-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nu6b92MWpvhjD20tNnJVg+m70qZbwa2I6wsEgtCQ5ntGBHhLB/llRU8QcS0osH+O tZCA2Kmt80uFNTXRU5R3YQ== 0000892569-97-000253.txt : 19970225 0000892569-97-000253.hdr.sgml : 19970225 ACCESSION NUMBER: 0000892569-97-000253 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961229 FILED AS OF DATE: 19970204 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: REMEDYTEMP INC CENTRAL INDEX KEY: 0001013467 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 952890471 STATE OF INCORPORATION: CA FISCAL YEAR END: 0929 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20831 FILM NUMBER: 97517608 BUSINESS ADDRESS: STREET 1: 32122 CAMINO CAPISTRANO CITY: SAN JUAN CAPISTRANO STATE: CA ZIP: 92675 BUSINESS PHONE: 7146611211 MAIL ADDRESS: STREET 1: 32122 CAMINO CAPISTRANO STREET 2: 32122 CAMINO CAPISTRANO CITY: SAN JUAN CAPISTRANO STATE: CA ZIP: 92675 10-Q 1 FORM 10-Q 1 ================================================================================ 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 QUARTERLY PERIOD ENDED DECEMBER 29, 1996 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) 32122 CAMINO CAPISTRANO SAN JUAN CAPISTRANO, CALIFORNIA 92675 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (714) 661-1211 ------------------------- 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 3, 1997 there were 5,830,100 shares of Class A Common Stock and 3,058,333 shares of Class B Common Stock outstanding. ================================================================================ 2 REMEDYTEMP, INC. INDEX
PAGE NO. -------- PART I--FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheet as of December 29, 1996 and September 29, 1996............................................ 2 Statement of Income for the three fiscal months ended December 29, 1996 and December 31, 1995..................................................................................... 3 Statement of Shareholders' Equity for the two fiscal years ended September 29, 1996 and October 1, 1995, and the three fiscal months ended December 29, 1996................................... 4 Statement of Cash Flows for the three fiscal months ended December 29, 1996 and December 31, 1995....... 5 Notes to Financial Statements........................................................................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............... 7 PART II--OTHER INFORMATION Item 1. Legal Proceedings................................................................................... * Item 2. Changes In Securities............................................................................... * Item 3. Defaults............................................................................................ * Item 4. Submission of Matters to a Vote of Security Holders................................................. 9 Item 5. Other Information................................................................................... * Item 6. Exhibits and Reports on Form 8-K.................................................................... 9 SIGNATURES........................................................................................................ 10
* No information provided due to inapplicability of item. 1 3 PART I--FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS REMEDYTEMP, INC. BALANCE SHEET (AMOUNTS IN THOUSANDS)
DEC. 29, SEPT. 29, 1996 1996 ------- ------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents .................................. $ 9,070 $10,959 Marketable securities ...................................... 3,050 1,016 Accounts receivable ........................................ 42,603 42,337 Prepaid expenses and other current assets .................. 1,869 2,177 Current portion of net investment in direct financing leases 168 164 ------- ------- Total current assets ............................... 56,760 56,653 Fixed assets, net ............................................ 5,831 5,527 Other assets ................................................. 1,261 1,262 Net investment in direct financing leases .................... 400 464 ------- ------- $64,252 $63,906 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable ........................................... $ 1,544 $ 933 Distributions payable to pre-offering shareholders ......... 3,650 4,007 Accrued workers' compensation .............................. 1,397 550 Accrued payroll, benefits and related costs ................ 7,821 10,056 Accrued licensees' share of gross profit ................... 1,078 1,388 Other accrued expenses ..................................... 657 1,711 Income taxes payable ....................................... 2,305 1,167 Current portion of capitalized lease obligation ............ 425 416 Deferred income taxes ...................................... 1,084 1,084 ------- ------- Total current liabilities .......................... 