-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T1E649AFKvzMvEY1i7DweePBAkipCE/vd9MIkXucBf5bGkocjb1fh1Fm2rI3Y01H Tt8v7YjfeNJm5+g8BkRA9w== 0000950134-99-004188.txt : 19990517 0000950134-99-004188.hdr.sgml : 19990517 ACCESSION NUMBER: 0000950134-99-004188 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN COIN MERCHANDISING INC CENTRAL INDEX KEY: 0000949112 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 841093721 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14780 FILM NUMBER: 99622727 BUSINESS ADDRESS: STREET 1: 5660 CENTRAL AVE CITY: BOULDER STATE: CO ZIP: 80301 BUSINESS PHONE: 3034442559 MAIL ADDRESS: STREET 1: 4870 STERLING DRIVE CITY: BOULDER STATE: CO ZIP: 80306 10-Q 1 FORM 10-Q FOR QUARTER END MARCH 31, 1999 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 or ( ) 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: 0-26580 AMERICAN COIN MERCHANDISING, INC. (Exact name of registrant as specified in its charter) DELAWARE 84-1093721 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5660 CENTRAL AVENUE, BOULDER, COLORADO 80301 (Address of principal executive offices) (Zip Code) (303) 444-2559 (Registrant's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the proceeding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
OUTSTANDING AT CLASS MAY 1, 1999 ----- ----------- Common Stock, $0.01 par value 6,475,069 shares
2 AMERICAN COIN MERCHANDISING, INC. INDEX
PART 1 FINANCIAL INFORMATION. PAGE Item 1. Financial Statements Consolidated Condensed Balance Sheets March 31, 1999 and December 31, 1998............................... 3 Consolidated Condensed Statements of Earnings for the Three Months Ended March 31, 1999 and 1998......................... 4 Consolidated Condensed Statement of Stockholders' Equity for the Three Months Ended March 31, 1999.................................. 5 Consolidated Condensed Statements of Cash Flows for the Three Months Ended March 31, 1999 and 1998......................... 6 Notes to Consolidated Condensed Financial Statements................. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................ 8 PART II OTHER INFORMATION. Item 6. Exhibits and Reports on Form 8-K.......................................... 12
3 PART I. FINANCIAL INFORMATION. ITEM 1. FINANCIAL STATEMENTS AMERICAN COIN MERCHANDISING, INC. CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, DECEMBER 31, 1999 1998 ------------- ------------- ASSETS Current assets: Cash and cash equivalents ................................................................ $ 2,829,000 $ 2,247,000 Trade accounts and other receivables ..................................................... 1,837,000 1,814,000 Inventories .............................................................................. 11,371,000 12,579,000 Prepaid expenses and other assets ........................................................ 2,187,000 1,581,000 ------------- ------------- Total current assets ................................................................. 18,224,000 18,221,000 ------------- ------------- Property and equipment, at cost: Vending machines ......................................................................... 47,308,000 46,704,000 Vehicles ................................................................................. 7,031,000 7,082,000 Office equipment, furniture and fixtures ................................................. 3,272,000 3,074,000 ------------- ------------- 57,611,000 56,860,000 Less accumulated depreciation ............................................................ (15,151,000) (13,381,000) ------------- ------------- Property and equipment, net .......................................................... 42,460,000 43,479,000 ------------- ------------- Placement fees, net of accumulated amortization of $601,000 in 1999 and $480,000 in 1998 .... 780,000 732,000 Costs in excess of assets acquired and other intangible assets, net of accumulated amortization of $2,452,000 in 1999 and $1,817,000 in 1998 ................................ 47,698,000 48,333,000 Other assets, net of accumulated amortization of $299,000 in 1999 and $199,000 in 1998 ...... 992,000 1,017,000 ------------- ------------- Total assets ......................................................................... $ 110,154,000 $ 111,782,000 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt ........................................................ $ 1,872,000 $ 2,155,000 Accounts payable ......................................................................... 3,063,000 3,441,000 Accrued commissions ...................................................................... 1,505,000 1,630,000 Other accrued expenses ................................................................... 1,891,000 1,760,000 ------------- ------------- Total current liabilities ............................................................ 8,331,000 8,986,000 Long-term debt, net of current portion ...................................................... 49,447,000 50,310,000 Other liabilities ........................................................................... 1,705,000 2,000,000 Deferred income taxes ....................................................................... 