##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM
10 - Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended January 1, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 0-5260
 REMEDYTEMP, INC.
 (Exact Name of Registrant as Specified in Its Charter)
 California
(State or Other Jurisdiction of
Incorporation or Organization)
    
    95-2890471
(I.R.S. Employer
Identification No.)101 Enterprise
Aliso Viejo, California
(Address of Principal Executive Offices)
    
    92656
(Zip Code)
 Registrants Telephone Number, Including Area Code: (949) 425-7600
 
 þ o
  o þ o
 o þ




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##### 



RemedyTemp, Inc.
  
 INDEX
 Page No.PART IFINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)Consolidated Balance Sheets as of January 1, 2006 and October 2, 2005
    
    
    3Consolidated Statements of Operations for the three fiscal months ended January 1, 2006
and January 2, 2005
    
    
    4Consolidated Statements of Cash Flows for the three fiscal months ended January 1, 2006
and January 2, 2005
    
    
    5Condensed Notes to Consolidated Financial Statements
    
    
    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 1A. Risk Factors
    
    
    *Item 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
    
    
    34EXHIBIT 10.47EXHIBIT 10.48EXHIBIT 10.49EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
  *
 2




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##### Table of Contents



RemedyTemp, Inc.
 
 PART IFINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except per share amounts)
(unaudited)
 January 1, 2006
    
    
    October 2, 2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    20,485
    
    
    $
    24,954Investments (Note 3)
    
    
    937
    
    
    
    692Restricted investments (Note 3)
    
    
    4,042
    
    
    
    3,771Accounts receivable, net of allowance for doubtful accounts of $1,152 and
$905, respectively
    
    
    62,128
    
    
    
    60,787Prepaid expenses and other current assets
    
    
    7,400
    
    
    
    7,406Prepaid workers compensation insurance
    
    
    1,202
    
    
    
    2,396Total current assets
    
    
    96,194
    
    
    
    100,006Fixed assets, net
    
    
    9,632
    
    
    
    9,696Restricted cash and investments (Note 3)
    
    
    21,889
    
    
    
    21,889Other assets
    
    
    240
    
    
    
    279Intangible assets, net of accumulated amortization of $1,380 and $1,244,
respectively
    
    
    1,604
    
    
    
    1,730Goodwill (Note 4)
    
    
    4,483
    
    
    
    4,483Total Assets
    
    $
    134,042
    
    
    $
    138,083LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,410
    
    
    $
    1,275Accrued workers compensation, current portion (Note 5)
    
    
    12,112
    
    
    
    14,526Accrued payroll, benefits and related costs
    
    
    13,014
    
    
    
    17,979Accrued licensees share of gross profit
    
    
    2,194
    
    
    
    2,630Other accrued expenses
    
    
    7,672
    
    
    
    7,834Total current liabilities
    
    
    36,402
    
    
    
    44,244Other liabilities (Note 5)
    
    
    33,657
    
    
    
    32,300Total liabilities
    
    
    70,059
    
    
    
    76,544Commitments and contingent liabilities (Note 7)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; 8,923
and 8,813 shares issued and outstanding at January 1, 2006 and October
2, 2005, respectively
    
    
    89
    
    
    
    88Class B Non-Voting Common Stock, $0.01 par value; authorized 4,530 shares;
798 shares issued and outstanding at January 1, 2006 and October 2, 2005
    
    
    8
    
    
    
    8Additional paid-in capital
    
    
    39,805
    
    
    
    41,824Unearned compensation
    
    
    
    
    
    
    (2,382
    )Accumulated other comprehensive loss
    
    
    (166
    )
    
    
    (129
    )Retained earnings
    
    
    24,247
    
    
    
    22,130Total shareholders equity
    
    
    63,983
    
    
    
    61,539Total Liabilities and Shareholders Equity
    
    $
    134,042
    
    
    $
    138,083
  3




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##### Table of Contents



RemedyTemp, Inc.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share amounts)
(unaudited)
 Three Months EndedJanuary 1, 2006
    
    
    January 2, 2005Company-owned office revenues
    
    $
    82,463
    
    
    $
    88,628Licensed franchise revenues
    
    
    51,148
    
    
    
    48,406Franchise royalties and initial franchise
fees
    
    
    385
    
    
    
    322Total revenues
    
    
    133,996
    
    
    
    137,356Cost of Company-owned office revenues
(exclusive of depreciation and amortization
shown below)
    
    
    64,162
    
    
    
    71,821Cost of licensed franchise revenues
(exclusive of depreciation and amortization
shown below)
    
    
    40,744
    
    
    
    38,744Licensees share of gross profit
    
    
    7,078
    
    
    
    6,468Selling and administrative expenses
    
    
    18,295
    
    
    
    19,348CIGA litigation
    
    
    129
    
    
    
    98Depreciation and amortization
    
    
    1,206
    
    
    
    1,364Income (loss) from operations
    
    
    2,382
    
    
    
    (487
    )Other income (expense):Interest expense
    
    
    (187
    )
    
    
    (128
    )Interest income
    
    
    336
    
    
    
