of the Canadian and United Kingdom assets were based on the estimated
selling prices of those ATM segments.
    
    Photocopy equipment in the United States and Canada. Because of operating losses in our
United States and Canadian photocopy segments and revised financial forecasts, we concluded
that it was necessary to review the carrying value of those segments long-lived assets,
which consist almost entirely of photocopy equipment. As a result, we determined that
future cash flows from the photocopy segments were not adequate to recover the carrying
value of that equipment, and we recorded impairment charges of $18.7 million in the United
States and $2.7 million in Canada based on a comparison of
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the carrying amounts of these assets to their estimated fair values. Our estimates of the
fair values of the asset groups were based on the estimated selling price of the United
States photocopy segment and the discounted value of estimated future cash flows over a
ten-year period using an 11% discount rate for the Canadian photocopy segment.
 11. Litigation and Potential Claims
   12. Corporate Restructuring, Equipment Write-downs and Inventory Write-down
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13. New Accounting Standards
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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
   Overview
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Three Months Ended September 30, 2007 Compared to Three Months Ended September 30, 2006
 ATM Results of Operations  Continuing Operations
 Three months ended September 30,2006
    
    
    2007Amount
    
    
    %
    
    
    Amount
    
    
    %(in thousands, except operating and percentage data)Transaction-based sales
    
    $
    24,809
    
    
    
    100.0
    %
    
    $
    21,826
    
    
    
    100.0
    %Less discounts
    
    
    16,702
    
    
    
    67.3
    
    
    
    14,990
    
    
    
    68.7Net transaction-based sales
    
    
    8,107
    
    
    
    32.7
    %
    
    
    6,836
    
    
    
    31.3
    %Service and other sales
    
    
    1,009
    
    
    
    
    
    
    
    978Sales of ATM equipment
    
    
    596
    
    
    
    
    
    
    
    523Net sales
    
    
    9,712
    
    
    
    
    
    
    
    8,337Cost of sales:Cost of vault cash
    
    
    1,782
    
    
    
    
    
    
    
    1,394Other
    
    
    4,111
    
    
    
    
    
    
    
    4,233Gross profit
    
    $
    3,819
    
    
    
    
    
    
    $
    2,710Operating data:Average number of transacting ATMs
    
    
    12,236
    
    
    
    
    
    
    
    10,176Withdrawal transactions
    
    
    11,068,157
    
    
    
    
    
    
    
    9,152,248Average withdrawals per ATM per month
    
    
    302
    
    
    
    
    
    
    
    300Average transaction-based sales per withdrawal transaction
    
    $
    2.24
    
    
    
    
    
    
    $
    2.39Average discount per withdrawal transaction
    
    $
    1.51
    
    
    
    
    
    
    $
    1.64Net transaction-based sales per withdrawal transaction
    
    $
    .73
    
    
    
    
    
    
    $
    .75
 Sales
    
    
    A 16.8% decrease in the average number of transacting ATMs in our networks,
primarily as a result of attrition of the contracts acquired from eFunds Corporation in
November 2004. We expect that the number of ATMs in our networks will continue to
decrease during the remainder of 2007.
    
    A .7% decrease in average withdrawal transactions per ATM per month.
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
    
    A 6.7% increase in average transaction-based sales per withdrawal transaction.
 Sales Discounts
  Cost of Sales
     
    
    A decrease in our cost of vault cash of $388,000, or 21.8%, as compared to the third
quarter of 2006. The number of ATMs for which we provide cash has decreased by 15.4% from
September 30, 2006 to September 30, 2007, and the total amount of vault cash in our system
has decreased by 22.3%, to $65.8 million at September 30, 2007 from
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$84.7 million at September 30, 2006. In addition, the interest rate on our vault cash
facility has decreased to 6.7% as of September 30, 2007 from 7.1% as of September 30, 2006,
primarily as a result of a negotiated .35% decrease in the mark-up over the commercial paper
rate.
    
    A decrease in armored car carrier costs of $224,000, or 25.6%, as compared to the third
quarter of 2006. This decrease in expense is due primarily to the reduction in the number
of ATMs for which we provide cash.
 Selling, General and Administrative Expense
  
    
    Amortization expense decreased by $1.3 million due to the reduction of the basis of
our intangible assets as a result of impairment charges taken in the third quarter of
2006.
    
