UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 30, 2001
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ___________
COMMISSION FILE NUMBER 0-5260
REMEDYTEMP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 95-2890471
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
101 ENTERPRISE
ALISO VIEJO, CALIFORNIA 92656
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (949) 425-7600
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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 preceding 12 months (or for such shorter period that registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
As of February 8, 2002 there were 7,841,430 shares of Class A Common Stock
and 1,479,911 shares of Class B Common Stock outstanding.
REMEDYTEMP, INC.
INDEX
PAGE NO.
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PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of December 30, 2001 and September 30, 2001 ................ 3
Consolidated Statements of Income for the three fiscal months ended December 30, 2001
and December 31, 2000 ..................................................................... 4
Consolidated Statements of Cash Flows for the three fiscal months ended December 30, 2001
and December 31, 2000 ..................................................................... 5
Condensed Notes to Consolidated Financial Statements ...................................... 6
Item 2. Management's Discussion and Analysis of Consolidated Financial Condition and Results of
Operations ................................................................................ 8
Item 3. Quantitative and Qualitative Disclosure About Market Risk ............................. *
PART II--OTHER INFORMATION
Item 1. Legal Proceedings ..................................................................... *
Item 2. Changes In Securities and Use of Proceeds ............................................. *
Item 3. Defaults Upon Senior Securities ....................................................... *
Item 4. Submission of Matters to a Vote of Security Holders ................................... *
Item 5. Other Information ..................................................................... *
Item 6. Exhibits and Reports on Form 8-K ...................................................... 11
SIGNATURES ........................................................................................ 12
* No information provided due to inapplicability of item.
2
REMEDYTEMP, INC.
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
DECEMBER 30, SEPTEMBER 30,
2001 2001
---- ----
Current assets:
Cash and cash equivalents .......................... $ 42,069 $ 37,362
Accounts receivable, net of allowance for doubtful
accounts of $1,978 and $1,789, respectively ....... 55,039 62,972
Prepaid expenses and other current assets .......... 5,232 4,842
Deferred income taxes .............................. 7,047 7,047
--------- --------
Total current assets .......................... 109,387 112,223
--------- --------
Fixed assets, net of accumulated depreciation of
$19,469 and $18,474, respectively .................. 17,277 17,820
Other assets, net .................................... 2,795 2,642
Deferred income taxes ................................ 123 123
Goodwill, net of accumulated amortization of $743 and
$675, respectively ................................. 4,496 4,494
--------- --------
Total assets ......................................... $ 134,078 $137,302
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................... $ 899 $ 2,395
Accrued workers' compensation ...................... 13,896 11,933
Accrued payroll, benefits and related costs ........ 9,821 12,552
Accrued licensees' share of gross profit ........... 2,664 3,202
Income taxes payable ............................... 873 1,748
Other accrued expenses ............................. 5,615 5,897
--------- --------
Total current liabilities ..................... 33,768 37,727
--------- --------
Commitments and contingent liabilities
Shareholders' equity:
Preferred Stock, $.01 par value; authorized 5,000
shares; none outstanding .......................... -- --
Class A Common Stock, $.01 par value; authorized
50,000 shares; 7,758 and 7,391 issued and
outstanding at December 30, 2001 and September 30,
2001, respectively (Note 4) ....................... 78 74
Class B Non-Voting Common Stock, $.01 par value;
authorized 4,530 shares; 1,564 and 1,565 issued and
outstanding at December 30, 2001 and September 30,
2001, respectively ................................ 16 16
Additional paid in capital (Note 4) ................ 38,950 33,889
Unearned compensation (Note 4) ..................... (5,022) --
Retained earnings .................................. 66,288 65,596
--------- --------
Total shareholders' equity .................... 100,310 99,575
--------- --------
Total liabilities and shareholders' equity .......... $ 134,078 $137,302
========= ========
See accompanying notes to consolidated financial statements.