    259Other, net
    
    
    370
    
    
    
    371Income before income taxes
    
    
    2,901
    
    
    
    15Provision for income taxes
    
    
    784
    
    
    
    37Net income (loss)
    
    $
    2,117
    
    
    $
    (22
    )Net income (loss) per share  basic
    
    $
    0.23
    
    
    $
    (0.00
    )Net income (loss) per share  diluted
    
    $
    0.23
    
    
    $
    (0.00
    )Weighted average shares  basic
    
    
    9,066
    
    
    
    9,033Weighted average shares  diluted
    
    
    9,393
    
    
    
    9,033
  4




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##### Table of Contents



RemedyTemp, Inc.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
 Three Months EndedJanuary 1, 2006
    
    
    January 2, 2005Cash flows from operating activities:Net income (loss)
    
    $
    2,117
    
    
    $
    (22
    )Adjustments to reconcile net income (loss) to net
cash from operating activities:Depreciation and amortization
    
    
    1,206
    
    
    
    1,364Provision for losses on accounts receivable
    
    
    305
    
    
    
    188Stock-based compensation expense
    
    
    383
    
    
    
    357Changes in assets and liabilities:Trading investments
    
    
    (271
    )
    
    
    (344
    )Accounts receivable
    
    
    (1,646
    )
    
    
    1,860Prepaid expenses and other current assets
    
    
    1,314
    
    
    
    1,151Prepaid income taxes
    
    
    
    
    
    
    74Other assets
    
    
    39
    
    
    
    60Accounts payable
    
    
    135
    
    
    
    (2,836
    )Accrued workers compensation
    
    
    (1,057
    )
    
    
    1,955Accrued payroll, benefits and related costs
    
    
    (4,965
    )
    
    
    (4,953
    )Accrued licensees share of gross profit
    
    
    (436
    )
    
    
    (589
    )Other accrued expenses
    
    
    (170
    )
    
    
    (707
    )Other
    
    
    (11
    )
    
    
    1Net cash used in operating activities
    
    
    (3,057
    )
    
    
    (2,441
    )Cash flows from investing activities:Purchase of fixed assets
    
    
    (1,121
    )
    
    
    (716
    )Purchase of available-for-sale investments
    
    
    (245
    )
    
    
    Proceeds from maturity of available-for-sale investments
    
    
    
    
    
    
    2,000Restricted cash and investments
    
    
    
    
    
    
    (1,781
    )Purchase of intangible assets
    
    
    (10
    )
    
    
    Net cash used in investing activities
    
    
    (1,376
    )
    
    
    (497
    )Effect of exchange rate changes in cash
    
    
    (36
    )
    
    
    22Net decrease in cash and cash equivalents
    
    
    (4,469
    )
    
    
    (2,916
    )Cash and cash equivalents at beginning of period
    
    
    24,954
    
    
    
    7,075Cash and cash equivalents at end of period
    
    $
    20,485
    
    
    $
    4,159
  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. Description of business and summary of significant accounting policies
 Description of business
   Basis of presentation
  Fiscal quarters
  Use of estimates in the preparation of consolidated financial statements
  Reclassifications
  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)
  2. Accounting for stock-based compensation
 Share-Based Payment, Accounting for Stock Issued to
Employees
  For the ThreeMonths EndedJanuary 2, 2005Net loss, as reported
    
    $
    (22
    )Deduct: total stock-based compensation expense determined under
    fair value method
    
    
    (444
    )Net loss, as adjusted
    
    $
    (466
    )Basic and diluted net loss per share:As reported
    
    $
    (0.00
    )As adjusted
    
    $
    (0.05
    )  Three Months EndedJanuary 1,
    
    
    January 2,2006
    
    
    2005Restricted stock-based compensation expense
    
    $
    354
    
    
    $
    338Board of Directors stock-based compensation expense
    
    
    19
    
    
    
    19Options stock-based compensation expense
    
    
    10
    
    
    
    Total
    
    $
    383
    
    
    $
    357
   3. Investments
 Accounting for
Certain Investments in Debt and Equity Securities
 January 1, 2006GrossAdjusted
    
    
    UnrealizedCost
    
    
    Losses
    
    
    Fair ValueAvailable-for-sale investments:U.S. government securities
    
    $
    22,655
    
    
    $
    (302
    )
    
    $
    22,353Mutual funds
    
    
    68
    
    
    
    
    
    
    
    68Total available-for-sale investments
    
    $
    22,723
    
    
    $
    (302
    )
    
    $
    22,421Classified as:Available-for-sale
    
    
    
    
    
    
    
    
    
    $
    22,421Trading (deferred compensation plan)
    
    
    
    
    
    
    
    
    
    
    4,042Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    405Total
    
    
    
    
    
    
    
    
    
    $
    26,868
 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)
 January 1, 2006Fair ValueReported as:Investments
    
    
    
    
    
    
    
    
    
    $
    937Restricted investments, short-term (deferred compensation plan)
    
    
    
    
    
    
    
    
    
    
    4,042Restricted cash and investments, long-term
    
    
    
    
    
    
    
    
    
