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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended December 29, 2002
 
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 Incorporation or organization)
  
(I.R.S. Employer 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
 
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 January 31, 2003, there were 8,228,195 shares of Class A Common Stock and 1,213,950 shares of Class B Common Stock outstanding.
 
 
 
 
 
 
 
 

RemedyTemp, Inc.

 

INDEX

 

      

Page No.

PART I—FINANCIAL INFORMATION

       

Item 1.    Financial Statements

       

Consolidated Balance Sheets as of December 29, 2002 (unaudited) and September 29, 2002

     

3

Consolidated Statements of Income for the three fiscal months ended December 29, 2002 and December 30, 2001 (unaudited)

     

4

Consolidated Statements of Cash Flows for the three fiscal months ended December 29, 2002 and December 30, 2001 (unaudited)

     

5

Condensed Notes to Consolidated Financial Statements

     

6

Item 2.    Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations

     

10

Item 3.    Quantitative and Qualitative Disclosure About Market Risk

     

16

PART II—OTHER INFORMATION

       

Item 1.    Legal Proceedings

     

17

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 Form8-K

     

18

SIGNATURES

     

20

CERTIFICATIONS

     

21

 

* 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 29,

2002

     

September 29,

2002

  
     

Current assets:

                  

Cash and cash equivalents

   

$

29,917

 

   

$

26,101

 

Investments

   

 

24,675

 

   

 

23,021

 

Accounts receivable, net of allowance for doubtful accounts of $2,032 and $1,913, respectively

   

 

52,232

 

   

 

61,724

 

Prepaid expenses and other current assets

   

 

5,853

 

   

 

6,087

 

Deferred income taxes

   

 

7,144

 

   

 

7,144

 

    
  

Total current assets

   

 

119,821

 

   

 

124,077

 

Fixed assets, net

   

 

15,772

 

   

 

16,268

 

Other assets

   

 

2,203

 

   

 

2,035

 

Goodwill and intangibles, net of accumulated amortization of $948 and $946, respectively

   

 

4,291

 

   

 

4,293

 

    
  

Total Assets

   

$

142,087

 

   

$

146,673

 

    
  

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

                  

Accounts payable

   

$

1,858

 

   

$

3,151

 

Accrued workers’ compensation (Note 3)

   

 

22,087

 

   

 

20,135

 

Accrued payroll, benefits and related costs

   

 

9,558

 

   

 

13,787

 

Accrued licensees’ share of gross profit

   

 

2,081

 

   

 

2,866

 

Other accrued expenses

   

 

2,589

 

   

 

3,621

 

    
  

Total current liabilities

   

 

38,173

 

   

 

43,560

 

Deferred income taxes

   

 

90

 

   

 

90

 

    
  

Total liabilities

   

 

38,263

 

   

 

43,650

 

Commitments and contingent liabilities (Note 5)

                  

Shareholders’ equity (Note 4):

                  

Preferred Stock, $.01 par value; authorized 5,000 shares; none outstanding

   

 

—  

 

   

 

—  

 

Class A Common Stock, $.01 par value; authorized 50,000 shares;
8,256 and 8,142 issued and outstanding at December 29, 2002 and September 29, 2002, respectively

   

 

83

 

   

 

82

 

Class B Non-Voting Common Stock, $.01 par value; authorized 4,530 shares;
1,214 and 1,253 issued and outstanding at December 29, 2002 and September 29, 2002, respectively

   

 

12

 

   

 

13

 

Additional paid-in capital

   

 

40,941

 

   

 

39,923

 

Unearned compensation

   

 

(5,395

)

   

 

(4,728

)

Retained earnings

   

 

68,183

 

   

 

67,733

 

    
  

Total shareholders’ equity

   

 

103,824

 

   

 

103,023

 

    
  

Total Liabilities and Shareholders’ Equity

   

$

142,087

 

   

$

146,673

 

    
  

 

See accompanying notes to consolidated financial statements.

 

 

3

RemedyTemp, Inc.
 
