##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended July 3, 2005
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ___________ to ___________
 Commission file number 0-5260
 REMEDYTEMP, INC.
 (Exact Name of Registrant as Specified in Its Charter)
 California
(State or Other Jurisdiction of
    
    95-2890471
(I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)101 Enterprise
Aliso Viejo, California
    
    92656(Zip Code)(Address of Principal Executive Offices)
 Registrants Telephone Number, Including Area Code: (949) 425-7600
 
 þ o
 þ o




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RemedyTemp, Inc.
 INDEX
 Page No.PART IFINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets as of July 3, 2005 and October 3, 2004 (unaudited)
    
    
    3Consolidated Statements of Operations for the three and nine fiscal months ended July 3, 2005
and June 27, 2004 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the nine fiscal months ended July 3, 2005
and June 27, 2004 (unaudited)
    
    
    5Condensed Notes to Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    27Item 4. Controls and Procedures
    
    
    27PART IIOTHER INFORMATIONItem 1. Legal Proceedings
    
    
    28Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    *Item 3. Defaults Upon Senior Securities
    
    
    *Item 4. Submission of Matters to a Vote of Security Holders
    
    
    *Item 5. Other Information
    
    
    *Item 6. Exhibits
    
    
    30SIGNATURES
    
    
    32EXHIBIT 10.41EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
  
 *
    
    No information provided due to inapplicability of item. 2




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##### Table of Contents



RemedyTemp, Inc.
 
 PART IFINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
(unaudited)
 July 3,
    
    October 3,2005
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    25,647
    
    
    $
    7,075Investments
    
    
    
    
    
    
    339Restricted investments
    
    
    3,627
    
    
    
    19,161Accounts receivable, net of allowance for doubtful accounts
of $964 and $2,984, respectively
    
    
    53,827
    
    
    
    63,152Prepaid expenses and other current assets
    
    
    9,410
    
    
    
    8,913Prepaid income taxes
    
    
    405
    
    
    
    160Total current assets
    
    
    92,916
    
    
    
    98,800Fixed assets, net
    
    
    10,048
    
    
    
    10,589Restricted cash and investments
    
    
    21,898
    
    
    
    21,925Other assets
    
    
    345
    
    
    
    330Intangible assets, net of accumulated amortization of $1,108 and
$700, respectively
    
    
    1,866
    
    
    
    2,274Goodwill
    
    
    4,578
    
    
    
    3,703Total Assets
    
    $
    131,651
    
    
    $
    137,621LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    688
    
    
    $
    4,225Accrued workers compensation, current portion (Note 9)
    
    
    13,760
    
    
    
    15,036Accrued payroll, benefits and related costs
    
    
    15,077
    
    
    
    17,938Accrued licensees share of gross profit
    
    
    2,244
    
    
    
    2,745Other accrued expenses
    
    
    4,620
    
    
    
    3,899Capital lease obligations, short-term
    
    
    22
    
    
    
    Total current liabilities
    
    
    36,411
    
    
    
    43,843Capital lease obligations, long-term
    
    
    116
    
    
    
    Other liabilities (Note 9)
    
    
    33,310
    
    
    
    30,267Total liabilities
    
    
    69,837
    
    
    
    74,110Commitments and contingent liabilities (Note 4)Shareholders equity:Preferred Stock, $0.01 par value; authorized 5,000
shares; none outstanding
    
    
    
    
    
    
    Class A Common Stock, $0.01 par value; authorized
50,000 shares; 8,801 and 8,778 shares issued and
outstanding at July 3, 2005 and
October 3, 2004, respectively
    
    
    88
    
    
    
    88Class B Non-Voting Common Stock, $0.01 par value;
authorized 4,530 shares; 798 and 800 shares issued and
outstanding at July 3, 2005 and
October 3, 2004, respectively
    
    
    8
    
    
    
    8Additional paid-in capital
    
    
    41,744
    
    
    
    41,522Unearned compensation
    
    
    (2,723
    )
    
    
    (3,737
    )Accumulated other comprehensive loss
    
    
    (152
    )
    
    
    (68
    )Retained earnings
    
    
    22,849
    
    
    
    25,698Total shareholders equity
    
    
    61,814
    
    
    
    63,511Total Liabilities and Shareholders Equity
    
    $
    131,651
    
    
    $
    137,621
  3




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##### Table of Contents



RemedyTemp, Inc.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share amounts)
(unaudited)
 Three Months Ended
    
    Nine Months EndedJuly 3,
    
    June 27,
    
    July 3,
    
    June 27,2005
    
    2004
    
    2005
    
    2004Company-owned office revenues
    
    $
    75,112
    
    
    $
    85,537
    
    
    $
    241,075
    
    
    $
    243,153Licensed franchise revenues
    
    
    46,786
    
    
    
    43,378
    
    
    
    142,815
    
    
    
    126,367Franchise royalties and initial franchise
fees
    
    
    359
    
    
    
    335
    
    
    
    986
    
    
    
    1,126Total revenues
    
    
    122,257
    
    
    
    129,250
    
    
    
    384,876
    
    
    
    370,646Cost of Company-owned office revenues
    
    
    60,269
    
    
    
    70,867
    
    
    
    194,252
    
    
    
    206,014Cost of licensed franchise revenues
    
    
    37,296
    
    
    
    34,605
    
    
    
    114,309
    
    
    
    101,092Licensees share of gross profit
    
    
    6,418
    
    
    
    5,900
    
    
    
    19,277
    
    
    
    17,044Selling and administrative expenses
    
    
    18,937
    
    
    
    18,101
    
    
    
    57,599
    
    
    
    51,087CIGA litigation
    
    
    17
    
    
    
    14
    
    
    
    154
    
    
    
    104Depreciation and amortization
    
    
    1,311
    
    
    
    1,253
    
    
    
    3,865
    
    
    
    4,515Loss from operations
    
    
    (1,991
    )
    
    
    (1,490
    )
    
    
    (4,580
    )
    
    
    (9,210
    )Other income and expense:Interest expense
    
    
    (192
    )
    
    
    (102
    )
    
    
    (498
    )
    
    
    (308
    )Interest income
    
    
    505
    
    
    
    244
    
    
    
    1,037
    
    
    
    781Other, net
    
    
    250
    
    
    
    146
    
    
    
    749
    
    
    
    521Loss before income taxes
    
    
    (1,428
    )
    
    
    (1,202
    )
    
    
    (3,292
    )
    
    
    (8,216
    )Provision for (benefit from) income taxes
    
    
    18
    
    
    
    106
    
    
    
    (443
    )
    
    
    433Net loss
    
    $
    (1,446
    )
    
    $
    (1,308
    )
    
