During Q1 2006, gross sales decreased 3% sequentially to $53.0 million from $54.5 million in Q4 2005 and 10% from $58.8 million in Q1 2005. Consolidated net sales were $28.9 million, an 8% increase from $26.8 million in Q4 2005, and a 13% decrease from $33.4 million in the prior year period. The year over year decrease in gross and net sales reflects a net decline in unit count and cash withdrawals associated with attrition in the ACI ATM portfolio that the Company acquired from eFunds Corporation in November 2004, as well as declining revenues from the Company's photocopy business.

Q1 2006 adjusted EBITDA was $5.4 million, a sequential improvement from adjusted EBITDA of negative $6.4 million in Q4 2005, and compares to Q1 2005 adjusted EBITDA of $11.2 million (see Attachment 3: Reconciliation of Adjusted EBITDA).

In Q1 2006, gross profit was $11.7 million, a sequential improvement from $8.8 million during Q4 2005, as compared to $15.9 million in Q1 2005. Operating income improved to $33,000 in Q1 2006 from an operating loss of $15.9 million in Q4 2005, as compared to operating income of $4.7 million in Q1 2005. The Company notes that cash losses from theft in the United Kingdom in Q1 2006 declined over 70% from Q1 2005, and over 60% sequentially from Q4 2005.

Net loss was $1.5 million, or $0.09 per diluted share in Q1 2006, which improved sequentially from a net loss of $13.7 million, or $0.82 per diluted share in Q4 2005, and compares to net income of $1.7 million, or $0.10 per diluted share in Q1 2005.

Interest expense of $2.3 million in Q1 2006 was down on a sequential basis and compared to Q1 2005, resulting primarily from the reduced principal amount of the Company's debt due to payments made during 2005.

There was a weighted average of 16.9 million diluted shares outstanding in Q1 2006 compared to 14.4 million in Q1 2005.

ATM sales and net sales in Q1 2006, on a sequential basis and compared to the prior year period, reflect a net decline in unit count, as attrition in the ACI ATM portfolio was only partially offset by organic growth in the legacy ATM estate. As a result, average transacting unit count and total cash withdrawals declined. Nonetheless, withdrawal transactions per unit per month increased 3% and transaction based sales per unit per month was flat on a year over year basis, reflecting continued transaction volume strength in the ATM estate.

ATM net sales increased 15% from Q4 2005, as discounts declined from 58% of sales in Q4 2005 to 51% of sales in Q1 2006. ATM gross profit and operating income improved compared to the fourth quarter of 2005 due to lower cost of sales, including vault cash and processing costs, and lower wage and benefit costs.

The Photocopy business experienced a decline in sales, net sales, gross profit and operating income from Q1 2005 to Q1 2006, primarily reflecting lower copy volumes per unit. The Company continued to implement price increases in the Photocopy business, which bolstered sales per copy by 14% from Q1 2005 and by 6% sequentially from Q4 2005.

In Q4 2005, the Photocopy business benefited from a $1.1 million settlement gain from a vendor relating to a design flaw in the North American photocopier equipment. Excluding this unusual gain, TRM's photocopy business continued to stabilize in Q1 2006 as gross profit was sequentially flat, and operating loss improved to $600,000 from an adjusted loss of $1.6 million in Q4 2005.

Management expects to focus on expense controls in the Photocopy business through the remainder of 2006, as well as to continue photocopy price increases.

Balance Sheet

The Company's current liabilities, which reflects vault cash obligations and the reclassification of total long term debt, was $188.7 million as of March 31, 2006. This compares to $193.9 million at December 31, 2005.

Update on Financing

The Company has entered into a Letter of Intent to refinance its debt. While there can be no assurance that the Company will be able to refinance its debt pursuant to that Letter of Intent, or secure a further forbearance from its lenders, the Company does expect to complete the refinancing of the debt prior to June 15, 2006 and anticipates that the interest rate under such a refinancing will not be significantly greater than what the Company is paying under the forbearance agreement.

Forward Looking Guidance

TRM Corporation is reiterating its forward looking guidance for 2006 of $220.0 million in revenue and $26.0-$30.0 million in adjusted EBITDA.Download the document now 36.6 kb (Adobe Acrobat Document)