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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
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 March 31, 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 (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 May 13, 2002 there were 8,060,892 shares of Class A Common Stock and
1,344,650 shares of Class B Common Stock outstanding.
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RemedyTemp, Inc.
INDEX
Page No.
--------
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2002 (unaudited) and September 30, 2001 ............ 3
Consolidated Statements of Income for the three fiscal months and six fiscal months
ended March 31, 2002 and April 1, 2001 (unaudited) ............................................. 4
Consolidated Statements of Cash Flows for the six fiscal months ended March 31, 2002
and April 1, 2001 (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 ..................................................................................... 9
Item 3. Quantitative and Qualitative Disclosure About Market Risk .................................. *
PART II--OTHER INFORMATION
Item 1. Legal Proceedings .......................................................................... 15
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 ........................................ 15
Item 5. Other Information .......................................................................... *
Item 6. Exhibits and Reports on Form 8-K ........................................................... 16
SIGNATURES ............................................................................................... 17
* 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
March 31,
2002 September 30,
(unaudited) 2001
----------- -------------
Current assets:
Cash and cash equivalents ........................................................ $ 47,705 $ 37,362
Accounts receivable, net of allowance for doubtful accounts of $1,690
and $1,789, respectively ....................................................... 53,639 62,972
Prepaid expenses and other current assets ........................................ 5,546 4,842
Deferred income taxes ............................................................ 7,047 7,047
-------- --------
Total current assets ...................................................... 113,937 112,223
-------- --------
Fixed assets, net of accumulated depreciation of $16,052 and $18,474,
respectively ..................................................................... 16,704 17,820
Other assets ........................................................................ 1,841 2,642
Deferred income taxes ............................................................... 123 123
Goodwill, net of accumulated amortization of $811 and $675, respectively ............ 4,428 4,494
-------- --------
Total assets ........................................................................ $137,033 $137,302
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................................. $ 1,579 $ 2,395
Accrued workers' compensation (Note 4) ........................................... 16,570 11,933
Accrued payroll, benefits and related costs ...................................... 11,336 12,552
Accrued licensees' share of gross profit ......................................... 2,471 3,202
Income taxes payable ............................................................. - 1,748
Other accrued expenses ........................................................... 4,241 5,897
-------- --------
Total current liabilities ................................................. 36,197 37,727
-------- --------
Commitments and contingent liabilities (Note 6)
Shareholders' equity:
Preferred Stock, $.01 par value; authorized 5,000 shares; none outstanding ........ - -
Class A Common Stock, $.01 par value; authorized 50,000 shares;
8,027 and 7,391 issued and outstanding at March 31, 2002 and September 30,
2001, respectively (Note 5) .................................................... 80 74
Class B Non-Voting Common Stock, $.01 par value; authorized 4,530 shares;
1,352 and 1,565 issued and outstanding at March 31, 2002 and September 30,
2001, respectively ............................................................. 14 16
Additional paid in capital (Note 5) ............................................... 39,702 33,889
Unearned compensation (Note 5) .................................................... (5,439) -
Retained earnings ................................................................. 66,479 65,596
-------- --------
Total shareholders' equity ................................................ 100,836 99,575
-------- --------
Total liabilities and shareholders' equity ......................................... $137,033 $137,302
======== ========
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 Six Months Ended
------------------ ----------------
March 31, April 1, March 31, April 1,
2002 2001 2002 2001
--------- --------- --------- ---------
Direct sales ..................................... $ 66,846 $ 72,864 $ 129,633 $ 156,251
Licensed franchise sales ........................ 39,247 56,487 90,751 121,616
Franchise royalties .............................. 475 640 938 1,605
Initial license and franchise fees ............... -- 41 6 41
--------- --------- --------- ---------
Total revenues ............................ 106,568 130,032 221,328 279,513
Cost of direct sales ............................. 54,788 57,588 105,338 123,474
Cost of licensed sales ........................... 30,362 42,543 70,155 91,477
Licensees' share of gross profit ................. 5,975 9,585 13,984 20,616
Selling and administrative expenses .............. 14,264 15,232 28,759 33,263
Depreciation and amortization .................... 1,308 1,421 2,715 2,830
--------- --------- --------- ---------
(Loss) income from operations ............. (129) 3,663 377 7,853
Other income:
Interest income, net ........................... 161 144 400 216
Other, net ..................................... 212 303 485 513
--------- --------- --------- ---------
Income before provision for income taxes ......... 244 4,110 1,262 8,582
Provision for income taxes ....................... 53 1,455 379 3,064
--------- --------- --------- ---------
Net income ....................................... $ 191 $ 2,655 $ 883 $ 5,518
========= ========= ========= =========
Net income per share, basic (Note 2) ............. $ 0.02 $ 0.30 $ 0.10 $ 0.62
========= ========= ========= =========
Weighted-average number of shares, basic ......... 8,957 8,906 8,957 8,904
========= ========= ========= =========
Net income per share, diluted (Note 2) ........... $ 0.02 $ 0.30 $ 0.10 $ 0.62
========= ========= ========= =========
Weighted-average number of shares, diluted ....... 9,034 8,928 9,001 8,925
========= ========= ========= =========
See accompanying notes to consolidated financial statements.