    $
    (2,849
    )
    
    $
    (8,649
    )Loss per share  basic and diluted:Net loss per share  basic and diluted
    
    $
    (0.16
    )
    
    $
    (0.14
    )
    
    $
    (0.32
    )
    
    $
    (0.96
    )Weighted average shares:Basic and diluted
    
    
    9,054
    
    
    
    9,024
    
    
    
    9,034
    
    
    
    9,021
  4




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##### Table of Contents



RemedyTemp, Inc.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
 For the Nine Months EndedJuly 3,
    
    June 27,2005
    
    2004Cash flows from operating activities:Net loss
    
    $
    (2,849
    )
    
    $
    (8,649
    )Adjustments to reconcile net loss to net cash from
operating activities:Depreciation and amortization
    
    
    3,865
    
    
    
    4,515(Recovery of) provision for losses on accounts receivable
    
    
    (81
    )
    
    
    720Stock-based compensation expense
    
    
    1,142
    
    
    
    697Gain on sale of available-for-sale investments
    
    
    (5
    )
    
    
    (57
    )Changes in assets and liabilities:Trading investments
    
    
    (466
    )
    
    
    (469
    )Accounts receivable
    
    
    9,421
    
    
    
    4,898Prepaid expenses and other current assets
    
    
    (757
    )
    
    
    (2,172
    )Other assets
    
    
    (15
    )
    
    
    940Accounts payable
    
    
    (3,537
    )
    
    
    (3,059
    )Accrued workers compensation
    
    
    1,767
    
    
    
    4,245Accrued payroll, benefits and related costs
    
    
    (2,864
    )
    
    
    (1,192
    )Accrued licensees share of gross profit
    
    
    (504
    )
    
    
    (94
    )Other accrued expenses
    
    
    720
    
    
    
    181Prepaid income taxes
    
    
    (245
    )
    
    
    (314
    )Net cash provided by operating activities
    
    
    5,592
    
    
    
    190Cash flows from investing activities:Purchase of fixed assets
    
    
    (2,518
    )
    
    
    (1,320
    )Purchase of available-for-sale investments
    
    
    (8,666
    )
    
    
    (28,023
    )Proceeds from sale of available-for-sale investments
    
    
    10,129
    
    
    
    36,533Net (increase) decrease in restricted cash and investments
    
    
    14,805
    
    
    
    (14,347
    )Acquisition of franchises
    
    
    (875
    )
    
    
    (1,443
    )Net cash provided by (used in) investing activities
    
    
    12,875
    
    
    
    (8,600
    )Cash flows from financing activities:Proceeds from stock option activity
    
    
    
    
    
    
    8Proceeds from Employee Stock Purchase Plan activity
    
    
    94
    
    
    
    113Net cash provided by financing activities
    
    
    94
    
    
    
    121Effect of exchange rate changes in cash
    
    
    11
    
    
    
    (29
    )Net increase (decrease) in cash and cash equivalents
    
    
    18,572
    
    
    
    (8,318
    )Cash and cash equivalents at beginning of period
    
    
    7,075
    
    
    
    13,236Cash and cash equivalents at end of period
    
    $
    25,647
    
    
    $
    4,918Supplemental disclosure of non-cash activities:Purchase of equipment with capital lease
    
    $
    138
    
    
    $
    Issuance of common shares to Non-Employee Director
    
    $
    127
    
    
    $
    Forfeiture of restricted stock
    
    $
    
    
    
    $
    1,345
  5




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##### Table of Contents



RemedyTemp, Inc.
 
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(amounts in thousands, except per share amounts)
(unaudited)
 1. Basis of Presentation
  Fiscal quarter
  Reclassifications
  Use of estimates
  2. Stock-based Incentive Compensation
   6




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##### Table of Contents



RemedyTemp, Inc.
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(amounts in thousands, except per share amounts)
(unaudited)
  For the Three Months Ended
    
    For the Nine Months EndedJuly 3,
    
    June 27,
    
    July 3,
    
    June 27,2005
    
    2004
    
    2005
    
    2004Net loss, as reported
    
    $
    (1,446
    )
    
    $
    (1,308
    )
    
    $
    (2,849
    )
    
    $
    (8,649
    )Add: stock-based compensation
included in net loss
    
    
    429
    
    
    
    177
    
    
    
    1,142
    
    
    
    697Deduct: total stock-based employee
compensation expense determined
under fair value based method
    
    
    (518
    )
    
    
    (298
    )
    
    
    (1,412
    )
    
    
    (1,051
    )Net loss, as adjusted
    
    $
    (1,535
    )
    
    $
    (1,429
    )
    
    $
    (3,119
    )
    
    $
    (9,003
    )Basic and diluted net loss per share:As reported
    
    $
    (0.16
    )
    
    $
    (0.14
    )
    
    $
    (0.32
    )
    
    $
    (0.96
    )As adjusted
    
    $
    (0.17
    )
    
    $
    (0.16
    )
    
    $
    (0.35
    )
    
    $
    (1.00
    )
  For the Three Months Ended
    
    For the Nine Months EndedJuly 3,
    
    June 27,
    
    July 3,
    
    June 27,2005
    
    2004
    
    2005
    
    2004Restricted stock-based compensation expense
    
    $
    340
    
    
    $
    158
    
    
    $
    1,016
    
    
    $
    608Phantom stock-based compensation expense
    
    
    76
    
    
    
    
    
    
    
    76
    
    
    
    Board of Directors stock-based
compensation expense
    
    
    13
    
    
    
    19
    
    
    
    49
    
    
    
    88Other stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Total
    
    $
    429
    
    
    $
    177
    
    
    $
    1,142
    
    
    $
    697
  3. Shareholders Equity
 Additional Paid-in Capital
  July 3, 2005Beginning balance
    
    $
    41,522Issuance of common shares to Non-Employee Director
    
    
    127Activity of Employee Stock Purchase Plan
    
    
    94Other
    
    
    1Ending balance
    
    $
    41,744
 7




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##### Table of Contents



RemedyTemp, Inc.
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(amounts in thousands, except per share amounts)
(unaudited)
 Comprehensive Loss
  Three Fiscal Months Ended
    
    Nine Fiscal Months EndedJuly 3,
    
    June 27,
    
    July 3,
    
    June 27,2005
    
    2004
    
    2005
    
    2004Net loss
    
    $
    (1,446
    )
    
    $
    (1,308
    )
    
    $
    (2,849
    )
    
    $
    (8,649
    )Other comprehensive income (loss):Change in unrealized gain
(loss) on investments
    
    
    89
    
    
    
    (270
    )
    
    
    (99
    )
    
