TRUEBLUE, INC., 10-K filed on 2/22/2021
Annual Report
v3.20.4
COVER PAGE - USD ($)
$ in Billions
12 Months Ended
Dec. 27, 2020
Feb. 01, 2021
Dec. 30, 2018
Cover [Abstract]      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Dec. 27, 2020    
Document Transition Report false    
Entity File Number 001-14543    
Entity Registrant Name TrueBlue, Inc.    
Entity Incorporation, State or Country Code WA    
Entity Tax Identification Number 91-1287341    
Entity Address, Address Line One 1015 A Street    
Entity Address, City or Town Tacoma    
Entity Address, State or Province WA    
Entity Address, Postal Zip Code 98402    
City Area Code 253    
Local Phone Number 383-9101    
Title of 12(b) Security Common stock, no par value    
Trading Symbol TBI    
Security Exchange Name NYSE    
Entity Well-Known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
ICFR Auditor Attestation Flag true    
Entity Shell Company false    
Entity Public Float     $ 0.5
Common Stock Shares Outstanding (in shares)   35,485,980  
Documents Incorporated by Reference
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this report is incorporated by reference from the registrant’s definitive proxy statement relating to the Annual Meeting of Shareholders scheduled to be held May 12, 2021, which will be filed no later than 120 days after the end of the fiscal year to which this report relates.
   
Amendment Flag false    
Document Fiscal Year Focus 2020    
Document Fiscal Period Focus FY    
Entity Central Index Key 0000768899    
Current Fiscal Year End Date --12-27    
v3.20.4
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Dec. 27, 2020
Dec. 29, 2019
Current assets:    
Cash and cash equivalents $ 62,507 $ 37,608
Accounts receivable, net of allowance of $2,921 and $4,288 278,343 342,303
Prepaid expenses and other current assets 26,137 30,717
Income tax receivable 11,898 11,105
Total current assets 378,885 421,733
Property and equipment, net 71,734 66,150
Restricted cash and investments 240,534 230,932
Deferred income taxes, net 30,019 3,228
Goodwill 94,873 237,498
Intangible assets, net 28,929 73,673
Operating lease right-of-use assets, net 65,940 41,082
Workers’ compensation claims receivable, net 52,934 44,624
Other assets, net 16,729 17,235
Total assets 980,577 1,136,155
Current liabilities:    
Accounts payable and other accrued expenses 62,199 68,406
Accrued wages and benefits 122,657 67,604
Current portion of workers’ compensation claims reserve 66,007 73,020
Current operating lease liabilities 13,938 14,358
Other current liabilities 4,166 7,418
Total current liabilities 268,967 230,806
Workers’ compensation claims reserve, less current portion 189,486 182,598
Long-term debt 0 37,100
Long-term deferred compensation liabilities 26,361 26,765
Long-term operating lease liabilities 54,797 28,849
Other long-term liabilities 3,776 4,064
Total liabilities 543,387 510,182
Commitments and contingencies
Shareholders’ equity:    
Preferred stock, $0.131 par value, 20,000 shares authorized; No shares issued and outstanding 0 0
Common stock, no par value, 100,000 shares authorized; 35,493 and 38,593 shares issued and outstanding 1 1
Accumulated other comprehensive loss (14,828) (13,238)
Retained earnings 452,017 639,210
Total shareholders’ equity 437,190 625,973
Total liabilities and shareholders’ equity $ 980,577 $ 1,136,155
v3.20.4
CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($)
$ in Thousands
Dec. 27, 2020
Dec. 29, 2019
Statement of Financial Position [Abstract]    
Accounts receivable allowance $ 2,921 $ 4,288
Preferred stock, par value (in dollars per share) $ 0.131 $ 0.131
Preferred stock, shares authorized 20,000,000 20,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value (in dollars per share) $ 0 $ 0
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 35,493,000 38,593,000
Common stock, shares outstanding 35,493,000 38,593,000
v3.20.4
CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME (LOSS) - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Dec. 27, 2020
Dec. 29, 2019
Dec. 30, 2018
Income Statement [Abstract]      
Revenue from services $ 1,846,360 $ 2,368,779 $ 2,499,207
Cost of services 1,405,715 1,748,831 1,843,760
Gross profit 440,645 619,948 655,447
Selling, general and administrative expense 408,307 516,220 540,479
Depreciation and amortization 32,031 37,549 41,049
Goodwill and intangible asset impairment charge 175,189 0 0
Income (loss) from operations (174,882) 66,179 73,919
Interest expense and other income, net 1,620 3,865 1,744
Income (loss) before tax expense (benefit) (173,262) 70,044 75,663
Income tax expense (benefit) (31,421) 6,971 9,909
Net income (loss) $ (141,841) $ 63,073 $ 65,754
Net income (loss) per common share:      
Basic (in dollars per share) $ (4.01) $ 1.63 $ 1.64
Diluted (in dollars per share) $ (4.01) $ 1.61 $ 1.63
Weighted average shares outstanding:      
Basic (in shares) 35,365 38,778 39,985
Diluted (in shares) 35,365 39,179 40,275
Other comprehensive income (loss):      
Foreign currency translation adjustment $ (1,590) $ 1,411 $ (6,320)
Total other comprehensive income (loss), net of tax (1,590) 1,411 (6,320)
Comprehensive income (loss) $ (143,431) $ 64,484 $ 59,434
v3.20.4
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($)
shares in Thousands, $ in Thousands
Total
Cumulative Effect, Period of Adoption, Adjustment
Common stock
Retained earnings
Retained earnings
Cumulative Effect, Period of Adoption, Adjustment
Accumulated other comprehensive loss
Accumulated other comprehensive loss
Cumulative Effect, Period of Adoption, Adjustment
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Change in accounting standard cumulative-effect adjustment   $ 0     $ 1,525   $ (1,525)
Beginning balance (in shares) at Dec. 31, 2017     41,098        
Beginning balance at Dec. 31, 2017 $ 554,847   $ 1 $ 561,650   $ (6,804)  
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income (loss) 65,754     65,754      
Foreign currency translation adjustment (6,320)         (6,320)  
Purchases and retirement of common stock     (1,371)        
Purchases and retirement of common stock (34,818)     (34,818)      
Issuances under equity plans, including tax benefits (in shares)     299        
Issuances under equity plans, including tax benefits (1,900)     (1,900)      
Stock-based compensation (in shares)     28        
Stock-based compensation 13,876     13,876      
Ending balance (in shares) at Dec. 30, 2018     40,054        
Ending balance at Dec. 30, 2018 591,439   $ 1 606,087   (14,649)  
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income (loss) 63,073     63,073      
Foreign currency translation adjustment 1,411         1,411  
Purchases and retirement of common stock     (1,855)        
Purchases and retirement of common stock (38,826)     (38,826)      
Issuances under equity plans, including tax benefits (in shares)     365        
Issuances under equity plans, including tax benefits (893)     (893)      
Stock-based compensation (in shares)     29        
Stock-based compensation $ 9,769     9,769      
Ending balance (in shares) at Dec. 29, 2019 38,593   38,593        
Ending balance at Dec. 29, 2019 $ 625,973   $ 1 639,210   (13,238)  
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Change in accounting standard cumulative-effect adjustment 639,210 $ (602)     $ (602)    
Net income (loss) (141,841)     (141,841)      
Foreign currency translation adjustment (1,590)         (1,590)  
Purchases and retirement of common stock     (3,557)        
Purchases and retirement of common stock (52,346)     (52,346)      
Issuances under equity plans, including tax benefits (in shares)     429        
Issuances under equity plans, including tax benefits (1,517)     (1,517)      
Stock-based compensation (in shares)     28        
Stock-based compensation $ 9,113     9,113      
Ending balance (in shares) at Dec. 27, 2020 35,493   35,493        
Ending balance at Dec. 27, 2020 $ 437,190   $ 1 $ 452,017   $ (14,828)  
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Change in accounting standard cumulative-effect adjustment $ 452,017            
v3.20.4
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