4
RemedyTemp, Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
Six Months Ended
----------------
March 31, April 1,
2002 2001
-------- --------
Cash flows from operating activities:
Net income ................................................................. $ 883 $ 5,518
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization .......................................... 2,715 2,830
Provision for losses on accounts receivable ............................ 734 2,892
Restricted stock compensation expense .................................. 307 --
Changes in assets and liabilities:
Accounts receivable .................................................. 8,599 499
Prepaid expenses and other current assets ............................ (704) (1,256)
Prepaid workers' compensation insurance .............................. -- 4,877
Other assets ......................................................... 801 76
Accounts payable ..................................................... (816) (1,858)
Accrued workers' compensation ........................................ 4,637 2,150
Accrued payroll, benefits and related costs .......................... (1,216) (1,092)
Accrued licensees' share of gross profit ............................. (731) (320)
Other accrued expenses ............................................... (164) (6)
Income taxes payable ................................................. (1,748) --
-------- --------
Net cash provided by operating activities .................................. 13,297 14,310
-------- --------
Cash flows from investing activities:
Purchase of fixed assets ................................................... (1,462) (2,088)
Purchase of franchises, net of assets acquired ............................. (1,563) (77)
-------- --------
Net cash used in investing activities ...................................... (3,025) (2,165)
-------- --------
Cash flows from financing activities:
Proceeds from stock option activity ........................................ 14 140
Proceeds from Employee Stock Purchase Plan activity ........................ 57 61
-------- --------
Net cash provided by financing activities .................................. 71 201
-------- --------
Net increase in cash and cash equivalents ..................................... 10,343 12,346
Cash and cash equivalents at beginning of period .............................. 37,362 1,084
-------- --------
Cash and cash equivalents at end of period .................................... $ 47,705 $ 13,430
======== ========
Other cash flow information:
Cash paid during the period for interest ................................... $ 104 $ 128
Cash paid during the period for income taxes ............................... $ 2,063 $ 4,152
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, the "Company"). All
significant intercompany transactions and balances have been eliminated.
The accompanying consolidated balance sheet at March 31, 2002, 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
------------------------------------------------------------------------------------------
March 31, 2002 April 1, 2001
----------------------------------------------- -----------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amounts (Numerator) (Denominator) Amounts
------------- --------------- ----------- ------------- --------------- -----------
Basic EPS
Income available to common
shareholders........................ $ 191 8,957 $ 0.02 $ 2,655 8,906 $ 0.30
------ ====== ======
Effect of Dilutive Securities
Stock options....................... $ - 77 $ - 22
------ ------ ------ ------
Diluted EPS
Income available to common
shareholders plus assumed
conversions......................... $ 191 9,034 $ 0.02 $ 2,655 8,928 $ 0.30
====== ====== ====== ====== ====== ======
Six Fiscal Months Ended
------------------------------------------------------------------------------------------
March 31, 2002 April 1, 2001
----------------------------------------------- -----------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amounts (Numerator) (Denominator) Amounts
------------- --------------- ----------- ------------- --------------- -----------
Basic EPS
Income available to common
shareholders....................... $ 883 8,957 $ 0.10 $ 5,518 8,904 $ 0.62
====== ======
Effect of Dilutive Securities
Stock options...................... $ - 44 $ - 21
------ ------ ------ ------
Diluted EPS
Income available to common
shareholders plus assumed
conversions........................ $ 883 9,001 $ 0.10 $ 5,518 8,925 $ 0.62
====== ===== ====== ====== ====== ======
3. Purchase of Franchised Operations
From time to time, the Company may selectively purchase traditional and
licensed franchised operations to facilitate its expansion plans of increased
market presence in identified geographic regions. During the first quarter of
fiscal 2002, the Company acquired two licensed franchise offices (one in
Michigan and one in Illinois). Additionally, during the second quarter of fiscal
2002, the Company made an earnout payment relating to a previous licensed
franchise
6
RemedyTemp, Inc.
acquisition in accordance with the provisions of the related purchase agreement.
