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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 28, 1999

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ________ TO ________.

COMMISSION FILE NUMBER 0-5260

REMEDYTEMP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

CALIFORNIA 95-2890471
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)

101 ENTERPRISE
ALISO VIEJO, CALIFORNIA 92656
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (949) 425-7600

----------------------

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /

As of May 10, 1999 there were 7,021,800 shares of Class A Common Stock and
1,803,539 shares of Class B Common Stock outstanding.

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REMEDYTEMP, INC.

INDEX

PAGE NO.
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PART I--FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheet as of March 28, 1999 and September 27, 1998...................... 3

Consolidated Statement of Income for the three fiscal months and six fiscal months ended
March 28, 1999 and March 29, 1998 ........................................................ 4

Consolidated Statement of Cash Flows for the six fiscal months ended March 28, 1999
and March 29, 1998........................................................................ 5

Notes to Consolidated Financial Statements.................................................. 6

Item 2. Management's Discussion and Analysis of Consolidated Financial Condition and Results of
Operations.................................................................................. 8

Item 3. Quantitative and Qualitative Disclosure About Market Risk................................... *

PART II--OTHER INFORMATION

Item 1. Legal Proceedings........................................................................... *

Item 2. Changes In Securities and Use of Proceeds................................................... *

Item 3. Defaults Upon Senior Securities............................................................. *

Item 4. Submission of Matters to a Vote of Security Holders......................................... 13

Item 5. Other Information........................................................................... *

Item 6. Exhibits and Reports on Form 8-K............................................................ 14

SIGNATURES................................................................................................ 15

* No information provided due to inapplicability of item.

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REMEDYTEMP, INC.

PART I--FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEET
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

ASSETS
MARCH 28, SEPTEMBER 27,
1999 1998
------------- -------------

Current assets:
Cash and cash equivalents ............................................... $ 1,845 $ 450
Accounts receivable, net of allowance for doubtful accounts of $2,476
and $2,647, respectively .............................................. 63,334 63,660
Prepaid expenses and other current assets ............................... 3,062 3,401
Deferred income taxes ................................................... 3,735 2,235
------------- -------------

Total current assets ............................................. 71,976 69,746
Fixed assets, net of accumulated depreciation of $13,877 and $12,560,
respectively ............................................................ 17,781 15,184
Other assets, net .......................................................... 2,514 2,567
Deferred income taxes ...................................................... 501 501
Goodwill, net of accumulated amortization of $229 and $152, respectively ... 1,710 1,787
------------- -------------

$ 94,482 $ 89,785
============= =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................ $ 3,939 $ 3,033
Accrued workers' compensation (Note 6) .................................. 6,893 5,535
Accrued payroll, benefits and related costs ............................. 10,915 13,604
Accrued licensees' share of gross profit ................................ 3,836 3,194
Other accrued expenses .................................................. 918 865
Income taxes payable .................................................... 1,288 809
Capitalized lease obligation ............................................ 164 308
------------- -------------
Total current liabilities ........................................ 27,953 27,348
------------- -------------
Commitments and contingent liabilities

Shareholders' equity:
Preferred Stock, $.01 par value; authorized 5,000 shares; none outstanding
Class A Common Stock, $.01 par value; authorized 50,000 shares;
7,010 and 7,206 issued and outstanding at March 28, 1999 and September
27, 1998, respectively ................................................ 70 72
Class B Non-Voting Common Stock, $.01 par value; authorized 4,530
shares; 1,806 issued and outstanding at March 28, 1999 and
September 27, 1998..................................................... 18 18
Additional paid-in capital ................................................. 31,929 34,732
Retained earnings .......................................................... 34,512 27,615
------------- -------------
Total shareholders' equity ................................................. 66,529 62,437
------------- -------------
$ 94,482 $ 89,785
============= =============

See accompanying notes to consolidated financial statements.

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REMEDYTEMP, INC.

CONSOLIDATED STATEMENT OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- ----------------------------
MARCH 28, MARCH 29, MARCH 28, MARCH 29,
1999 1998 1999 1998
--------- --------- --------- ---------

Direct sales ........................... $ 62,731 $ 68,479 $ 129,169 $ 137,910
Licensed sales ......................... 51,180 40,327 103,874 81,266
Franchise royalties .................... 631 714 1,291 1,489
Initial license and franchise fees ..... 51 87 85 87
--------- --------- --------- ---------
Total revenues .................. 114,593 109,607 234,419 220,752
Cost of direct sales ................... 50,035 53,903 101,695 108,546
Cost of licensed sales ................. 37,975 30,138 77,121 60,795
Licensees' share of gross profit ....... 8,973 6,937 18,114 13,873
Selling and administrative expenses .... 11,895 13,233 25,070 25,867
Depreciation and amortization .......... 895 673 1,690 1,333
--------- --------- --------- ---------
Income from operations .......... 4,820 4,723 10,729 10,338
Other income:
Interest (expense) income, net ....... (13) 36 10 84
Other, net ........................... 265 345 475 691
--------- --------- --------- ---------
Income before provision for income taxes 5,072 5,104 11,214 11,113
Provision for income taxes ............. 1,861 2,118 4,317 4,612
--------- --------- --------- ---------
Net income ............................. $ 3,211 $ 2,986 $ 6,897 $ 6,501
========= ========= ========= =========