12 Months Ended
Dec. 27, 2020
Dec. 29, 2019
Dec. 30, 2018
Cash flows from operating activities:      
Net income (loss) $ (141,841) $ 63,073 $ 65,754
Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
Depreciation and amortization 32,031 37,549 41,049
Goodwill and intangible asset impairment charge 175,189 0 0
Provision for doubtful accounts 6,300 7,661 10,042
Stock-based compensation 9,113 9,769 13,876
Deferred income taxes (26,791) 1,263 (1,929)
Non-cash lease expense 15,195 14,823 0
Other operating activities (686) (1,589) 5,154
Changes in operating assets and liabilities, net of amounts acquired and divested:      
Accounts receivable 57,146 5,450 11,640
Income tax receivable (1,122) (6,480) (996)
Other assets (2,124) (12,575) (12,928)
Accounts payable and other accrued expenses (6,561) 6,921 3,029
Accrued wages and benefits 55,053 (9,494) (1,613)
Workers’ compensation claims reserve (125) (10,828) (7,877)
Operating lease liabilities (14,562) (15,178) 0
Other liabilities (3,684) 3,166 491
Net cash provided by operating activities 152,531 93,531 125,692
Cash flows from investing activities:      
Capital expenditures (27,066) (28,119) (17,054)
Acquisition of businesses, net of cash acquired 0 0 (22,742)
Divestiture of business 0 215 10,587
Payments for company-owned life insurance (12,031) (12,210) 0
Purchases of restricted available-for-sale investments (2,896) (7,667) (6,173)
Sales of restricted available-for-sale investments 12,311 20,859 1,991
Purchases of restricted held-to-maturity investments (32,495) (22,963) (6,768)
Maturities of restricted held-to-maturity investments 27,561 28,254 19,644
Other 205 0 0
Net cash used in investing activities (34,411) (21,631) (20,515)
Cash flows from financing activities:      
Purchases and retirement of common stock (52,346) (38,826) (34,818)
Net proceeds from employee stock purchase plans 922 1,329 1,503
Common stock repurchases for taxes upon vesting of restricted stock (2,438) (2,222) (3,404)
Net change in revolving credit facility (37,100) (42,900) (15,900)
Payments on debt 0 0 (22,397)
Other (1,540) (296) 0
Net cash used in financing activities (92,502) (82,915) (75,016)
Effect of exchange rate changes on cash, cash equivalents and restricted cash 623 936 (1,542)
Net change in cash, cash equivalents and restricted cash 26,241 (10,079) 28,619
Cash, cash equivalents and restricted cash, beginning of period 92,371 102,450 73,831
Cash, cash equivalents and restricted cash, end of period 118,612 92,371 102,450
Supplemental disclosure of cash flow information:      
Interest 3,149 2,432 4,373
Income taxes (3,441) 12,166 12,898
Operating lease liabilities 16,995 17,643 0
Non-cash transactions:      
Property and equipment purchased but not yet paid 1,347 993 1,553
Divestiture non-cash consideration 0 0 798
Right-of-use assets obtained in exchange for new operating lease liabilities $ 38,847 $ 18,759 $ 0
v3.20.4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Note)
12 Months Ended
Dec. 27, 2020
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of business
TrueBlue, Inc. (the “company,” “TrueBlue,” “we,” “us” and “our”) is a leading provider of specialized workforce solutions that help clients achieve business growth and improve productivity. We serve clients in a wide variety of industries through our PeopleReady segment which offers on-demand, industrial staffing, our PeopleManagement segment which offers contingent, on-site industrial staffing and commercial driver services, and our PeopleScout segment which offers recruitment process outsourcing (“RPO”) and managed service provider (“MSP”) solutions to a wide variety of industries. We are headquartered in Tacoma, Washington.
Basis of presentation
The consolidated financial statements (“financial statements”) include the accounts of TrueBlue and all of its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Reclassifications
Certain previously reported amounts have been reclassified to conform to the current presentation. Specifically, the company has made certain reclassifications between cost of services and selling, general and administrative expense (“SG&A”) to more accurately reflect the costs of delivering our services. Such reclassifications did not have a significant impact on the company’s gross profit or SG&A expense.
Fiscal period end
The financial statements are presented on a 52/53-week fiscal year-end basis, with the last day of the fiscal year ending on the Sunday closest to the last day of December. In fiscal years consisting of 53 weeks, the final quarter will consist of 14 weeks, while in fiscal years consisting of 52 weeks, all quarters will consist of 13 weeks. All years presented include 52 weeks.
Use of estimates
Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Estimates in our financial statements include, but are not limited to, purchase accounting, allowance for credit losses, estimates for asset and goodwill impairments, stock-based performance awards, assumptions underlying self-insurance reserves, contingent legal, regulatory and government incentive liabilities, and the potential outcome of future tax consequences of events that have been recognized in the financial statements. Actual results and outcomes may differ from these estimates and assumptions.
We also considered COVID-19 related impacts to our estimates, as appropriate, within our financial statements and there may be changes to those estimates in future periods. However, we believe that the accounting estimates used are appropriate after considering the increased uncertainties surrounding the severity and duration of COVID-19. These estimates and assumptions are subject to inherent uncertainties, which may result in actual future amounts differing from reported estimated amounts.
Revenue recognition
We account for a contract when both parties to the contract have approved the contract, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. Consolidated revenues are presented net of intercompany eliminations. Additionally, consolidated revenues are recognized net of any discounts, allowances and sales incentives, including rebates. Revenues are recognized over time using an output measure, as the control of the promised services is transferred to the client, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. The majority of our contracts are short-term in nature as they are filling the contingent staffing needs of our clients, or include termination clauses that allow either party to cancel within a short notice period, without cause. Revenue includes billable travel and other reimbursable costs and are reported net of sales, use or other transaction taxes collected from clients and remitted to taxing authorities. Payment terms vary by client and the services
offered, however we do not extend payment terms beyond one year. Substantially all of our contracts include payment terms of 90 days or less.
We primarily record revenue on a gross basis as a principal versus on a net basis as an agent on the Consolidated Statements of Operations and Comprehensive Income. We have determined that gross reporting as a principal is the appropriate treatment based upon the following key factors:
We maintain the direct contractual relationship with the client and are responsible for fulfilling the service promised to the client.
We demonstrate control over the services provided to our clients by being the employer of record for the individuals performing the service.
We establish our associate’s billing rate.
Contingent staffing
We recognize revenue for our PeopleReady and PeopleManagement contingent staffing services over time as services are performed in an amount that reflects the consideration we expect to be entitled to collect in exchange for our services, which is generally calculated as hours worked multiplied by the agreed-upon hourly bill rate. The client simultaneously receives and consumes the benefits of the services as they are provided. We do not incur costs to obtain our contingent staffing contracts. Costs are incurred to fulfill some contingent staffing contracts, however these costs are immaterial and are expensed as incurred.