    
    (284
    )Reclassification adjustment for
net realized gain included in
net loss
    
    
    (5
    )
    
    
    (7
    )
    
    
    (5
    )
    
    
    (57
    )Translation adjustments
    
    
    (13
    )
    
    
    (32
    )
    
    
    20
    
    
    
    (33
    )Total comprehensive loss
    
    $
    (1,375
    )
    
    $
    (1,617
    )
    
    $
    (2,933
    )
    
    $
    (9,023
    )
 Accumulated Other Comprehensive Loss
  July 3, 2005
    
    October 3, 2004Accumulated unrealized loss on investments
    
    $
    (219
    )
    
    $
    (115
    )Accumulated translation adjustments
    
    
    67
    
    
    
    47Total accumulated other comprehensive loss
    
    $
    (152
    )
    
    $
    (68
    )
 Registration Statement
  4. Commitments and Contingent Liabilities
  Lindsay Welch-Hess v. Remedy Temporary Services, Inc.
 Lindsay Welch-Hess v.
Remedy Temporary Services, Inc.
  8




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##### Table of Contents



RemedyTemp, Inc.
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(amounts in thousands, except per share amounts)
(unaudited)
  CIGA
     9




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##### Table of Contents



RemedyTemp, Inc.
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(amounts in thousands, except per share amounts)
(unaudited)
  Other Litigation
  Other Contingency
  5. Earnings Per Share
   6. Investments
  10




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##### Table of Contents



RemedyTemp, Inc.
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(amounts in thousands, except per share amounts)
(unaudited)
 July 3, 2005Gross
    
    GrossAdjusted
    
    Unrealized
    
    UnrealizedCost
    
    Gains
    
    Losses
    
    Fair ValueAvailable-for-sale investments:U.S. government securities
    
    $
    20,414
    
    
    $
    3
    
    
    $
    (222
    )
    
    $
    20,195Mutual funds
    
    
    67
    
    
    
    1
    
    
    
    
    
    
    
    68Total available-for-sale investments
    
    $
    20,481
    
    
    $
    4
    
    
    $
    (222
    )
    
    $
    20,263Classified as:Available-for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    20,263Trading (deferred compensation plan)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,627Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,635Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    25,525Reported as:Restricted investments, short-term
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,627Restricted cash and investments, long-term
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,898Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    25,525
 October 3, 2004Gross
    
    GrossAdjusted
    
    Unrealized
    
    UnrealizedCost
    
    Gains
    
    Losses
    
    Fair ValueAvailable-for-sale investments:U.S. government securities
    
    $
    15,472
    
    
    
    
    
    
    $
    (115
    )
    
    $
    15,357Auction rate securities
    
    
    6,400
    
    
    
    
    
    
    
    
    
    
    
    6,400Mutual funds
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    66Total available-for-sale investments
    
    $
    21,938
    
    
    
    
    
    
    $
    (115
    )
    
    $
    21,823Classified as:Available-for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    21,823Trading (deferred compensation plan)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,161Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    441Certificate of deposit (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,000Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    41,425Reported as:Investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    339Restricted investments, short-term
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,161Restricted cash and investments, long-term
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,925Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    41,425
  11




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##### Table of Contents



RemedyTemp, Inc.
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(amounts in thousands, except per share amounts)
(unaudited)
  Three Fiscal Months Ended
    
    Nine Fiscal Months EndedJuly 3,
    
    June 27,
    
    July 3,
    
    June 27,2005
    
    2004
    
    2005
    
    2004Gross realized gains.
    
    $
    5
    
    
    $
    8
    
    
    $
    5
    
    
    $
    63Gross realized losses
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (6
    )Total
    
    $
    5
    
    
    $
    7
    
    
    $
    5
    
    
    $
    57
  Three Fiscal Months Ended
    
    Nine Fiscal Months EndedJuly 3,
    
    June 27,
    
    July 3,
    
    June 27,2005
    
    2004
    
    2005
    
    2004Net holding gains.
    
    $
    56
    
    
    $
    31
    
    
    $
    196
    
    
    $
    236
  Less than 12 Months
    
    Greater than 12 Months
    
    TotalFair
    
    Unrealized
    
    Fair
    
    Unrealized
    
    Fair
    
    UnrealizedValue
    
    Loss
    
    Value
    
    Loss
    
    Value
    
    LossU.S. government securities
    
    $
    3,130
    
    
    $
    (12
    )
    
    $
    16,062
    
    
    $
    (210
    )
    
    $
    19,192
    
    
    $
    (222
    )
  Cost
    
    Fair ValueDue in 1 year or less
    
    $
    4,942
    
    
    $
    4,930Due in 1-2 years
    
    
    9,501
    
    
    
    9,363Due in 2-5 years
    
    
    5,971
    
    
    
    5,902Total
    
    $
    20,414
    
    
    $
    20,195
 7. Goodwill and Intangible Assets
  July 3,
    
    October 3,2005
    
    2004Beginning balance
    
    $
    3,703
    
    
    $
    3,030Goodwill recorded in connection with purchase of franchise operations
    
    
    
    
    
    
    700Goodwill recorded in connection with contingent consideration earned
    
    
    875
    
    
    
    Other adjustments
    
    
    
    
    
    
    (27
    )Ending balance
    
    $
    4,578
    
    
    $
    3,703
 12




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##### Table of Contents



RemedyTemp, Inc.
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(amounts in thousands, except per share amounts)
(unaudited)
  July 3, 2005AccumulatedGross
    
    Amortization
    
    NetFranchise rights
    
    $
    2,090
    
    
    $
    (712
    )
    
    $
    1,378Client relationships
    
    
    470
    
    
    
    (232
    )
    
    
    238Non-competition agreements
    
    
    414
    
    
    
    (164
    )
    
    
    250Total
    
    $
    2,974
    
    
    $
    (1,108
    )
    
    $
    1,866
 October 3, 2004AccumulatedGross
    
    Amortization
    
    NetFranchise rights
    
    $
    2,090
    
    
    $
    (462
    )
    
    $
    1,628Client relationships
    
    
    470
    
    
    
    (131
    )
    
    
    339Non-competition agreements
    
    
    414
    
    
    
    (107
    )
    
    
    307Total
    
    $
    2,974
    
    
    $
    (700
    )
    
    $
    2,274
   Remainder of 2005
    
    $
    1362006
    
    
    5422007
    
    
    4932008
    
    
    3792009
    
    
    2422010
    
    
    74Total
    
    $
    1,866
 8. Capitalized Software Costs
  9. Workers Compensation
  13




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##### Table of Contents



RemedyTemp, Inc.
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(amounts in thousands, except per share amounts)
(unaudited)
    July 3,
    