Results of operations for the acquired licensed franchise 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. Workers Compensation
Effective April 1, 2002, the Company entered into a contract with ACE USA
("ACE") for its workers' compensation insurance and claims administration. The
Company's deductible under the insurance contract is $500 per individual claim
and ACE is responsible for costs in excess of the deductible amount. Under the
terms of the agreement, the Company is required to maintain a $13,778 letter of
credit to secure repayment to ACE of the deductible portion of all open claims.
From April 1, 2001 through March 31, 2002, the Company utilized a similar
deductible program with Liberty Mutual Insurance Company ("Liberty"). The
Company's deductible under this insurance contract is $250 per individual claim
incurred and Liberty is responsible for costs in excess of the deductible
amount. Under the terms of this agreement, the Company is required to maintain a
$17,250 letter of credit to secure repayment to Liberty of the deductible
portion of all open claims.
The Company is self-insured for its remaining estimated deductible
liability under both contracts discussed above. The Company utilizes actuarial
methods to estimate the remaining undiscounted liability for its workers'
compensation claims, including those incurred but not reported. These estimates
are based on historical company and industry experience as well as current
legal, economic and regulatory factors. While management believes that the
recorded amounts are adequate, there can be no assurance that changes to
management's estimates will not occur due to limitations inherent in the
estimation process. Changes in the estimates of this liability are charged or
credited to earnings in the period determined. Prior to April 1, 2001, the
Company utilized a guaranteed cost insurance program.
5. Restricted Stock Award
In December 2001 and February 2002, the Compensation Committee of the Board
of Directors authorized and issued 365 shares and 50 shares, respectively, of
restricted Class A Common Stock (collectively, "Restricted Stock") to certain
officers of the Company 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 five years from
the respective grant dates, at which point the restrictions lapse; however, the
Restricted Stock is subject to accelerated vesting after three years if certain
pre-established performance goals are achieved. All unvested Restricted Stock
shall be forfeited upon voluntary termination or termination for cause. Upon
involuntary termination for other than cause or retirement, 20% vests one year
from the applicable grant date with the remaining unvested shares vesting at
1.66% each month thereafter. In connection with these issuances, the Company
credited the capital accounts and charged unearned compensation for the market
value of the Restricted Stock on the respective grant dates. The unearned
compensation is shown as a reduction of shareholders' equity in the accompanying
balance sheet and is being amortized to expense ratably over the restricted
periods.
In connection with the Restricted Stock grants, the recipients were
required to forfeit all outstanding stock options, to the extent available. As a
result, a total of 592 stock options were forfeited and cancelled in connection
with these grants.
6. Litigation
On October 16, 2001, GLF Holding Company, Inc. and Fredrick S. Pallas filed
a complaint in the Superior Court of the State of California, County of Los
Angeles, against the Company, Karin Somogyi, Paul W. Mikos and Greg Palmer. The
Complaint purports to be a class action brought by the individual plaintiffs on
behalf of all of the Company's traditional and licensed franchisees. The
Complaint alleges claims for fraud and deceit, negligent misrepresentation,
negligence, breach of contract, breach of warranty, conversion, and accounting,
unfair and deceptive practices, and restitution and equitable relief. The
plaintiffs claim that Remedy wrongfully induced its franchisees into signing
franchise agreements and breached the agreements, thus causing the franchisees
damage. Remedy has sought to compel arbitration with the plaintiffs in
accordance
7
RemedyTemp, Inc.
with its franchise agreement with each of them and to deny class certification.
Remedy believes it has meritorious defenses to the allegations contained in this
complaint and intends to defend this action with vigor. 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 licensed franchisees of Remedy until their
franchise 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.
From time to time, the Company becomes a party to other litigation
incidental to its business and operations. The Company maintains insurance
coverage that management believes is reasonable and prudent for the business
risks that the Company faces. Management does not believe the Company is party
to any other legal proceeding that are likely to have a material adverse effect
on the Company.