    Labor costs (excluding non-cash stock compensation expense) decreased by $1.3
million, or approximately 47%. In connection with and following the sales of
businesses in January and June 2007 we have substantially reduced our selling, general
and administrative staff, from 102 employees as of December 31, 2006, to 41 employees
as of September 30, 2007.
 Equipment Write-offs
  Tax Rate
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Discontinued Operations
   Net Loss
  Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 30, 2006
 ATM Results of Operations  Continuing Operations
 Nine months ended September 30,2006
    
    
    2007Amount
    
    
    %
    
    
    Amount
    
    
    %(in thousands, except operating and percentage data)Transaction-based sales
    
    $
    76,253
    
    
    
    100.0
    %
    
    $
    64,721
    
    
    
    100.0
    %Less discounts
    
    
    51,132
    
    
    
    67.1
    
    
    
    44,007
    
    
    
    68.0Net transaction-based sales
    
    
    25,121
    
    
    
    32.9
    %
    
    
    20,714
    
    
    
    32.0
    %Service and other sales
    
    
    4,475
    
    
    
    
    
    
    
    3,349Sales of ATM equipment
    
    
    2,755
    
    
    
    
    
    
    
    1,702Net sales
    
    
    32,351
    
    
    
    
    
    
    
    25,765Cost of sales:Cost of vault cash
    
    
    4,823
    
    
    
    
    
    
    
    4,184Other
    
    
    12,056
    
    
    
    
    
    
    
    13,360Gross profit
    
    $
    15,472
    
    
    
    
    
    
    $
    8,221Operating data:Average number of transacting ATMs
    
    
    12,667
    
    
    
    
    
    
    
    10,486Withdrawal transactions
    
    
    33,663,157
    
    
    
    
    
    
    
    27,361,645Average withdrawals per ATM per month
    
    
    295
    
    
    
    
    
    
    
    290Average transaction-based sales per withdrawal
transaction
    
    $
    2.27
    
    
    
    
    
    
    $
    2.37Average discount per withdrawal transaction
    
    $
    1.52
    
    
    
    
    
    
    $
    1.61Net transaction-based sales per withdrawal transaction
    
    $
    .75
    
    
    
    
    
    
    $
    .76
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Sales
    
    
    A 17.2% decrease in the average number of transacting ATMs in our networks,
primarily as a result of attrition of the contracts acquired from eFunds Corporation in
November 2004. We expect that the number of ATMs in our networks will continue to
decrease during the remainder of 2007.
    
    A 1.7% decrease in average withdrawal transactions per ATM per month.
  
    
    A 4.4% increase in average transaction-based sales per withdrawal transaction.
   Sales Discounts
  Cost of Sales
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
    
    A decrease in our cost of vault cash of $638,000, or 13.2%, as compared to the first
nine months of 2006. The number of ATMs for which we provide cash has decreased by
15.4% from September 30, 2006 to September 30, 2007, and the total amount of vault cash
in our system has decreased by 22.3%, to $65.8 million at September 30, 2007 from $84.7
million at September 30, 2006. In addition, the interest rate on our vault cash
facility has decreased to 6.7% as of September 30, 2007 from 7.1% as of September 30,
2006, primarily as a result of a negotiated .35% decrease in the mark-up over the
commercial paper rate.
    
    A decrease in armored car carrier costs of $225,000, or 9.1%, as compared to the
first nine months of 2006. This decrease in expense is due primarily to the reduction
in the number of ATMs for which we provide cash.
    
    A $713,000 decrease in the cost of ATM machines sold due to the $1.1 million
decrease in ATM sales as compared to the first nine months of 2006.
 Selling, General and Administrative Expense
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
    
    Amortization expense decreased by $3.8 million due to the reduction of the basis of
our intangible assets as a result of impairment charges taken in the third quarter of
2006.
    
    Labor costs (excluding non-cash stock compensation expense) decreased by $3.2
million, or approximately 40%. In connection with and following the sales of
businesses in January and June 2007 we have substantially reduced our selling, general
and administrative staff, from 102 employees as of December 31, 2006, to 41 employees
as of September 30, 2007.
    
    Non-cash stock compensation expense decreased by $605,000. In the second quarter of
2006, we recorded $618,000 of expense in connection with the acceleration of the
vesting of options granted to our former President and Chief Executive Officer.
 Impairment Charges
  Restructuring Charges
   Equipment Write-offs
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Loss on Early Extinguishment of Debt
  Other Income
  Tax Rate
  Discontinued Operations
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Net Loss
  Liquidity and Capital Resources
 General
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Syndicated Credit Facility
  29




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United States Vault Cash Facility
 General.
 Structure of the facility.
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
    
    TRM Inventory Funding Trust, or the Trust. The Trust is a Delaware business trust
that was created pursuant to a deposit trust agreement among GSS Holdings, Inc. as
depositor, Wilmington Trust Company as owner trustee, and TRM ATM Corporation as
servicer. The majority equity holder in the Trust is Autobahn Funding Company, LLC,
and the minority equity holder is GSS Holdings, Inc. Neither we, TRM ATM Corporation
nor any of our other affiliates have any ownership interest in the Trust.
    
    TRM ATM Corporation, or TRM ATM. TRM ATM is one of our subsidiaries and acts as the
servicer under the facility.
    
    Autobahn Funding Company, LLC, or Autobahn. Autobahn is an affiliate of DZ Bank AG,
Deutsche Zentral-Genossenschaftsbank Frankfurt am Main, and is the lender under the
facility. Autobahn is independent of us, TRM ATM and our other affiliates.
 Operation of the facility.
    Collateral and credit enhancement.
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Cost of the facility.
 