    October 3,2005
    
    2004CurrentLiability for various state funds
and previous guaranteed cost
policies
    
    $
    2,512
    
    
    $
    2,677Accrued workers compensation
    
    
    11,248
    
    
    
    12,359Accrued workers compensation
    
    $
    13,760
    
    
    $
    15,036Long-termOther liabilities
    
    $
    
    
    
    $
    300Accrued CIGA litigation
    
    
    5,877
    
    
    
    5,877Accrued workers compensation
    
    
    27,433
    
    
    
    24,090Other liabilities
    
    $
    33,310
    
    
    $
    30,267
   14




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##### Table of Contents



RemedyTemp, Inc.
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(amounts in thousands, except per share amounts)
(unaudited)
 10. Capital Lease Obligations
  Remainder of 2005
    
    $
    92006
    
    
    352007
    
    
    352008
    
    
    352009
    
    
    352010
    
    
    27Total minimum lease payments
    
    
    176Amounts representing interest
    
    
    (38
    )Present value of net minimum lease payments
    
    
    138Less: capital lease obligations, short-term portion
    
    
    (22
    )Capital lease obligations, long-term portion
    
    $
    116
 11. Line of Credit
    15




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##### Table of Contents



RemedyTemp, Inc.
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(amounts in thousands, except per share amounts)
(unaudited)
  12. Office Closures
  13. Stock-based Compensation Plans
 Restricted Stock Awards
  Phantom Stock Plan
  16




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##### Table of Contents



RemedyTemp, Inc.
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(amounts in thousands, except per share amounts)
(unaudited)
 14. Income Taxes
  15. New Accounting Standards
    17




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##### Table of Contents



RemedyTemp, Inc.
 
 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, but not limited to, those related to the growth and
strategies, future operating results and financial position as well as economic and market events
and trends of RemedyTemp, Inc., including its wholly-owned subsidiaries, (collectively, the
Company). All forward-looking statements made by the Company, including such statements herein,
include 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, plan, expect, will, future, or similar
words). 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 success of certain cost reduction efforts, the continued performance of the RemX®
specialty division, the Companys ability to realize improvements in the months ahead, changes in
general or local economic conditions that could impact the Companys expected financial results,
the availability of sufficient personnel, various costs relating to temporary workers and
personnel, including but not limited to workers compensation and state unemployment rates, the
Companys ability to expand its sales capacity and channels, to open new points of distribution and
expand in core geographic markets, attract and retain clients and franchisees/licensees, the
outcome of litigation, software integration and implementation, application of deferred tax assets
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. The following should be read in conjunction with the Consolidated Financial Statements of
the Company and Notes thereto.
 Company Overview
  Executive Summary
    18




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##### Table of Contents



RemedyTemp, Inc.
  
    
    Increasing the proportion of revenues from its Company-owned offices;
    
    Increasing the proportion of revenues generated outside of California;
    
    Increasing Company-owned office revenues (Company-owned office revenue or direct
revenue) in its clerical business;
    
    Increasing direct hire revenue (whereby the Company earns a fee for placing an associate
in a permanent position);
    
    Targeting small (retail) to midsize clients;
    
    Increasing the productivity of the Companys expanded sales force (referred to as the
Companys sales productivity goal); and
    
    Growing the niche sectors of the Companys business (financial staffing, information
technology services and office staff services).
 Operations
    July 3, 2005
    
    June 27, 2004Company-owned offices
    
    
    133
    
    
    
    131Licensed franchise offices
    
    
    96
    
    
    
    95Traditional franchise offices
    
    
    11
    
    
    
    9Total offices
    
    
    240
    
    
    
    235
  Traditional Franchise
  Licensed Franchise
  19




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##### Table of Contents



RemedyTemp, Inc.
 Results of Operations (amounts in thousands)
 For the Three and Nine Fiscal Months Ended July 3, 2005 Compared to the Three and Nine Fiscal
Months Ended June 27, 2004
 Revenue
 For the Three Months ended
    
    Favorable (Unfavorable)July 3,
    
    June 27,2005
    
    2004
    
    $ Change
    
    % ChangeCompany-owned office revenues
    
    $
    75,112
    
    
    $
    85,537
    
    
    $
    (10,425
    )
    
    
    (12.2
    %)Licensed franchise revenues
    
    
    46,786
    
    
    
    43,378
    
    
    
    3,408
    
    
    
    7.9
    %Franchise royalties and
initial franchise fees
    
    
    359
    
    
    
    335
    
    
    
    24
    
    
    
    7.2
    %Total revenues
    
    $
    122,257
    
    
    $
    129,250
    
    
    $
    (6,993
    )
    
    
    (5.4
    %)
 For the Nine Months Ended
    
    Favorable (Unfavorable)July 3,
    
    June 27,2005
    
    2004
    
    $ Change
    
    % ChangeCompany-owned office revenues
    
    $
    241,075
    
    
    $
    243,153
    
    
    $
    (2,078
    )
    
    
    (0.9
    %)Licensed franchise revenues
    
    
    142,815
    
    
    
    126,367
    
    
    
    16,448
    
    
    
    13.0
    %Franchise royalties and
initial franchise fees
    
    
    986
    
    
    
    1,126
    
    
    
    (140
    )
    
    
    (12.4
    %)Total revenues
    
    $
    384,876
    
    
    $
    370,646
    
    
    $
    14,230
    
    
    
    3.8
    %
 
    
    Company-owned revenue decreased 12.2% for the three fiscal months ended July 3, 2005 as
compared to the three fiscal months ended June 27, 2004. The decrease is primarily
attributable to a $12,344 decrease in light industrial revenue and a $1,846 decrease in
clerical revenue offset by the Companys RemX® specialty staffing division which generated
a $3,510 increase in revenue to $11,425 for the three fiscal months ended July 3, 2005 as
compared to the same period in the prior year. The $12,344 decrease in light industrial
primarily reflected the impact of executing that part of the Companys strategy that calls
for pruning unprofitable and risky accounts. Additionally, approximately $500 is
attributable to the sale of two Company-owned offices. Of the $1,846 decrease in clerical
revenue, approximately $600 is attributable to the sale of two Company-owned offices.
    
    Company-owned revenue decreased 0.9% for the nine fiscal months ended July 3, 2005 as
compared to the nine fiscal months ended June 27, 2004. The decrease is primarily
attributable to a $16,285 decrease in light industrial revenue and a $1,218 decrease in
clerical offset by the Companys RemX® specialty staffing division which generated a
$14,804 increase in revenue to $33,648 for the nine fiscal months ended July 3, 2005 as
compared to the same period in the prior year. Of the $16,285 decrease in light
industrial, approximately $1,200 is attributable to the sale of a Company-owned office to a
licensee. Of the $1,218 decrease in clerical revenue, approximately $1,200 is attributable
to the sale of a Company-owned office to a licensee.
    