    
    21,889Total
    
    
    
    
    
    
    
    
    
    $
    26,868
 October 2, 2005GrossAdjusted
    
    
    UnrealizedCost
    
    
    Losses
    
    
    Fair ValueAvailable-for-sale investments:U.S. government securities
    
    $
    22,409
    
    
    $
    (301
    )
    
    $
    22,108Mutual funds
    
    
    68
    
    
    
    
    
    
    
    68Total available-for-sale investments
    
    $
    22,477
    
    
    $
    (301
    )
    
    $
    22,176Classified as:Available-for-sale
    
    
    
    
    
    
    
    
    
    $
    22,176Trading (deferred compensation plan)
    
    
    
    
    
    
    
    
    
    
    3,771Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    405Total
    
    
    
    
    
    
    
    
    
    $
    26,352Reported as:Investments
    
    
    
    
    
    
    
    
    
    $
    692Restricted investments, short-term (deferred compensation plan)
    
    
    
    
    
    
    
    
    
    
    3,771Restricted cash and investments, long-term
    
    
    
    
    
    
    
    
    
    
    21,889Total
    
    
    
    
    
    
    
    
    
    $
    26,352
   Three Months EndedJanuary 1,
    
    January 2,2006
    
    2005Net holding gains
    
    $
    83
    
    
    $
    190
  Less than 12 Months
    
    Greater than 12 Months
    
    TotalFair
    
    Unrealized
    
    Fair
    
    Unrealized
    
    Fair
    
    UnrealizedValue
    
    Loss
    
    Value
    
    Loss
    
    Value
    
    LossU.S. government securities
    
    $
    7,913
    
    
    $
    (54
    )
    
    $
    14,440
    
    
    $
    (248
    )
    
    $
    22,353
    
    
    $
    (302
    )
  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)
  January 1, 2006Cost Basis
    
    
    Fair ValueDue within one year
    
    $
    7,968
    
    
    $
    7,913Due after one year through 3 years
    
    
    14,755
    
    
    
    14,508Total
    
    $
    22,723
    
    
    $
    22,421
 October 2, 2005Cost Basis
    
    
    Fair ValueDue within one year
    
    $
    7,968
    
    
    $
    7,892Due after one year through 3 years
    
    
    14,509
    
    
    
    14,284Total
    
    $
    22,477
    
    
    $
    22,176
 4. Goodwill and other intangible assets
 Goodwill and Intangible Assets
  January 1,
    
    
    October 2,2006
    
    
    2005Beginning balance
    
    $
    4,483
    
    
    $
    3,703Goodwill recorded in connection with contingent consideration earned
    
    
    
    
    
    
    875Impairment charges
    
    
    
    
    
    
    (95
    )Ending balance
    
    $
    4,483
    
    
    $
    4,483
  5. Workers Compensation
   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)
   January 1,
    
    
    October 2,2006
    
    
    2005CurrentLiability for various state funds and previous guaranteed cost policies
    
    $
    2,177
    
    
    $
    2,552Accrued workers compensation
    
    
    9,935
    
    
    
    11,974Accrued workers compensation
    
    $
    12,112
    
    
    $
    14,526Long-termOther liabilities
    
    $
    117
    
    
    $
    116Accrued CIGA litigation
    
    
    5,877
    
    
    
    5,877Accrued workers compensation
    
    
    27,663
    
    
    
    26,307Other liabilities
    
    $
    33,657
    
    
    $
    32,300
   6. Shareholders Equity
 Earnings per share calculation
 Earnings Per Share.
 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)
    Three Months EndedJanuary 1,
    
    
    January 2,2006
    
    
    2005Numerator:Net income (loss)
    
    $
    2,117
    
    
    $
    (22
    )Denominator:Weighted-average number of shares, basic
    
    
    9,066
    
    
    
    9,033Effect of dilutive securities
    
    
    327
    
    
    
    Weighted-average number of shares  assuming dilution
    
    
    9,393
    
    
    
    9,033Net income (loss) per share  basic
    
    $
    0.23
    
    
    $
    (0.00
    )Net income (loss) per share  diluted
    
    $
    0.23
    
    
    $
    (0.00
    )
 Accumulated other comprehensive loss
  Three Months EndedJanuary 1,
    
    
    October 2,2006
    
    
    2005Accumulated unrealized loss on investments
    
    $
    (302
    )
    
    $
    (301
    )Accumulated translation adjustments
    
    
    136
    
    
    
    172Total accumulated other comprehensive loss
    
    $
    (166
    )
    
    $
    (129
    )
 Phantom Stock Plan
 ® ® ®
 Stock Incentive Plan
  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)
   Options OutsideIncentive Plan Options
    
    
    Stock Purchase Plan
    
    
    Incentive PlanWeighted-Average
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    Weighted-AverageShares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceOutstanding
October 2, 2005
    
    
    670.5
    
    
    $
    14.47
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Granted
    
    
    2.5
    
    
    $
    7.61
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Cancelled
    
    
    (1.2
    )
    
    $
    12.54
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Exercised
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Outstanding January
1, 2006
    