19,961 21,312 Deferred income taxes ........................................ 4,834 5,584 Capitalized lease obligation ................................. 624 734 ------- ------- 25,419 27,630 ------- ------- Commitments and contingent liabilities Shareholders' equity (Note 2): Preferred Stock, par value $.01; authorized 5,000 shares; none outstanding Class A Common Stock, $.01 par value; authorized 50,000 shares; 5,830 issued and outstanding ..................... 58 58 Class B Non-Voting Common Stock, $.01 par value; authorized 4,530 shares, 3,058 issued and outstanding .... 31 31 Additional paid-in capital ................................. 32,671 32,671 Retained earnings .......................................... 6,073 3,516 ------- ------- Total shareholders' equity ......................... 38,833 36,276 ------- ------- $64,252 $63,906 ======= =======
See accompanying notes to financial statements. 2 4 REMEDYTEMP, INC. STATEMENT OF INCOME (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED --------------------- DEC. 29, DEC. 31, 1996 1995 -------- -------- (UNAUDITED) Direct sales ............................. $ 54,463 $ 41,795 Licensed sales ........................... 29,336 22,171 Franchise royalties ...................... 764 691 Initial franchise fees ................... 24 -------- -------- Total revenues ................. 84,563 64,681 Cost of direct sales ..................... 42,431 31,596 Cost of licensed sales ................... 21,882 16,664 Licensees' share of gross profit ......... 5,015 3,711 Selling and administrative expenses ...... 10,670 9,221 Depreciation and amortization ............ 610 438 -------- -------- Income from operations ......... 3,955 3,051 Other income: Interest income (expense), net ......... 123 (22) Other, net ............................. 293 204 -------- -------- Income before provision for income taxes 4,371 3,233 Provision for income taxes ............... 1,814 48 -------- -------- Net income ............................... $ 2,557 $ 3,185 ======== ======== Net income per share ..................... $ 0.28 ======== Weighted average number of shares ........ 9,020 ======== Unaudited pro forma data (Note 3) Income before income taxes ............... $ 3,233 Provision for income taxes ............... 1,293 -------- Pro forma net income ..................... $ 1,940 ======== Pro forma net income per share ........... $ 0.25 ======== Weighted average number of shares ........ 7,685 ========
See accompanying notes to financial statements. 3 5 REMEDYTEMP, INC. STATEMENT OF SHAREHOLDERS' EQUITY (AMOUNTS IN THOUSANDS)
CLASS A CLASS B COMMON STOCK COMMON STOCK ADDITIONAL -------------------- ------------------ PAID-IN RETAINED SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL -------- -------- -------- -------- -------- -------- -------- Balance at October 2, 1994 ................ 2,265 $ 23 4,530 $ 45 $ 84 $ 13,677 $ 13,829 Net income ................................ 6,400 6,400 Distributions to shareholders ............. (921) (921) -------- -------- -------- -------- -------- -------- -------- Balance at October 1, 1995 ................ 2,265 23 4,530 45 84 19,156 19,308 Conversion of common stock ................ 1,472 14 (1,472) (14) Net proceeds from public offering of common stock ................................... 2,093 21 23,387 23,408 Reclassification of S corporation retained earnings ................................ 9,200 (9,200) Net income ................................ 4,213 4,213 Distribution to pre-offering shareholders . (701) (701) Special distribution to pre-offering shareholders in connection with initial public offering ........................ . (9,952) (9,952) -------- -------- -------- -------- -------- -------- -------- Balance at September 29, 1996 ............. 5,830 58 3,058 31 32,671 3,516 36,276 Unaudited Information: Net income .............................. 2,557 2,557 -------- -------- -------- -------- -------- -------- -------- Balance at December 29, 1996 .............. 5,830 $ 58 3,058 $ 31 $ 32,671 $ 6,073 $ 38,833 ======== ======== ======== ======== ======== ======== ========
See accompanying notes to financial statements. 4 6 REMEDYTEMP, INC. STATEMENT OF CASH FLOWS (AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED ---------------------- DEC. 29, DEC. 31, 1996 1995 -------- -------- (UNAUDITED) Cash flows provided by (used in) operating activities: Net income ............................................................. $ 2,557 $ 3,185 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .................................... 610 438 Provision for losses on accounts receivable ...................... 410 212 Deferred taxes ................................................... (750) Changes in assets and liabilities: Accounts receivable .......................................... (676) (810) Prepaid expenses and other current assets .................... 308 790 Net investment in direct financing leases .................... 