7. 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 six months ended March 31, 2002 and April 1, 2001, the
Company reported goodwill amortization of $137 and $133, respectively. SFAS No.
141 is effective for all business combinations initiated after June 30, 2001.
SFAS No. 142 will be effective for the Company in fiscal 2003. The Company is
currently assessing 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.
8
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 Company's new telemarketing
program, changes in general or local economic conditions that could impact the
Company's expected financial results, the availability of sufficient personnel,
the Company's ability to expand in core geographic markets, attract and retain
clients and franchisees, 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.
Operations
The Company's revenues are derived from company-owned offices (direct
sales) and independently-managed franchise offices (licensed sales and franchise
royalties).
Independently-managed franchised offices have been an important element of
the Company's growth strategy for more than a decade. Such offices have enabled
the Company to expand into new markets with highly qualified franchisees without
significant capital expenditures. The majority of the Company's offices outside
California are independently-managed franchises. Franchise agreements have
ten-year terms and are renewable for successive five-year or ten-year terms,
depending upon when such agreements originated. Such agreements cover exclusive
geographic territories and contain minimum revenue performance standards. The
Company's franchise agreements are structured in either a "traditional"
franchise format or a "licensed" franchise format. Currently, the Company only
offers "licensed" franchises.
Under the Company's traditional franchise agreements, the traditional
franchisee pays all lease and working capital costs relating to its office,
including funding payroll and collecting clients' accounts. Generally,
traditional franchisees pay the Company an initial franchise fee and continuing
franchise fees, or royalties, equal to 7% of its gross billings. Royalty fees
are reduced when the franchisee serves a national client as these clients
typically have lower margins. The Company processes payroll and invoices
clients, and the franchisee employs all management staff and temporary personnel
affiliated with its office. The Company provides training, the right to use the
Company's service marks, trademarks and business model, proprietary computer
programs and operational support.
The Company switched from the traditional franchise to the licensed
franchise format to exercise more control over the collection and tracking of
the receivables of the independently-managed offices and to allow the Company to
grow without being limited by the financial resources of traditional
franchisees. Under the Company's licensed franchise agreement, the licensee pays
the Company an initial franchise fee, pays all lease and operating costs
relating to its office and employs all management staff affiliated with its
office. The licensed franchise format differs from the traditional franchise
format in that the Company employs of all temporary personnel affiliated with
the office. The Company funds payroll, collects clients' accounts and remits to
the licensee 60%-70% of the office's gross profit, based upon the level of hours
billed during the licensee's contract year. However, the Company's share of the
licensee's gross profit, representing its continuing franchise fees, is
generally not less than 7.5% of the licensee's gross billings, with the
exception of national accounts on which the Company's fee is reduced to
compensate for lower gross margins. The percentage of gross profit paid to the
licensee is generally based on the level of hours billed during the contract
year.
Results of Operations
For the Three Fiscal Months Ended March 31, 2002 Compared to the Three Fiscal
Months Ended April 1, 2001
Total revenues decreased 18.0%, or $23.5 million, to $106.6 million for the
three fiscal months ended March 31, 2002 from $130.0 million for the three
fiscal months ended April 1, 2001. Direct revenues decreased 8.3% to $66.8
million from $72.9 million, licensed franchise revenues decreased 30.5% to $39.2
million from $56.5 million and traditional franchise royalties decreased 25.8%
to $0.5 million from $0.6 million for the three fiscal months ended March 31,
2002 and April 1, 2001, respectively. The overall decrease in revenues resulted
primarily from the general economic
9
RemedyTemp, Inc.