Human resource outsourcing
We primarily recognize revenue for our PeopleScout outsourced recruitment of permanent employees over time in an amount that reflects the consideration we expect to be entitled to in exchange for our services. The client simultaneously receives and consumes the benefits of the services as they are provided. We do not incur costs to obtain our outsourced recruitment of permanent employee contracts. The costs to fulfill these contracts are immaterial and are expensed as incurred.
Unsatisfied performance obligations
As a practical expedient, we do not disclose the value of unsatisfied performance obligations for (i) contracts with an expected original duration of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.
Cost of services
Cost of services refers to costs directly associated with the earning of revenue and primarily includes wages and related payroll taxes and workers’ compensation expenses. Cost of services also includes billable travel as well as other reimbursable and non-reimbursable expenses.
Advertising costs
Advertising costs consist primarily of print and other promotional activities. We expense advertisements as of the first date the advertisements take place. Advertising expenses included in SG&A were $5.5 million, $6.8 million and $8.1 million in fiscal 2020, 2019 and 2018, respectively.
Cash, cash equivalents and marketable securities
We consider all highly liquid instruments purchased with an original maturity of three months or less at date of purchase to be cash equivalents. Investments with original maturities greater than three months are classified as marketable securities. We do not buy and hold securities principally for the purpose of selling them in the near future. Our investment policy is focused on the preservation of capital, liquidity and return. From time to time, we may sell certain securities but the objective is not to generate profits on short-term differences in price. We manage our cash equivalents and marketable securities as a single portfolio of highly liquid securities.
Accounts receivable and allowance for credit losses
Accounts receivable are recorded at the invoiced amount. We establish an estimate for the allowance for credit losses resulting from the failure of our clients to make required payments by applying an aging schedule to pools of assets with similar risk characteristics. Based on an analysis of the risk characteristics of our clients and associated receivables, we have concluded our pools are as follows:
PeopleReady and Centerline Drivers (“Centerline”) have a large, diverse set of clients, generally with frequent, low dollar invoices due to the daily nature of the work we perform. This results in high turnover in accounts receivable and lower rates of non-payment.
PeopleManagement On-Site has a smaller number of clients, and follows a contractual billing schedule. The invoice amounts are higher than that of PeopleReady and Centerline, with longer payment terms.
PeopleScout has a smaller number of clients, and generally sends invoices on a consolidated basis for a client. Invoice amounts are generally higher for PeopleScout than for PeopleManagement On-Site, with similar payment terms.
When specific clients are identified as no longer sharing the same risk profile as their current pool, they are removed from the pool and evaluated separately. The credit loss rates applied to each aging category by pool are based on current collection efforts, historical collection trends, write-off experience, client credit risk, current economic data and forecasted information. The allowance for credit loss is reviewed monthly and represents our best estimate of the amount of expected credit losses. Each month, past due or delinquent balances are identified based upon a review of aged receivables performed by collections and operations. Past due balances are written off when it is probable the receivable will not be collected. Changes in the allowance for credit losses are recorded in SG&A on the Consolidated Statements of Operations and Comprehensive Income (Loss). As a result of our adoption of the accounting standard for current expected credit losses (“CECL”), we recognized a cumulative-effect adjustment to our account receivable allowance of $0.5 million as of the beginning of the first quarter of 2020.
Restricted cash and investments
Cash and investments pledged as collateral and restricted for use in workers’ compensation insurance programs are included as restricted cash and investments on our Consolidated Balance Sheets. Our investments consist of highly-rated investment grade debt securities, which at the time of purchase, were rated A1/P1 or higher for short-term securities and A or higher for long-term securities, by nationally recognized rating organizations. We have the positive intent and ability to hold our restricted investments until maturity in accordance with our investment policy and, accordingly, all of our restricted investments are classified as held-to-maturity. In the event that an investment is downgraded, it is replaced with a highly-rated investment grade security.
We establish an allowance for credit loss for our held-to-maturity debt securities using a discounted cash flow method including a probability of default rate based on the issuer’s credit rating. We report the entire change in present value as credit loss expense (or reversal of credit loss expense) in cost of services on the Consolidated Statements of Operations and Comprehensive Income (Loss). The cumulative-effect adjustment to our held-to-maturity debt securities as a result of adopting CECL as of the beginning of the first quarter of 2020 was immaterial, as was the allowance as of December 27, 2020.
We have an agreement with American International Group, Inc. and the Bank of New York Mellon Corporation creating a trust (“Trust”), which holds the majority of our collateral obligations under existing workers’ compensation insurance policies. Placing the collateral in the Trust allows us to manage the investment of the assets and provides greater protection of those assets.
Fair value of financial instruments and investments
Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. For assets and liabilities recorded or disclosed at fair value on a recurring basis, we determine fair value based on the following:
Level 1: The carrying value of cash and cash equivalents and mutual funds approximates fair value because of the short-term nature of these instruments. Inputs are valued using quoted market prices in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices in active markets for identical assets and liabilities are used. We use quoted prices for similar instruments in active markets or we estimate the fair value using a variety of valuation methodologies, which include observable inputs for comparable instruments and unobservable inputs.
Level 3: For assets and liabilities with unobservable inputs, we typically rely on management’s estimates of assumptions that market participants would use in pricing the asset or liability.
The carrying value of our cash and cash equivalents and restricted cash approximates fair value because of the short-term maturity of those instruments. We hold mutual funds and money market funds to support our deferred compensation liability, which are carried at fair value based on quoted market prices in active markets for identical assets. There are inherent limitations when estimating the fair value of financial instruments, and the fair values reported are not necessarily indicative of the amounts that would be realized in current market transactions.
The carrying value of our accounts receivable, accounts payable and other accrued expenses, and accrued wages and benefits approximates fair value due to their short-term nature. In addition to mutual funds and money market funds, we also have company owned life insurance policies that fund our deferred compensation liability. Company owned life insurance policies are carried at cash surrender value, which approximates fair value. We also hold certain restricted investments which collateralize workers’ compensation programs and are classified as held-to-maturity and carried at amortized cost on our Consolidated Balance Sheets.
Certain items such as goodwill and other intangible assets are recognized or disclosed at fair value on a non-recurring basis. We determine the fair value of these items using level 3 inputs.
Property and equipment
Property and equipment are recorded at cost. We compute depreciation using the straight-line method over the estimated useful lives of the assets as follows:
 Years
Buildings40
Software
3 - 8
Computers, furniture and equipment
3 - 10
Leasehold improvements are amortized over the shorter of the related non-cancelable lease term or their estimated useful lives.
Non-capital expenditures associated with opening new locations are expensed as incurred.
When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss, net of proceeds, is reflected on the Consolidated Statements of Operations and Comprehensive Income.
Repairs and maintenance costs are charged directly to expense as incurred. Major renewals or replacements that substantially extend the useful life of an asset are capitalized and depreciated.
Costs associated with the acquisition or development of software for internal use are capitalized and amortized over the expected useful life of the software, from three to eight years. A subsequent addition, modification or upgrade to internal-use software is capitalized to the extent that it enhances the software’s functionality or extends its useful life. Software maintenance and training costs are expensed in the period incurred.