60 (173) Other assets ................................................. 1 (15) Accounts payable ............................................. 611 2,250 Accrued workers' compensation ................................ 847 (157) Accrued payroll, benefits and related costs .................. (2,235) (1,143) Accrued licensees' share of gross profit ..................... (310) 282 Other accrued expenses ....................................... (1,054) 505 Income taxes payable ......................................... 1,138 6 -------- -------- Net cash provided by operating activities .............................. 1,517 5,370 -------- -------- Cash flows used in investing activities: Purchase of fixed assets ............................................... (914) (789) Purchase of investments ................................................ (2,034) -------- -------- Net cash used in investing activities .................................. (2,948) (789) -------- -------- Cash flows provided by financing activities: Borrowings under line of credit agreement .............................. 100 1,400 Repayments under line of credit agreement .............................. (100) (8,100) Repayments under capital lease obligation .............................. (101) (85) Distributions to pre-offering shareholders ............................. (357) -------- -------- Net cash used in financing activities .................................. (458) (6,785) -------- -------- Net decrease in cash and cash equivalents ................................. (1,889) (2,204) Cash and cash equivalents at beginning of period .......................... 10,959 2,204 -------- -------- Cash and cash equivalents at end of period ................................ $ 9,070 $ 0 ======== ======== Other cash flow information Cash paid during the period for interest .................................. $ 44 $ 26 Cash paid during the period for income taxes .............................. 1,427
See accompanying notes to financial statements. 5 7 REMEDYTEMP, INC. NOTES TO FINANCIAL STATEMENTS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1. BASIS OF PRESENTATION The accompanying balance sheet and statement of shareholders' equity at December 29, 1996, and the statements of income and of cash flows for the three fiscal months ended December 29, 1996 and December 31, 1995, are unaudited. These statements have been prepared on the same basis as the Company's audited 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 financial position and results of operations for such periods. These unaudited financial statements should be read in conjunction with the audited financial statements included in the Company's Form 10K/A as filed with the Securities and Exchange Commission on December 26, 1996. Certain reclassifications, which have no effect on retained earnings, have been made to conform the 1995 information to the 1996 presentation. 2. RECAPITALIZATION Concurrent with it's initial public offering in July 1996, the Company (i) effected a 1.812-for-1 stock split of its outstanding voting and non-voting common stock, and (ii) amended its Articles of Incorporation to provide for the issuance of up to 5,000 shares of preferred stock, par value $.01, an increase in the number of voting common shares authorized from 10,000 to 50,000, a reclassification of the voting and non-voting common stock, and a decrease in the number of authorized non-voting common shares from 7,500 to 4,530. Share and per share amounts for all periods presented have been adjusted to give retroactive effect to the above. 3. UNAUDITED PRO FORMA NET INCOME AND NET INCOME PER SHARE Prior to its initial public offering, the Company elected treatment as an S corporation for federal and state income tax purposes. Pro forma net income for the three fiscal months ended December 31, 1995 represents net income after a pro forma provision, using a tax rate of 40%, to reflect the estimated income tax expense of the Company as if it had been subject to normal federal and state income taxes at C corporation rates for the period. Pro forma net income per share for the three fiscal months ended December 31, 1995 is computed by using the weighted average number of common and common equivalent shares outstanding during the period, adjusted to include the estimated number of shares required to be sold by the Company to prepay distributions to the pre-offering shareholders totaling $9,952 (890 shares as calculated based on the net proceeds from the initial public offering) including a $5,000 distribution paid in May 1996 and a $4,952 distribution to the pre-offering shareholders to be paid from the proceeds of the offering in April 1997. The Company advanced $1.3 million of this distribution prior to December 29, 1996. The computation of pro forma weighted average shares outstanding gives effect to the stock split being effected in connection with the initial public offering (see Note 2). Historical net income per share has not been presented in view of prior period S corporation status. 