Net income per share, basic (Note 2) ... $ 0.36 $ 0.33 $ 0.78 $ 0.73
========= ========= ========= =========
Weighted-average number of shares ...... 8,821 8,949 8,894 8,942
========= ========= ========= =========

Net income per share, diluted (Note 2) . $ 0.36 $ 0.32 $ 0.77 $ 0.70
========= ========= ========= =========
Weighted-average number of shares ...... 8,908 9,275 8,980 9,245
========= ========= ========= =========

See accompanying notes to consolidated financial statements.

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REMEDYTEMP, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

SIX MONTHS ENDED
---------------------------
Cash flows provided by (used in) operating activities: MARCH 28, MARCH 29,
1999 1998
--------- ---------

Net income ............................................................ $ 6,897 $ 6,501
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ..................................... 1,690 1,333
Provision for losses on accounts receivable ....................... 80 742
Deferred taxes .................................................... (1,500) (1,500)
Changes in assets and liabilities:
Accounts receivable ............................................. 246 (2,672)
Prepaid expenses and other current assets ....................... 339 (362)
Other assets .................................................... 53 (214)
Accounts payable ................................................ 906 267
Accrued workers' compensation ................................... 1,358 2,115
Accrued payroll, benefits and related costs ..................... (2,689) (469)
Accrued licensees' share of gross profit ........................ 642 376
Other accrued expenses .......................................... 53 (302)
Income taxes payable ............................................ 479 (2,266)
--------- ---------
Net cash provided by operating activities ............................. 8,554 3,549
--------- ---------
Cash flows used in investing activities:
Purchase of fixed assets .............................................. (4,210) (3,821)
Purchase of franchises, net of assets acquired ........................ -- (1,014)
--------- ---------
Net cash used in investing activities ................................. (4,210) (4,835)
--------- ---------
Cash flows (used in) provided by financing activities:
Borrowings under line of credit agreement ............................. 5,000 1,000
Repayments under line of credit agreement ............................. (5,000) (1,000)
Repayments under capital lease obligation ............................. (144) (189)
Proceeds from stock option activity ................................... 8 265
Purchase of Company Common Stock ...................................... (2,957) --
Proceeds from Employee Stock Purchase Plan activity ................... 144 149
--------- ---------
Net cash (used in) provided by financing activities ................... (2,949) 225
--------- ---------
Net increase (decrease) in cash and cash equivalents .................... 1,395 (1,061)
Cash and cash equivalents at beginning of period ........................ 450 5,128
--------- ---------
Cash and cash equivalents at end of period .............................. $ 1,845 $ 4,067
========= =========

Other cash flow information:
Cash paid during the period for interest .............................. $ 84 $ 56
Cash paid during the period for income taxes .......................... $ 5,338 $ 8,378

See accompanying notes to consolidated financial statements.

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REMEDYTEMP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. BASIS OF PRESENTATION

The consolidated financial statements include the accounts of
RemedyTemp, Inc. (the "Company") including its wholly-owned subsidiary, Remedy
Insurance Group, LTD ("RIG"). All significant intercompany transactions and
balances have been eliminated.

The accompanying consolidated balance sheet at March 28, 1999, and the
consolidated statements of income and of cash flows for the six fiscal months
ended March 28, 1999 are unaudited. These statements have been prepared on the
same basis as the Company's audited consolidated financial statements and in the
opinion of management reflect all adjustments, which are only of a normal
recurring nature, necessary for a fair presentation of the consolidated
financial position and results of operations for such periods. These unaudited
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements included in the Company's Form 10-K as filed
with the Securities and Exchange Commission on December 23, 1998.

2. EARNINGS PER SHARE DISCLOSURE

Earnings per share is calculated as follows:

THREE FISCAL MONTHS ENDED
-------------------------------------------------------------------------------------------
MARCH 28, 1999 MARCH 29, 1998
-------------------------------------------- --------------------------------------------
INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNTS (NUMERATOR) (DENOMINATOR) AMOUNTS
------------ ------------ ------------ ------------ ------------ ------------

BASIC EPS
Income available to common
shareholders ................. $ 3,211 8,821 $ 0.36 $ 2,986 8,949 $ 0.33
============ ============
EFFECT OF DILUTIVE SECURITIES
Stock options ................ $ -- 87 $ -- 326
------------ ------------ ------------ ------------
DILUTED EPS
Income available to common
shareholders plus assumed
conversions................... $ 3,211 8,908 $ 0.36 $ 2,986 9,275 $ 0.32
============ ============ ============ ============ ============ ============