Leases
We conduct our branch operations from leased locations. We also lease office spaces for our centralized support functions, office equipment, and machinery for use at client sites. Many leases require variable payments of property taxes, insurance, and common area maintenance, in addition to base rent. The variable portion of these lease payments is not included in our right-of-use assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred and are included in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income. We determine if an arrangement meets the definition of a lease at inception, at which time we also perform an analysis to determine whether the lease qualifies as operating or financing. The terms of our lease agreements generally range from three to five years, with some as high as 15 years and many containing options to renew. Under the majority of our leases, we have the right to terminate the lease with 90 days’ notice.
Operating leases are included in operating lease right-of-use assets, net and current and long-term operating lease liabilities on our Consolidated Balance Sheets. Lease expense for operating leases is recognized on a straight-line basis over the lease term and is included in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income.
Financing leases are included in property and equipment, net, other current liabilities, and other long-term liabilities on our Consolidated Balance Sheets. Lease expense for financing leases is recognized as depreciation of the right-of-use asset and interest expense. Financing leases are immaterial to our financial statements.
Lease right-of-use assets and lease liabilities are measured using the present value of future minimum lease payments over the lease term at commencement date. The right-of-use asset also includes any lease payments made on or before the commencement date of the lease, less any lease incentives received. As the rate implicit in the lease is not readily determinable in our leases, we use our incremental borrowing rates based on the information available at the lease commencement date in determining the present value of lease payments. The incremental borrowing rates used are estimated based on what we would be required to pay for a collateralized loan over a similar term. We have lease agreements with lease and non-lease components, which are accounted for as a single lease component.
For leases with an initial non-cancelable lease term of less than one year and no option to purchase, we have elected not to recognize the lease on our Consolidated Balance Sheets and instead recognize rent payments on a straight-line basis over the lease term within SG&A expense on our Consolidated Statements of Operations and Comprehensive Income. In addition, for those leases where the right to cancel the lease is available to both TrueBlue (as the lessee) and the lessor, the lease term is the initial non-cancelable period plus the notice period, which is typically 90 days, and not greater than one year.
Goodwill and indefinite-lived intangible assets
We evaluate goodwill for impairment on an annual basis as of the first day of our fiscal second quarter, and whenever events or circumstances make it more likely than not that an impairment may have occurred. These events or circumstances could include a significant change in the business climate, operating performance indicators, competition, client engagement, legal factors, or sale or disposition of a significant portion of a reporting unit. We monitor the existence of potential impairment indicators throughout the fiscal year. We test for goodwill impairment at the reporting unit level. We consider our operating segments to be our reporting units for goodwill impairment testing. Our operating segments are PeopleReady, PeopleManagement Centerline, PeopleManagement On-Site, PeopleScout RPO, and PeopleScout MSP. The impairment test involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit. If the fair value exceeds the carrying value, we conclude that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, we recognize an impairment charge in an amount equal to the excess, not to exceed the carrying value of the goodwill.
Determining the fair value of a reporting unit involves the use of significant estimates and assumptions to evaluate the impact of operational and macroeconomic changes on each reporting unit. The fair value of each reporting unit is a weighted average of the income and market valuation approaches. The income approach applies a fair value methodology based on discounted cash flows. This analysis requires significant estimates and judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested. We also apply a market approach, which identifies similar publicly traded companies and develops a correlation, referred to as a multiple, to apply to the operating results of the reporting units. The primary market multiples to which we compare are revenue and earnings before interest, taxes, depreciation, and amortization. The income and market approaches were equally weighted in our most recent annual impairment test. We base fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. We consider a reporting unit’s fair value to be substantially in excess of its carrying value at a 20% premium or greater.
During the first quarter of 2020, certain events made it more likely than not that an impairment had occurred and accordingly, we performed an interim impairment test as of the last day of our fiscal first quarter. As a result, we recorded an impairment charge of $140.5 million with respect to our PeopleScout RPO, PeopleScout MSP and PeopleManagement On-Site reporting units. Refer to Note 6: Goodwill and Intangible Assets for further details.
There were no goodwill impairment charges recorded during fiscal 2019 nor 2018.
We have indefinite-lived intangible assets related to our Staff Management | SMX and PeopleScout trade names. We test our trade names annually for impairment, and when indications of potential impairment exist.
We performed our annual indefinite-lived intangible asset impairment test for 2020, 2019 and 2018, and determined that the estimated fair values exceeded the carrying amounts for our indefinite-lived trade names. Accordingly, no impairment charge was recognized for the years ended December 27, 2020, December 29, 2019 or December 30, 2018.
Other long-lived assets
Other long-lived assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Other long-lived assets include property and equipment, lease right-of-use assets, finite-lived intangible assets and capitalized implementation costs for cloud computing arrangements that are service contracts.
We have finite-lived intangible assets related to acquired company customers, trade names/trademarks, and technology, as well as purchased trade names/trademarks. During fiscal 2020, we recorded a non-cash impairment charge for our PeopleScout RPO and PeopleManagement On-Site client relationship intangible assets of $34.7 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 27, 2020. Refer to Note 6: Goodwill and Intangible Assets for further details. There were no long-lived asset impairment charges recorded during fiscal 2019 nor 2018.
We capitalize implementation costs incurred in a cloud computing arrangement that is a service contract. Capitalized implementation costs are recorded as a prepaid asset in other assets, net on our Consolidated Balance Sheets, with the related amortization recorded in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income on a straight-line basis over the fixed, non-cancelable term of the associated arrangement plus any reasonably certain renewal periods. Software license fees incurred during the development period are expensed as incurred.
Business combinations
We account for our business acquisitions using the acquisition method of accounting. The fair value of the net assets acquired and the results of the acquired business are included in the financial statements from the acquisition date forward. We are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and results of operations during the reporting period. Estimates are used in accounting for, among other things, the fair value of acquired net operating assets, property and equipment, intangible assets, useful lives of property and equipment, and amortizable lives for acquired intangible assets. Any excess of the purchase consideration over the identified fair value of the assets and liabilities acquired is recognized as goodwill. Goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date. We estimate the fair value of acquired assets and liabilities as of the date of the acquisition based on information available at that time. The initial valuation of these tangible and identifiable intangible assets and liabilities is subject to further management review and may change between the preliminary allocation and the final allocation.
All acquisition-related costs are expensed as incurred and recorded in SG&A expense on the Consolidated Statements of Operations and Comprehensive Income. Additionally, we recognize liabilities for anticipated restructuring costs that will be necessary due to the elimination of excess capacity, redundant assets or unnecessary functions, and record them as SG&A expense on the Consolidated Statements of Operations and Comprehensive Income.
Workers’ compensation claims reserves
We maintain reserves for workers’ compensation claims using actuarial estimates of the future cost of claims and related expenses. These estimates include claims that have been reported but not settled and claims that have been incurred but not reported. These reserves, which reflect potential liabilities to be paid in future periods based on estimated payment patterns, are discounted to estimated net present value using discount rates based on average returns of “risk-free” United States (“U.S.”) Treasury instruments available during the year in which the liability was incurred, which are evaluated on a quarterly basis. We evaluate the reserves regularly throughout the year and make adjustments accordingly. If the actual cost of such claims and related expenses exceeds the amounts estimated, additional reserves may be required. Changes in reserve estimates are reflected in cost of services on the Consolidated Statements of Operations and Comprehensive Income in the period when the changes are made.