6 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In addition to historical information, management's discussion and analysis includes certain forward-looking statements, including those related to the Company's growth and strategies, regarding events and financial trends that may affect the Company's future operating results and financial position. The Company's actual results and financial position could differ materially from those anticipated in the forward-looking statements as a result of competition, the availability of sufficient personnel, and other risks and uncertainties as described in detail under the "Risk Factors" section and elsewhere in the Company's Form 10K/A as filed with the SEC on December 26, 1996. RESULTS OF OPERATIONS For the Three Fiscal Months Ended December 29, 1996 compared to the Three Fiscal Months Ended December 31, 1995 Total revenues increased 30.7% or $19.9 million to $84.6 million for the three fiscal months ended December 29, 1996 from $64.7 million for the three fiscal months ended December 31, 1995, due primarily to volume increases attributable to increased billings at existing offices, a 4% increase in the average billing rate, expansion of services, including EDGE(R), and 23 new offices opened since the prior period. The Company's ability to continue to increase revenues depends upon many factors, including existing and emerging competition, the availability of working capital to support such growth, and the Company's ability to maintain margins in the face of pricing pressures, find and retain new qualified licensees and office managers, recruit and train additional qualified temporary personnel, and manage costs. There can be no assurance that the Company's revenues will continue to increase. Total cost of direct and licensed sales increased 33.3% or $16.1 million to $64.3 million for the three fiscal months ended December 29, 1996 from $48.3 million for the three fiscal months ended December 31,1995. Total cost of direct and licensed sales as a percentage of revenues increased to 76.1% for the three fiscal months ended December 29, 1996 from 74.6% for the three fiscal months ended December 31, 1995. This increase was due to a new high volume, lower gross margin client and accelerated growth in the light industrial business, which generally has lower gross margins. The Company's cost of direct sales as a percentage of direct sales increased, while cost of licensed sales as a percentage of licensed sales remained relatively stable. Many factors, including increased wage costs or other employment expenses, could have an adverse effect on 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. Licensees' share of gross profit increased 35.1% or $1.3 million to $5.0 million for the three fiscal months ended December 29, 1996 from $3.7 million for the three fiscal months ended December 31, 1995. Licensees' share of gross profit as a percentage of total revenues increased to 5.9% for the three fiscal months ended December 29, 1996 from 5.7% for the three fiscal months ended December 31, 1995. This increase resulted from an increase in licensed offices to 79 at December 29,1996 from 63 as of December 31, 1995 and from continued growth in existing licensed offices. Licensees' share of gross profit as a percentage of licensees' total gross profit remained relatively unchanged. Selling, general and administrative expenses (including depreciation and amortization) increased 16.8% or $1.6 million to $11.3 million for the three fiscal months ended December 29, 1996 from $9.7 million for the three fiscal months ended December 31, 1995. Selling, general and administrative expenses as a percentage of total revenues decreased to 13.3% for the three fiscal months ended December 29, 1996 from 14.9% for the three fiscal months ended December 31, 1995, largely due to the Company's total revenues expanding more rapidly than selling, general and administrative expenses. The Company has implemented several cost saving measures to maintain or reduce its level of selling, general and administrative expenses as a percentage of total revenue. Such measures include the installation of a Company-wide expense budgeting program to make corporate managers more accountable for their operating expenditures and the initiation of a profit sharing plan at the office level that rewards office and area managers based on office location operating profit. There can be no assurance that selling, general and administrative expenses will not increase in the future, both in absolute terms and as a percentage of total revenues, and increases in these expenses could adversely affect the Company's profitability. Operating income increased 29.6% or $0.9 million to $4.0 million for the three fiscal months ended December 29, 1996 from $3.1 million for the three fiscal months ended December 31, 1995 due to factors described above. Operating income as a percentage of revenues remained constant at 4.7% for the three fiscal months ended December 29, 1996 and for the three fiscal months ended December 31, 1995. Income before income taxes increased 35.2% or $1.1 million to $4.4 million for the three fiscal months ended December 29, 1996 from $3.2 million for the three fiscal months ended December 31, 1995 due to the factors described above. As a percentage of total revenues, income before income taxes increased to 5.2% in the three fiscal months ended December 29, 1996 from 5.0% in the three fiscal months ended December 31, 1995. 