    
    Interest on the loaned funds. The loans bear interest at an interest rate equal to
1.35% plus the interest rate borne by the commercial paper that was issued to raise the
funds for the loans.
    
    Return for equity investors. Autobahn and GSS Holdings, Inc., as equity investors
in the Trust, receive a return on the value of their investments, which were $1,485,000
and $15,000, respectively, as of September 30, 2007. Autobahns annual return is equal
to 1.35% plus the interest rate borne by the commercial paper that is outstanding. GSS
Holdings annual return is equal to 25.0%.
    
    Fees. Autobahn receives a commitment fee and the collateral agent receives
administrative fees in connection with the facility.
  Risk of loss and insurance.
  United Kingdom Vault Cash Facility
  Canadian Vault Cash Facility
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Off-balance Sheet Arrangements
  Contractual Commitments and Obligations
  Payments Due by PeriodOctober 1 December 31,Contractual obligations
    
    Total
    
    
    2007
    
    
    2008-2009
    
    
    2010-2011
    
    
    After 2011TRM Corporation and subsidiariesLong-term debt
    
    $
    3,574
    
    
    $
    87
    
    
    $
    686
    
    
    $
    686
    
    
    $
    2,115Operating leases
    
    
    1,421
    
    
    
    123
    
    
    
    884
    
    
    
    243
    
    
    
    171Purchase obligations
    
    
    10,625
    
    
    
    1,250
    
    
    
    9,375
    
    
    
    
    
    
    
    Total TRM Corporation and subsidiaries
    
    
    15,620
    
    
    
    1,460
    
    
    
    10,945
    
    
    
    929
    
    
    
    2,286TRM Inventory Funding Trust note payable
    
    
    81,899
    
    
    
    1,071
    
    
    
    8,494
    
    
    
    8,494
    
    
    
    63,840Total contractual cash obligations
    
    $
    97,519
    
    
    $
    2,531
    
    
    $
    19,439
    
    
    $
    9,423
    
    
    $
    66,126
  Critical Accounting Policies and Estimates
  New Accounting Standards
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     34




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ITEM 4. CONTROLS AND PROCEDURES
    Ineffective controls over segment disclosures and impairment analysis.
 Inadequate staffing in the United Kingdom.
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PART II  OTHER INFORMATION
 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  36




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ITEM 6. EXHIBITS
 (a) Exhibits
 2.1
    
    Asset Purchase Agreement dated June 19, 2007, between TRM (Canada)
Corporation and TRM Multitech Services Inc. (incorporated herein by reference to
Exhibit 2.1 of Form 10-Q for the period ended March 31, 2007).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).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).
 10.6
    
    (a)
    
    Employment Agreement dated August 1, 2007 by and between TRM Corporation and
Michael Dolan (incorporated herein by reference to Exhibit 10.6(a) of Form 10-Q
for the period ended June 30, 2007).(b)
    
    Employment Agreement dated August 12, 2005 by
and between TRM Corporation and Daniel E. OBrien (incorporated herein
by reference to Exhibit 10.7(f) of Form 10-Q for the period ended June
30, 2005).(c)
    
    Retainer Agreement dated May 31, 2007 by and
between TRM Corporation and Jeffrey F. Brotman (incorporated herein by
reference to Exhibit 10.6(b) of Form 10-Q for the period ended
March 31, 2007).(d)
    
    Employment Agreement dated May 21, 2007, by and
between TRM Corporation and Richard B. Stern (incorporated herein by
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reference to Exhibit 10.6(c) of Form 10-Q for the period ended
March 31, 2007).(e)
    
    Consulting Agreement dated December 12, 2006,
by and between TRM Corporation and Danial J. Tierney (incorporated
herein by reference to Exhibit 10.6(d) of Form 10-K for the year ended
December 31, 2006).(f)
    
    Severance Agreement dated December 12, 2006 by
and between TRM Corporation and Danial J. Tierney (incorporated herein
by reference to Exhibit 10.6(e) of Form 10-K for the year ended
December 31, 2006).(g)
    
    Retainer Agreement dated May 3, 2006 by and
between TRM Corporation and Amy B. Krallman (incorporated herein by
reference to Exhibit 10.7(j) of Form 10-Q filed for the quarter ended
March 1, 2006).(h)
    
    Severance Agreement and Release of Claims dated
September 17, 2007, by and between TRM Corporation and Daniel
E. OBrien (incorporated herein by reference to Exhibit 10.1 of Form
8-K filed on September 19, 2007).10.8
    (a)
    
    
    Fourteenth Amendment to Loan and Servicing Agreement dated as of November 2, 2007
among TRM Inventory Funding Trust, TRM ATM Corporation, Autobahn Funding Company LLC,
DZ Bank AG, Deutsche Zentral-Genossenschaftsbank Frankfurt am Main, and U.S. Bank
National Association.
 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.
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SIGNATURE
  TRM CORPORATIONDate:      November 8, 2007
    By:
    /s/ Jon S. PitcherJon S. PitcherPrincipal Accounting Officer 39