    The 7.9% increase in the licensed franchise revenue for the three fiscal months ended
July 3, 2005 is due to the addition of several new customers and increased revenue from
existing customers, offset by the loss of three significant customers.
    
    The 13.0% increase in the licensed franchise revenue for the nine fiscal months ended
July 3, 2005 is due to the addition of several new customers and increased revenue from
existing customers, offset by the loss of nine significant customers.
    
    Company-owned revenues accounted for 61.4% of total revenues for the three fiscal months
ended July 3, 2005 as compared to 66.2% for the three fiscal months ended June 27, 2004.
 20




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##### Table of Contents



RemedyTemp, Inc.
 
  For the Three Months Ended
    
    For the Nine Months EndedJuly 3,
    
    June 27,
    
    July 3,
    
    June 27,2005
    
    2004
    
    2005
    
    2004Light Industrial
    
    
    63.4
    %
    
    
    67.3
    %
    
    
    63.9
    %
    
    
    67.6
    %Clerical
    
    
    27.0
    %
    
    
    26.3
    %
    
    
    27.1
    %
    
    
    26.9
    %RemX®
    
    
    9.3
    %
    
    
    6.1
    %
    
    
    8.7
    %
    
    
    5.1
    %Other
    
    
    0.3
    %
    
    
    0.3
    %
    
    
    0.3
    %
    
    
    0.4
    %
 
    
    The decrease in light industrial revenues as a percentage of total revenue during the
three and nine fiscal months ended July 3, 2005 is primarily due to the impact of executing
that part of the Companys strategy that calls for pruning unprofitable and risky accounts.
    
    The increase in revenues generated from the RemX® division is consistent with the
Companys long-term strategic plan to shift its overall business mix to higher margin
services. The increase in RemX® revenues is primarily attributable the maturation of the
RemX® division and growth in information technology service revenues and direct-hire
revenues.
 Cost of Revenues
 For the Three Months Ended
    
    Favorable (Unfavorable)July 3,
    
    June 27,2005
    
    2004
    
    $ Change
    
    % ChangeCost of Company-owned office
revenues
    
    $
    60,269
    
    
    $
    70,867
    
    
    $
    10,598
    
    
    
    15.0
    %Cost of licensed franchise revenues
    
    
    37,296
    
    
    
    34,605
    
    
    
    (2,691
    )
    
    
    (7.8
    %)Total cost of revenues
    
    $
    97,565
    
    
    $
    105,472
    
    
    $
    7,907
    
    
    
    7.5
    %
 For the Nine Months Ended
    
    Favorable (Unfavorable)July 3,
    
    June 27,2005
    
    2004
    
    $ Change
    
    % ChangeCost of Company-owned office
revenues
    
    $
    194,252
    
    
    $
    206,014
    
    
    $
    11,762
    
    
    
    5.7
    %Cost of licensed franchise revenues
    
    
    114,309
    
    
    
    101,092
    
    
    
    (13,217
    )
    
    
    (13.1
    %)Total cost of revenues
    
    $
    308,561
    
    
    $
    307,106
    
    
    $
    (1,455
    )
    
    
    (0.5
    %)
 
    
    Total cost of Company-owned and licensed franchise revenues consists of wages and other
expenses related to temporary associates and as a percentage of revenues was 79.8% and
81.6% for the three fiscal months ended July 3, 2005 and June 27, 2004, respectively.
Overall consolidated gross margin improved to 20.2% for the three fiscal months ended July
3, 2005 as compared to 18.4% for the three fiscal months ended June 27, 2004. The 1.8
percentage point increase in margin is primarily attributable to the Companys success in
its efforts to increase direct hire revenues and markup (defined as the bill rate/wage
rate). A $1,571 increase in direct hire revenues, whereby the Company earns a fee for
placing an associate in a permanent position, contributed 1.1 percentage points to the
improved margins. Direct hire revenue as a percentage of total revenue increased to 2.8%
for the three fiscal months ended July 3, 2005, as compared to 1.5% for the three fiscal
months ended June 27, 2004. Markup contributed 0.8 percentage points to the increase.
Reflecting changed strategies in the type of assignments we accept we experienced a
decrease in workers compensation expense and other burden, which contributed 0.7
percentage points to the improved margins and were offset by a 0.8 percentage point
increase related to a charge of $983 in connection with the potential settlement of
payroll-related tax matters.
    
    Total cost of Company-owned and licensed franchise revenues consists of wages and other
expenses related to temporary associates and as a percentage of revenues was 80.2% and
82.9% for the nine fiscal months ended July 3, 2005 and June 27, 2004, respectively.
Overall consolidated gross margin improved to 19.8% for the nine fiscal months ended July
3, 2005 as compared to 17.1% for the nine fiscal months ended June 27, 2004. The 2.7
percentage point increase in margin is primarily attributable to the Companys success in
its efforts to increase direct hire revenues and markup (defined as the bill rate/wage
rate). A $4,407 increase in direct hire revenues, whereby the Company earns a fee for
placing an associate in a permanent position, contributed 0.9 percentage points to the
improved margins. Direct hire revenue as a percentage of total revenue increased to 2.3%
for the nine fiscal months ended July 3, 2005, as compared to 1.3% for the nine fiscal
months ended June 27, 2004. Markup contributed 1.3 percentage points to the increase.
Reflecting changed strategies in the type of assignments we accept we experienced a
decrease in workers compensation expense and other burden which,
contributed 0.9 percentage points to the improved margins and were offset by a 0.4
percentage point increase related to a charge of $983 in connection with the potential
settlement of payroll-related tax matters.
 21




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##### Table of Contents



RemedyTemp, Inc.
 