7 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES Net cash flow from operating activities was $1.5 million and $5.4 million for the three fiscal months ended December 29, 1996 and December 31, 1995, respectively. The decrease in cash flow from operating activities for the three fiscal months ended December 29, 1996 resulted from accelerated payments of liabilities during the current fiscal quarter with the funds generated by the initial public offering. Additionally, the Company paid approximately $1.4 million in estimated taxes during the first quarter of fiscal 1997. No taxes were paid in the corresponding preceding period given the Company's prior S corporation status. Cash used for purchases of fixed assets, which are generally for computers and peripherals and office furniture and equipment, totaled $0.9 million and $0.8 million for the three fiscal months ended December 29, 1996 and December 31, 1995, respectively. The Company expects capital expenditures to be approximately $3.6 million over the next 12 months due to anticipated openings of new Company-owned offices and further investments in the Company's computer-based technologies. Cash used for the purchase of investments, which are generally short-term investments with original maturities greater than 90 days but not more than one year, totaled $2.0 million for the three fiscal months ended December 29, 1996. The increase in investments is offset by a decrease in cash and cash equivalents. The Company has a revolving line of credit agreement with Bank of America and Union Bank providing for aggregate borrowings and letters of credit of $25.0 million. Interest on outstanding borrowings is payable monthly at the prime rate or, at the Company's discretion, LIBOR plus 1.95%. The line of credit is unsecured and expires on February 28, 1997. The Company is in the process of renegotiating a new line of credit agreement. Historically the principal use of the line of credit has been to finance receivables, to provide a letter of credit required in connection with the Company's California workers' compensation self-insurance program to meet regulatory requirements and to finance distributions made to pre-offering shareholders. The Company had no borrowings under its line of credit and $4.8 million in undrawn letters of credit as of December 29, 1996. The Company is no longer self insured for workers' compensation and as a result canceled the letter of credit in January 1997. The bank agreements governing the lines of credit require the Company to maintain certain financial ratios and comply with certain restrictive covenants. During the fourth quarter of fiscal 1996 the Company declared a distribution to the pre-offering shareholders in an aggregate amount equal to $4.9 million which represents the pre-offering shareholders' income tax obligations related to the Company's undistributed S corporation earnings from October 2, 1995 through July 9, 1996 (the effective termination date of the Company's S corporation status). The Company will pay the additional distribution in April 1997 from the proceeds of the initial public offering. In fiscal 1996 and in the first quarter of fiscal 1997, the Company advanced $0.9 million and $0.4 million respectively, to pre-offering shareholders, representing portions of the anticipated distribution mentioned above. 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 been historically strong as a result of manufacturing and retail emphasis on holiday sales. The second fiscal quarter historically shows little to no growth 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. 8 10 REMEDYTEMP, INC. PART II--OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None 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* 3.2 Amended and Restated Bylaws of the Company* 4.1 Specimen Stock Certificate* 4.2 Shareholder Rights Agreement* 10.1 Robert B. McDonough, Sr. Amended and Restated Employment Agreement* 10.2 Paul W. Mikos Employment Agreement* 10.3 R. Emmett McDonough Employment Agreement* 10.4 Allocation Agreement with R. Emmett McDonough and Related Trusts* 10.5 Registration Rights Agreement with R. Emmett McDonough and Related Trusts* 10.6 Letter regarding terms of employment and potential severance of Alan M. Purdy* 10.7 Deferred Compensation Agreement for Alan M. Purdy* 10.8 Letter regarding potential severance of Jeffrey A. Elias* 10.9 Form of Indemnification Agreement* 10.10 Lease Agreement between RemedyTemp, Inc. and Robert E. McDonough, Sr.