3
REMEDYTEMP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
------------------
DECEMBER 30, DECEMBER 31,
2001 2000
---- ----
Direct sales ....................... $ 62,787 $ 83,387
Licensed sales ..................... 51,504 65,129
Franchise royalties ................ 463 965
Initial license and franchise fees . 6 --
-------- --------
Total revenues ................ 114,760 149,481
Cost of direct sales ............... 50,550 65,885
Cost of licensed sales ............. 39,793 48,935
Licensees' share of gross profit ... 8,009 11,031
Selling and administrative expenses 14,495 18,032
Depreciation and amortization ...... 1,407 1,409
-------- --------
Income from operations ........ 506 4,189
Other income:
Interest income (expense), net .... 239 72
Other, net ........................ 273 210
-------- --------
Income before provision for income
taxes ............................ 1,018 4,471
Provision for income taxes ......... 326 1,609
-------- --------
Net income ......................... $ 692 $ 2,862
======== ========
Net income per share, basic (Note 2) $ 0.08 $ 0.32
======== ========
Weighted-average number of shares,
basic ............................ 8,956 8,903
======== ========
Net income per share, diluted
(Note 2) ......................... $ 0.08 $ 0.32
======== ========
Weighted-average number of shares,
diluted .......................... 8,985 8,923
======== ========
See accompanying notes to consolidated financial statements.
4
REMEDYTEMP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED
------------------
DECEMBER 30, DECEMBER 31,
2001 2000
---- ----
Cash flows from operating activities: ............
Net income ..................................... $ 692 $ 2,862
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............... 1,407 1,406
Provision for losses on accounts receivable . 354 2,316
Restricted stock compensation expense ....... 43 --
Changes in assets and liabilities:
Accounts receivable ........................ 7,579 (10,330)
Prepaid expenses and other current assets .. (390) 1,319
Prepaid workers' compensation insurance .... -- 3,406
Other assets ............................... (153) 169
Accounts payable ........................... (1,496) 427
Accrued workers' compensation .............. 1,963 530
Accrued payroll, benefits and related costs (2,731) (1,433)
Accrued licensees' share of gross profit ... (538) (33)
Other accrued expenses ..................... (282) 210
Income taxes payable ....................... (875) 248
-------- --------
Net cash provided by operating activities ...... 5,573 1,097
-------- --------
Cash flows from investing activities:
Purchase of fixed assets ....................... (796) (648)
Purchase of franchises, net of assets acquired . (70) (45)
-------- --------
Net cash used in investing activities .......... (866) (693)
-------- --------
Net increase in cash and cash equivalents ........ 4,707 404
Cash and cash equivalents at beginning of period 37,362 1,084
-------- --------
Cash and cash equivalents at end of period ....... $ 42,069 $ 1,488
======== ========
Other cash flow information:
Cash paid during the period for interest ....... $ 53 $ 102
Cash paid during the period for income taxes ... $ 1,201 $ 121
See accompanying notes to consolidated financial statements.
5
REMEDYTEMP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of RemedyTemp,
Inc. and its wholly owned subsidiaries (collectively, the "Company"). All
significant intercompany transactions and balances have been eliminated.
The accompanying consolidated balance sheet at December 30, 2001, and the
consolidated statements of income and cash flows are unaudited. These statements
have been prepared on the same basis as the Company's audited consolidated
financial statements and in the opinion of management reflect all adjustments,
which are only of a normal recurring nature, necessary for a fair presentation
of the consolidated financial position and results of operations for such
periods. These unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements included in the
Company's Form 10-K as filed with the Securities and Exchange Commission on
December 28, 2001.
2. EARNINGS PER SHARE DISCLOSURE
Earnings per share is calculated as follows:
THREE FISCAL MONTHS ENDED
------------------------------------------------------------------------------------------
DECEMBER 30, 2001 DECEMBER 31, 2000
----------------------------------------- -------------------------------------------
INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNTS (NUMERATOR) (DENOMINATOR) (AMOUNTS)
----------- ------------- ------- ----------- ------------- ---------
BASIC EPS
Income available to
common shareholders . $692 8,956 $ 0.08 $2,862 8,903 $ 0.32
====== ======
EFFECT OF DILUTIVE
SECURITIES
Stock options and
restricted stock..... $ -- 29 $ -- 20
---- ----- ------ -----
DILUTED EPS
Income available to
common shareholders
plus assumed
conversions.......... $692 8,985 $ 0.08 $2,862 8,923 $ 0.32
==== ===== ====== ====== ===== ======
3. REPURCHASE OF LICENSED OFFICES
The Company acquired two licensed offices (one in Michigan and one in
Illinois) during the first quarter of fiscal 2002. Results of operations for the
acquired licensed offices are recorded in accordance with the Company's licensed
revenue recognition policy until the acquisition date. Subsequent to the
acquisition date, the direct office revenue recognition policy is utilized. Had
the results of operations for the licensed offices been shown as of the
beginning of the current and prior year fiscal periods, the consolidated results
would not be significantly different. These acquisitions are accounted for under
the purchase accounting method. The purchase prices were allocated primarily to
goodwill and are being amortized over an estimated life of twenty years.