Our workers’ compensation reserves include estimated expenses related to claims above our self-insured limits (“excess claims”) and a corresponding receivable for the insurance coverage on excess claims based on the contractual policy agreements we have with insurance companies. We discount the liability and its corresponding receivable to its estimated net present value using the “risk-free” rates available during the year in which the liability was incurred, and associated with the actuarial determined weighted average lives of our excess claims. When appropriate, based on our best estimate, we record a valuation allowance against the insurance receivable to reflect amounts that may not be realized.
We also establish an allowance for credit loss for our insurance receivables using a probability of default and losses expected upon default method, with the probability of default rate based on the third-party insurance carrier’s credit rating. Changes in the allowance for credit losses are recorded in cost of services on the Consolidated Statements of Operations and Comprehensive Income (Loss). The cumulative-effect adjustment to our workers’ compensation insurance receivables as a result of adopting CECL as of the beginning of the first quarter of 2020 was immaterial, as was the allowance as of December 27, 2020.
Legal contingency reserves and regulatory liabilities
From time to time we are subject to compliance audits by federal, state and local authorities relating to a variety of regulations including wage and hour laws, taxes, workers’ compensation, immigration, and safety. In addition, we are subject to legal proceedings in the ordinary course of our operations. We establish accruals for contingent legal and regulatory liabilities when management determines that it is probable that a legal claim will result in an adverse outcome and the amount of liability can be reasonably estimated. We evaluate our reserve regularly throughout the year and make adjustments as needed. If the actual outcome of these matters is different than expected, an adjustment is charged or credited to expense in the period the outcome occurs or the period in which the estimate changes.
Income taxes and related valuation allowance
We account for income taxes by recording taxes payable or receivable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns. These expected future tax consequences are measured based on provisions of tax law as currently enacted; the effects of future changes in tax laws are not anticipated. Future tax law changes, such as changes to the federal and state corporate tax rates and the mix of states and their taxable income, could have a material impact on our financial condition or results of operations. When appropriate, we record a valuation allowance against deferred tax assets to offset future tax benefits that may not be realized. In determining whether a valuation allowance is appropriate, we consider whether it is more likely than not that all or some portion of our deferred tax assets will not be realized, based in part upon management’s judgments regarding future events and past operating results. Based on that analysis, we have determined that a valuation allowance is appropriate for certain net operating losses (“NOLs”) and tax credits that we expect will not be utilized within the permitted carryforward periods as of December 27, 2020 and December 29, 2019.
A significant driver of fluctuations in our effective income tax rate is the Work Opportunity Tax Credit (“WOTC”). WOTC is designed to encourage hiring of workers from certain disadvantaged targeted categories and is generally calculated as a percentage of wages over a twelve month period up to worker maximum by targeted category. Based on historical results and business trends, we estimate the amount of WOTC we expect to earn related to wages of the current year. However, the estimate is subject to variation because 1) a small percentage of our associates qualify for one or more of the many targeted categories; 2) the targeted categories are subject to different incentive credit rates and limitations; 3) credits fluctuate depending on economic conditions and qualified worker retention periods; and 4) state and federal offices can delay their credit certification processing and have inconsistent certification rates. We recognize additional prior year hiring credits if credits in excess of original estimates have been certified by government offices.
Deferred compensation plan
We offer a non-qualified defined contribution plan (the “Plan”) to eligible employees. Participating employees may elect to defer and contribute a portion of their eligible compensation. The Plan allows participants to direct their account based on the investment options determined by TrueBlue and offers discretionary matching contributions.
The current portion of the deferred compensation liability is included in accrued wages and benefits on our Consolidated Balance Sheets. The total deferred compensation liability is largely offset by deferred compensation mutual funds, money market funds and company owned life insurance policies recorded in restricted cash and investments on our Consolidated Balance Sheets. The mutual funds and money market funds are measured at fair value, with unrealized gains and losses recognized in SG&A expense, while realized gains and losses are recorded in other income on our Consolidated Statements of Operations and Comprehensive Income. The carrying value of company owned life insurance policies is based on the cash surrender value of the policies and, accordingly, approximates fair value. Changes in the cash surrender value of the insurance policies are recorded in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income.
Stock-based compensation
Under various plans, officers, employees and non-employee directors have received or may receive grants of stock, restricted stock awards, or performance share units to purchase common stock. We also have an employee stock purchase plan (“ESPP”).
Compensation expense for restricted stock awards and performance share units is generally recognized on a straight-line basis over the vesting period, based on our stock’s fair market value on the grant date. For performance share unit grants issued with performance conditions, compensation expense is recognized over each vesting period based on assessment of the likelihood of meeting these conditions. We recognize compensation expense for only the portion of restricted stock and performance share units that is expected to vest, rather than record forfeitures when they occur. If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in the future periods.
Foreign currency
Our financial statements are reported in U.S. dollars. Assets and liabilities of international subsidiaries with non-U.S. dollar functional currencies are translated to U.S. dollars at the exchange rates in effect on the balance sheet date. Revenues and expenses for each subsidiary are translated to U.S. dollars using a weighted average rate for the relevant reporting period. Translation adjustments resulting from this process are included, net of tax, in other comprehensive income, when applicable.
Purchases and retirement of our common stock
We purchase our common stock under a program authorized by our Board of Directors (the “Board”). Under applicable Washington State law, shares purchased are not displayed separately as treasury stock on the Consolidated Balance Sheets and are treated as authorized but unissued shares. It is our accounting policy to first record these purchases as a reduction to our common stock account. Once the common stock account has been reduced to a nominal balance, remaining purchases are recorded as a reduction to our retained earnings. Furthermore, activity in our common stock account related to stock-based compensation is also recorded to retained earnings until such time as the reduction to retained earnings due to stock repurchases has been recovered.
Net income per share
Basic net income per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is calculated by dividing net income by the weighted average number of common shares and potential common shares outstanding during the period. Potential common shares include the dilutive effects of vested and non-vested restricted stock, performance share units and shares issued under the ESPP, except where their inclusion would be anti-dilutive.
Anti-dilutive shares primarily include non-vested restricted stock and performance share units for which the sum of the assumed proceeds, including unrecognized compensation expense, exceeds the average stock price during the periods presented.
Segments
Our operating segments are based on the organizational structure for which financial results are regularly reviewed by our chief operating decision-maker, our Chief Executive Officer, to determine resource allocation and assess performance. We evaluate performance based on segment revenue and segment profit. Segment revenue is net of intercompany eliminations. Segment profit includes revenue, related cost of services, and ongoing operating expenses directly attributable to the reportable segment. Segment profit excludes goodwill and intangible asset impairment charges, depreciation and amortization expense, unallocated corporate general and administrative expense, interest expense, other income and expense, income taxes, and other adjustments not considered to be ongoing.
Government incentives
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), which among other things, provides employer payroll tax credits for wages paid to employees who are unable to work during the COVID-19 outbreak. Also, the Canadian government enacted the Canada Emergency Wage Subsidy and the Australian government enacted the JobKeeper subsidy to help employers offset a portion of their employee wages for a limited period.
We elected to treat qualified government incentives from the U.S., Canada and Australian governments as offsets to the related operating expenses. During fiscal 2020, the qualified payroll tax credits and government subsidies reduced our operating expenses by $9.9 million on our Consolidated Statement of Operations and Comprehensive Income (Loss).