    
    671.8
    
    
    $
    14.44
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
  Weighted Avg.Shares
    
    
    PriceJanuary 1, 2006
    
    
    661.8
    
    
    $
    14.52October 2, 2005
    
    
    660.1
    
    
    $
    14.53
  Options Outstanding
    
    Options ExercisableWeighted-AverageShares
    
    Remaining Life
    
    Weighted-Average
    
    Shares
    
    Weighted-AverageExercise Price
    
    Outstanding
    
    (in years)
    
    Price
    
    Exercisable
    
    Price$7.00 - $10.00
    
    
    77.0
    
    
    
    9.3
    
    
    $
    9.21
    
    
    
    67.0
    
    
    $
    9.21$10.01 - $13.00
    
    
    226.0
    
    
    
    4.3
    
    
    $
    12.13
    
    
    
    226.0
    
    
    $
    12.13$13.01 - $16.00
    
    
    234.6
    
    
    
    4.5
    
    
    $
    14.74
    
    
    
    234.6
    
    
    $
    14.74$16.01 - $20.00
    
    
    55.0
    
    
    
    3.6
    
    
    $
    17.58
    
    
    
    55.0
    
    
    $
    17.58$20.01 - $25.00
    
    
    69.2
    
    
    
    2.4
    
    
    $
    22.64
    
    
    
    69.2
    
    
    $
    22.64$25.01 - $30.00
    
    
    10.0
    
    
    
    2.2
    
    
    $
    26.19
    
    
    
    10.0
    
    
    $
    26.19
   January 1,
    
    October 2,Assumptions
    
    2006
    
    2005Dividend Yield
    
    
    0.0
    %
    
    
    0.0
    %Risk-Free Interest
    
    
    4.75
    %
    
    
    4.04
    %Volatility
    
    
    44.85
    %
    
    
    46.0
    %Expected Life (Years)
    
    
    5.9
    
    
    
    5.6Weighted Average Per Share
    
    
    $3.85
    
    
    
    $4.84
 Restricted stock awards
  7. Commitments and contingent liabilities
 Litigation
 Lindsay Welch-Hess v. Remedy Temporary Services, Inc.
    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)
      CIGA
    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)
   Other litigation
  Other contingency
  8. Line of credit
  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)
    9. Income taxes
  10. Business segment and geographic information
  ®
  Specialty
    
    
    Commercial
    
    
    TotalThree months ended January 1, 2006Service revenues
    
    $
    23,117
    
    
    $
    107,050
    
    
    $
    130,167Direct-hire and other revenues
    
    
    2,466
    
    
    
    1,363
    
    
    
    3,829Total revenues
    
    $
    25,583
    
    
    $
    108,413
    
    
    $
    133,996Segment income from operations
    
    $
    876
    
    
    $
    8,659
    
    
    $
    9,535Three months ended January 2, 2005Service revenues
    
    $
    24,081
    
    
    $
    110,299
    
    
    $
    134,380Direct-hire and other revenues
    
    
    2,141
    
    
    
    835
    
    
    
    2,976Total revenues
    
    $
    26,222
    
    
    $
    111,134
    
    
    $
    137,356Segment income from operations
    
    $
    130
    
    
    $
    7,075
    
    
    $
    7,205
 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)
  January 1, 2006
    
    
    January 2, 2005Total income from operations for reportable segments
    
    $
    9,535
    
    
    $
    7,205Unallocated amounts:Corporate and other expenses
    
    
    6,196
    
    
    
    6,627Depreciation and amortization
    
    
    957
    
    
    
    1,065Other income (expense):Interest expense
    
    
    (187
    )
    
    
    (128
    )Interest income
    
    
    336
    
    
    
    259Other, net
    
    
    370
    
    
    
    371Income
before income taxes
    
    $
    2,901
    
    
    $
    15
 January 1, 2006
    
    
    October 2, 2005AssetsTotal assets for reportable segments
    
    $
    75,840
    
    
    $
    71,724Assets held at Corporate
    
    
    52,115
    
    
    
    60,146Total assets
    
    $
    127,955
    
    
    $
    131,870
   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)
 11.
New accounting pronouncements
 Exchanges of Nonmonetary Assets  An Amendment
of APB Opinion No. 29, Accounting for Nonmonetary Transactions Accounting for Nonmonetary
Transactions,
 Accounting Changes and
Error Corrections Accounting Changes Reporting Accounting Changes in Interim Financial
Statements
 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 and other
statements contained elsewhere in this Quarterly Report on Form 10-Q include 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, or future). Accordingly,
the Companys actual results may differ materially from those expressed or implied in any such
forward-looking statements as a result of various factors, including, without limitation, the
success of certain cost reduction efforts, the continued performance of the RemX ® specialty business unit, 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 below and elsewhere herein and 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 therein filed on
Form 10-K on December 16, 2005.
 (Unless otherwise noted, all dollar amounts are in thousands)
 Company Overview
   Traditional Franchise
  Licensed Franchise
  18




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##### Table of Contents



RemedyTemp, Inc.
  Executive Summary
   Highlights
  
    
    Total revenues, while having decreased 2.4%, showed improved traction with cost of
revenues being favorable by 5.1%.
    