4. RESTRICTED STOCK AWARD
In December 2001, the Compensation Committee of the Board of Directors
authorized and issued 365 shares of restricted Class A Common Stock to certain
officers of the Company (the "Restricted Stock") under the Company's 1996 Stock
Incentive Plan ("Incentive Plan"). Shares granted are subject to certain
restrictions on ownership and transferability. The Restricted Stock cliff vests
after five years at which point the restrictions lapse; however, the Restricted
Stock is subject to accelerated vesting after three years if certain performance
goals are achieved. All unvested Restricted Stock shall be forfeited upon
voluntary termination or termination for cause. Upon involuntary termination for
6
REMEDYTEMP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
other than cause, 20% vests one year from the grant date with the remaining
unvested shares vesting at 1.66% each month thereafter. In connection with this
issuance, the Company credited the capital accounts and charged unearned
compensation for the market value of the Restricted Stock on the grant date. The
unearned compensation is shown as a reduction of shareholders' equity in the
accompanying Consolidated Balance Sheets and is being amortized to expense
ratably over the restricted period.
In connection with the Restricted Stock grant, the executives were
required to forfeit outstanding stock options on a one for one basis, to the
extent available. As a result, a total of 311 stock options were forfeited and
cancelled in connection with this grant.
5. LITIGATION
In October 2001, the Company and certain of its officers were named as
defendants in a complaint purporting to be a class action brought by two
individual plaintiffs on behalf of all of the Company's franchisees and
licensees. The plaintiffs claim that Remedy wrongfully induced its franchisees
and licensees into signing franchise/license agreements and took other action
that caused the franchisees damage and seek unspecified damages. The Company has
sought to compel arbitration with the plaintiffs in accordance with its
franchise/license agreement with each of them and to deny class certification.
The Company believes it has meritorious defenses to this complaint and intends
to vigorously defend this action. At this time management is unable to give an
estimate as to the amount or range of potential loss, if any, which might result
to the Company if the outcome in this matter were unfavorable.
On December 10, 2001, Remedy filed a demand for arbitration before the Los
Angeles branch of the American Arbitration Association and a complaint in United
States District Court, Central District of California, for, among other things,
breach of contract, trademark infringement, misappropriation of trade secrets,
and unfair competition against Stephen M. Smith, Jody A. Smith and Smith
Temporaries, Inc. doing business as CornerStone Staffing and Remedy Intelligent
Staffing. The defendants have filed a counterclaim in arbitration alleging,
among other things, breach of contract, defamation and trade secret
misappropriation. The defendants were licensees of Remedy until their licensing
agreement expired on December 30, 2001. Remedy believes that its case is
meritorious and will protect its interests to the fullest extent permitted by
law.
6. ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board issued Statements
on Financial Accounting Standards (SFAS) Nos. 141 "Business Combinations" and
142 "Goodwill and Other Intangible Assets". SFAS 141, among other things,
eliminates the use of the pooling of interests method of accounting for business
combinations. Under the provisions of SFAS No. 142, goodwill will no longer be
amortized, but will be subject to a periodic test for impairment based upon fair
values. During the three months ended December 30, 2001 and December 31, 2000,
the Company reported goodwill amortization of $68 and $63, respectively. SFAS
No. 141 is effective for all business combinations initiated after June 30,
2001. SFAS No. 142 will be effective for the Company beginning September 30,
2002. Given the recent issuance of these standards, the Company has not yet
determined the impact of adoption on the financial statements.