SIX FISCAL MONTHS ENDED
-------------------------------------------------------------------------------------------
MARCH 28, 1999 MARCH 29, 1998
-------------------------------------------- --------------------------------------------
INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNTS (NUMERATOR) (DENOMINATOR) AMOUNTS
------------ ------------ ------------ ------------ ------------ ------------

BASIC EPS
Income available to common
shareholders ................ $ 6,897 8,894 $ 0.78 $ 6,501 8,942 $ 0.73
============ ============
EFFECT OF DILUTIVE SECURITIES
Stock options ............... $ -- 86 $ -- 303
------------ ------------ ------------ ------------
DILUTED EPS
Income available to common
shareholders plus assumed
conversions ................. $ 6,897 8,980 $ 0.77 $ 6,501 9,245 $ 0.70
============ ============ ============ ============ ============ ============

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REMEDYTEMP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

3. STOCK OPTIONS

Under the terms of the Company's 1996 Stock Incentive Plan, as amended,
on February 17, 1999, upon their reelection to the Board of Directors, the
Company granted options to purchase 5 shares of Class A Common Stock to each of
its five non-employee directors at $17.50 per share, for a total of 25 shares.
This plan is "non-compensatory" under APB No. 25, and accordingly, no
compensation expense was recorded in connection with these grants.

4. STOCK REPURCHASE

On October 2, 1998, the Board of Directors authorized the Company to
repurchase its outstanding Class A and/or Class B Common Stock in the open
market or in privately negotiated transactions at the prevailing market prices
not to exceed $5,000 in the aggregate. During the six fiscal months ended March
28, 1999, the Company repurchased 202.9 Class A Common Stock shares at prices
ranging from $12.56 to $15.13, for a total of $2,957.

5. REPURCHASE OF LICENSED OFFICES

During March 1999, the Company acquired two licensed offices in
Stockbridge and Atlanta, Georgia. Results of operations for the acquired
licensed offices are recorded in accordance with the Company's licensed revenue
recognition policy until the acquisition date. Subsequent to the acquisition
date, the direct office revenue recognition policy is utilized. These
acquisitions were accounted for under the purchase method of accounting. The
purchase prices are contingent upon a percentage of gross margin and will be
allocated to goodwill as earned. Goodwill will be amortized over a twenty-year
life. The Company is contemplating the continued selective repurchase of
licensed and franchised offices in certain territories with the intent of
expanding the Company's market presence in such regions.

6. SUBSEQUENT EVENTS

a) LINE OF CREDIT RENEWAL
On March 31, 1999, the Company renewed its revolving line of credit
agreement with Bank of America with renegotiated terms, providing for aggregate
borrowings and letters of credit of $40,000. Interest on outstanding borrowings
is payable monthly. The interest rate is the bank's reference rate minus up to
0.25%, based upon certain financial covenants or, at the Company's discretion,
LIBOR plus a range of 1.0% to 1.375%, based upon the financial covenants. The
line of credit is unsecured and expires on February 28, 2002. The Company
borrowed $18,750 under this agreement during April in connection with the
workers' compensation reinsurance contract discussed below.

b) WORKERS' COMPENSATION REINSURANCE
Effective April 1, 1999, the Company entered into a reinsurance
contract with Reliance National Insurance Company ("Reliance") whereby Reliance
assumed the Company's existing self-insurance liability for all open claims
incurred during the period July 22, 1997 to March 31, 1999. Additionally, the
Company entered into a one-year fully insured workers' compensation program with
Reliance. This program has a fixed cost for payroll up to $295,000 and for
payroll exceeding $295,000, the premium is at a lesser rate than the base
rate. The Company paid the aggregate cost of both the reinsurance contract and
the one-year premium of $18,873 to Reliance on April 16, 1999. If the ultimate
aggregate losses exceed current projections, the reinsurance contract includes a
provision for additional payments up to $700.

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REMEDYTEMP, INC.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

In addition to historical information, management's discussion and
analysis includes certain forward-looking statements, 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 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. Accordingly, the
Company's actual results and financial position could differ materially from
those expressed or implied in any forward-looking statement as a result of
various factors, including without limitation those factors described in the
Company's filings with the Securities and Exchange Commission regarding risks
affecting the Company's financial conditions 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.