Recently adopted accounting standards
Credit losses
In June 2016, the Financial Accounting Standards Board issued guidance on accounting for credit losses on financial instruments. This guidance sets forth a current expected credit loss model, which requires the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance requires the application of a current expected credit loss model, which is a new impairment model based on expected losses. Under this model, an entity recognizes an allowance for expected credit losses based on historical experience, current conditions, and forecasted information rather than the previous methodology of delaying recognition of credit losses until it is probable a loss has been incurred. This guidance was adopted at the beginning of the first quarter of 2020. We were required to apply the new standard by means of a cumulative-effect adjustment to opening retained earnings as of the beginning of the first quarter of 2020. The total impact upon adoption to opening retained earnings was immaterial to both the individual financial assets affected as well as in the aggregate.
Recently issued accounting pronouncements not yet adopted
There are no new accounting pronouncements, issued or effective during the fiscal year, that are expected to have a significant impact on our financial statements and related disclosures.
v3.20.4
ACQUISITION AND DIVESTITURE (Note)
12 Months Ended
Dec. 27, 2020
Business Combinations [Abstract]  
ACQUISITION AND DIVESTITURE ACQUISITION AND DIVESTITURE
2018 acquisition
Effective June 12, 2018, we acquired all of the outstanding equity interests of TMP Holdings LTD (“TMP”), through our subsidiary PeopleScout, Inc. for a cash purchase price of $22.7 million, net of cash acquired of $7.0 million. TMP is a mid-sized RPO and employer branding service provider operating in the United Kingdom. This acquisition increases our ability to win multi-continent engagements by adding a physical presence in Europe, referenceable clients and employer branding capabilities.
We incurred acquisition and integration-related costs of $1.6 million and $2.7 million for the years ended December 29, 2019 and December 30, 2018, respectively, which were included in SG&A expense on the Consolidated Statements of Operations and Comprehensive Income (Loss) and cash flows from operating activities on the Consolidated Statements of Cash Flows.
The following table reflects the allocation of the purchase price, net of cash acquired, to the fair value of the assets acquired and liabilities assumed:
(in thousands)Purchase price allocation
Cash purchase price, net of cash acquired $22,742 
Accounts receivable9,770 
Prepaid expenses, deposits and other current assets337 
Property and equipment435 
Customer relationships6,286 
Trade names/trademarks1,738 
Total assets acquired18,566 
Accounts payable and other accrued expenses9,139 
Accrued wages and benefits1,642 
Income tax payable205 
Deferred income tax liability1,444 
Total liabilities assumed12,430 
Net identifiable assets acquired6,136 
Goodwill (1)16,606 
Total consideration allocated$22,742 
(1) Goodwill represents the expected synergies with our existing business, the acquired assembled workforce, potential new clients and future cash flows after the acquisition of TMP, and is non-deductible for income tax purposes.
Intangible assets include identifiable intangible assets for customer relationships and trade names/trademarks. We estimated the fair value of the acquired identifiable intangible assets, which are subject to amortization, using the income approach.
The following table sets forth the components of identifiable intangible assets, their estimated fair values and useful lives as of June 12, 2018:
(in thousands, except for estimated useful lives, in years)Estimated fair valueEstimated useful life in years
Customer relationships - other$2,809 3
Customer relationships - RPO3,477 7
Trade names/trademarks1,738 14
Total acquired identifiable intangible assets$8,024 
The results of TMP’s operations and cash flows reported for 2018 on our Consolidated Statements of Operations and Comprehensive Income (Loss) and Consolidated Statements of Cash Flows relate to the period from June 12, 2018 to December 30, 2018. Revenue from TMP included in our Consolidated Statements of Operations and Comprehensive Income (Loss) was $31.0 million from the acquisition date to December 30, 2018, and $51.3 million and $46.0 million for the years ended December 29, 2019 and December 27, 2020, respectively. The acquisition of TMP was immaterial to our consolidated results of operations and as such, pro forma financial information was not required.
2018 divestiture
Effective March 12, 2018, we divested substantially all the assets and certain liabilities of PlaneTechs, LLC (“PlaneTechs”) for a sales price of $11.4 million, of which $8.5 million was paid in cash, and $1.6 million in a note receivable, with monthly principal payments of $0.1 million beginning in April 2018. The balance was fully repaid as of December 29, 2019. The remaining purchase price balance consisted of the preliminary working capital adjustment, which was included in prepaid expenses and other current assets on the Consolidated Balance Sheets. The company recognized a pre-tax gain on the divestiture of $0.7 million, which was included in interest and other income on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 30, 2018. Fiscal first quarter revenue through the closing date of the divestiture for the PlaneTechs business of $8.0 million was reported in the PeopleManagement reportable segment for the year ended December 30, 2018.
The divestiture of PlaneTechs did not represent a strategic shift with a major effect on the company’s operations and financial results and, therefore was not reported as discontinued operations in the Consolidated Balance Sheets or Consolidated Statements of Operations and Comprehensive Income (Loss) for the periods presented.
v3.20.4
FAIR VALUE MEASUREMENT (Note)
12 Months Ended
Dec. 27, 2020
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENT FAIR VALUE MEASUREMENT
Assets measured at fair value on a recurring basis
Our assets measured at fair value on a recurring basis consisted of the following:
December 27, 2020
(in thousands)Total fair valueQuoted prices in active markets for identical assets (level 1)Significant other observable inputs (level 2)Significant unobservable inputs (level 3)
Cash and cash equivalents$62,507 $62,507 $— $— 
Restricted cash and cash equivalents56,105 56,105 — — 
Cash, cash equivalents and restricted cash (1)
$118,612 $118,612 $— $— 
Municipal debt securities$70,723 $— $70,723 $— 
Corporate debt securities85,937 — 85,937 — 
Agency mortgage-backed securities512 — 512 — 
U.S. government and agency securities1,124 — 1,124 — 
Restricted investments classified as held-to-maturity (2)$158,296 $— $158,296 $— 
Deferred compensation investments (3)$5,915 $5,915 $— $— 
December 29, 2019
(in thousands)Total fair valueQuoted prices in active markets for identical assets (level 1)Significant other observable inputs (level 2)Significant unobservable inputs (level 3)
Cash and cash equivalents$37,608 $37,608 $— $— 
Restricted cash and cash equivalents54,763 54,763 — — 
Cash, cash equivalents and restricted cash (1)
$92,371 $92,371 $— $— 
Municipal debt securities$74,236 $— $74,236 $— 
Corporate debt securities76,068 — 76,068 — 
Agency mortgage-backed securities1,376 — 1,376 — 
U.S. government and agency securities1,051 — 1,051 — 
Restricted investments classified as held-to-maturity (2)$152,731 $— $152,731 $— 
Deferred compensation investments (3)$13,670 $13,670 $— $— 
(1)Cash, cash equivalents and restricted cash consist of money market funds, deposits, and investments with original maturities of three months or less.
(2)Refer to Note 4: Restricted Cash and Investments for additional details on our held-to-maturity debt securities.
(3)Deferred compensation investments consist of mutual funds and money market funds.
Assets measured at fair value on a nonrecurring basis
We measure the fair value of certain non-financial assets on a non-recurring basis, including goodwill and certain intangible assets. During the first quarter of 2020, we performed an interim impairment test as of the last day of our first fiscal quarter (March 29, 2020). As a result of the test, goodwill and client relationship intangible assets with a total carrying value of $221.6 million were written down to their fair value, and an impairment charge of $175.2 million was recognized on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 27, 2020. There were no goodwill or intangible asset impairment charges recorded during fiscal 2019 or 2018. Refer to Note 6: Goodwill and Intangible Assets for additional details on the impairment charge and valuation methodologies.