1,346,000 1,346,000 ------------- ------------- Total liabilities .................................................................... 60,829,000 62,642,000 ------------- ------------- Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated debentures ............................................ 15,504,000 15,492,000 Stockholders' equity: Preferred stock, $.10 par value (Authorized 500,000 shares; none issued) ................. -- -- Common stock, $.01 par value (Authorized 20,000,000 shares; issued and outstanding 6,475,069 shares) .......................................................... 65,000 65,000 Additional paid-in-capital ............................................................... 21,989,000 21,989,000 Retained earnings ........................................................................ 11,767,000 11,594,000 ------------- ------------- Total stockholders' equity ........................................................... 33,821,000 33,648,000 ------------- ------------- Total liabilities and stockholders' equity ........................................... $ 110,154,000 $ 111,782,000 ============= =============
See accompanying notes to consolidated condensed financial statements. 3 4 AMERICAN COIN MERCHANDISING, INC. CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 1999 1998 ----------- ----------- Revenue: Vending .................................................... $27,766,000 $17,615,000 Franchise and other ........................................ 1,381,000 1,146,000 ----------- ----------- Total revenue .......................................... 29,147,000 18,761,000 ----------- ----------- Cost of revenue: Vending, excluding related depreciation and amortization ... 18,215,000 11,580,000 Depreciation and amortization .............................. 1,943,000 1,089,000 ----------- ----------- Total cost of vending .................................. 20,158,000 12,669,000 Franchise and other ........................................ 966,000 688,000 ----------- ----------- Total cost of revenue .................................. 21,124,000 13,357,000 ----------- ----------- Gross profit ........................................... 8,023,000 5,404,000 General and administrative expenses ........................... 5,311,000 3,275,000 Depreciation and amortization ................................. 779,000 188,000 ----------- ----------- Operating earnings ..................................... 1,933,000 1,941,000 Interest expense, related parties ............................. -- 11,000 Interest expense, other ....................................... 1,674,000 107,000 ----------- ----------- Earnings before income taxes ........................... 259,000 1,823,000 Provision for income taxes .................................... 86,000 638,000 ----------- ----------- Net earnings ........................................... $ 173,000 $ 1,185,000 =========== =========== Basic earnings per share of common stock ............... $ 0.03 $ 0.18 Diluted earnings per share of common stock ............. $ 0.03 $ 0.18 Basic weighted average common shares ................... 6,475,000 6,457,000 Diluted weighted average common shares ................. 6,478,000 6,649,000
See accompanying notes to consolidated condensed financial statements. 4 5 AMERICAN COIN MERCHANDISING, INC. CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
TOTAL ADDITIONAL STOCK- COMMON PAID-IN RETAINED HOLDERS' STOCK CAPITAL EARNINGS EQUITY ------- ----------- ----------- ----------- DECEMBER 31, 1998 .... $65,000 $21,989,000 $11,594,000 $33,648,000 Net earnings ...... -- -- 173,000 173,000 ------- ----------- ----------- ----------- MARCH 31, 1999 ....... $65,000 $21,989,000 $11,767,000 $33,821,000 ======= =========== =========== ===========
See accompanying notes to consolidated condensed financial statements. 5 6 AMERICAN COIN MERCHANDISING, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 1998 ----------- ----------- Operating activities: Net earnings ....................................................... $ 173,000 $ 1,185,000 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization .................................. 2,844,000 1,282,000 Compensation expense related to stock options .................. -- 5,000 Changes in operating assets and liabilities: Trade accounts and other receivables ....................... (23,000) 336,000 Inventories ................................................ 1,208,000 (557,000) Prepaid expenses and other assets .......................... (681,000) (307,000) Income taxes payable ....................................... -- 148,000 Accounts payable, accrued expenses and other liabilities ... (667,000) 913,000 ----------- ----------- Net cash provided by operating activities .................... 2,854,000 3,005,000 ----------- ----------- Investing activities: Acquisitions of property and equipment, net ........................ (937,000) (3,747,000) Acquisition of franchisee and others ............................... -- (2,600,000) Placement fees ..................................................... (189,000) (33,000) ----------- ----------- Net cash used in investing activities ........................ (1,126,000) (6,380,000) ----------- ----------- Financing activities: Net borrowings (payments) on credit facility ....................... (860,000) 4,714,000 Principal payments on long-term debt ............................... (286,000) (272,000) Principal payments on notes payable to Control Group ............... -- (337,000) Acquisition of warrants ............................................ -- (492,000) Exercise of employee stock options ................................. -- 84,000 ----------- ----------- Net cash provided by (used in) financing activities .......... (1,146,000) 3,697,000 ----------- ----------- Net increase in cash and cash equivalents .................... 582,000 322,000 Cash and cash equivalents at beginning of period ...................... 2,247,000 1,929,000 ----------- ----------- Cash and cash equivalents at end of period ............................ $ 2,829,000 $ 2,251,000 =========== ===========
See accompanying notes to consolidated condensed financial statements. 6 7 AMERICAN COIN MERCHANDISING, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION American Coin Merchandising, Inc., d/b/a Sugarloaf Creations, Inc. and American Coin Merchandising Trust I (the "Company") and its franchisees own and operate coin-operated skill-crane machines ("Shoppes") that dispense stuffed animals, plush toys, watches, jewelry and other items. The Company's Shoppes are placed in supermarkets, mass merchandisers, bowling centers, truck stops, bingo halls, bars, restaurants, warehouse clubs and similar locations. The Company also operates bulk vending equipment, kiddie rides and video equipment that are located primarily in supermarkets and mass merchandisers. At March 31, 1999, the Company had 41 field offices with operations in 41 states and there were 14 Company franchisees operating in 16 territories. The accompanying consolidated condensed financial statements have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. Certain amounts for prior periods have been reclassified to conform to the March 31, 1999 presentation. Although the Company believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these consolidated condensed financial statements be read in connection with the financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1998. In the opinion of the Company, the accompanying consolidated condensed financial statements include all adjustments (consisting of normal recurring accruals and adjustments) required to present fairly the Company's financial position at March 31, 1999 and December 31, 1998, and the results of its operations for each of the three month periods ended March 31, 1999 and 1998, and the cash flows for each of the three month periods then ended. The operating results for the three months ended March 31, 1999 are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. 2. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION A schedule of supplemental cash flow information follows:
THREE MONTHS ENDED MARCH 31, 1999 1998 ---------- ---------- Cash paid during the period: Interest paid .......................................... $1,659,000 $ 119,000 Income taxes paid ...................................... 47,000 490,000 Significant noncash investing and financing activity-- note payable issued for acquisition of franchisee ...... -- 1,200,000
3. EARNINGS PER SHARE Basic earnings and diluted earnings per share are computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding during the period and by all dilutive potential common shares outstanding during the period, respectively. The weighted average number of shares used in the computation of basic and dilutive earnings per share were 6,475,069 and 6,477,851, respectively, for the three months ended March 31, 1999 and 6,457,226 and 6,649,240, respectively for the three months ended March 31, 1998. 4. INCOME TAXES Quarterly income taxes are computed using the anticipated effective tax rate for the year. 7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Except for the historical information contained herein, the following discussion contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this section and the Company's Form 10-K for the year ended December 31, 1998. GENERAL Substantially all of the Company's revenue and gross profit is derived from Company-owned Shoppes. The Company's revenue and gross profit in a particular period is directly related to the number of Shoppes in operation during the period. Management believes that the Company's business is somewhat seasonal, with average revenue per machine per week greater during the Easter and Christmas periods. Vending revenue represents cash receipts from customers using vending machines and is recognized when collected. The cost of vending revenue is comprised of the cost of vended product, location commissions, depreciation, and direct service cost. Franchise and other revenue represents the Company's percentage of gross vending revenue generated by Shoppes owned and operated by franchisees, as well as product sold to franchisees and non-franchisee customers. Product sold to franchisees and non-franchisees consists of goods to vend in the Shoppes. Equipment sales to the franchisees have been done on a pass-through basis from the Company's main suppliers. The Company anticipates that