RESULTS OF OPERATIONS

For the Three Fiscal Months Ended March 28, 1999 Compared to the Three Fiscal
Months Ended March 29, 1998

Total revenues increased 4.5% or $5.0 million to $114.6 million for the
three fiscal months ended March 28, 1999 from $109.6 million for the three
fiscal months ended March 29, 1998. Direct revenues decreased 8.4% to $62.7
million from $68.5 million, while licensed revenues increased 26.9% to $51.2
million from $40.3 million for the three fiscal months ended March 28, 1999 and
March 29, 1998, respectively. During the fiscal year ended September 27, 1998,
the Company elected not to renew a contract in which the client requested a
substantially reduced gross margin. As of December 1998, the Company
discontinued providing service to this high volume, low gross margin client,
which had primarily been serviced by the Company's direct offices. Excluding
this client, revenues at the direct offices increased 7.5% and total Company
revenue increased 15.2% for the three fiscal months ended March 28, 1999
compared to the same period in the previous year. The expansion of business at
existing licensed offices as well as the opening of 15 new licensed offices
since the prior period account for the increase in licensed revenue. The
Company's management expects licensed revenue to continue to out-pace direct
revenue growth in the foreseeable future, due to projected office openings and
the average age of franchise offices being less than that of direct offices. The
Company's future revenue increases depend significantly on the Company's ability
to continue to attract new clients, retain existing clients, open new offices
and manage newly opened offices to maturity.

Total cost of direct and licensed sales, which consists of wages and
other expenses related to the temporary associates, increased 4.7% or $4.0
million to $88.0 million for the three fiscal months ended March 28, 1999 from
$84.0 million for the three fiscal months ended March 29, 1998. Such increase
was primarily due to increased revenues as discussed above. Total cost of direct
and licensed sales as a percentage of revenues was 76.8% for the three fiscal
months ended March 28, 1999 compared to 76.7% for the three fiscal months ended
March 29, 1998. Many factors, including increased wage costs or other employment
expenses, could adversely affect the Company's cost of direct and licensed
sales.

Licensees' share of gross profit represents the net payments to
licensees based upon a percentage of gross profit generated by the licensed
operation. The percentage of gross profit earned by the licensee generally is
based on the number of hours billed. In general, pursuant to terms of the
Company's franchise agreement for licensed offices executed prior to March 31,
1999, the Company's share of gross profit cannot be less than 7.5% of the
licensed operation sales, with the exception of national accounts on which the
Company's fee is reduced to compensate for lower gross margins. For franchise
agreements for licensed offices executed on or after April 1, 1999, the
Company's share of gross profit cannot be less than 8.75% of the licensed
operation sales. Licensees' share of gross profit increased 29.3% or $2.1
million to $9.0 million for the three fiscal months ended March 28, 1999 from
$6.9 million for the three fiscal months ended March 29, 1998 due to increased
billings at existing licensed offices and to the opening of 15 new offices.
Licensees' share of gross profit as a percentage of total revenues increased to
7.8% for the three fiscal months ended March 28, 1999 from 6.3% for the three
fiscal months ended March 29, 1998 due to increased licensed revenue as a
percentage of total revenue, as discussed above. Licensees' share of gross
profit as a percentage of licensed gross profit remained relatively constant.

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REMEDYTEMP, INC.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)

Selling, general and administrative expenses, including depreciation
and amortization, decreased 8.0% or $1.1 million to $12.8 million for the three
fiscal months ended March 28, 1999 from $13.9 million for the three fiscal
months ended March 29, 1998. Selling, general and administrative expenses as a
percentage of total revenues decreased to 11.2% for the three fiscal months
ended March 28, 1999 from 12.7% for the three fiscal months ended March 29,
1998. Bad debt expense decreased $542.5 for the three fiscal months ended March
28, 1999 as compared to the three fiscal months ended March 29, 1998 due to
successful collection and recovery efforts resulting in lower writeoffs and
required reserves. Also, profit sharing and bonus expense decreased to $481.7
for the three fiscal months ended March 28, 1999 compared to $1,233.5 for the
three fiscal months ended March 29, 1998. In general, the Company has continued
to control growth in selling, general and administrative expenses by tightening
cost controls through budgetary analysis, implementing more stringent hiring and
compensation guidelines and variable compensation. There can be no assurance
that selling, general and administrative expenses will not increase in the
future, both in absolute terms and as a percentage of total revenues. Increases
in these expenses could adversely affect the Company's profitability.

Income from operations increased 2.1% or $0.1 million to $4.8 million
for the three fiscal months ended March 28, 1999 from $4.7 million for the three
fiscal months ended March 29, 1998 due to the factors described above. Income
from operations as a percentage of revenues was 4.2% for the three fiscal months
ended March 28, 1999 compared to 4.3% for the three fiscal months ended March
29, 1998.

Net income increased 7.5% or $0.2 million to $3.2 million for the
three fiscal months ended March 28, 1999 from $3.0 million for the three fiscal
months ended March 29, 1998 due to the factors described above. Net income was
also favorably affected by a decrease in the Company's effective tax rate. The
lower rate reflects the expected tax savings from Work Opportunity Credits. As a
percentage of total revenues, net income was 2.8% in the three fiscal months
ended March 28, 1999 compared to 2.7% in the three fiscal months ended March 29,
1998. All revenues and results have been internally generated by the Company.