* 10.11 RemedyTemp, Inc. 1996 Stock Incentive Plan* 10.12 RemedyTemp, Inc. 1996 Employee Stock Purchase Plan* 10.13 Form of Franchising Agreement for Licensed Offices* 10.14 Form of Franchising Agreement for Franchised Offices* 10.15 Form of Licensing Agreement for IntellisearchSM* 10.16 Credit Agreement among Bank of America National Trust and Savings Association, Union Bank and RemedyTemp, Inc. as amended* 10.17 Paul W. Mikos Promissory Note* 10.18 Additional Deferred Compensation Agreement for Alan Purdy 11.1 Statement Regarding Computation of Per Share Earnings 27.1 Financial Data Schedule * 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) Reports on Form 8-K No reports on Form 8-K were filed in the fiscal quarter ended December 29, 1996. 9 11 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. February 3, 1997 REMEDYTEMP, INC. /s/ PAUL W. MIKOS Paul W. Mikos, President and Chief Executive Officer /s/ ALAN M. PURDY Senior Vice President and Chief Financial Officer (Principal Financial Officer) 10 12 EXHIBIT INDEX NUMBER EXHIBIT DESCRIPTION - ------- ----------- 3.1 Amended and Restated Articles of Incorporation of the Company* 3.2 Amended and Restated Bylaws of the Company* 4.1 Specimen Stock Certificate* 4.2 Shareholder Rights Agreement* 10.1 Robert B. McDonough, Sr. Amended and Restated Employment Agreement* 10.2 Paul W. Mikos Employment Agreement* 10.3 R. Emmett McDonough Employment Agreement* 10.4 Allocation Agreement with R. Emmett McDonough and Related Trusts* 10.5 Registration Rights Agreement with R. Emmett McDonough and Related Trusts* 10.6 Letter regarding terms of employment and potential severance of Alan M. Purdy* 10.7 Deferred Compensation Agreement for Alan M. Purdy* 10.8 Letter regarding potential severance of Jeffrey A. Elias* 10.9 Form of Indemnification Agreement* 10.10 Lease Agreement between RemedyTemp, Inc. and Robert E. McDonough, Sr.* 10.11 RemedyTemp, Inc. 1996 Stock Incentive Plan* 10.12 RemedyTemp, Inc. 1996 Employee Stock Purchase Plan* 10.13 Form of Franchising Agreement for Licensed Offices* 10.14 Form of Franchising Agreement for Franchised Offices* 10.15 Form of Licensing Agreement for IntellisearchSM* 10.16 Credit Agreement among Bank of America National Trust and Savings Association, Union Bank and RemedyTemp, Inc. as amended* 10.17 Paul W. Mikos Promissory Note* 10.18 Additional Deferred Compensation Agreement for Alan M. Purdy 11.1 Statement Regarding Computation of Per Share Earnings 27.1 Financial Data Schedule * 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. 11 EX-10.18 2 ADDITIONAL DEFERRED COMPENSATION AGREEMENT 1 EXHIBIT 10.18 DEFERRED COMPENSATION AGREEMENT FOR ALAN M. PURDY THIS AGREEMENT is made this 27th day of November, 1996, between RemedyTemp, Inc., a Delaware corporation (the "Corporation"), and Alan M. Purdy, an individual residing in Laguna Beach, California (the "Employee"). In consideration of the mutual promises and obligations set forth herein the parties hereto agree as follows: 1. (a) The Corporation shall credit to a book reserve (the "Deferred Compensation Account"), specifically established for purposes of this Agreement, the Employee's compensation bonus to be earned in fiscal year 1997 (the "Bonus"). The Deferred Compensation Account shall be reflected in the Corporation's books and records in a manner that clearly segregates the amounts deferred under this Agreement from any other amounts credited to book reserves established in connection with other deferred compensation agreements entered into by the Employee and the Corporation or any deferred compensation plans established by the Corporation in which the Employee participates. (b) The full amount of the Bonus, if any, will be credited to the Deferred Compensation Account. In addition, social security, Medicaid and any other required payroll taxes shall be withheld on an annual basis from the amount credited to the Deferred Compensation Account. (c) Any such funds so credited to the Deferred Compensation Account may be kept in cash or invested and reinvested in mutual funds, stocks, bonds, securities, or any other assets as may be selected by the Employer. The Employee may make recommendations as to specific investments which the Employer shall consider. The income, gains, and losses from those investments shall be credited or charged to the Deferred Compensation Account. Any expenses incurred which are attributable to those investments shall be borne by the Deferred Compensation Account. (d) The Employee agrees on behalf of himself and his designated beneficiary to assume all risk in connection with any decrease in value of the funds which are invested or which continue to be invested in accordance with the provisions of this Agreement. (e) Title to and beneficial ownership of any assets which the Corporation may earmark to pay the deferred compensation hereunder, shall at all times remain in the Corporation and the Employee and his designated beneficiary shall not have any property interest whatsoever in any specific assets of the Corporation. 