slowdown, continued pricing pressures and reduced permanent placement billings,
whereby the Company receives a fee for placing a temporary associate in a
permanent position. The mix between direct, licensed franchise and royalty
revenues shifted with direct revenues accounting for 62.7% of total revenues for
the three months ended March 31, 2002 as compared to 56.0% for the three months
ended April 1, 2001. This shift resulted primarily from incremental revenues
generated from new company-owned offices opened during the quarter and the
closure of several licensed franchise locations, as a result of reduced business
and the non-renewal of an expired licensed franchise agreement. New
company-owned offices opened include three in the Company's new financial
staffing division (RemX(R) Financial Staffing), four replacement offices in the
former licensed franchisee's territory discussed above and two additional
offices in strategic markets. The decrease in franchise royalties resulted from
lower billings at existing offices. Overall, and in accordance with the
Company's focus, revenues from middle market clients (defined as clients with
$0.2 million to $5.0 million in annual sales) increased to 53.7% of total
revenues for the three months ended March 31, 2002 from 51.5% in the preceding
year. 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 licensed franchisees 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 15.0%, or $15.0 million,
to $85.2 million for the three fiscal months ended March 31, 2002 from $100.1
million for the three fiscal months ended April 1, 2001. This decrease resulted
primarily from reduced revenues as described above. Total cost of direct and
licensed sales as a percentage of revenues was 79.9% for the three fiscal months
ended March 31, 2002 compared to 77.0% for the three fiscal months ended April
1, 2001. This increase resulted from i) lower markup resulting from pricing
pressures and a shift in mix towards light industrial business, ii) reduced
permanent placement business and royalty income and iii) 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 licensed
franchisees based upon a percentage of gross profit generated by the licensed
franchise operations, as noted above. Licensees' share of gross profit decreased
37.7%, or $3.6 million, to $6.0 million for the three fiscal months ended March
31, 2002 from $9.6 million for the three fiscal months ended April 1, 2001 due
to an overall 36.3% 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 67.2% for the three fiscal months ended March 31,
2002 as compared to 68.7% for the three fiscal months ended April 1, 2001. This
decrease resulted primarily from reduced permanent placement billings for which
a licensee generally earns a higher percentage of the related gross profit.
Selling and administrative expenses decreased 6.4%, or $1.0 million, to
$14.3 million for the three fiscal months ended March 31, 2002 from $15.2
million for the three fiscal months ended April 1, 2001. This overall decrease
resulted 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. These cost
reductions were offset by planned start-up costs associated with the creation of
a telemarketing department as well as the new office openings discussed above.
Selling and administrative expenses as a percentage of total revenues were 13.4%
for the three fiscal months ended March 31, 2002 as compared to 11.7% for the
three fiscal months ended April 1, 2001. 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 decreased 8.0%, or $0.1 million, to $1.3 for
the three fiscal months ended March 31, 2002 from $1.4 million for the three
fiscal months ended April 1, 2001.
The Company's net loss from operations of $0.1 million for the three fiscal
months ended March 31, 2002 represents a decrease of 103.5%, or $3.8 million,
from operating income of $3.7 million generated in the three fiscal months ended
April 1, 2001 as a result of the factors described above.
Net income decreased 92.8%, or $2.5 million, to $0.2 million for the three
fiscal months ended March 31, 2002 from $2.7 million for the three fiscal months
ended April 1, 2001 due to the factors described above. The Company's effective
tax rate reflects the expected benefit generated from Work Opportunity and
Welfare to Work Tax Credits. As a percentage of total revenues, net income was
0.2% for the three fiscal months ended March 31, 2002 compared to 2.0% for the
three fiscal months ended April 1, 2001.
10
RemedyTemp, Inc.
For the Six Fiscal Months Ended March 31, 2002 Compared to the Six Fiscal Months
Ended April 1, 2001
Total revenues decreased 20.8%, or $58.2 million, to $221.3 million for the
six fiscal months ended March 31, 2002 from $279.5 million for the six fiscal
months ended April 1, 2001. Direct revenues decreased 17.0% to $129.6 million
from $156.3 million, licensed franchise revenues decreased 25.4% to $90.8
million from $121.6 million and traditional franchise royalties decreased 41.6%
to $0.9 million from $1.6 million for the six fiscal months ended March 31, 2002
and April 1, 2001, respectively. The overall decrease in direct and licensed
franchise revenues resulted from the general economic slowdown as well as
continued pricing pressures and reduced permanent placement billings. The mix
between direct, licensed franchise and royalty revenues shifted with direct
revenues accounting for 58.6% of total revenues for the six months ended March
31, 2002 as compared to 55.9% for the six months ended April 1, 2001. This shift
resulted primarily from incremental revenues generated from new company-owned
offices opened during the second quarter, as discussed above, and the closure of
several licensed franchise locations resulting from reduced business and the
non-renewal of an expired licensed franchise agreement at the end of the first
quarter of fiscal 2002. New company-owned offices opened include three in the
Company's new financial staffing division and four replacement offices in the
former licensed franchisee's territory. The decrease in franchise royalties
resulted from lower billings at existing offices and certain office closures
during the first quarter of fiscal 2002 resulting from reduced business and
conversion to the licensed franchise format. 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 licensed
franchisees 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 18.4%, or $39.5 million,
to $175.5 million for the six fiscal months ended March 31, 2002 from $215.0
million for the six fiscal months ended April 1, 2001. This decrease resulted
primarily from reduced revenues as described above. Total cost of direct and
licensed sales as a percentage of revenues was 79.3% for the six fiscal months
ended March 31, 2002 compared to 76.9% for the six fiscal months ended April 1,
2001. This increase resulted from i) lower markup resulting from pricing
pressures and a shift in mix towards light industrial business, ii) reduced
permanent placement business and royalty income, and iii) 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 decreased 32.2%, or $6.6 million, to $14.0
million for the six fiscal months ended March 31, 2002 from $20.6 million for
the six fiscal months ended March 31, 2002 due to an overall 31.7% decrease in
licensed gross profits as well as decreased permanent placement billings for
which a licensee typically earns a larger percentage of the gross margin.