For the Six Fiscal Months Ended March 28, 1999 Compared to the Six Fiscal Months
Ended March 29, 1998

Total revenues increased 6.2% or $13.6 million to $234.4 million for
the six fiscal months ended March 28, 1999 from $220.8 million for the six
fiscal months ended March 29, 1998. Direct revenues decreased 6.3% to $129.2
million from $137.9 million, while licensed revenues increased 27.8% to $103.9
million from $81.3 million for the six fiscal months ended March 28, 1999 and
March 29, 1998, respectively. As of December 1998, the Company discontinued
providing service to a high volume, low gross margin client for various reasons,
including the Company's strategic emphasis on maintaining acceptable gross
margin levels on all client accounts. Excluding this client, revenues at the
direct offices increased 8.2% and total Company revenue increased 16.0% for the
six fiscal months ended March 28, 1999 compared to the same period in the
previous year. The expansion of business at existing licensed offices as well as
the opening of 15 new licensed offices since the prior period account for the
increase in licensed revenue. The Company's management expects licensed revenue
to continue to out-pace direct revenue growth in the foreseeable future, due to
projected office openings and the average age of franchise offices being less
than that of direct offices. The Company's future revenue increases depend
significantly on the Company's ability to continue to attract new clients,
retain existing clients, open new offices and manage newly opened offices to
maturity.

Total cost of direct and licensed sales, which consists of wages and
other expenses related to the temporary associates, increased 5.6% or $9.5
million to $178.8 million for the six fiscal months ended March 28, 1999 from
$169.3 million for the six fiscal months ended March 29, 1998, due to increased
revenues as discussed above. Total cost of direct and licensed sales as a
percentage of revenues was 76.3% for the six fiscal months ended March 28, 1999
compared to 76.7% for the six fiscal months ended March 29, 1998. Many factors,
including increased wage costs or other employment expenses, could adversely
affect the Company's cost of direct and licensed sales.

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REMEDYTEMP, INC.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)

Licensees' share of gross profit increased 30.6% or $4.2 million to
$18.1 million for the six fiscal months ended March 28, 1999 from $13.9 million
for the six fiscal months ended March 29, 1998 due to increased billings at
existing licensed offices and to the opening of 15 new offices. Licensees' share
of gross profit as a percentage of total revenues increased to 7.7% for the six
fiscal months ended March 28, 1999 from 6.3% for the six fiscal months ended
March 29, 1998 due to increased licensed revenue as a percentage of total
revenue, as discussed above. Licensees' share of gross profit as a percentage of
licensed gross profit remained relatively constant.

Selling, general and administrative expenses, including depreciation
and amortization, decreased 1.6% or $0.4 million to $26.8 million for the six
fiscal months ended March 28, 1999 from $27.2 million for the six fiscal months
ended March 29, 1998. Selling, general and administrative expenses as a
percentage of total revenues decreased to 11.4% for the six fiscal months ended
March 28, 1999 from 12.3% for the six fiscal months ended March 29, 1998. Bad
debt expense decreased $662.7 for the six fiscal months ended March 28, 1999 as
compared to the six fiscal months ended March 29, 1998 due to successful
collection and recovery efforts resulting in lower writeoffs and required
reserves. Also, profit sharing and bonus expense decreased to $2,181.6 for the
six fiscal months ended March 28, 1999 compared to $2,831.8 for the six fiscal
months ended March 29, 1998. In general, the Company has continued to control
growth in selling, general and administrative expenses by tightening cost
controls through budgetary analysis, implementing more stringent hiring and
compensation guidelines and the use of variable compensation. There can be no
assurance that selling, general and administrative expenses will not increase in
the future, both in absolute terms and as a percentage of total revenues.
Increases in these expenses could adversely affect the Company's profitability.

Income from operations increased 3.8% or $0.4 million to $10.7 million
for the six fiscal months ended March 28, 1999 from $10.3 million for the six
fiscal months ended March 29, 1998 due to the factors described above. Income
from operations as a percentage of revenues was 4.6% for the six fiscal months
ended March 28, 1999 compared to 4.7% for the six fiscal months ended March 29,
1998.

Net income increased 6.1% or $0.4 million to $6.9 million for the six
fiscal months ended March 28, 1999 from $6.5 million for the six fiscal months
ended March 29, 1998 due to the factors described above. Net income was also
favorably impacted by a decrease in the Company's effective tax rate. The lower
rate reflects the expected tax savings from Work Opportunity Credits. As a
percentage of total revenues, net income remained constant at 2.9% for both the
six fiscal months ended March 28, 1999 and the six fiscal months ended March 29,
1998. All revenues and results have been internally generated by the Company.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities was $8.6 million for the six
fiscal months ended March 28, 1999 and $3.5 million for the six fiscal months
ended March 29, 1998. Cash provided by operating activities was primarily
impacted by improved accounts receivable collection efforts, as discussed above.