12 2 2. The benefits to be paid as deferred compensation are as follows: (a) If the Employee's employment hereunder is terminated on or after the Employee shall have reached the retirement age of 65 (the "Normal Retirement Age"), the Corporation shall pay to him a retirement benefit, either in the form of 10 annual installments or in the form of a lump sum payment, equal to the balance in the Deferred Compensation Account. The determination as to the form of payment shall be made by the Employee in the year preceding the year in which he reaches normal retirement age in such manner as the Corporation shall direct. In the event the Employee fails to make such a determination, then he shall be deemed to have selected the 10 year installment option. If the installment option is selected, then the total payable to the Employee shall be appropriately increased or decreased, as the case may be, but not more than semi-annually, to reflect the appreciation or depreciation in value and the income, gain or loss on the funds which remain invested in the Deferred Compensation Account. If the Employee should die on or after his 65th birthday and before the 10 annual payments are made, the unpaid balance will continue to be paid in installments for the unexpired portion of such 10 year period to his designated beneficiary in the same manner as set forth above. If both the Employee and his designated beneficiary should die before a total of 10 annual payments are made by the Corporation, then the remaining value of the Deferred Compensation Account shall be determined as of the date of the death of the designated beneficiary and shall be paid as promptly as possible in one lump sum to the estate of such designated beneficiary. (b) If the Employee's employment is terminated on account of the Employee becoming disabled before his Normal Retirement Agent, or if the Employee's employment is terminated on account of the Employee electing to retire prior to reaching Normal Retirement Age, then the balance in the Deferred Compensation Account shall be paid in installments as provided in paragraph 2(a) above and shall commence at the time established by Section 2(f) below. (c) If the Employee's employment hereunder is terminated for any reason other than death or disability but before the Employee shall have reached the Normal Retirement Age, then the amount in the Deferred Compensation Account shall be paid in a lump sum payment within 30 days of such termination of employment. (d) The beneficiary referred to in this paragraph may be designated or changed by the Employee (without the consent of any prior beneficiary) on a form provided by the Corporation and delivered to the Corporation before his death. If no such beneficiary shall have been designated, or if no designated beneficiary shall survive the Employee, the installment payments payable under paragraph 2(a) shall be payable to the Employee's estate. (e) The Employee shall be deemed to have become disabled for purposes of paragraph 2(b) above, if the Corporation shall find on the basis of competent medical evidence satisfactory to the Corporation that the Employee is totally disabled, mentally or physically, so as to be prevented from engaging in further employment by the Corporation and that such disability will be permanent and continuous during the remainder of his life. (f) The installment payment to be made to the Employee under paragraphs 2(a) and (b) above, shall commence on the fifth anniversary of the date of the Employee's termination of employment. The installment payments to be made to the designated beneficiary 13 3 under the provisions of this paragraph 2 shall commence on a date to be selected by the Corporation but within six months from the date of death of the Employee. 3. Nothing contained in this Agreement and no action taken pursuant to the provisions of this Agreement shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Corporation and the Employee, his designated beneficiary or any other person. Any funds which may be invested under the provisions of this Agreement shall continue for all purposes to be a part of the general funds of the Corporation and no person other than the Corporation shall by virtue of the provisions of this Agreement, have any interest in such funds. To the extent that any person acquires a right to receive payments from the Corporation under this Agreement, such right shall be no greater than the right of any unsecured general creditor of the Corporation. 4. The right of the Employee or any other person to the payment of deferred compensation or other benefits under this Agreement shall not be assigned, transferred, pledged or encumbered except by will or by the laws of descent and distribution. 