    Sequentially, total revenues grew 3.6% over the fourth quarter of fiscal year 2005.
    
    RemX®achieved $13,365 in total revenues for the first quarter of fiscal year 2006, the
highest quarterly revenues in this business units history.
    
    Direct-hire revenues continued growth into the first quarter of fiscal year 2006,
recording the second highest in the Companys history, with
sequential growth of 1.9% and
growth of 29.9% over the first quarter of fiscal year 2005.
    
    Selling and administrative expenses decreased to 13.7% of revenues for the three months
ended January 1, 2006, compared to 14.1% for the three months ended January 2, 2005.
    
    Earnings before income taxes for the three months ended January 1, 2006 were $2,901, a
significant improvement over the $15 for the three months ended January 2, 2005 and an
increase of over 300% from the $715 in the fourth quarter of fiscal year 2005.
 19




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##### Table of Contents



RemedyTemp, Inc.
 
    
    We believe that the quality of accounts receivable, the Companys primary operating
asset, continues to be consistent, with days sales outstanding (DSO) at 46.4 and 44.7
days and an allowance for doubtful accounts as a percentage of gross accounts receivable of
1.8% and 2.7% at January 1, 2006 and January 2, 2005, respectively.
 Critical Accounting Policies and Estimates
   Revenue Recognition
 Reporting Revenue Gross
as a Principal versus Net as an Agent
 Accounts Receivable
 Workers Compensation Costs
 20




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##### Table of Contents



RemedyTemp, Inc.
  Goodwill and Other Intangible Assets Goodwill and Other Intangible Assets
 Other Long-Lived Assets Accounting for the Impairment or Disposal of Long-Lived Assets
 Income Taxes
   Contingencies and Litigation 
 21




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##### Table of Contents



RemedyTemp, Inc.
 Results of Operations
 For the Three Fiscal Months Ended January 1, 2006 Compared to the Three Fiscal Months Ended January
2, 2005
 For the Three Months Ended
    
    
    % of Respective RevenuesJanuary 1, 2006
    
    
    January 2, 2005
    
    
    January 1, 2006
    
    

January 2, 2005Company-owned office revenues
    
    $
    82,463
    
    
    $
    88,628Licensed franchise revenues
    
    
    51,148
    
    
    
    48,406Franchise royalties and initial franchise fees
    
    
    385
    
    
    
    322Total revenues
    
    
    133,996
    
    
    
    137,356Cost of Company-owned office revenues
(exclusive of depreciation and amortization
shown below)
    
    
    64,162
    
    
    
    71,821
    
    
    
    77.8%
    
    
    
    81.0%Cost of licensed franchise revenues
(exclusive of depreciation and amortization
shown below)
    
    
    40,744
    
    
    
    38,744
    
    
    
    79.1%
    
    
    
    79.5%Licensees share of gross profit
    
    
    7,078
    
    
    
    6,468Selling and administrative expenses
    
    
    18,295
    
    
    
    19,348CIGA litigation
    
    
    129
    
    
    
    98Depreciation and amortization
    
    
    1,206
    
    
    
    1,364Income (loss) from operations
    
    $
    2,382
    
    
    $
    (487
    )
 Revenue
 For the Three Months Ended
    
    
    Favorable (Unfavorable)January 1, 2006
    
    
    January 2, 2005
    
    
    $ Change
    
    
    % ChangeCompany-owned office revenues
    
    $
    82,463
    
    
    $
    88,628
    
    
    $
    (6,165
    )
    
    
    (7.0
    %)Licensed franchise revenues
    
    
    51,148
    
    
    
    48,406
    
    
    
    2,742
    
    
    
    5.7
    %Franchise royalties and initial
franchise fees
    
    
    385
    
    
    
    322
    
    
    
    63
    
    
    
    19.6
    %Total revenues
    
    $
    133,996
    
    
    $
    137,356
    
    
    $
    (3,360
    )
    
    
    (2.4
    %)
 
    
    The mix between Company-owned, licensed franchise and franchise royalty revenues shifted
with Company-owned revenues accounting for 61.5% of total revenues for the three months
ended January 1, 2006, compared to 64.5% for the three months ended January 2, 2005.
    
    Company-owned revenues decreased 7.0% for the three months ended January 1, 2006,
compared to the three months ended January 2, 2005. The decrease is primarily attributable
to the residual effect of decisions taken during fiscal year 2005 to eliminate certain
higher risk and lower margin business, principally in California, that did not meet the
Companys strategic directives. Somewhat offsetting this was the Companys RemX® specialty
staffing division, which generated a $2,503 increase in revenues to $13,365 for the three
months ended January 1, 2006, compared to the same period in the prior year. The $2,742 or
5.7% increase in the licensed franchise revenues is due to the addition of several new
customers and increased revenues from existing customers.
    
    For the three months ended January 1, 2006, direct-hire revenues accounted for 2.5% of
total revenues, up from 1.9% for the same period in the prior year.
    
