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 EXCHANGE ACT OF 1934 |
For the quarterly period ended June 27, 2004
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 0-5260
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 No.) |
| 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 August 5, 2004 there were 8,768,871 of Class A Common Stock and 800,312 shares of Class B Common Stock outstanding.
| * | No information provided due to inapplicability of item. |
Remedy Temp, Inc.
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
(amounts in thousands, except per share amounts)
| (unaudited) June 27, |
September 28, |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 5,064 | $ | 13,236 | ||||
| Investments |
4,820 | 15,730 | ||||||
| Restricted investments |
3,123 | 2,654 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $2,639 and $2,627, respectively |
54,983 | 60,594 | ||||||
| Prepaid expenses and other current assets |
8,557 | 6,679 | ||||||
| Deferred and current income taxes |
643 | 330 | ||||||
| Total current assets |
77,190 | 99,223 | ||||||
| Fixed assets, net |
9,780 | 12,337 | ||||||
| Restricted cash and investments |
37,931 | 21,615 | ||||||
| Other assets |
394 | 1,334 | ||||||
| Intangible assets, net of accumulated amortization of $563 and $219, respectively |
2,411 | 1,655 | ||||||
| Goodwill |
3,403 | 3,030 | ||||||
| Total Assets |
$ | 131,109 | $ | 139,194 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,761 | $ | 4,790 | ||||
| Accrued workers’ compensation, current portion (Note 10) |
17,509 | 15,263 | ||||||
| Accrued payroll, benefits and related costs |
16,338 | 17,530 | ||||||
| Accrued licensees’ share of gross profit |
2,138 | 2,231 | ||||||
| Other accrued expenses |
3,611 | 3,335 | ||||||
| Total current liabilities |
41,357 | 43,149 | ||||||
| Accrued workers’ compensation, non-current portion (Note 10) |
22,681 | 20,681 | ||||||
| Total liabilities |
64,038 | 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; 8,769 shares issued and outstanding at June 27, 2004 and September 28, 2003 |
88 | 88 | ||||||
| Class B Non-Voting Common Stock, $0.01 par value; authorized 4,530 shares; 800 and 894 shares issued and outstanding at June 27, 2004 and September 28, 2003, respectively |
8 | 9 | ||||||
| Additional paid-in capital |
41,450 | 42,674 | ||||||
| Unearned compensation |
(4,076 | ) | (6,031 | ) | ||||
| Accumulated other comprehensive (loss) income |
(240 | ) | 134 | |||||
| Retained earnings |
29,841 | 38,490 | ||||||
| Total shareholders’ equity |
67,071 | 75,364 | ||||||
| Total Liabilities and Shareholders’ Equity |
$ | 131,109 | $ | 139,194 | ||||
See accompanying notes to consolidated financial statements.
3
Remedy Temp, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share amounts)
(unaudited)
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| June 27, 2004 |
June 29, 2003 |
June 27, 2004 |
June 29, 2003 |
|||||||||||||
| Company-owned office revenues |
$ | 85,537 | $ | 74,135 | $ | 243,153 | $ | 217,703 | ||||||||
| Licensed franchise revenues |
43,378 | 44,361 | 126,367 | 136,494 | ||||||||||||
| Franchise royalties |
335 | 337 | 1,110 | 1,253 | ||||||||||||
| Initial franchise fees |
— | 5 | 16 | 17 | ||||||||||||
| Total revenues |
129,250 | 118,838 | 370,646 | 355,467 | ||||||||||||
| Cost of Company-owned office revenues |
70,867 | 62,122 | 206,014 | 184,680 | ||||||||||||
| Cost of licensed franchise revenues |
34,605 | 35,279 | 101,092 | 108,771 | ||||||||||||
| Licensees’ share of gross profit |
5,900 | 6,002 | 17,044 | 18,363 | ||||||||||||
| Selling and administrative expenses |
18,115 | 16,327 | 51,191 | 47,841 | ||||||||||||
| Depreciation and amortization |
1,253 | 1,547 | 4,515 | 4,052 | ||||||||||||
| Loss from operations |
(1,490 | ) | (2,439 | ) | (9,210 | ) | (8,240 | ) | ||||||||
| Other income (expense): |
||||||||||||||||
| Interest expense |
(102 | ) | (97 | ) | (308 | ) | (294 | ) | ||||||||
| Interest income |
244 | 232 | 781 | 831 | ||||||||||||
| Other, net |
146 | 158 | 521 | 532 | ||||||||||||
| Loss before income taxes |
(1,202 | ) | (2,146 | ) | (8,216 | ) | (7,171 | ) | ||||||||
| Provision for (benefit from) income taxes |
106 | (1,711 | ) | 433 | (4,374 | ) | ||||||||||
| Loss before cumulative effect of adoption of a new accounting standard |
(1,308 | ) | (435 | ) | (8,649 | ) | (2,797 | ) | ||||||||
| Cumulative effect of adoption of a new accounting standard, net of income taxes of $1,634 |
— | — | — | (2,421 | ) | |||||||||||
| Net loss |
$ | (1,308 | ) | $ | (435 | ) | $ | (8,649 | ) | $ | (5,218 | ) | ||||
| Earnings per share – basic and diluted: |
||||||||||||||||
| Loss before cumulative effect of adoption of a new accounting standard |
$ | (0.14 | ) | $ | (0.05 | ) | $ | (0.96 | ) | $ | (0.31 | ) | ||||
| Cumulative effect of adoption of a new accounting standard, net of incomes taxes |
— | — | — | (0.27 | ) | |||||||||||
| Net loss – basic and diluted |
$ | (0.14 | ) | $ | (0.05 | ) | $ | (0.96 | ) | $ | (0.58 | ) | ||||
| Weighted average shares: |
||||||||||||||||
| Basic and diluted |
9,024 | 9,048 | 9,021 | 9,042 | ||||||||||||
See accompanying notes to consolidated financial statements.
4
Remedy Temp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
| Nine Months Ended |
||||||||
| June 27, 2004 |
June 29, 2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (8,649 | ) | $ | (5,218 | ) | ||
| 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 |
4,515 | 4,052 | ||||||
| Provision for losses on accounts receivable |
720 | 1,142 | ||||||
| Restricted stock compensation expense |
609 | 935 | ||||||
| Changes in assets and liabilities: |
||||||||
| Trading investments |
(469 | ) | (634 | ) | ||||
| Accounts receivable |
4,897 | 5,092 | ||||||
| Prepaid expenses and other current assets |
(2,172 | ) | 890 | |||||
| Other assets |
940 | 333 | ||||||
| Accounts payable |
(3,059 | ) | 3,035 | |||||
| Accrued workers’ compensation |
4,245 | 4,458 | ||||||
| Accrued payroll, benefits and related costs |
(1,192 | ) | 786 | |||||
| Accrued licensees’ share of gross profit |
(94 | ) | (733 | ) | ||||
| Other accrued expenses |
270 | (887 | ) | |||||
| Prepaid income taxes |
(314 | ) | (5,049 | ) | ||||
| Net cash provided by operating activities |
247 | 10,623 | ||||||
| Cash flows from investing activities: |
||||||||
| Purchase of fixed assets |
(1,321 | ) | (2,108 | ) | ||||
| Purchase of available-for-sale investments |
(430 | ) | (23,959 | ) | ||||