5. If the Corporation shall find that any person to whom any payment is payable under this Agreement is unable to care for his affairs because of illness or accident, or is a minor, any payment due (unless a prior claim therefor shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, a child, a parent, or a brother or sister, or to any person deemed by the Corporation to have incurred expense for such person otherwise entitled to payment, in such manner and proportions as the Corporation may determine. Any such payment shall be a complete discharge of the liabilities of the Corporation under this Agreement. 6. Nothing contained herein shall be construed as conferring upon the Employee the right to continue in the employ of the Corporation. 7. Any deferred compensation payable under this Agreement shall be deemed salary or other compensation to the Employee for the purpose of computing benefits to which he may be entitled under any pension plan or other arrangement of the Corporation which may be adopted by the Corporation for the benefit of its employees. 8. The Corporation shall have full power and authority to interpret, construe and administer this Agreement and the Corporation's interpretations and construction thereof, and actions thereunder, including a determination of the amount of any payment to be made, shall be binding and conclusive on all persons for all purposes. No officer of the Corporation shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Agreement unless attributable to his own willful misconduct or lack of good faith. The Employee hereby agrees to indemnify and hold the Corporation harmless against (i) any and all costs, liabilities or expenses incurred by the Corporation in the administration of this Agreement according to its terms and (ii) any and all costs, liabilities or expenses, including without limitation, attorneys fees and disbursements, arising as a result of any claims made by a designated beneficiary or other third parties against the Corporation for its actions in accordance with this Agreement. Without limitation of any of its other remedies otherwise available under 14 4 law, the Corporation shall be entitled to offset any amounts owed pursuant to the above indemnification against and thereby reduce any amounts otherwise due to Employee or his beneficiaries under this Agreement. 9. This Agreement shall be binding upon and inure to the benefit of the Corporation, its successors and assigns and the employee and his heirs, executors, administrators and legal representatives. 10. This Agreement shall be construed in accordance with and governed by the laws of the State of California. IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed by its duly authorized officer and Employee and his wife have hereunto set their hands as of the date first written above. REMEDYTEMP, INC. /s/ PAUL W. MIKOS ------------------------------------ Paul W. Mikos, President and Chief Executive Officer /s/ ALAN M. PURDY ------------------------------------ Alan M. Purdy /s/ SARAH R. PURDY ----------------------------------- Sarah R. Purdy 15 EX-11.1 3 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11.1 STATEMENT OF COMPUTATION OF PER SHARE EARNINGS (1) (AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE THREE MONTHS MONTHS ENDED ENDED DEC. 29, DEC. 31, 1996 1995 ------ ------ Net income(1) .............................................. $2,557 $1,940 ====== ====== Average shares outstanding ............................... 8,888 6,795 Common equivalent shares ................................. 132 Assumed shares sold to prepay shareholder distribution (2) 890 ------ ------ Weighted average number of common shares ................. 9,020 7,685 ====== ====== Earnings per common and common equivalent share .......... $ .28 $ .25 ====== ======
(1) The computation set forth for the three fiscal months ended December 31, 1995, is based on pro forma net income which reflects the recording by the Company of additional taxes as if the Company were treated as a C corporation for all periods presented. (2) Reflects the estimated number of shares required to be sold by the Company (as calculated based upon the net proceeds of the initial public offering) to pay the pre-offering shareholder distributions of approximately $9,952. The total estimated shares of 890 were assumed to be outstanding for the entire first quarter of fiscal 1996. Subsequent to the initial public offering, the shares were actually outstanding and are therefore included in the "average shares outstanding" calculation above. 16 EX-27 4 FINANCIAL DATA SCHEDULE
5 3-MOS SEP-28-1997 SEP-30-1996 DEC-29-1996 9,070 3,050 42,603 0 0 56,760 5,831 0 64,252 19,961 0 0 0 89 38,744 64,252 0 84,563 0 64,313 16,295 0 0 4,371 1,814 0 0 0 0 2,557 0.28 0
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