    
    Company-owned office gross margin was 19.8% for the three fiscal months ended July 3,
2005 as compared to 17.2% for the same period in the prior year. The 2.6 percentage point
increase in Company-owned office gross margin is primarily attributable to an increase in
direct hire revenues and markup. An increase in direct hire business contributed 1.9
percentage points to the overall 2.6 percentage point increase. Markup contributed 1.2
percentage points of the improved margins while a decrease in workers compensation expense
and other burden offset by an increase in state unemployment costs decreased margins by 0.5
percentage points. The decrease in workers compensation expense was partially offset by a
charge of $983 in connection with the potential settlement of payroll-related tax matters.
The Company believes that the increase in state unemployment insurance costs will continue
for the remainder of fiscal 2005, both within and outside of California.
 Operating Expenses
 For the Three Months Ended
    
    Favorable (Unfavorable)July 3,
    
    June 27,2005
    
    2004
    
    $ Change
    
    % ChangeLicensees share of gross profit
    
    $
    6,418
    
    
    $
    5,900
    
    
    $
    (518
    )
    
    
    (8.8
    %)Selling and administrative
expenses
    
    
    18,937
    
    
    
    18,101
    
    
    
    (836
    )
    
    
    (4.6
    %)CIGA litigation
    
    
    17
    
    
    
    14
    
    
    
    (3
    )
    
    
    (21.4
    %)Depreciation and amortization
    
    
    1,311
    
    
    
    1,253
    
    
    
    (58
    )
    
    
    (4.6
    %)Total operating expenses
    
    $
    26,683
    
    
    $
    25,268
    
    
    $
    (1,415
    )
    
    
    (5.6
    %)
 For the Nine Months Ended
    
    Favorable (Unfavorable)July 3,
    
    June 27,2005
    
    2004
    
    $ Change
    
    % ChangeLicensees share of gross profit
    
    $
    19,277
    
    
    $
    17,044
    
    
    $
    (2,233
    )
    
    
    (13.1
    %)Selling and administrative
expenses
    
    
    57,599
    
    
    
    51,087
    
    
    
    (6,512
    )
    
    
    (12.7
    %)CIGA litigation
    
    
    154
    
    
    
    104
    
    
    
    (50
    )
    
    
    (48.1
    %)Depreciation and amortization
    
    
    3,865
    
    
    
    4,515
    
    
    
    650
    
    
    
    14.4
    %Total operating expenses
    
    $
    80,895
    
    
    $
    72,750
    
    
    $
    (8,145
    )
    
    
    (11.2
    %)
 
    
    Licensees share of gross profit represents the net payments to licensed franchisees
based upon a percentage of gross profit generated by the licensed franchise operation. The
increase in licensees share of gross profit is consistent with the increase in licensed
franchise revenues and cost of licensed franchise revenues. Licensees share of gross
profit as a percentage of licensed gross profit increased to 67.6% for the three fiscal
months ended July 3, 2005 as compared to 67.2% for the three fiscal months ended June 27,
2004. Licensees share of gross profit as a percentage of licensed gross profit increased
to 67.6% for the nine fiscal months ended July 3, 2005 as compared to 67.4% for the nine
fiscal months ended June 27, 2004.
    
    The following table summarizes the significant changes in selling and administrative
expenses for the three fiscal months ended July 3, 2005 as compared to the three fiscal
months ended June 27, 2004:
 Consolidated
    
    RemX®
    
    OtherChange
    
    Change
    
    Offices*Colleague salary and related taxes
    
    $
    (596
    )
    
    $
    (318
    )
    
    $
    (278
    )Profit sharing
    
    
    (526
    )
    
    
    (341
    )
    
    
    (185
    )Colleague travel and business conferences
    
    
    (30
    )
    
    
    (7
    )
    
    
    (23
    )Workers comp
    
    
    9
    
    
    
    2
    
    
    
    7Group insurance
    
    
    276
    
    
    
    
    
    
    
    276Rent
    
    
    (115
    )
    
    
    (66
    )
    
    
    (49
    )Telephone and Data lines
    
    
    (92
    )
    
    
    (23
    )
    
    
    (69
    )Audit Fees
    
    
    (119
    )
    
    
    (10
    )
    
    
    (109
    )Legal Fees
    
    
    24
    
    
    
    
    
    
    
    24Outside Services
    
    
    64
    
    
    
    (6
    )
    
    
    70Bad Debt
    
    
    232
    
    
    
    
    
    
    
    232Direct Admin
    
    
    
    
    
    
    (197
    )
    
    
    197Other Selling & Administrative
    
    
    38
    
    
    
    (53
    )
    
    
    91Net (increase) decrease
    
    $
    (835
    )
    
    $
    (1,019
    )
    
    $
    184
 
 *
    
    Other Offices category includes the corporate office 22




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##### Table of Contents



RemedyTemp, Inc.
  Consolidated
    
    RemX®
    
    OtherChange
    
    Change
    
    Offices*Colleague salary and related taxes
    
    $
    (3,737
    )
    
    $
    (1,832
    )
    
    $
    (1,905
    )Profit sharing
    
    
    (1,750
    )
    
    
    (974
    )
    
    
    (776
    )Colleague travel and business conferences
    
    
    (440
    )
    
    
    (83
    )
    
    
    (357
    )Workers comp
    
    
    45
    
    
    
    (17
    )
    
    
    62Group insurance
    
    
    143
    
    
    
    (65
    )
    
    
    208Rent
    
    
    (341
    )
    
    
    (243
    )
    
    
    (98
    )Telephone and Data lines
    
    
    (407
    )
    
    
    (108
    )
    
    
    (299
    )Audit Fees
    
    
    (334
    )
    
    
    (10
    )
    
    
    (324
    )Legal Fees
    
    
    (137
    )
    
    
    
    
    
    
    (137
    )Outside Services
    
    
    (246
    )
    
    
    (20
    )
    
    
    (226
    )Bad Debt
    
    
    800
    
    
    
    
    
    
    
    800Direct Admin
    
    
    
    
    
    
    (382
    )
    
    
    382Royalty payments
    
    
    175
    
    
    
    
    
    
    
    175Other Selling & Administrative
    
    
    (283
    )
    
    
    (134
    )
    
    
    (149
    )Net (increase) decrease
    
    $
    (6,512
    )
    
    $
    (3,868
    )
    
    $
    (2,644
    )
 
 *
    
    Other Offices category includes the corporate office 
    
    Selling and administrative expenses as a percentage of total revenues were 15.5% for the
three fiscal months ended July 3, 2005 as compared to 14.0% for the three fiscal months
ended June 27, 2004. The primary factor contributing to the net increase was a $1,122
increase in colleague salaries and profit sharing due to the Companys sales capacity goal
and the expansion of the RemX® specialty staffing division.
    
    Selling and administrative expenses as a percentage of total revenues were 15.0% for the
nine fiscal months ended July 3, 2005 as compared to 13.8% for the nine fiscal months ended
June 27, 2004. The primary factor contributing to the net increase was a $5,487 increase
in colleague salaries and profit sharing due to the Companys sales capacity goal and the
expansion of the RemX® specialty staffing division.
    