Licensees' share of gross profit as a percentage of licensed gross profit was
67.9% for the six fiscal months ended March 31, 2002 compared to 68.4% for the
six fiscal months ended April 1, 2001.
Selling and administrative expenses decreased 13.5%, or $4.5 million, to
$28.8 million for the six fiscal months ended March 31, 2002 from $33.3 million
for the six fiscal months ended April 1, 2001. This overall decrease resulted
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. These cost
reductions were offset by planned expenditures, during fiscal 2002, associated
with new office openings. 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 13.0% for the six
fiscal months ended March 31, 2002 as compared to 11.9% for the six fiscal
months ended April 1, 2001. 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 decreased 4.1%, or $0.1 million, to $2.7 for
the six fiscal months ended March 31, 2002 from $2.8 million for the six fiscal
months ended April 1, 2001.
Income from operations decreased 95.2%, or $7.5 million, to $0.4 million
for the six fiscal months ended March 31, 2002 from $7.9 million for the six
fiscal months ended April 1, 2001 due to the factors described above. Income
from operations as a percentage of revenues was 0.2% for the six fiscal months
ended March 31, 2002 compared to 2.8% for the six fiscal months ended April 1,
2001.
11
RemedyTemp, Inc.
Net income decreased 84.0%, or $4.6 million, to $0.9 million for the six
fiscal months ended March 31, 2002 from $5.5 million for the six fiscal months
ended April 1, 2001 due to the factors described above. Interest income
increased from investment of the Company's growing cash balance. Additionally,
the Company's effective tax rate reflects expected benefit generated from Work
Opportunity and Welfare to Work Tax Credits. As a percentage of total revenues,
net income was 0.4% for the six fiscal months ended March 31, 2002 compared to
2.0% for the six fiscal months ended April 1, 2001.
Liquidity and Capital Resources
Historically, the Company has financed its operations through cash
generated by operating activities and its line of credit facility, if necessary.
The Company's principal uses of cash are working capital needs, capital
expenditures (including management information systems initiatives) and
franchise acquisitions. The nature of the Company's business requires payment of
wages to its temporary associates on a weekly basis, while payments from clients
are generally received 30-60 days after the related billing.
Cash provided by operating activities was $13.3 million for the six fiscal
months ended March 31, 2002 and $14.3 million for the six fiscal months ended
April 1, 2001. Cash from operating activities in the current fiscal year was
impacted by decreases in accounts receivable balances. As a result of the
economic downturn, collection of outstanding accounts receivable outpaced the
growth of receivables generated by current sales. Additionally, the Company
reduced its days sales outstanding as a result of stronger collection efforts.
Other factors, somewhat offsetting net cash flows generated by accounts
receivable collections, were reductions in the current year payroll related
accruals, the licensees share of gross margin accrual and current taxes payable,
as well as changes in the Company's workers' compensation program as noted
below.
Prior to April 1, 2001, the Company utilized a guaranteed cost insurance
program for its workers' compensation claims liability. The estimated premium
was based upon expected payroll levels, prepaid at the beginning of the policy
and amortized based upon actual payroll levels. As a result, the Company had
unamortized prepaid insurance premiums at the inception of the prior fiscal
year. The Company amortized the entire prepaid balance during the six fiscal
months ended April 1, 2001 and had also accrued additional premiums due based
upon actual payroll levels exceeding the original estimate.