franchise and other revenue will increase in the future as a result of the sale of product to non-franchisee customers. REVENUE Total revenue for the first three months of 1999 increased 55.4% to $29.1 million from $18.8 million for the same period in 1998. Vending revenue increased $10.2 million or 57.6% for the first three months of 1999 to $27.8 million from $17.6 million for the comparable period in 1998, primarily as a result of a 62.9% increase in the average number of Shoppes in place during the first three months of 1999 compared to the average number in place during the same period in 1998. The Company has recently experienced substantial growth, however, there can be no assurance that the Company will continue to grow at historical rates or at all. The Company's ability to generate increased revenue and achieve higher levels of profitability will depend upon its ability and the ability of its franchisees to place additional Shoppes as well as to maintain or increase the average financial performance of the Shoppes. The Company's ability to place additional Shoppes depends on a number of factors beyond the Company's control, including general business and economic conditions. Installation of additional Shoppes will also depend, in part, upon the Company's ability to secure additional national and regional supermarket, mass merchandiser and restaurant chain accounts and to obtain approval to place additional Shoppes in individual locations of such accounts. The Company, its franchisees and their suppliers also may be unable to place and adequately service additional Shoppes. The Company has recently completed a number of acquisitions (15 acquisitions since June 1, 1996, including ten acquisitions since October 1, 1997). For example, the Company's results were effected by the interest expense and amortization of goodwill related to the acquisitions completed in the second half of 1998. The Company's results were also affected by the costs associated with the integration of operational and administrative functions. There can be no assurance that the Company will be able to integrate the businesses it has acquired successfully or in a timely manner in accordance with its strategic objectives. Failure to effectively and efficiently integrate acquired businesses could have a material adverse effect on the Company's business, financial condition and results of operations. Franchise and other revenue increased $235,000 or 20.5% to $1.4 million for the first three months of 1999 as compared to the same period in 1998 due to an increase in product sales to non-franchisees offset by lower product and machine sales and franchise royalties from franchisees due to the acquisition of franchisees by the Company. COST OF REVENUE AND GROSS PROFIT The cost of vending operations for the first three months of 1999 increased $7.5 million or 59.1% to $20.2 million from $12.7 million for the comparable period in 1998. The vending operations' contribution to gross profit for the first three months of 1998 increased to $7.6 million, which represents a 53.8% increase over gross profit from vending operations realized in the same period in 1998. The vending gross profit achieved during the first quarter of 1999 was 27.4% of vending revenue, which represents a .7 percentage point decrease from the gross profit percentage achieved during the first quarter of 1998. The decline in vending margin resulted primarily from higher depreciation and amortization. 8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED). The cash vending gross profit (vending revenue minus cost of vended product, location commissions and direct service cost) achieved during the first quarter of 1999 was 34.4% of vending revenue, which is .1 percentage point higher than the cash vending gross profit achieved during the first quarter of 1998. The cash vending gross profit for the current quarter is also .4 percentage points higher than the cash vending gross profit achieved during the fourth quarter of 1998. The Company attributes some of the shortfall in fourth quarter 1998 cash vending gross profit to lower per week average Shoppe revenue due to an effective product mix. The Company has taken steps to improve Shoppe performance by redeploying over 300 Shoppes during the first quarter of 1999 and addressing some of the problems associated with the effectiveness of the product mix. While the Company has taken these steps, there can be no assurance that such efforts will continue to have a positive impact on the performance of the Shoppes. Substantially all the Company's plush toys and other products dispensed from the Shoppes are produced by foreign manufacturers. A majority are purchased directly by the Company from manufacturers in the People's Republic of China ("China"). The Company purchases its other products indirectly from vendors who obtain a significant percentage of such products from foreign manufacturers. As a result, the Company is subject to changes in governmental policies, the imposition of tariffs, import and export controls, transportation delays and interruptions, political and economic disruptions and labor strikes which could disrupt the supply of products from such manufacturers. Among other