    The decrease in depreciation and amortization for the nine fiscal months ended July 3,
2005 as compared to the nine fiscal months ended June 27, 2004 is due to an increase in
fully depreciated fixed assets at July 3, 2005 as compared to June 27, 2004. The decrease
in depreciation and amortization was partially offset by the incremental amortization
expense from identifiable intangible assets resulting from the franchise acquisition during
the second quarter of fiscal 2004.
  23




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##### Table of Contents



RemedyTemp, Inc.
   Liquidity and Capital Resources (amounts in thousands)
   July 3,
    
    October 3,2005
    
    2004Cash and cash equivalents
    
    $
    25,647
    
    
    $
    7,075Investments
    
    
    
    
    
    
    339Collateralized certificate of deposit related to bank agreement
    
    
    
    
    
    
    16,000Deferred compensation investments
    
    
    3,627
    
    
    
    3,161Total restricted investments
    
    
    3,627
    
    
    
    19,161Total cash and investments  current
    
    
    29,274
    
    
    
    26,575Total restricted cash and investments  long-term
    
    
    21,898
    
    
    
    21,925Total cash and investments
    
    $
    51,172
    
    
    $
    48,500Letters of credit
    
    $
    36,538
    
    
    $
    34,661
 24




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##### Table of Contents



RemedyTemp, Inc.
  For the Nine Months EndedJuly 3,
    
    June 27,2005
    
    2004Cash provided by (used in):Operating activities
    
    $
    5,592
    
    
    $
    190Investing activities
    
    
    12,875
    
    
    
    (8,600
    )Financing activities
    
    
    94
    
    
    
    121Effect of exchange rate on cash
    
    
    11
    
    
    
    (29
    )Net increase (decrease) in cash and cash
equivalents
    
    
    18,572
    
    
    
    (8,318
    )Cash and cash equivalents at beginning of period
    
    
    7,075
    
    
    
    13,236Cash and cash equivalents at end of period
    
    $
    25,647
    
    
    $
    4,918
 
    
    Cash flows from operating activities, compared to the preceding period, were primarily
impacted by a $5,800 decrease in net loss, the timing of receivables collections, the
timing of payroll disbursements (including incentive compensation payments), as well as the
timing of vendor payments. 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 30-45 days after the related billing.
    
    During the nine fiscal months ended July 3, 2005, cash provided in investing activities
was primarily related to the proceeds received from the maturity of a $16,000 certificate
of deposit. Cash used for purchases of fixed assets, including information systems
development costs, was $2,518 for the nine fiscal months ended July 3, 2005 and $1,320 for
the nine fiscal months ended June 27, 2004. During the nine fiscal months ended June 27,
2004, cash used in investing activities was primarily related to the Companys investment
portfolio, which includes highly rated debt securities with various maturity dates through
fiscal 2007. The Company continues to invest in computer-based technologies and direct
office openings.
    
    During the nine fiscal months ended July 3, 2005 and June 27, 2004, cash provided by
financing activities was primarily a result of shares of the Companys Class A Common Stock
issued through the Employee Stock Purchase Plan.
     25




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##### Table of Contents



RemedyTemp, Inc.
      Off-Balance Sheet Arrangements
  Contractual Obligations
  Critical Accounting Policies and Estimates
  Seasonality
  26




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##### Table of Contents



RemedyTemp, Inc.
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  27




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##### Table of Contents



RemedyTemp, Inc.
 
 PART IIOTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Lindsay Welch-Hess v. Remedy Temporary Services, Inc.
 Lindsay Welch-Hess v.
Remedy Temporary Services, Inc.
   CIGA
    28




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##### Table of Contents



RemedyTemp, Inc.
   Other Litigation
  Other Contingency
  29




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##### Table of Contents



RemedyTemp, Inc.
 
 ITEM 6. EXHIBITS
  Exhibit No.
    
    Description3.1
    
    Amended and Restated Articles of Incorporation of the Company (a)3.2
    
    Amended and Restated Bylaws of the Company (e)4.1
    
    Specimen Stock Certificate (a)4.2
    
    Shareholder Rights Agreement (a)10.1
    
    *Robert E. McDonough, Sr. Amended and Restated Employment Agreement (f)10.2
    
    *Paul W. Mikos Employment Agreement, as amended (g)10.3
    
    *Robert E. McDonough, Sr. Amendment No. 1 to Amended and Restated Employment Agreement (i)10.7
    
    *Deferred Compensation Agreement for Alan M. Purdy (a)10.9
    
    Form of Indemnification Agreement entered into by RemedyTemp, Inc. and each of its
directors and certain executive officers (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 (h)10.13
    
    Form of Franchising Agreement for Licensed Offices (k)10.14
    
    Form of Franchising Agreement for Franchised Offices (a)10.15
    
    Form of Licensing Agreement for IntelliSearch® (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 (m)10.24
    
    *1998 RemedyTemp, Inc. Amended and Restated Deferred Compensation and Stock
Ownership Plan for Outside Directors (r)10.25
    
    Form of Licensing Agreement for i/Search 2000®(e)10.27
    
    *Paul W. Mikos Severance Agreement and General Release (j)10.28
    
    *Gunnar B. Gooding Employment and Severance Letter (l)10.29
    
    *Cosmas N. Lykos Employment and Severance Letter (l)10.30
    
    *Alan M. Purdy Retirement Agreement and General Release (n)10.31
    
    *Monty Houdeshell Employment Letter (o)10.34
    
    Amendment No. 2 to the Lease Agreement between RemedyTemp, Inc. and Parker 
Summit, LLC (q)10.36
    
    Business Loan Agreement between Bank of America N.A. and RemedyTemp, Inc. (s)10.37
    
    A mended and Restated Credit Agreement between Bank of America, N.A. and Remedy
Temp, Inc. (t)10.38
    
    *Robert E. McDonough, Sr. Amendment No. 2 to Amended and Restated Employment Agreement (u)10.39
    
    *Short-term Incentive Bonus Plan (v)10.40
    
    *Amended Agreement with Janet Hawkins (w)
 30




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##### Table of Contents



RemedyTemp, Inc.
 Exhibit No.
    