On October 3, 2001, the Financial Accounting Standards Board issued
Statement on Financial Accounting Standards (SFAS) No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 supercedes SFAS No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" and amends Accounting Principles Board Opinion No. 30
(APB 30) "Reporting Results of Operations Reporting the Effects of Disposal of a
Segment of a Business". SFAS No. 144 requires that long-lived assets to be
disposed of by sale be measured at the lower of book value or fair value less
cost to sell. Also, SFAS No. 144 eliminates APB 30's requirement that
discontinued operations be measured at net realizable value or that entities
include under "discontinued operations" in the financial statements amounts for
operating losses that have not yet occurred. Additionally, SFAS No. 144 expands
the scope of discontinued operations to include all components of an entity with
operations that (1) can be distinguished from the rest of the entity and (2)
will be eliminated from the ongoing operations of the entity in a disposal
transaction. SFAS No. 144 is effective for financial statements issued for
fiscal years beginning after December 15, 2001 and, generally, its provisions
are to be applied prospectively. Management does not believe that the adoption
of SFAS No. 144 will have a material impact on the Company's consolidated
financial statements.
7
REMEDYTEMP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
In addition to historical information, management's discussion and
analysis includes certain forward-looking statements made by the Company that
involve material risks and uncertainties and are subject to change based on
factors beyond the control of the Company (certain of such statements are
identified by the use of words such as "anticipate," "believe," "estimate,"
"intend," "expect," or "future"). Accordingly, the Company's actual results may
differ materially from those expressed or implied in any such forward-looking
statements as a result of various factors, including, without limitation, the
successful launch of RemX(R) Financial Staffing, the ability to open new points
of distribution, changes in general or local economic conditions, the
availability of sufficient personnel, the Company's ability to attract and
retain clients and franchisees/licensees, implementation and operation of the
Company's new IT systems, the outcome of litigation and other factors described
in the Company's filings with the Securities and Exchange Commission regarding
risks affecting the Company's financial condition and results of operations. The
Company does not undertake to publicly update or revise its forward-looking
statements even if experience or future changes make it clear that any projected
results expressed or implied therein will not be realized.
RESULTS OF OPERATIONS
For the Three Fiscal Months Ended December 30, 2001 Compared to the Three Fiscal
Months Ended December 31, 2000
Total revenues decreased 23.2% or $34.7 million to $114.8 million for the
three fiscal months ended December 30, 2001 from $149.5 million for the three
fiscal months ended December 31, 2000. Direct revenues decreased 24.7% to $62.8
million from $83.4 million, licensed revenues decreased 20.9% to $51.5 million
from $65.1 million and franchise royalties decreased 52.0% to $0.5 million from
$1.0 million for the three fiscal months ended December 30, 2001 and December
31, 2000, respectively. The overall decrease in direct revenues results from the
general slowdown in the economy as well as continued pricing pressures. The
decrease in licensed revenues was also impacted by current economic conditions.
The decrease in franchise royalties resulted from the conversion of five
franchised offices to the licensed format and the closure of four additional
offices, as well as lower billings at existing offices. There was a slight
change in mix between direct, licensed and royalty revenues with direct revenues
accounting for 54.7% of total revenues for the three months ended December 30,
2001 as compared to 55.8% for the three months ended December 31, 2000. The
Company's ability to increase revenues depends significantly on the Company's
ability to continue to attract new clients, retain existing clients, open new
offices, find and retain licensees and office managers and manage newly opened
offices to maturity. There can be no assurance that the Company's revenues will
increase.
Total cost of direct and licensed sales, which consists of wages and other
expenses related to the temporary associates, decreased 21.3% or $24.5 million
to $90.3 million for the three fiscal months ended December 30, 2001 from $114.8
million for the three fiscal months ended December 31, 2000. This decrease
resulted primarily from reduced revenues as described above. Total cost of
direct and licensed sales as a percentage of revenues was 78.7% for the three
fiscal months ended December 30, 2001 compared to 76.8% for the three fiscal
months ended December 31, 2000. This increase results from a shift in business
mix, lower markup resulting from pricing pressures, reduced permanent placement
business and royalty income, as well as increased workers' compensation costs.
Many factors, including increased wage costs or other employment expenses, could
adversely affect the Company's cost of direct and licensed sales.