Effective April 1, 2001 through March 31, 2002, the Company entered into a
contract with Liberty Mutual Insurance Company ("Liberty") for its workers'
compensation insurance and claims administration for claims incurred during the
corresponding period. The Company's deductible under the insurance contract is
$0.25 million per individual claim incurred and Liberty is responsible for costs
in excess of the deductible amount. The Company is self-insured for and has
accrued its remaining estimated deductible liability and, as such, no prepaid
premiums existed at March 31, 2001. Under the terms of this agreement, the
Company is required to maintain a $17.3 million letter of credit to secure
repayment to Liberty of the deductible portion of all open claims.
Effective April 1, 2002, the Company entered into a similar insurance
arrangement with ACE USA ("ACE") workers compensation claims incurred from April
1, 2002 through March 31, 2003. The Company's deductible under this insurance
contract is $0.5 million per individual claim and ACE is responsible for costs
in excess of the deductible amount. Under the terms of the agreement, the
Company is required to maintain a $13.8 million letter of credit to secure
repayment to ACE of the deductible portion of all open claims.
Cash used for purchases of fixed assets, including information systems, was
$1.5 million for the six fiscal months ended March 31, 2002 and $2.1 million for
the six fiscal months ended April 1, 2001. 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.
From time to time, the Company may selectively purchase traditional and
licensed franchised operations to facilitate its expansion plans of increased
market presence in identified geographic regions. During the first quarter of
fiscal 2002, the Company acquired two licensed franchise offices (one in
Michigan and one in Illinois). Additionally, during the second quarter of fiscal
2002, the Company made an earnout payment relating to a previous licensed
franchise acquisition in accordance with the provisions of the related purchase
agreement. 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.
12
RemedyTemp, Inc.
In January 2002, the Company launched RemX(R) Financial Staffing, a new
business division focused on providing financial personnel on a temporary,
temp-to-hire or direct hire basis in major markets nationwide. The Company
opened three RemX(R) Financial Staffing offices during the second quarter of
fiscal 2002 and anticipates opening six additional offices during the remainder
of calendar 2002, while continuing to evaluate possible strategic acquisitions.
Such office openings and potential acquisitions may have an impact on future
liquidity.
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 March 31, 2002 and has a $17.3
million letter of credit in accordance with the workers' compensation insurance
agreement with Liberty discussed above. The Company is in the process of
securing an additional $13.8 million letter of credit in accordance with the
workers' compensation insurance agreement with ACE as discussed above. The line
of credit agreement expires on May 31, 2002 and the Company is currently
negotiating a new line of credit facility with two banks. The existing line of
credit agreement requires the Company to maintain certain financial ratios and
comply with certain restrictive covenants. The Company is in compliance with all
restrictive covenants and required ratios, with the exception of its total
liabilities to EBITDA ratio. The Company has obtained a waiver from the bank for
this ratio.
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.
Critical Accounting Policies
Remedy's consolidated financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America. The
preparation of consolidated financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
The significant accounting policies applied in preparing the Company's
consolidated financial statements are described in the Notes to the Consolidated
Financial Statements included in the Company's Annual Report on Form 10-K.
Policies that are considered critical are described below.
Revenue recognition
The Company generates revenue from the sale of temporary staffing and
permanent placement services by its company-owned and licensed franchise
operations and from royalties on sales of such services by its traditional
franchise operations. Temporary staffing revenues and the related labor costs
and payroll taxes are recorded in the period in which the services are
performed. Permanent placement revenues are recognized when the permanent
placement candidate begins full-time employment.
The Company utilizes two types of franchise agreements referred to as
"traditional" and "licensed." Under the Company's traditional franchised
agreement, the franchisee has the direct contractual relationship with the
customers, holds title to the related customer receivables and is the legal
employer of the temporary employees. Accordingly, sales and cost of sales
generated by the traditional franchise operations are not included in the
Company's consolidated financial statements. The Company earns and records
continuing franchise fees, based upon the contractual percentage of franchise
gross sales, in the period in which the traditional franchisee provides the
services. Such fees are recorded by the Company as "Franchise royalties."