Cash used for purchases of fixed assets was $4.2 million for the six
fiscal months ended March 28, 1999, and $3.8 million for the six fiscal months
ended March 29, 1998. The increase in fiscal 1999 primarily resulted from
expenditures associated with leasehold improvements at direct offices and the
Company's new management information system. Upgrades of computers and hardwarwe
to support the new system began in early calendar year 1999, while
implementation of the related software is scheduled to begin in the third fiscal
quarter of 1999. During the next twelve months, the Company anticipates capital
expenditures associated with direct office openings, and further investments in
the Company's computer-based technologies to approximate $5.0 million.

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REMEDYTEMP, INC.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)

Prior to April 1, 1999, the Company's workers' compensation risk was
self-insured in California and in most other states in which the Company does
business. Effective April 1, 1999, the Company entered into a reinsurance
contract with Reliance National Insurance Company, whereby the insurance company
assumed the Company's existing self-insured workers' compensation liability for
claims incurred during the period July 22, 1997 through March 31, 1999.
Additionally, the Company purchased a guaranteed cost insurance policy to cover
workers' compensation claims for the period April 1, 1999 to March 31, 2000. The
total cost to the Company for both the reinsurance contract and the guaranteed
cost policy was $18.9 million. See further discussion in Note 6 to the
Consolidated Financial Statements.

The Company has a revolving line of credit agreement with Bank of
America providing for aggregate borrowings and letters of credit of $40.0
million. Interest on outstanding borrowings is payable monthly. The interest
rate is the bank's reference rate minus up to 0.25%, based upon certain
financial covenants or, at the Company's discretion, LIBOR plus a range of 1.0%
to 1.375%, based upon financial covenants. The line of credit is unsecured
and expires on February 28, 2002. The principal use of the line of credit has
been to finance receivables and to provide a letter of credit required in
connection with the Company's workers' compensation self-insurance program. The
Company had no balance outstanding under its line of credit and $6.7 million in
undrawn letters of credit as of March 28, 1999. The outstanding letters of
credit will be canceled in conjunction with the reinsurance contract, as
discussed above and in Note 6 to the Consolidated Financial Statements. The
Company borrowed $18.8 million under this line of credit agreement in connection
with the workers' compensation transactions discussed above. The agreement
governing the line of credit requires the Company to maintain certain financial
ratios and comply with certain restrictive covenants. The Company is in
compliance with these requirements.

Additionally, RIG has a letter of credit agreement with Bank of Bermuda
(New York) Limited in the amount of $80,000. The letter of credit is unsecured,
expires on July 22, 1999 and was required in connection with the Company's
workers' compensation self-insurance program. This letter of credit will also be
canceled in conjunction with the workers' compensation reinsurance contract as
discussed above.

In connection with the Company's initial public offering (the
"Offering") in July 1996, the Company terminated its S corporation status and,
as a result, was required to change its overall method of accounting for tax
reporting purposes from the cash method to the accrual method, resulting in a
one-time net charge to earnings in the fourth quarter of fiscal 1996 of
approximately $7.8 million. The Internal Revenue Code allows the Company to
recognize the effects of this termination in its tax returns over a four-year
period. This resulted in additional quarterly installments of $750,000 in the
first and second fiscal quarters of 1999 and 1998, respectively.

The Company is contemplating certain strategic acquisitions. Such
acquisitions may have an impact on liquidity depending on the size of the
acquisition.

The Company believes that its current and expected levels of working
capital and line of credit are adequate to support present operations and to
fund future growth and business opportunities.

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REMEDYTEMP, INC.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)

YEAR 2000 COMPLIANCE

The Company's State of Readiness

Many computer systems and other equipment with embedded chips or
processors use only two digits to represent the year and may be unable
to process accurately certain data before, during or after the Year 2000.
Consequently, business and governmental entities are at risk for possible
miscalculations or systems failures causing disruptions in their business
operation. Furthermore, the Year 2000 is a leap year, which may present
additional issues for computer systems and other equipment with embedded chips
or processors.

Year 2000 issues may affect the Company's internal systems, including
information technology ("IT") and non-IT systems. The Company is in the process
of assessing the readiness of its systems for handling the Year 2000. The
Company is currently developing and implementing a process to replace all of its
material IT systems with a new IT system. The Company believes that the new IT
system and the computer hardware used to operate the system will be Year 2000
compliant and that partial implementation of the new IT system will be completed
by the end of calendar year 1999. In conjunction with such partial
implementation of the new IT system, the Company has begun to modify its
existing IT systems to avoid a material impact on the Company's ability to
conduct business. Accordingly, the Company believes that partial implementation
of the new IT system, together with the modifications of the Company's current
IT systems, will allow the Company to operate on and after Year 2000 without a
material adverse effect on the Company's financial condition and results of
operations.

Based on information currently available, the Company believes that it
does not have any material-specific dependencies on its non-IT systems (devices
that have imbedded microprocessors). Accordingly, the Company believes that the
Year 2000 poses no material risk to the Company's non-IT systems. The Company is
in the process of contacting its clients and material suppliers of products and
services to determine whether the suppliers' operations and the products and
services they provide are Year 2000 compliant, and will evaluate their progress
toward Year 2000 compliance. There can be no assurance that the Company's
material suppliers, vendors or other third parties will not suffer a Year 2000
business disruption. Such failures could have a material adverse affect on the
Company's financial condition and results of operations.