Licensees' share of gross profit represents the net payments to licensees
based upon a percentage of gross profit generated by the licensed operation. The
percentage of gross profit earned by the licensee is generally based on the
number of hours billed. Pursuant to terms of the Company's franchise agreement
for licensed offices, the Company's share of gross profit typically cannot be
less than 7.5% of the licensed operation sales, with the exception of national
accounts on which the Company's fee is reduced. Licensees' share of gross profit
decreased 27.4% or $3.0 million to $8.0 million for the three fiscal months
ended December 30, 2001 from $11.0 million for the three fiscal months ended
December 31, 2000 due to an overall 27.7% decrease in licensed gross profits as
well as decreased permanent placement billings. Licensees' share of gross profit
as a percentage of licensed gross profit was 68.4% for the three fiscal months
ended December 30, 2001 compared to 68.1% for the three fiscal months ended
December 31, 2000. This increase resulted from certain licensees earning a
larger percentage of gross profit in the current year.
8
REMEDYTEMP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Selling and administrative expenses decreased 19.6% or $3.5 million to
$14.5 million for the three fiscal months ended December 30, 2001 from $18.0
million for the three fiscal months ended December 31, 2000. This overall
decrease results primarily from a continued company-wide cost containment
initiative that has resulted in operational and organizational changes designed
to increase efficiency in a cost-effective manner, as well as reduced
implementation and support costs associated with the Company's information
systems. Additionally, in the prior year the Company recorded a $1.9 million
charge to provide for a large client's account receivable deemed uncollectible
as a result of sudden financial deterioration. Selling and administrative
expenses as a percentage of total revenues were 12.6% for the three fiscal
months ended December 30, 2001 as compared to 12.1% for the three fiscal months
ended December 31, 2000. There can be no assurance that selling and
administrative expenses will not increase in the future, both in absolute terms
and as a percentage of total revenues. Increases in these expenses could
adversely affect the Company's profitability.
Depreciation and amortization expenses remained consistent at $1.4 million
for the three fiscal months ended December 30, 2001 and December 31, 2000.
Income from operations decreased 87.9% or $3.7 million to $0.5 million for
the three fiscal months ended December 30, 2001 from $4.2 million for the three
fiscal months ended December 31, 2000 due to the factors described above. Income
from operations as a percentage of revenues was 0.4% for the three fiscal months
ended December 30, 2001 compared to 2.8% for the three fiscal months ended
December 31, 2000.
Net income decreased 75.8% or $2.2 million to $0.7 million for the three
fiscal months ended December 30, 2001 from $2.9 million for the three fiscal
months ended December 31, 2000 due to the factors described above. Interest
income increased from investment of the Company's growing cash balance.
Additionally, the Company reduced its effective tax rate as a result of expected
Work Opportunity and Welfare to Work Tax Credits. As a percentage of total
revenues, net income was 0.6% for the three fiscal months ended December 30,
2001 compared to 1.9% for the three fiscal months ended December 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $5.6 million for the three
months ended December 30, 2001 and $1.1 million for the three fiscal months
ended December 31, 2000. Cash from operating activities was impacted by the
timing of accounts receivable collection, the Company's reduced operations in
the current year, changes in the Company's workers' compensation program and the
timing of vendor payments.
Prior to April 1, 2001, the Company utilized a guaranteed cost insurance
program for its workers' compensation claims liability and had prepaid insurance
premiums in the prior year. Effective April 1, 2001, the Company entered into a
contract with Liberty Mutual Insurance Company ("Liberty") for its workers'
compensation insurance and claims administration. The Company's deductible under
the insurance contract is $0.25 million per individual claim and Liberty is
responsible for costs in excess of the deductible amount. The Company is
self-insured for its deductible liability and as such no prepayment was made in
the current year. Under the terms of the agreement, the Company is required to
maintain a letter of credit to secure repayment to Liberty of the deductible
portion of all open claims.
Cash used for purchases of fixed assets was $0.8 million for the three
fiscal months ended December 30, 2001 and $0.6 million for the three fiscal
months ended December 31, 2000. The Company continues to invest in
computer-based technologies and direct office openings and anticipates $5.0
million in related capital expenditures during the next twelve months. In
connection with the non-renewal of a licensing agreement effective December 30,
2001, the Company opened three replacement offices in the former licensee's
territory. The Company continues to service existing clients in this territory
and has a sales team in place to further develop the territory. There can be no
assurance that capital expenditures will not increase and that revenue and
operating income will not be negatively impacted by this transition to direct
offices.