    Revenues generated in California decreased to 38.2% of total revenues for the three
months ended January 1, 2006, compared to 43.4% for the three months ended January 2, 2005.
  For the Three Months Ended
    
    % of Total RevenuesJanuary 1,
    
    
    
    
    
    January 2,
    
    January 1,
    
    January 2,2006
    
    
    
    
    
    2005
    
    2006
    
    2005Commercial
    
    $
    108,413
    
    
    
    
    
    
    $
    111,134
    
    
    
    80.9
    %
    
    
    80.9
    %Specialty
    
    
    25,583
    
    
    
    
    
    
    
    26,222
    
    
    
    19.1
    %
    
    
    19.1
    %
 
    
    The 2.4% decrease in Commercial revenues reflects the impact of selectively reducing
higher risk and lower margin business within the Company-owned light industrial business
unit of the segment during mid and late fiscal year 2005. Somewhat offsetting this
decrease are increases noted above in the licensed franchise business unit and a near
doubling of direct-hire revenues.
    
    For the quarter ended January 1, 2006, the 2.4% decrease in revenues from the Specialty
segment is due to the impact of closing underperforming offices in mid and late fiscal year
2005 in preparation for organizing the start up of the Talent Magnet business unit, net of
23% growth from the RemX® business unit over the same period in the prior year.
Direct-hire revenues from Talent Magnet grew by 58% for the three months ended January 1,
2006, compared to the same period in the prior year.
 Cost
of Revenues (exclusive of depreciation and amortization)
 For the Three Months Ended
    
    
    Favorable (Unfavorable)January 1,
    
    
    January 2,2006
    
    
    2005
    
    
    $ Change
    
    
    % ChangeCost of Company-owned office revenues
    
    $
    64,162
    
    
    $
    71,821
    
    
    $
    7,659
    
    
    
    10.7
    %Cost of licensed franchise revenues
    
    
    40,744
    
    
    
    38,744
    
    
    
    (2,000
    )
    
    
    (5.2
    %)Total cost of revenues
    
    $
    104,906
    
    
    $
    110,565
    
    
    $
    5,659
    
    
    
    5.1
    %
 22




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##### Table of Contents



RemedyTemp, Inc.
 
    
    Total cost of Company-owned and licensed franchise revenues consists of payroll wages
and other expenses related to temporary associates and as a percentage of revenues was
78.3% and 80.5% for the three months ended January 1, 2006 and January 2, 2005,
respectively. The 2.2 percentage point improvement is the result of a 0.2 percentage point
increase due to pricing and mix efforts; a 1.5 percentage point increase attributable to
the Companys decrease in workers compensation expense; and a 0.5 percentage point
increase as a result of an $800 increase in direct-hire revenues, whereby the Company earns
a fee for placing an associate in a direct-hire position. Direct-hire revenues as a
percentage of total revenues increased 2.5% for the three months ended January 1, 2006,
compared to 1.9% for the three months ended January 2, 2005.
    
    Company-owned cost of revenues was 77.8% for the three months ended January 1, 2006,
compared to 81.0% for the same period in the prior year. The 3.2 percentage point decrease
in Company-owned office cost of revenues is primarily attributable to a decrease in workers
compensation expense, which contributed 2.2 percentage points. Within the decreased
workers compensation expense, was an adjustment of 1.2 percentage points or $900 as a
result of favorable claim frequency and severity trends confirmed in the most recent
actuarial reports, in particular within the state of California. Additionally, improved
pricing and mix contributed 0.3 percentage points; lower burden contributed 0.2 percentage
points of the increase and direct-hire business contributed 0.5 percentage points.
    
    The increase in cost of licensed franchise revenues is consistent with the 5.7% increase
in licensed franchise revenues.
 Operating Expenses
 For the Three Months Ended
    
    
    Favorable (Unfavorable)January 1,
    
    
    January 2,2006
    
    
    2005
    
    
    $ Change
    
    
    % ChangeLicensees share of gross profit
    
    $
    7,078
    
    
    $
    6,468
    
    
    $
    (610
    )
    
    
    (9.4
    %)Selling and administrative expenses
    
    
    18,295
    
    
    
    19,348
    
    
    
    1,053
    
    
    
    5.4
    %CIGA litigation
    
    
    129
    
    
    
    98
    
    
    
    (31
    )
    
    
    (31.6
    %)Depreciation and amortization
    
    
    1,206
    
    
    
    1,364
    
    
    
    158
    
    
    
    11.6
    %Total operating expenses
    
    $
    26,708
    
    
    $
    27,278
    
    
    $
    570
    
    
    
    2.1
    %
 
    
    Licensees share of gross profit represents the net payments to licensed franchisees
based upon a percentage of profit or revenues generated by the licensed franchise operation after deducting certain operating expenses. The
increase in licensees share of gross profit is consistent with the increase in licensed
franchise revenues and cost of licensed franchise revenues.
Licensees
 23




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##### Table of Contents



RemedyTemp, Inc.
 share of gross profit as a percentage of licensed gross profit increased to 68.0% for the
three months ended January 1, 2006, compared to 66.9% for the three months ended January 2,
2005.
    