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share amounts)
 
(unaudited)
 
    
Three Months Ended
    
December 29,
2002
   
December 30,
2001
Direct sales
   
$
70,268
   
$
62,787
Licensed franchise sales
   
 
49,950
   
 
51,504
Franchise royalties
   
 
570
   
 
463
Initial franchise fees
   
 
6
   
 
6
    
  
Total revenues
   
 
120,794
   
 
114,760
Cost of direct sales
   
 
57,781
   
 
50,550
Cost of licensed sales
   
 
39,887
   
 
39,793
Licensees’ share of gross profit
   
 
6,721
   
 
8,009
Selling and administrative expenses
   
 
15,145
   
 
14,495
Depreciation and amortization
   
 
1,209
   
 
1,407
    
  
Income from operations
   
 
51
   
 
506
Other income:
              
Interest income, net
   
 
339
   
 
239
Other, net
   
 
149
   
 
273
    
  
Income before provision for income taxes
   
 
539
   
 
1,018
Provision for income taxes
   
 
89
   
 
326
    
  
Net income
   
$
450
   
$
692
    
  
Net income per share, basic (Note 2)
   
$
0.05
   
$
0.08
    
  
Weighted-average number of shares, basic
   
 
9,000
   
 
8,956
    
  
Net income per share, diluted (Note 2)
   
$
0.05
   
$
0.08
    
  
Weighted-average number of shares, diluted
   
 
9,140
   
 
8,985
    
  
 
See accompanying notes to consolidated financial statements.
 

4

RemedyTemp, Inc.
 
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
 
(unaudited)
 
    
Three Months Ended
  
    
December 29,
2002
     
December 30,
2001
  
Cash flows from operating activities:
                  
Net income
   
$
450
 
   
$
692
 
Adjustments to reconcile net income to net cash provided by operating activities:
                  
Depreciation and amortization
   
 
1,209
 
   
 
1,407
 
Provision for losses on accounts receivable
   
 
381
 
   
 
354
 
Restricted stock compensation expense
   
 
298
 
   
 
43
 
Changes in assets and liabilities:
                  
Trading investments
   
 
(473
)
   
 
(419
)
Accounts receivable
   
 
9,111
 
   
 
7,579
 
Prepaid expenses and other current assets
   
 
234
 
   
 
64
 
Other assets
   
 
(169
)
   
 
(153
)
Accounts payable
   
 
(1,293
)
   
 
(1,496
)
Accrued workers’ compensation
   
 
1,952
 
   
 
1,963
 
Accrued payroll, benefits and related costs
   
 
(4,229
)
   
 
(2,731
)
Accrued licensees’ share of gross profit
   
 
(785
)
   
 
(538
)
Other accrued expenses
   
 
(1,032
)
   
 
(282
)
Income taxes payable
   
 
—  
 
   
 
(875
)
    
  
Net cash provided by operating activities
   
 
5,654
 
   
 
5,608
 
    
  
Cash flows from investing activities:
                  
Purchase of fixed assets
   
 
(710
)
   
 
(796
)
Purchase of available-for-sale investments
   
 
(9,181
)
   
 
(2,488
)
Proceeds from maturity of available-for-sale investments
   
 
8,000
 
   
 
—  
 
Purchase of franchises, net of assets acquired
   
 
—  
 
   
 
(70
)
    
  
Net cash used in investing activities
   
 
(1,891
)
   
 
(3,354
)
    
  
Cash flows from financing activities:
                  
Proceeds from Employee Stock Purchase Plan activity
   
 
53
 
   
 
—  
 
    
  
Net cash provided by financing activities
   
 
53
 
   
 
—  
 
    
  
Net increase in cash and cash equivalents
   
 
3,816
 
   
 
2,254
 
Cash and cash equivalents at beginning of period
   
 
26,101
 
   
 
37,362
 
    
  
Cash and cash equivalents at end of period
   
$
29,917
 
   
$
39,616
 
    
  
Other cash flow information:
                  
Cash paid during the period for interest
   
$
8
 
   
$
53
 
Cash paid during the period for income taxes
   
$
119
 
   
$
1,201
 
 
See accompanying notes to consolidated financial statements.
 

5

RemedyTemp, Inc.
 
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share amounts)
 
(unaudited)
 
1.    Basis of Presentation
 
The consolidated financial statements include the accounts of RemedyTemp, Inc. and its wholly-owned subsidiaries (collectively referred to herein as the “Company” or “Remedy”). These financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, the accompanying unaudited consolidated financial statements contain all material adjustments (consisting of only normal, recurring adjustments) necessary to fairly state the financial position of the Company as of December 29, 2002, and its results of operations and cash flows for the thirteen weeks ended December 29, 2002 and December 30, 2001. All significant intercompany accounts and transactions have be