<PAGE> 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.
================================================================================
<PAGE> 2
REMEDYTEMP, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
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
</TABLE>
* No information provided due to inapplicability of item.
1
<PAGE> 3
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REMEDYTEMP, INC.
BALANCE SHEET
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DEC. 29, SEPT. 29,
1996 1996
------- -------
(UNAUDITED)
<S> <C> <C>
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
======= =======
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 4
REMEDYTEMP, INC.
STATEMENT OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
DEC. 29, DEC. 31,
1996 1995
-------- --------
(UNAUDITED)
<S> <C> <C>
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
========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 5
REMEDYTEMP, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK ADDITIONAL
-------------------- ------------------ PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
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
======== ======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 6
REMEDYTEMP, INC.
STATEMENT OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
DEC. 29, DEC. 31,
1996 1995
-------- --------
(UNAUDITED)
<S> <C> <C>
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
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 1
EXHIBIT 11.1
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS (1)
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE THREE
MONTHS MONTHS
ENDED ENDED
DEC. 29, DEC. 31,
1996 1995
------ ------
<S> <C> <C>
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
====== ======
</TABLE>
(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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-28-1997
<PERIOD-START> SEP-30-1996
<PERIOD-END> DEC-29-1996
<CASH> 9,070
<SECURITIES> 3,050
<RECEIVABLES> 42,603
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 56,760
<PP&E> 5,831
<DEPRECIATION> 0
<TOTAL-ASSETS> 64,252
<CURRENT-LIABILITIES> 19,961
<BONDS> 0
0
0
<COMMON> 89
<OTHER-SE> 38,744
<TOTAL-LIABILITY-AND-EQUITY> 64,252
<SALES> 0
<TOTAL-REVENUES> 84,563
<CGS> 0
<TOTAL-COSTS> 64,313
<OTHER-EXPENSES> 16,295
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,371
<INCOME-TAX> 1,814
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,557
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0
</TABLE>
