Though Still Shaky, a Smaller TRM Gets Closer to Profitability

Still financially challenged but claiming to be on the mend, TRM Corp., operator of the nation's second-largest non-bank ATM network, reduced its loss in the third quarter as it culled underperforming machines and cut expenses. The Portland, Ore.-based firm on Friday reported a net loss of $4.89 million compared with a $98.9 million loss a year earlier. Sales fell 12% to $23.3 million from $26.4 million in 2006's third quarter. The Portland, Ore.-based company again issued a so-called “going concern” warning in its third-quarter report to the Securities and Exchange Commission that essentially says its survival is far from assured. But president and chief executive Richard Stern in an analysts' conference call Friday professed confidence in TRM's future. “I remain optimistic about this business and our ability to turn it around,” he said. TRM's average number of transacting ATMs and withdrawal transactions both fell 17% to 10,176 and 9.15 million, respectively, from the year-earlier period as TRM removed inactive and low-profit machines. The company also has shed foreign operations and its photocopier business over the past year in restructuring moves. The average number of monthly withdrawals decreased not quite 1% to 300 per machine from 302 a year earlier. But one important number headed north? net sales per withdrawal transaction, which increased nearly 3% to 75 cents from 73 cents in 2006's third quarter. That's how much TRM has after subtracting so-called merchant discounts from surcharges and other gross revenues. The company is seeking more favorable terms in its vendor contracts. It has replaced its armored-car provider and is talking with eFunds Corp., recently acquired by Fidelity National Information Services Inc., about its processing contract, though exactly what is under negotiation is unclear. The contract is an outgrowth of TRM's November 2004 acquisition of eFunds' 15,000-machine ATM network. Under it, according to TRM's 2006 annual report, TRM pays eFunds a minimum of $5 million a year for a laundry list of services. “We are actively engaged in discussions with [eFunds] and hope to have an amicable and sensible resolution to this situation in the near future,” said Stern. Besides placing more machines in higher-volume national and regional retailer locations, TRM is looking to buy smaller ATM operators to get scale and boost profitability. But the “negative climate that has developed in the credit markets” is putting a chill on that strategy at the moment, Stern said. He added that TRM also hopes it could “strategically align” with another company in the future, though he didn't elaborate.