The impairment was comprised as follows:
March 29, 2020
(in thousands)Total fair valueQuoted prices in active markets for identical assets (level 1)Significant other observable inputs (level 2)Significant unobservable inputs (level 3)Total impairment charge
Goodwill$31,705 $— $— $31,705 $(140,489)
Client relationships14,700 — — 14,700 (34,700)
Total$46,405 $— $— $46,405 $(175,189)
v3.20.4
RESTRICTED CASH AND INVESTMENTS (Note)
12 Months Ended
Dec. 27, 2020
Restricted Cash and Investments [Abstract]  
RESTRICTED CASH AND INVESTMENTS RESTRICTED CASH AND INVESTMENTS
The following is a summary of the carrying value of our restricted cash and investments:
(in thousands)December 27,
2020
December 29,
2019
Cash collateral held by insurance carriers$26,025 $24,612 
Cash and cash equivalents held in Trust29,410 23,681 
Investments held in Trust152,247 149,373 
Deferred compensation investments5,915 13,670 
Company-owned life insurance policies26,267 13,126 
Other restricted cash and cash equivalents670 6,470 
Total restricted cash and investments$240,534 $230,932 
Held-to-maturity
Restricted cash and investments include collateral that has been provided or pledged to insurance carriers for workers’ compensation and state workers’ compensation programs. Our insurance carriers and certain state workers’ compensation programs require us to collateralize a portion of our workers’ compensation obligation. The collateral typically takes the form of cash and cash equivalents and highly rated investment grade securities, primarily in debt and asset-backed securities. The majority of our collateral obligations are held in a Trust.
The amortized cost and estimated fair value of our held-to-maturity investments held in Trust, aggregated by investment category as of December 27, 2020 and December 29, 2019, were as follows:
December 27, 2020
(in thousands)Amortized costGross unrealized gainsGross unrealized lossesFair value
Municipal debt securities$67,287 $3,436 $— $70,723 
Corporate debt securities83,467 2,511 (41)85,937 
Agency mortgage-backed securities493 19 — 512 
U.S. government and agency securities1,000 124 — 1,124 
Total held-to-maturity investments$152,247 $6,090 $(41)$158,296 
December 29, 2019
(in thousands)Amortized costGross unrealized gainsGross unrealized lossesFair value
Municipal debt securities$72,017 $2,219 $— $74,236 
Corporate debt securities75,000 1,102 (34)76,068 
Agency mortgage-backed securities1,357 21 (2)1,376 
U.S. government and agency securities999 52 — 1,051 
Total held-to-maturity investments$149,373 $3,394 $(36)$152,731 
The amortized cost and fair value by contractual maturity of our held-to-maturity investments are as follows:
December 27, 2020
(in thousands)Amortized costFair value
Due in one year or less$20,307 $20,446 
Due after one year through five years115,421 119,981 
Due after five years through ten years16,519 17,869 
Total held-to-maturity investments$152,247 $158,296 
Actual maturities may differ from contractual maturities because the issuers of certain debt securities have the right to call or prepay their obligations without penalty. We have no significant concentrations of counterparties in our held-to-maturity investment portfolio.
Deferred compensation investments and company-owned life insurance policies
We hold mutual funds, money market funds and company-owned life insurance policies to support our deferred compensation liability. Unrealized gains and losses related to these investments still held at December 27, 2020, December 29, 2019 and December 30, 2018, included in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income (Loss), were as follows:
(in thousands)202020192018
Unrealized gains (losses)$723 $2,814 $(3,400)
v3.20.4
SUPPLEMENTAL BALANCE SHEET INFORMATION (Note)
12 Months Ended
Dec. 27, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
SUPPLEMENTAL BALANCE SHEET INFORMATION SUPPLEMENTAL BALANCE SHEET INFORMATION
Accounts receivable allowance
Due to the uncertain economic environment, it is difficult to estimate the full impact caused by COVID–19 on our clients. However, the allowance for credit loss for accounts receivable as of December 27, 2020 is our best estimate of the amount of expected credit losses. Should actual results deviate from what we have currently estimated, our allowance for credit losses could change significantly.
The activity related to the allowance for accounts receivable was as follows:
(in thousands)202020192018
Beginning balance$4,288 $5,026 $4,344 
Cumulative-effect adjustment (1)524 — — 
Current period provision6,300 7,661 10,042 
Write-offs(8,181)(8,358)(9,349)
Foreign currency translation(10)(41)(11)
Ending balance$2,921 $4,288 $5,026 
(1)As a result of our adoption of the accounting standard for credit losses, we recognized a cumulative-effect adjustment to our account receivable allowance of $0.5 million as of the beginning of the first quarter of 2020.
Prepaid expenses and other current assets
(in thousands)December 27,
2020
December 29,
2019
Prepaid software agreements$8,643 $9,576 
Other prepaid expenses8,631 7,761 
Other current assets8,863 13,380 
Prepaid expenses and other current assets$26,137 $30,717 

Property and equipment
(in thousands)December 27,
2020
December 29,
2019
Buildings and land$44,479 $43,621 
Software127,715 132,378 
Computers, furniture and equipment42,846 57,770 
Construction in progress9,997 8,727 
Gross property and equipment225,037 242,496 
Less accumulated depreciation(153,303)(176,346)
Property and equipment, net$71,734 $66,150 
Capitalized software costs, net of accumulated depreciation, were $27.6 million and $26.0 million as of December 27, 2020 and December 29, 2019, respectively, excluding amounts in construction in progress. Construction in progress consists primarily of purchased and internally-developed software.
Depreciation expense of property and equipment totaled $21.9 million, $19.7 million and $20.3 million for the years ended December 27, 2020, December 29, 2019 and December 30, 2018, respectively.
Accrued wages and benefits
(in thousands)December 27,
2020
December 29,
2019
Deferred employer payroll tax$55,420 $— 
Other accrued wages and benefits67,237 67,604 
Accrued wages and benefits$122,657 $67,604 
On March 27, 2020, the U.S. government enacted the CARES Act, which among other things, provided employer payroll tax credits for wages paid to employees who were unable to work during the COVID-19 outbreak. Additionally, we were allowed to delay payments for the employer portion of social security taxes (6.2% of taxable wages) incurred between March 27, 2020 and December 31, 2020, for both our temporary associates and permanent employees. We anticipate the deferred amount will be paid by September 15, 2021.
v3.20.4
GOODWILL AND INTANGIBLE ASSETS (Note)
12 Months Ended
Dec. 27, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
GOODWILL AND INTANGIBLE ASSETS GOODWILL AND INTANGIBLE ASSETS
Goodwill
The following table reflects changes in the carrying amount of goodwill during the period by reportable segments:
(in thousands)PeopleReadyPeopleManagementPeopleScoutTotal company
Balance atDecember 30, 2018
Goodwill before impairment$106,304 $81,092 $144,970 $332,366 
Accumulated impairment charge(46,210)(33,700)(15,169)(95,079)
Goodwill, net60,094 47,392 129,801 237,287 
Foreign currency translation— — 211 211 
Balance atDecember 29, 2019
Goodwill before impairment106,304 81,092 145,181 332,577 
Accumulated impairment charge(46,210)(33,700)(15,169)(95,079)
Goodwill, net60,094 47,392 130,012 237,498 
Impairment charge— (45,901)(94,588)(140,489)
Foreign currency translation— — (2,136)(2,136)
Balance atDecember 27, 2020
Goodwill before impairment106,304 81,092 143,045 330,441 
Accumulated impairment charge(46,210)(79,601)(109,757)(235,568)
Goodwill, net$60,094 $1,491 $33,288 $94,873 
Intangible assets
Finite-lived intangible assets
The following table presents our purchased finite-lived intangible assets:
 December 27, 2020December 29, 2019
(in thousands)Gross carrying amountAccumulated
amortization
Net
carrying
amount
Gross carrying amountAccumulated
amortization
Net
carrying
amount
Finite-lived intangible assets (1):
Customer relationships (2)$113,382 $(91,956)$21,426 $149,299 $(83,317)$65,982 
Trade names/trademarks2,088 (585)1,503 2,052 (441)1,611 
Technologies— — — 600 (520)80 
Total finite-lived intangible assets$115,470 $(92,541)$22,929 $151,951 $(84,278)$67,673 
(1)Excludes assets that are fully amortized.