In January 2002, the Company launched RemX(R) Financial Staffing, a new
direct business unit focused on providing financial personnel on a temporary,
temp-to-hire or direct hire basis in major markets nationwide. The Company
anticipates opening nine RemX(R) Financial Staffing offices during calendar
2002, while continuing to evaluate possible strategic acquisitions. Such office
openings and potential acquisitions may have an impact on future liquidity.
9
REMEDYTEMP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
The Company acquired two licensed offices (one in Michigan and one in
Illinois) during the first quarter fiscal 2002 (see Note 3 to the consolidated
financial statements) and one licensed office in New Jersey during the
comparative prior year quarter. The Company is contemplating the continued
selective repurchase of licensed and franchised offices in certain territories
with the intent of expanding the Company's market presence in such regions.
The Company has a revolving line of credit agreement with Bank of America
providing for aggregate borrowings and letters of credit of $40.0 million. The
Company has no borrowings outstanding as of December 30, 2001 and has a $17.3
million letter of credit in accordance with the workers' compensation insurance
agreement discussed above. The line of credit is unsecured and expires on
February 28, 2002. The agreement governing the line of credit requires the
Company to maintain certain financial ratios and comply with certain restrictive
covenants. The Company is in compliance with these covenants.
The Company believes that its current and expected levels of working
capital and line of credit are adequate to support present operations and to
fund future growth and business opportunities.
SEASONALITY
The Company's quarterly operating results are affected by the number of
billing days in the quarter and the seasonality of its clients' businesses. The
first fiscal quarter has historically been relatively strong as a result of
manufacturing and retail emphasis on holiday sales. Historically, the second
fiscal quarter shows a decline in comparable revenues from the first fiscal
quarter. Revenue growth has historically accelerated in each of the third and
fourth fiscal quarters as manufacturers, retailers and service businesses
increase their level of business activity.
10
REMEDYTEMP, INC.
PART II--OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Set forth below is a list of the exhibits included as part of this
Quarterly Report:
Number
Exhibit Description
------- -----------
3.1 Amended and Restated Articles of Incorporation of the Company (a)
3.2 Amended and Restated Bylaws of the Company (f)
4.1 Specimen Stock Certificate (a)
4.2 Shareholder Rights Agreement (a)
10.1 Robert E. McDonough, Sr. Amended and Restated Employment Agreement (g)
10.2 Paul W. Mikos Employment Agreement, as amended (j)
10.5 Registration Rights Agreement with R. Emmett McDonough and Related
Trusts (a)
10.6 Alan M. Purdy Change in Control Severance Agreement (i)
10.7 Deferred Compensation Agreement for Alan M. Purdy (a)
10.9 Form of Indemnification Agreement (a)
10.11 Amended and restated RemedyTemp, Inc. 1996 Stock Incentive Plan (h)
10.12 Amended and restated RemedyTemp, Inc. 1996 Employee Stock Purchase
Plan (a)
10.13 Form of Franchising Agreement for Licensed Offices (l)
10.14 Form of Franchising Agreement for Franchised Offices (a)
10.15 Form of Licensing Agreement for IntelliSearch(R) (a)
10.18 Additional Deferred Compensation Agreement for Alan M. Purdy (b)
10.19 Lease Agreement between RemedyTemp, Inc. and Parker-Summit, LLC (c)
10.22 RemedyTemp, Inc. Deferred Compensation Plan (d)
10.23 Amended and Restated Employment Agreement for Greg Palmer
10.24 1998 RemedyTemp, Inc. Deferred Compensation and Stock Ownership Plan
for Outside Directors (e)
10.25 Form of Licensing Agreement for i/search2000(TM) (f)
10.26 Credit Agreement among Bank of America National Trust and Savings
Association and RemedyTemp, Inc. (h)
10.27 Paul W. Mikos Severance Agreement and General Release (k)
10.28 Gunnar B. Gooding Employment and Severance Letter (m)
10.29 Cosmas N. Lykos Employment and Severance Letter (m)
(a) Incorporated by reference to the exhibit of same number to the
Registrant's Registration Statement on Form S-1 (Reg. No.
333-4276), as amended.
(b) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended December 29, 1996.
(c) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended March 30, 1997.
(d) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended June 29, 1997.
(e) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended March 29, 1998.