    The following table summarizes the significant changes in selling and administrative
expenses for the three months ended January 1, 2006, compared to the three months ended
January 2, 2005:
 Favorable (Unfavorable)ConsolidatedChange
    
    
    Specialty
    
    
    Commercial
    
    
    Other*Colleague salary & related taxes
    
    $
    937
    
    
    $
    357
    
    
    $
    305
    
    
    $
    275Profit sharing
    
    
    (291
    )
    
    
    (455
    )
    
    
    74
    
    
    
    90Colleague travel and business conferences
    
    
    150
    
    
    
    85
    
    
    
    42
    
    
    
    23Supplies and
postage
    
    
    51
    
    
    
    24
    
    
    
    17
    
    
    
    10Rent
    
    
    74
    
    
    
    17
    
    
    
    60
    
    
    
    (3
    )Professional fees
    
    
    91
    
    
    
    1
    
    
    
    
    
    
    
    90Legal fees
    
    
    135
    
    
    
    (8
    )
    
    
    1
    
    
    
    142Bad debt
    
    
    (118
    )
    
    
    
    
    
    
    
    
    
    
    (118
    )Testing fees
    
    
    (52
    )
    
    
    (4
    )
    
    
    (48
    )
    
    
    Other selling & administrative
    
    
    76
    
    
    
    112
    
    
    
    11
    
    
    
    (47
    )Total change in selling & administrative.
    
    $
    1,053
    
    
    $
    129
    
    
    $
    462
    
    
    $
    462
 
 *
    
    Other Offices category includes the corporate office. 
    
    Selling and administrative expenses as a percentage of total revenues were 13.7% for the
three months ended January 1, 2006, compared to 14.1% for the three months ended January 2,
2005. The primary factor contributing to the net decrease was colleague salary and related
taxes, which improved $937 due primarily to a reduction in headcount.
    
    Profit sharing increased $291 due mainly to the increase in direct-hire revenues and
improved overall results.
    
    The $158 decrease in depreciation and amortization for the three months ended January 1,
2006, compared to the three months ended January 2, 2005, is due to an increase in fully
depreciated fixed assets at January 1, 2006, compared to January 2, 2005.
 Operating Income
   For the Three Months EndedJanuary 1,
    
    January 2,2006
    
    2005Commercial
    
    
    8.0
    %
    
    
    6.4
    %Specialty
    
    
    3.4
    %
    
    
    0.5
    %
 
    
    The Commercial segment operating margins improved within both the light industrial and licensed
franchise business units for the three months ended January 1, 2006, compared with the same
period in the prior year. The main drivers to the improvement were lower workers
compensation costs and the favorable impact of increased direct-hire revenues within both
business units.
    
    The Specialty segment showed further operating margin improvement for the first three months ended
January 1, 2006, compared with the same period prior year. This percentage improvement was
attributable to both the Talent Magnet business units improved results on lower
temporary staffing volume and the impact of increased direct-hire
volume as well as the
RemX®
business units continued growth.
   Liquidity and Capital Resources
  24




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##### Table of Contents



RemedyTemp, Inc.
   January 1, 2006
    
    
    October 2, 2005Cash and cash equivalents
    
    $
    20,485
    
    
    $
    24,954Investments
    
    
    937
    
    
    
    692Deferred compensation investments
    
    
    4,042
    
    
    
    3,771Total cash and investments  current
    
    
    25,464
    
    
    
    29,417Total restricted cash and investments  long-term
    
    
    21,889
    
    
    
    21,889Total cash and investments
    
    $
    47,353
    
    
    $
    51,306Letters of credit
    
    $
    36,538
    
    
    $
    36,538
  For the Three Months EndedJanuary 1, 2006
    
    
    January 2, 2005Cash used in:Operating activities
    
    $
    (3,057
    )
    
    $
    (2,441
    )Investing activities
    
    
    (1,376
    )
    
    
    (497
    )Financing activities
    
    
    
    
    
    
    Effect of exchange rate on cash
    
    
    (36
    )
    
    
    22Net decrease in cash and cash equivalents
    
    
    (4,469
    )
    
    
    (2,916
    )Cash and cash equivalents at beginning of period
    
    
    24,954
    
    
    
    7,075Cash and cash equivalents at end of period
    
    $
    20,485
    
    
    $
    4,159
 
    
    Cash flows from operating activities, compared to the preceding year, were primarily
impacted by 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 to 45 days after the
related billing.
    
    Cash used in investing activities was $1,376 and $497 for the three months ended January
1, 2006 and January 2, 2005, respectively. During the first quarter of fiscal year 2006,
cash used in investing activities was primarily related to capital expenditures, which
consisted of cash used for purchases of fixed assets, including information systems
development costs. Net cash outflows related to available-for-sale investments were $245
for the three months ended January 1, 2006, compared to $0 of cash outflows in the three
months ended January 2, 2005. The Company continues to invest in computer-based
technologies and anticipates approximately $2,000 in related capital expenditures for the
remaining nine months of fiscal 2006.
    
