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 March 28, 2004
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 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of May 7, 2004 there were 8,803,871 of Class A Common Stock and 800,312 shares of Class B Common Stock outstanding.
INDEX
| Page No. | ||||
| PART I—FINANCIAL INFORMATION | ||||
| Item 1. | Financial Statements | |||
| Consolidated Balance Sheets as of March 28, 2004 (unaudited) and September 28, 2003 | 3 | |||
| Consolidated Statements of Operations for the three and six fiscal months ended March 28, 2004 and March 30, 2003 (unaudited) | 4 | |||
| Consolidated Statements of Cash Flows for the six fiscal months ended March 28, 2004 and March 30, 2003 (unaudited) | 5 | |||
| Condensed Notes to Consolidated Financial Statements (unaudited) | 6 | |||
| Item 2 | Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations | 14 | ||
| Item 3. | Quantitative and Qualitative Disclosure About Market Risk | 27 | ||
| Item 4. | Controls and Procedures | 27 | ||
| PART II—OTHER INFORMATION | ||||
| Item 1. | Legal Proceedings | 28 | ||
| 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 | 29 | ||
| Item 5. | Other Information | * | ||
| Item 6. | Exhibits and Reports on Form 8-K | 30 | ||
| SIGNATURES | 32 | |||
| * | No information provided due to inapplicability of item. |
2
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
(amounts in thousands, except per share amounts)
ASSETS
| (unaudited) March 28, 2004 |
September 28, 2003 |
|||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 13,415 | $ | 13,236 | ||||
| Investments |
3,032 | 18,384 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $2,686 and $2,627, respectively |
51,675 | 60,594 | ||||||
| Prepaid expenses and other current assets |
5,245 | 6,679 | ||||||
| Deferred and current income taxes |
739 | 330 | ||||||
| Total current assets |
74,106 | 99,223 | ||||||
| Fixed assets, net |
10,116 | 12,337 | ||||||
| Restricted cash and investments |
37,941 | 21,615 | ||||||
| Other assets |
381 | 1,334 | ||||||
| Intangible assets, net of accumulated amortization of $427 and $219, respectively |
2,547 | 1,655 | ||||||
| Goodwill |
3,403 | 3,030 | ||||||
| Total Assets |
$ | 128,494 | $ | 139,194 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
| |||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,353 | $ | 4,790 | ||||
| Accrued workers’ compensation, current portion (Note 9) |
16,633 | 15,263 | ||||||
| Accrued payroll, benefits and related costs |
14,742 | 17,530 | ||||||
| Accrued licensees’ share of gross profit |
2,047 | 2,231 | ||||||
| Other accrued expenses |
2,871 | 3,335 | ||||||
| Total current liabilities |
37,646 | 43,149 | ||||||
| Accrued workers’ compensation, non-current portion (Note 9) |
22,374 | 20,681 | ||||||
| Total liabilities |
60,020 | 63,830 | ||||||
| Commitments and contingent liabilities (Note 2) |
||||||||
| Shareholders’ equity: |
||||||||
| Preferred Stock, $0.01 par value; authorized 5,000 shares; none outstanding |
— | — | ||||||
| Class A Common Stock, $0.01 par value; authorized 50,000 shares; 8,795 and 8,769 shares issued and outstanding at March 28, 2004 and September 28, 2003, respectively |
88 | 88 | ||||||
| Class B Non-Voting Common Stock, $0.01 par value; authorized 4,530 shares; 805 and 894 shares issued and outstanding at March 28, 2004 and September 28, 2003, respectively |
8 | 9 | ||||||
| Additional paid-in capital |
41,846 | 42,674 | ||||||
| Unearned compensation |
(4,686 | ) | (6,031 | ) | ||||
| Accumulated other comprehensive income |
69 | 134 | ||||||
| Retained earnings |
31,149 | 38,490 | ||||||
| Total shareholders’ equity |
68,474 | 75,364 | ||||||
| Total Liabilities and Shareholders’ Equity |
$ | 128,494 | $ | 139,194 | ||||
See accompanying notes to consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share amounts)
(unaudited)
| Three Months Ended |
Six Months Ended |
|||||||||||||||
| March 28, 2004 |
March 30, 2003 |
March 28, 2004 |
March 30, 2003 |