(f) Incorporated by reference to the exhibit of same number to the
Registrant's Annual Report on Form 10-K for the yearly period
ended September 27, 1998.
(g) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Reports on Form 10-Q for the quarterly
period ended December 27, 1998.
(h) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended March 28, 1999.
(i) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended June 28, 1999.
(j) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Reports on Form 10-Q for the quarterly
period ended June 28, 1999 (original agreement) and for the
quarterly period ended December 31, 2000 (amendment).
(k) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended April 1, 2001.
(l) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended July 1, 2001.
(m) Incorporated by reference to the exhibit of same number to the
Registrant's Annual Report on Form 10-K for the yearly period
ended September 30, 2001.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the last quarter of the
period covered by this Report.
11
REMEDYTEMP, 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.
REMEDYTEMP, INC.
February 13, 2002 /s/ GREG PALMER
----------------- ----------------
Greg Palmer, President and Chief
Executive Officer
February 13, 2002 /s/ ALAN M. PURDY
----------------- ------------------
Senior Vice President and Chief Financial
Officer (Principal Financial and Accounting
Officer)
12
REMEDYTEMP, INC.
EXHIBIT INDEX
NUMBER
EXHIBIT DESCRIPTION
------- -----------
3.1 Amended and Restated Articles of Incorporation of the Company (a)
3.2 Amended and Restated Bylaws of the Company (f)
4.1 Specimen Stock Certificate (a)
4.2 Shareholder Rights Agreement (a)
10.1 Robert E. McDonough, Sr. Amended and Restated Employment Agreement (g)
10.2 Paul W. Mikos Employment Agreement, as amended (j)
10.5 Registration Rights Agreement with R. Emmett McDonough and Related
Trusts (a)
10.6 Alan M. Purdy Change in Control Severance Agreement (i)
10.7 Deferred Compensation Agreement for Alan M. Purdy (a)
10.9 Form of Indemnification Agreement (a)
10.11 Amended and restated RemedyTemp, Inc. 1996 Stock Incentive Plan (h)
10.12 Amended and restated RemedyTemp, Inc. 1996 Employee Stock Purchase Plan
(a)
10.13 Form of Franchising Agreement for Licensed Offices (l)
10.14 Form of Franchising Agreement for Franchised Offices (a)
10.15 Form of Licensing Agreement for IntelliSearch(R) (a)
10.18 Additional Deferred Compensation Agreement for Alan M. Purdy (b)
10.19 Lease Agreement between RemedyTemp, Inc. and Parker-Summit, LLC (c)
10.22 RemedyTemp, Inc. Deferred Compensation Plan (d)
10.23 Amended and Restated Employment Agreement for Greg Palmer
10.24 1998 RemedyTemp, Inc. Deferred Compensation and Stock Ownership Plan
for Outside Directors (e)
10.25 Form of Licensing Agreement for i/search 2000((TM)) (f)
10.26 Credit Agreement among Bank of America National Trust and Savings
Association and RemedyTemp, Inc. (h)
10.27 Paul W. Mikos Severance Agreement and General Release (k)
10.28 Gunnar B. Gooding Employment and Severance Letter (m)
10.29 Cosmas N. Lykos Employment and Severance Letter (m)
13
REMEDYTEMP, INC.
(a) Incorporated by reference to the exhibit of same number to the
Registrant's Registration Statement on Form S-1 (Reg. No. 333-4276), as
amended.
(b) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended December 29, 1996.
(c) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended March 30, 1997.
(d) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended June 29, 1997.
(e) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended March 29, 1998.
(f) Incorporated by reference to the exhibit of same number to the
Registrant's Annual Report on Form 10-K for the yearly period ended
September 27, 1998.
(g) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Reports on Form 10-Q for the quarterly period
ended December 27, 1998.
(h) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended March 28, 1999.
(i) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended June 28, 1999.
(j) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Reports on Form 10-Q for the quarterly period
ended June 28, 1999 (original agreement) and for the quarterly period
ended December 31, 2000 (amendment).
(k) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended April 1, 2001.
(l) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended July 1, 2001.
(m) Incorporated by reference to the exhibit of same number to the
Registrant's Annual Report on Form 10-K for the yearly period ended
September 30, 2001.
14