things, the loss of China's "most favored nation" status under U.S. tariff laws could result in a substantial increase in the import duty of certain products manufactured in China, which could result in substantially increased costs for certain products purchased by the Company which could have a material adverse effect on the Company's business, financial condition and results of operation. For the first quarter of 1999, gross profit on franchise and other revenue decreased to $415,000 or 30.1% of franchise and other revenue, as compared to $458,000 or 40.0% of franchise and other revenue for the first quarter of 1998. The decrease in gross margin as a percentage of franchise and other revenue resulted primarily from lower franchise royalties earned from franchisees due to the acquisition of franchisees by the Company. OPERATING EXPENSE General and administrative expenses and depreciation and amortization as a percentage of revenue increased to 20.9% for the first three months of 1999, as compared to 18.5% for the comparable period in 1998. The increase in general and administrative expenses results primarily from the additional operating and satellite offices opened, amortization of goodwill and other general and administrative expenses related to the acquisitions made by the Company during the second half of 1998. The Company anticipates higher general and administrative expenses to continue through 1999. OPERATING EARNINGS Operating earnings for the first three months of 1999 decreased .4% to $1.9 million, or 6.6% of total revenue, as compared to $1.9 million, or 10.3% of total revenue for the comparable period in 1998. The decrease in operating earnings as a percentage of revenue results primarily from the lower gross margin achieved from the vending operation, lower franchise royalties and the increase in general and administrative expenses. NON OPERATING INCOME (EXPENSE) Interest expense for the first three months of 1999 increased $1.6 million to $1.7 million as compared to the same period in 1998. The increase in interest expense relates to the acquisitions made by the Company in the second half of 1998. The Company's interest expense is directly related to its level of borrowings and changes in the underlying interest rates. NET EARNINGS AND NET EARNINGS PER SHARE Net earnings for the first three months of 1999 decreased 85.4% to $173,000, or .6% of total revenue, as compared to net earnings of $1.2 million for the comparable period in 1998. Diluted earnings per share for the first three months of 1999 decreased 83.3% to $0.03, as compared to $0.18 for the first three months of 1998. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of liquidity and capital resources historically have been cash flows from operations, borrowings under the Company's bank credit facility and issuance of its equity securities. These sources of 9 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED). cash flows have been offset by cash used for acquisitions, investment in skill-crane machines, other amusement vending businesses and payment of long-term borrowings. Net cash provided by operating activities was $2.9 million and $3.0 million for the three months ended March 31, 1999 and 1998, respectively. The Company anticipates that cash will continue to be provided by operations as additional skill-crane machines and other amusement devices are placed in service. Cash required in the future is expected to be funded by existing cash and cash provided by operations, borrowings under the Company's credit facility and the issuances of debt securities or sale of equity securities. Net cash used in investing activities was $1.1 million and $6.4 million for the three months ended March 31, 1999 and 1998, respectively. Capital expenditures for the three months ended March 31, 1999 and 1998 amounted to $937,000 and $3.7 million, respectively, of which $774,000 and $2.8 million was for the acquisition of skill-crane and other machines. The acquisition of a franchisee and an amusement vending business in 1998 used $2.6 million. Net cash used by financing activities was $1.1 million for the three months ended March 31, 1999 while cash provided by financing activities was $3.7 million for the three months ended March 31, 1998. Financing activities consist of advances and repayments on the Company's credit facility and other debt obligations and in 1998 the repurchase of warrants. Under its current credit facility, the Company may borrow up to $55.0 million, less an interest reserve of $2.2 million, at the bank's prime interest rate (7.75% at March 31, 1999) or, at the Company's option, an interest rate based on the current LIBOR rate. The interest reserve will be reduced quarterly, as interest payments are made on the Company's Trust Preferred Securities. The credit facility is available through July 13, 2001 and at March 31, 1999 there was a principal amount of approximately $45.7 million outstanding and $6.3 million available under the facility. The credit facility provides that certain financial ratios be met and places restrictions on, among other things, the occurrence of additional debt financing and the payment of dividends. The Company was in compliance with such financial ratios and restrictions