    Description10.41
    
    *Deferred Compensation Plan for Greg Palmer10.42
    
    *Form of Change in Control Severance Agreement entered into by RemedyTemp, Inc.
and certain executive officers (x)10.43
    
    *Amendment to Amended and Restated Employment Agreement for Greg Palmer (y)31.1
    
    Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
    
    Chief Executive Officer and Chief Financial Officer Certifications Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Indicates a management contract or a compensatory plan, contract or arrangement. (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 Annual Report
on Form 10-K for the yearly period ended September 28, 1997.
 (e)
    
    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.
 (f)
    
    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.
 (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 June 27, 1999 (original agreement) and
for the quarterly period ended December 31, 2000 (amendment).
 (h)
    
    Incorporated by reference to the exhibit of same number to the Registrants Annual Report
on Form 10-K for the yearly period ended March 28, 1999.
 (i)
    
    Incorporated by reference to exhibit number 10.1 to the Registrants Quarterly Report on
Form 10-Q for the quarterly period ended December 31, 2000.
 (j)
    
    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.
 (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 July 1, 2001.
 (l)
    
    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.
 (m)
    
    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.
 (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 June 30, 2002.
 (o)
    
    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 29, 2002.
 (p)
    
    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, 2003.
 (q)
    
    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 28, 2003.
 (r)
    
    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, 2004.
 (s)
    
    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, 2004.
 (t)
    
    Incorporated by reference to the exhibit of same number to Registrants Current Report on
Form 8-K filed on December 3, 2004.
 (u)
    
    Incorporated by reference to the exhibit of same number to Registrants Quarterly Report
on Form 10-Q for the quarterly period ended January 2, 2005.
 (v)
    
    Incorporated by reference to Item 1.01 of the Registrants Current Report on Form 8-K
filed on February 1, 2005.
 (w)
    
    Incorporated by reference to Item 10.1 of the Registrants Current Report on Form 8-K
filed on May 9, 2005.
 (x)
    
    Incorporated by reference to Exhibit 10.1 to Registrants Current Report on Form 8-K filed
on April 22, 2005.
 (y)
    
    Incorporated by reference to Exhibit 10.2 to Registrants Current Report on Form 8-K filed
on April 22, 2005.
 31




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##### Table of Contents



RemedyTemp, Inc.
 
 
 SIGNATURES
  REMEDYTEMP, INC.August 9, 2005
    
    
    
    /s/ GREG D. PALMERGreg D. Palmer, President and ChiefExecutive OfficerAugust 9, 2005
    
    
    
    /s/ MONTY A. HOUDESHELLMonty A. Houdeshell, Senior VicePresident, Chief Administrative Officer andCorporate Secretary(Principal Financial Officer)August 9, 2005
    
    
    
    /s/ JOHN D. SWANCOATJohn D. Swancoat, Vice President and Controller(Principal Accounting Officer)
 32




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##### Table of Contents



RemedyTemp, Inc.
 EXHIBIT
INDEX
 Exhibit No.
    
    Description3.1
    
    Amended and Restated Articles of Incorporation of the Company (a)3.2
    
    Amended and Restated Bylaws of the Company (e)4.1
    
    Specimen Stock Certificate (a)4.2
    
    Shareholder Rights Agreement (a)10.1
    
    *Robert E. McDonough, Sr. Amended and Restated Employment Agreement (f)10.2
    
    *Paul W. Mikos Employment Agreement, as amended (g)10.3
    
    *Robert E. McDonough, Sr. Amendment No. 1 to Amended and Restated Employment Agreement (i)10.7
    
    *Deferred Compensation Agreement for Alan M. Purdy (a)10.9
    
    Form of Indemnification Agreement entered into by RemedyTemp, Inc. and each of its
directors and certain executive officers (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 (h)10.13
    
    Form of Franchising Agreement for Licensed Offices (k)10.14
    
    Form of Franchising Agreement for Franchised Offices (a)10.15
    
    Form of Licensing Agreement for IntelliSearch® (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 (m)10.24
    
    *1998 RemedyTemp, Inc. Amended and Restated Deferred Compensation and Stock
Ownership Plan for Outside Directors (r)10.25
    
    Form of Licensing Agreement for i/Search 2000®(e)10.27
    
    *Paul W. Mikos Severance Agreement and General Release (j)10.28
    
    *Gunnar B. Gooding Employment and Severance Letter (l)10.29
    
    *Cosmas N. Lykos Employment and Severance Letter (l)10.30
    
    *Alan M. Purdy Retirement Agreement and General Release (n)10.31
    
    *Monty Houdeshell Employment Letter (o)10.34
    
    Amendment No. 2 to the Lease Agreement between RemedyTemp, Inc. and Parker -
Summit, LLC (q)10.36
    
    Business Loan Agreement between Bank of America N.A. and RemedyTemp, Inc. (s)10.37
    
    Amended and Restated Credit Agreement between Bank of America, N.A. and Remedy
Temp, Inc. (t)10.38
    
    *Robert E. McDonough, Sr. Amendment No. 2 to Amended and Restated Employment Agreement (u)10.39
    
    *Short-term Incentive Bonus Plan (v)10.40
    
    *Amended Agreement with Janet Hawkins (w)




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##### Table of Contents



RemedyTemp, Inc.
 Exhibit No.
    
    Description10.41
    
    *Deferred Compensation Plan for Greg Palmer10.42
    
    *Form of Change in Control Severance Agreement entered into by RemedyTemp, Inc.
and certain executive officers (x)10.43
    
    *Amendment to Amended and Restated Employment Agreement for Greg Palmer (y)31.1
    
    Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
    
    Chief Executive Officer and Chief Financial Officer Certifications Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Indicates a management contract or a compensatory plan, contract or arrangement. (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 Annual Report
on Form 10-K for the yearly period ended September 28, 1997.
 (e)
    
    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.
 (f)
    
    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.
 (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 June 27, 1999 (original agreement) and
for the quarterly period ended December 31, 2000 (amendment).
 (h)
    
    Incorporated by reference to the exhibit of same number to the Registrants Annual Report
on Form 10-K for the yearly period ended March 28, 1999.
 (i)
    
    Incorporated by reference to exhibit number 10.1 to the Registrants Quarterly Report on
Form 10-Q for the quarterly period ended December 31, 2000.
 (j)
    
    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.
 (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 July 1, 2001.
 (l)
    
    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.
 (m)
    
    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.
 (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 June 30, 2002.
 (o)
    
    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 29, 2002.
 (p)
    
    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, 2003.
 (q)
    
    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 28, 2003.
 (r)
    
    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, 2004.
 (s)
    
    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, 2004.
 (t)
    
    Incorporated by reference to the exhibit of same number to Registrants Current Report on
Form 8-K filed on December 3, 2004.
 (u)
    
    Incorporated by reference to the exhibit of same number to Registrants Quarterly Report
on Form 10-Q for the quarterly period ended January 2, 2005.
 (v)
    
    Incorporated by reference to Item 1.01 of the Registrants Current Report on Form 8-K
filed on February 1, 2005.
 (w)
    
    Incorporated by reference to Item 10.1 of the Registrants Current Report on Form 8-K
filed on May 9, 2005.
 (x)
    
    Incorporated by reference to Exhibit 10.1 to Registrants Current Report on Form 8-K filed
on April 22, 2005.
 (y)
    
    Incorporated by reference to Exhibit 10.2 to Registrants Current Report on Form 8-K filed
on April 22, 2005.