    There was no cash used in or provided by financing activities for the first quarter of
fiscal years 2006 and 2005.
   25




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RemedyTemp, Inc.
          26




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##### Table of Contents



RemedyTemp, Inc.
 Off-Balance Sheet Arrangements
  Contractual Obligations
  Critical Accounting Policies and Estimates
  Seasonality
  
 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.
        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
  ExhibitNo.
    
    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 (effective as of January 1,
2005)(cc)10.12
    
    *Amended and Restated RemedyTemp, Inc. 1996 Employee Stock Purchase Plan (effective as of
September 26, 2005)(z)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 (effective as of January 1, 2005)(cc)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 (effective as of January 1, 2005)(cc)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)
 30




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##### Table of Contents



RemedyTemp, Inc.
 ExhibitNo.
    
    Description10.37
    
    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 for Fiscal 2005(v)10.40
    
    *Amended Agreement with Janet Hawkins(w)10.41
    
    *Deferred Compensation Plan for Greg Palmer(cc)10.42
    
    *Form of Change in Control Severance Agreement(x)10.43
    
    *Amendment to Amended and Restated Employment Agreement for Greg Palmer(y)10.44
    
    *Short-Term Incentive Bonus Plan for Fiscal 2006(aa)10.45
    
    *Form of Lock-Up Agreement with certain executive officers(bb)10.46
    
    Summary of Compensation Arrangements for Named Executive Officers and Directors(cc)10.47
    
    Form of Franchising Agreement for Licensed Offices (effective January 1, 2006)10.48
    
    Form of Early Renewal Addendum for Existing Licensees (effective January 1, 2006)10.49
    
    Form of Software License Agreement for Licensees (effective January 1, 2006)31.1
    
    Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Chief Administrative Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
of 200232
    
    Chief Executive Officer and Chief Administrative 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. 31




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##### Table of Contents



RemedyTemp, Inc.
 (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.(z)
    
    Incorporated by reference to Exhibit 10.2 to Registrants Current Report on
Form 8-K filed on September 27, 2005.(aa)
    
    Incorporated by reference to Item 1.01 of the Registrants Current Report on
Form 8-K filed on September 23, 2005.(bb)
    
    Incorporated by reference to Exhibit 10.1 of the Registrants Current Report on
Form 8-K filed on September 27, 2005. 32




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##### Table of Contents



RemedyTemp, Inc.
 (cc)
    
    Incorporated by reference to the exhibit of same number to the Registrants
Annual Report on Form 10-K for the yearly period ended October 2, 2005. 33




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##### Table of Contents



RemedyTemp, Inc.
 
 SIGNATURES
  REMEDYTEMP, INC.February 10, 2006
    
    /s/ GREG D. PALMERGreg D. Palmer, President and ChiefExecutive OfficerFebruary 10, 2006
    
    /s/ MONTY A. HOUDESHELLMonty A. Houdeshell, Senior VicePresident Chief Administrative Officer andCorporate Secretary(Principal Financial Officer)February 10, 2006
    
    /s/ JOHN D. SWANCOATJohn D. Swancoat, Vice President and Controller(Principal Accounting Officer)
 34




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##### Table of Contents



Exhibit Index
 ExhibitNo.
    
    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 (effective as of January 1,
2005)(cc)10.12
    
    *Amended and Restated RemedyTemp, Inc. 1996 Employee Stock Purchase Plan (effective as of
September 26, 2005)(z)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 (effective as of January 1, 2005)(cc)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 (effective as of January 1, 2005)(cc)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)




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##### Table of Contents



ExhibitNo.
    
    Description10.37
    
    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 for Fiscal 2005(v)10.40
    
    *Amended Agreement with Janet Hawkins(w)10.41
    
    *Deferred Compensation Plan for Greg Palmer(cc)10.42
    
    *Form of Change in Control Severance Agreement(x)10.43
    
    *Amendment to Amended and Restated Employment Agreement for Greg Palmer(y)10.44
    
    *Short-Term Incentive Bonus Plan for Fiscal 2006(aa)10.45
    
    *Form of Lock-Up Agreement with certain executive officers(bb)10.46
    
    Summary of Compensation Arrangements for Named Executive Officers and Directors(cc)10.47
    
    Form of Franchising Agreement for Licensed Offices (effective January 1, 2006)10.48
    
    Form of Early Renewal Addendum for Existing Licensees (effective January 1, 2006)10.49
    
    Form of Software License Agreement for Licensees (effective January 1, 2006)31.1
    
    Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Chief Administrative Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
of 200232
    
    Chief Executive Officer and Chief Administrative 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.




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##### Table of Contents



(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.(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.(z)
    
    Incorporated by reference to Exhibit 10.2 to Registrants Current Report on
Form 8-K filed on September 27, 2005.(aa)
    
    Incorporated by reference to Item 1.01 of the Registrants Current Report on
Form 8-K filed on September 23, 2005.(bb)
    
    Incorporated by reference to Exhibit 10.1 of the Registrants Current Report on
Form 8-K filed on September 27, 2005.(cc)
    
    Incorporated by reference to the exhibit of same number to the Registrants
Annual Report on Form 10-K for the yearly period ended October 2, 2005.