at March 31, 1999. The Company may use a portion of its capital resources to effect acquisitions of franchisees. Because the Company cannot predict the timing or nature of acquisition opportunities, or the availability of acquisition financing, the Company cannot determine the extent to which capital resources may be used. Company management believes that funds generated from operations, borrowings available under its credit facility, the Company's ability to negotiate additional and enhanced credit agreements and to sell additional equity securities will be sufficient to meet the Company's foreseeable operating and capital expenditure needs. YEAR 2000 COMPLIANCE The Year 2000 issue refers to the fact that certain management information systems use two digit date fields which recognize dates using the assumption that the first two digits are "19" (i.e., the number 98 is recognized as the year 1998). When the year 2000 occurs, these systems could interpret the year as 1900 versus 2000, which in turn, could result in system failures or miscalculations causing disruptions to the Company and its suppliers. To address the issue, the Company has established a compliance team that includes outside consulting staff. The team has instituted a multi-phase plan that includes; inventorying all computer systems, software and business equipment to assess the impact of the Year 2000; obtaining documentation from each software vendor to ascertain their compliance; developing solution plans related to upgrading, modifying or replacing affected systems; and obtaining documentation from significant suppliers stating their Year 2000 readiness. The compliance team has determined that the Company's critical operating systems, accounting systems, computer systems and business equipment are the major resources that are affected by the Year 2000 issue. While certain of these systems will need to be upgraded or replaced, the identified systems and or programs are primarily "off the shelf" products with Year 2000 updates available. The Company expects to have these systems fully compliant by June 30, 1999. As part of its Year 2000 plan, the Company is in the process of contacting its significant suppliers to determine the extent to which the systems of such suppliers are Year 2000 compliant. The Company will continue to contact its suppliers in an effort to minimize any potential Year 2000 compliance impact, however, it is not possible to guarantee their compliance. The total cost for the Year 2000 plan has been and is expected to be minimal. 10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED). Management believes that it has an effective plan in place to adequately address the Year 2000 issue in a timely manner. Nevertheless, failure of third parties upon which the Company's business relies could result in disruption of the Company's supply of equipment and other general problems related to daily operations. In addition, disruptions in the economy generally resulting from Year 2000 issues could adversely affect the Company. Although, the Company believes its Year 2000 plan will adequately address the Company's internal issues, the overall risks associated with the Year 2000 issue cannot be fully identified until the Company receives more responses from significant suppliers. Accordingly, the amount of potential liability and lost revenue, if any, cannot be reasonably estimated at this time. 11 12 PART II. OTHER INFORMATION. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. 11.1 Statement re: Computation of Per Share Earnings 27 Financial Data Schedule (b) Reports on Form 8-K. None. 12 13 AMERICAN COIN MERCHANDISING, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN COIN MERCHANDISING, INC. May 13, 1999 By: /s/ W. John Cash - ---------------------- ------------------------------- Date W. John Cash Vice President, Chief Financial Officer 13 14 EXHIBIT INDEX
Exhibit No. Description Page - ----------- ----------- ---- 11.1 Statement re: Computation of Per Share Earnings 15 27 Financial Data Schedule 16
EX-11.1 2 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11.1 AMERICAN COIN MERCHANDISING, INC. COMPUTATION OF PER SHARE EARNINGS
Three Months Ended March 31, 1999 1998 ---------- ---------- Net earnings ....................................... $ 173,000 $1,185,000 ========== ========== Common shares outstanding at beginning of period ... 6,475,069 6,452,904 Effect of shares issued during the period ...... -- 4,322 ---------- ---------- Basic weighted average common shares ............... 6,475,069 6,457,226 Incremental shares from assumed conversions: Stock options .................................. 2,782 163,520 Warrants ....................................... -- 28,494 ---------- ---------- Diluted weighted average common shares ............. 6,477,851 6,649,240 ========== ========== Basic earnings per share ....................... $ 0.03 $ 0.18 Diluted earnings per share ..................... $ 0.03 $ 0.18
EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1999 MAR-31-1999 2,829 0 1,837 0 11,371 18,224 57,611 15,151 110,154 8,331 0 0 0 65 33,756 110,154 27,725 29,147 6,066 21,124 0 6 1,674 259 86 173 0 0 0 173 0.03 0.03
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