The Costs to Address the Company's Year 2000 Issues

The Company's new IT system is being implemented for strategic business
reasons unrelated to Year 2000 issues and the implementation schedule was not
accelerated due to Year 2000 issues. The Company is in the process of
implementing a contingency plan effort to modify the Company's existing IT
systems to avoid a material impact on the Company's ability to conduct business
by using such IT systems on and after Year 2000. Currently, the Company
estimates that the total expected costs relating to this effort will be
$200,000.

The Risks to the Company of Year 2000 Issues

Although unclear at this time, the Company believes that its exposure
to Year 2000 risks are unlikely to have a material effect on the Company's
results of operations, liquidity and financial condition. The Company
anticipates that partial implementation of the new IT system, which is believed
to be Year 2000 compliant, together with the modification of the Company's
current IT systems, will allow the Company to operate on and after Year 2000
without a material adverse effect on the Company's financial condition and
results of operations. The Company believes that its most reasonably likely
worst case Year 2000 scenario is that certain functions of its new IT system are
not implemented on time and the Company's efforts to make Year 2000
modifications to the existing IT systems fail. Such a scenario could disrupt the
Company's business and, therefore, could have a material adverse effect on the
financial condition and results of operations. Additionally, if any third
parties that provide goods or services that are critical to the Company's
business fail to appropriately address their Year 2000 issues, there could be a
material adverse effect on the Company's financial condition and results of
operations.

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13
REMEDYTEMP, INC.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)

The Company's Contingency Plans

The Company continues to modify existing IT systems, which will allow
the Company to use such systems without a material adverse effect on the
Company's financial condition and results of operations before, on and after
Year 2000. The likely impact of Year 2000 failure on such existing IT systems
would be in "from-to" reporting and date printing which the Company believes it
can correct without material loss in business operation or function. The Company
continues to evaluate strategies, including the use of certain available
resources, in formulating its contingency plans for failure of the existing IT
systems. Additionally, the Company is in the process of identifying and
contacting its material vendors and clients and will formulate a system to
understand such material third parties' ability to continue providing services
and products after the Year 2000, including formulating contingency plans, where
appropriate. However, the Company can neither predict nor assure the successful
outcome of such third parties' remediation efforts.

SEASONALITY

The Company's quarterly operating results are affected by the number of
billing days in the quarter and the seasonality of its clients' businesses. The
first fiscal quarter has historically been strong as a result of manufacturing
and retail emphasis on holiday sales. The second fiscal quarter historically
shows little to no growth, and in some years a decline, in comparable revenues
from the first fiscal quarter. Revenue growth has historically accelerated in
each of the third and fourth fiscal quarters as manufacturers, retailers and
service businesses increase their level of business activity.

PART II--OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On February 17, 1999, the Company held its Annual Meeting of
Shareholders ("the Annual Meeting"). The Company's shareholders voted in favor
of the two matters voted upon at the Annual Meeting according to the following
vote tabulation:

Proposal One: Election of Directors.

Abstentions and Broker
For Withhold Non-Votes
--- -------- ----------------------

William D. Cvengros 5,942,526 8,410 1,111,588
James L. Doti 5,942,526 8,410 1,111,588
Robert A. Elliott 5,942,526 8,410 1,111,588
J. Michael Hagan 5,942,526 8,410 1,111,588
Robert E. McDonough, Sr. 5,942,326 8,610 1,111,588
Paul W. Mikos 5,942,526 8,410 1,111,588
John B. Zaepfel 5,942,526 8,410 1,111,588

Proposal Two: Ratification and approval of amendment to the Stock Incentive Plan
increasing the number of shares authorized for issuance thereunder by 575,000
shares.

For: 4,625,797
Against: 521,972
Votes Abstaining: 10,563
Broker Non-Votes: 1,904,192

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REMEDYTEMP, INC.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Set forth below is a list of the exhibits included as part of this
Quarterly Report:

Number
Exhibit Description
- ------- -----------

3.1 Amended and Restated Articles of Incorporation of the Company (a)

3.2 Amended and Restated Bylaws of the Company (h)

4.1 Specimen Stock Certificate (a)

4.2 Shareholder Rights Agreement (a)

10.1 Robert E. McDonough, Sr. Amended and Restated Employment Agreement
(i)

10.2 Paul W. Mikos Employment Agreement (i)

10.3 R. Emmett McDonough Employment Agreement (a)

10.4 Allocation Agreement with R. Emmett McDonough and Related Trusts
(a)

10.5 Registration Rights Agreement with R. Emmett McDonough and Related
Trusts (a)

10.6 Letter regarding terms of employment and potential severance of
Alan M. Purdy (a)

10.7 Deferred Compensation Agreement for Alan M. Purdy (a)

10.8 Letter regarding potential severance of Jeffrey A. Elias (a)

10.9 Form of Indemnification Agreement (a)

10.11 RemedyTemp, Inc. Amended and Restated 1996 Stock Incentive Plan

10.12 RemedyTemp, Inc. 1996 Employee Stock Purchase Plan (a)

10.13 Form of Franchising Agreement for Licensed Offices (h)

10.14 Form of Franchising Agreement for Franchised Offices (a)

10.15 Form of Licensing Agreement for IntelliSearch(R) (a)

10.18 Additional Deferred Compensation Agreement for Alan M. Purdy (b)

10.19 Lease Agreement between RemedyTemp, Inc. and Parker-Summit, LLC
(c)

10.20 Lease Agreement between RemedyTemp, Inc. and Mitchell Land &
Improvement Company (d)

10.21 Credit Agreement among Bank of America National Trust and Savings
Association and RemedyTemp, Inc. (e)

10.22 RemedyTemp, Inc. Deferred Compensation Plan (e)

10.23 Greg Palmer Employment Agreement (f)

10.24 1998 RemedyTemp, Inc. Deferred Compensation and Stock Ownership
Plan for Outside Directors (g)

10.25 Form of Licensing Agreement for i/search2000(TM) (h)

10.26 Credit Agreement among Bank of America National Trust and Savings
Association and RemedyTemp, Inc., effective March 31, 1999.

27.1 Financial Data Schedule

(a) Incorporated by reference to the exhibit of same number to the
Registrant's Registration Statement on Form S-1 (Reg. No. 333-4276), as
amended.

(b) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period ended
December 29, 1996.

(c) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period ended
March 30, 1997.

(d) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period ended
June 29, 1997.

(e) Incorporated by reference to the exhibit of same number to the
Registrant's Annual Report on Form 10-K for the yearly period ended
September 28, 1997. Exhibit 10.21 is superseded by the new agreement,
effective March 31, 1999. See Exhibit 10.26

(f) 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 27, 1997.

(g) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period ended
March 29, 1998.

(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
September 27, 1998.

(i) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period ended
December 27,1998.

(b) Reports on Form 8-K.

No reports on Form 8-K were filed in the fiscal quarter ended March
1999.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

REMEDYTEMP, INC.

May 10, 1999 /s/ PAUL W. MIKOS
Paul W. Mikos, President and Chief
Executive Officer

May 10, 1999 /s/ ALAN M. PURDY
Senior Vice President and Chief Financial
Officer (Principal Financial and Accounting
Officer)

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16
EXHIBIT INDEX

NUMBER
EXHIBIT DESCRIPTION
- ------- -----------

3.1 Amended and Restated Articles of Incorporation of the Company (a)

3.2 Amended and Restated Bylaws of the Company (h)

4.1 Specimen Stock Certificate (a)

4.2 Shareholder Rights Agreement (a)

10.1 Robert E. McDonough, Sr. Amended and Restated Employment Agreement
(i)

10.2 Paul W. Mikos Employment Agreement (i)

10.3 R. Emmett McDonough Employment Agreement (a)

10.4 Allocation Agreement with R. Emmett McDonough and Related Trusts
(a)

10.5 Registration Rights Agreement with R. Emmett McDonough and Related
Trusts (a)

10.6 Letter regarding terms of employment and potential severance of
Alan M. Purdy (a)

10.7 Deferred Compensation Agreement for Alan M. Purdy (a)

10.8 Letter regarding potential severance of Jeffrey A. Elias (a)

10.9 Form of Indemnification Agreement (a)

10.11 RemedyTemp, Inc. Amended and Restated 1996 Stock Incentive Plan

10.12 RemedyTemp, Inc. 1996 Employee Stock Purchase Plan (a)

10.13 Form of Franchising Agreement for Licensed Offices (h)

10.14 Form of Franchising Agreement for Franchised Offices (a)

10.15 Form of Licensing Agreement for IntelliSearch(R) (a)

10.18 Additional Deferred Compensation Agreement for Alan M. Purdy (b)

10.19 Lease Agreement between RemedyTemp, Inc. and Parker-Summit, LLC
(c)

10.20 Lease Agreement between RemedyTemp, Inc. and Mitchell Land &
Improvement Company (d)

10.21 Credit Agreement among Bank of America National Trust and Savings
Association and RemedyTemp, Inc. (e)

10.22 RemedyTemp, Inc. Deferred Compensation Plan (e)

10.23 Greg Palmer Employment Agreement (f)

10.24 1998 RemedyTemp, Inc. Deferred Compensation and Stock Ownership
Plan for Outside Directors (g)

10.25 Form of Licensing Agreement for i/search 2000(TM) (h)

10.26 Credit Agreement among Bank of America National Trust and Savings
Association and RemedyTemp, Inc., effective March 31, 1999.

27.1 Financial Data Schedule

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