|||||||||||||
| Company-owned office revenues |
$ | 75,426 | $ | 73,300 | $ | 157,616 | $ | 143,568 | ||||||||
| Licensed franchise revenues |
39,611 | 42,183 | 82,989 | 92,133 | ||||||||||||
| Franchise royalties |
348 | 346 | 775 | 916 | ||||||||||||
| Initial franchise fees |
— | 6 | 16 | 12 | ||||||||||||
| Total revenues |
115,385 | 115,835 | 241,396 | 236,629 | ||||||||||||
| Cost of Company-owned office revenues |
64,280 | 64,777 | 135,147 | 122,558 | ||||||||||||
| Cost of licensed franchise revenues |
31,833 | 33,605 | 66,487 | 73,492 | ||||||||||||
| Licensees’ share of gross profit |
5,327 | 5,640 | 11,145 | 12,361 | ||||||||||||
| Selling and administrative expenses |
16,634 | 16,369 | 33,075 | 31,514 | ||||||||||||
| Depreciation and amortization |
1,514 | 1,299 | 3,262 | 2,508 | ||||||||||||
| Loss from operations |
(4,203 | ) | (5,855 | ) | (7,720 | ) | (5,804 | ) | ||||||||
| Other income: |
||||||||||||||||
| Interest expense |
(79 | ) | (189 | ) | (206 | ) | (197 | ) | ||||||||
| Interest income |
279 | 252 | 537 | 599 | ||||||||||||
| Other, net |
181 | 228 | 375 | 377 | ||||||||||||
| Loss before income taxes |
(3,822 | ) | (5,564 | ) | (7,014 | ) | (5,025 | ) | ||||||||
| Provision for (benefit from) income taxes |
203 | (2,752 | ) | 327 | (2,663 | ) | ||||||||||
| Loss before cumulative effect of adoption of a new accounting standard |
(4,025 | ) | (2,812 | ) | (7,341 | ) | (2,362 | ) | ||||||||
| Cumulative effect of adoption of a new accounting standard, net of income taxes of $1,634 |
— | — | — | (2,421 | ) | |||||||||||
| Net loss |
$ | (4,025 | ) | $ | (2,812 | ) | $ | (7,341 | ) | $ | (4,783 | ) | ||||
| Earnings per share—basic and diluted: |
||||||||||||||||
| Loss before cumulative effect of adoption of a new accounting standard |
$ | (0.45 | ) | $ | (0.31 | ) | $ | (0.81 | ) | $ | (0.26 | ) | ||||
| Cumulative effect of adoption of a new accounting standard, net of incomes taxes |
— | — | — | (0.27 | ) | |||||||||||
| Net loss—basic and diluted |
$ | (0.45 | ) | $ | (0.31 | ) | $ | (0.81 | ) | $ | (0.53 | ) | ||||
| Weighted average shares: |
||||||||||||||||
| Basic |
9,019 | 9,042 | 9,019 | 9,039 | ||||||||||||
| Diluted |
9,019 | 9,042 | 9,019 | 9,039 | ||||||||||||
See accompanying notes to consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
| Six Months Ended |
||||||||
| Cash flows from operating activities: | March 28, 2004 |
March 30, 2003 |
||||||
| Net loss |
$ | (7,341 | ) | $ | (4,783 | ) | ||
| Adjustments to reconcile net loss to net cash from operating activities: |
||||||||
| Cumulative effect of adoption of a new accounting standard, net of income taxes |
— | 2,421 | ||||||
| Depreciation and amortization |
3,262 | 2,508 | ||||||
| Provision for losses on accounts receivable |
617 | 759 | ||||||
| Restricted stock compensation expense |
451 | 635 | ||||||
| Changes in assets and liabilities: |
||||||||
| Trading investments |
(378 | ) | (622 | ) | ||||
| Accounts receivable |
8,302 | 7,959 | ||||||
| Prepaid expenses and other current assets |
1,287 | 2,230 | ||||||
| Other assets |
953 | 192 | ||||||
| Accounts payable |
(3,467 | ) | (2,195 | ) | ||||
| Accrued workers’ compensation |
3,063 | 6,345 | ||||||
| Accrued payroll, benefits and related costs |
(2,788 | ) | (356 | ) | ||||
| Accrued licensees’ share of gross profit |
(184 | ) | (604 | ) | ||||
| Other accrued expenses |
(464 | ) | (986 | ) | ||||
| Prepaid income taxes |
(409 | ) | (3,303 | ) | ||||
| Net cash provided by operating activities |
2,904 | 10,200 | ||||||
| Cash flows from investing activities: |
||||||||
| Purchase of fixed assets |
(686 | ) | (1,242 | ) | ||||
| Purchase of available-for-sale investments |
(14,629 | ) | (15,277 | ) | ||||
| Proceeds from maturity of available-for-sale investments |
30,295 | 12,000 | ||||||
| Restricted cash and investments |
(16,326 | ) | — | |||||
| Acquisition of franchises |
(1,443 | ) | (3,786 | ) | ||||
| Net cash used in investing activities |
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