Under the Company's licensed franchise agreement, revenues generated by the
franchised operation and the related costs of services are included in the
Company's consolidated financial statements and are reported as "Licensed
franchise sales" and "Cost of licensed sales," respectively. The Company has the
direct contractual relationship with the customer, holds title to the related
customer receivables and is the legal employer of the temporary employees. Thus,
certain risks associated with the licensed franchise operations remain with the
Company. The net distribution paid to the licensed franchisee for the services
rendered is based on a percentage of the gross profit generated by the licensed
operation and is reflected as "Licensees' share of gross profit" in the
consolidated statements of income. The Company's share of the licensees' gross
profit represents the continuing franchise fee as outlined in the licensed
franchise agreement and is recorded when earned in connection with the related
licensed franchise sales.
13
RemedyTemp, Inc.
Workers' compensation costs
The Company retains the risk for the deductible portion of its workers'
compensation insurance programs. The Company utilizes actuarial methods to
estimate the remaining undiscounted liability for its workers' compensation
claims, including those incurred but not reported. These estimates are based on
historical company and industry experience as well as current legal, economic
and regulatory factors. While management believes that the recorded amounts are
adequate, there can be no assurance that changes to management's estimates will
not occur due to limitations inherent in the estimation process. Changes in the
estimates of this liability are charged or credited to earnings in the period
determined. Remedy funds portions of its retained risks through deposits with
its insurance carriers.
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.
14
RemedyTemp, Inc.
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 16, 2001, GLF Holding Company, Inc. and Fredrick S. Pallas filed
a complaint in the Superior Court of the State of California, County of Los
Angeles, against RemedyTemp, Inc., Remedy Intelligent Staffing, Inc. (a
wholly-owned subsidiary), Remedy Temporary Services, Inc. (a wholly-owned
subsidiary), Karin Somogyi, Paul W. Mikos and Greg Palmer. The Complaint
purports to be a class action brought by the individual plaintiffs on behalf of
all of the Company's traditional and licensed franchisees. The Complaint alleges
claims for fraud and deceit, negligent misrepresentation, negligence, breach of
contract, breach of warranty, conversion, and accounting, unfair and deceptive
practices, and restitution and equitable relief. The plaintiffs claim that
Remedy wrongfully induced its franchisees into signing franchise agreements and
breached the agreements, thus causing the franchisees damage. Remedy has sought
to compel arbitration with the plaintiffs in accordance with its franchise
agreement with each of them and to deny class certification. Remedy believes it
has meritorious defenses to the allegations contained in this complaint and
intends to defend this action with vigor.
At this time management is unable to give an estimate, within the meaning
and in accordance with standards set for the American Bar Association Statement
of Policy, 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. Management
does not believe the Company is party to any other legal proceeding that is
likely to have a material adverse effect on the Company.
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 are licensed franchisees of Remedy; however, their
franchise 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.
From time to time, the Company becomes a party to other litigation
incidental to its business and operations. The Company maintains insurance
coverage that management believes is reasonable and prudent for the business
risks that the Company faces.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On February 28, 2002, the Company held its Annual Meeting of Shareholders
("the Annual Meeting"). The Company's shareholders voted in favor of the matter
voted upon at the Annual Meeting according to the following vote tabulation:
Proposal One: Election of Directors.
Abstentions and Broker
----------------------
For Withhold Non-Votes
--- -------- ---------
William D. Cvengros 7,049,996 15,289 --
James L. Doti 7,045,096 20,189 --
Robert A. Elliott 7,049,996 15,289 --
Mary George 7,045,096 20,189 --
J. Michael Hagan 7,045,096 20,189 --
Robert E. McDonough, Sr. 7,043,396 21,889 --
Paul W. Mikos 7,044,996 20,289 --
Greg D. Palmer 7,049,896 15,389 --
John B. Zaepfel 7,049,996 15,289 --
15
RemedyTemp, Inc.
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:
Exhibit No. 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 (n)
10.24 1998 RemedyTemp, Inc. Deferred Compensation and Stock Ownership Plan for Outside Directors (e)
10.25 Form of Licensing Agreement for i/search2000TM (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.
(n) 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 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.
16
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.
May 15, 2002 /s/ GREG PALMER
------------ ----------------
Greg Palmer, President and Chief
Executive Officer
May 15, 2002 /s/ ALAN M. PURDY
------------ ------------------
Senior Vice President and Chief Financial
Officer (Principal Financial and Accounting
Officer)
17
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 (n)
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)
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.
(n) 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 30, 2001.