(2)Balances at December 27, 2020 are net of impairment charge of $34.7 million.
Amortization expense of our finite-lived intangible assets was $10.1 million, $17.9 million and $20.8 million for the years ended December 27, 2020, December 29, 2019 and December 30, 2018, respectively.
The following table provides the estimated future amortization of finite-lived intangible assets as of December 27, 2020:
(in thousands)
2021$6,684 
20225,793 
20235,138 
20244,164 
2025330 
Thereafter820 
Total future amortization$22,929 
Indefinite-lived intangible assets
We also held indefinite-lived trade names/trademarks of $6.0 million as of December 27, 2020 and December 29, 2019.
Impairments
Goodwill
Interim impairment test
During the first quarter of 2020, the following events made it more likely than not that an impairment had occurred and accordingly, we performed an interim impairment test as of the last day of our fiscal first quarter (March 29, 2020).
We experienced a significant decline in our stock price during the first quarter of 2020. As a result of the decline in stock price, our market capitalization fell significantly below the recorded value of our consolidated net assets. The reduced market capitalization reflected the expected continued weakness in pricing and demand for our staffing services in a volatile economic climate. This was further impacted in March 2020 by COVID-19, which created a sudden global economic shock. We experienced a significant drop in client demand associated with government and societal actions taken to address COVID-19. We expected significant decreases to our revenues and corresponding operating results to continue due to weakness in pricing and demand for our services during the severe economic downturn. While demand was expected to recover in the future, the rate of recovery was expected to vary by geography and industry depending on the economic impact caused by COVID-19 and the rate at which infections would decline to a contained level.
Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions to evaluate the impact of operating and macroeconomic changes on each reporting unit. The fair value of each
reporting unit was estimated using a combination of a discounted cash flow methodology and the market valuation approach using publicly traded company multiples in similar businesses. This analysis required significant judgments, including estimation of future cash flows, which was dependent on internally developed forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows would occur, and determination of our weighted average cost of capital, which was risk-adjusted to reflect the specific risk profile of the reporting unit being tested. The weighted average cost of capital used ranged from 11.5% to 12.0%. The combined fair values for all reporting units were then reconciled to our aggregate market value of our shares of common stock on the date of valuation, while considering a reasonable control premium. As a result of this impairment test, we concluded that the carrying amounts of goodwill for our PeopleScout RPO, PeopleScout MSP and PeopleManagement On-Site reporting units exceeded their implied fair values and we recorded a non-cash impairment charge of $140.5 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 27, 2020. The goodwill carrying value of $45.9 million for our PeopleManagement On-Site reporting unit was fully impaired. The goodwill impairment charge for PeopleScout RPO and PeopleScout MSP was $92.2 million and $2.4 million, respectively.
Annual impairment test
Given the proximity of our interim impairment measurement date (last day of our fiscal first quarter - March 29, 2020) to our annual goodwill impairment measurement date (first day of our fiscal second quarter - March 30, 2020), we performed a qualitative assessment to determine whether it was more likely than not that the fair value of any of our reporting units was less than the carrying value. We considered the current and expected future economic and market conditions surrounding COVID-19 and concluded that it was not more likely than not that the goodwill associated with our reporting units were impaired as of the first day of our fiscal second quarter. Therefore, a quantitative assessment was not performed as of March 30, 2020.
Additionally, we did not identify any events or conditions that make it more likely than not that an impairment may have occurred during the period from March 30, 2020 to December 27, 2020. The remaining goodwill balances for PeopleScout RPO and PeopleScout MSP were $23.6 million and $9.7 million, respectively, as of December 27, 2020. Should actual results decline further or longer than we have currently estimated, the remaining goodwill balances may be further impaired. We will continue to closely monitor the operational performance of these reporting units.
Finite-lived intangible assets
Interim impairment test
With the decrease in demand for our services due to the economic impact caused by the response to COVID-19, we lowered our future expectations, which was the primary trigger of the impairment test as of the last day of our fiscal first quarter (March 29,2020) for certain of our acquired client relationships intangible assets. As a result of this impairment test, we recorded a non-cash impairment charge for our PeopleScout RPO and PeopleManagement On-Site client relationship intangible assets of $34.7 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 27, 2020. The impairment charge for PeopleScout RPO and PeopleManagement On-Site client relationship intangible assets was $25.0 million and $9.7 million, respectively. Considerable management judgment was necessary to determine key assumptions, including projected revenue of acquired clients and an appropriate discount rate of 12.0%. Additionally, we did not identify any events or conditions that make it more likely than not that an impairment may have occurred during the period from March 30, 2020 to December 27, 2020. The remaining client relationship intangible asset balances related to assets impaired for PeopleScout RPO and PeopleManagement On-Site were $5.1 million and $7.2 million, respectively, as of December 27, 2020.
Indefinite-lived intangible assets
Interim impairment test
We performed an interim impairment test of our indefinite-lived intangible assets as of the last day of our first fiscal quarter (March 29, 2020) for 2020 and determined that the estimated fair values exceeded the carrying amounts for our indefinite-lived trade names. Accordingly, no impairment charge was recognized.
Annual impairment test
Given the proximity of our interim impairment measurement date (last day of our fiscal first quarter - March 29, 2020) to our annual indefinite-lived trade names impairment measurement date (first day of our fiscal second quarter - March 30, 2020), we performed a qualitative assessment to determine whether it was more likely than not that the fair value of any of our indefinite-lived trade names was less than the carrying value. We concluded that it was not more likely than not that the indefinite-lived intangible assets associated with our Staff Management | SMX and PeopleScout trade names were impaired as of the first day of our fiscal second quarter. Therefore, a quantitative assessment was not performed as of March 30, 2020.
Additionally, we did not identify any events or conditions that make it more likely than not that an impairment may have occurred during the period from March 30, 2020 to December 27, 2020.
v3.20.4
WORKERS' COMPENSATION INSURANCE AND RESERVES (Note)
12 Months Ended
Dec. 27, 2020
Workers' Compensation Insurance and Reserves [Abstract]  
WORKERS' COMPENSATION INSURANCE AND RESERVES WORKERS’ COMPENSATION INSURANCE AND RESERVES
We provide workers’ compensation insurance for our associates and permanent employees. The majority of our current workers’ compensation insurance policies cover claims for a particular event above a $2.0 million deductible limit, on a “per occurrence” basis. This results in our being substantially self-insured.
Our workers’ compensation reserve for claims below the deductible limit is discounted to its estimated net present value using discount rates based on average returns of “risk-free” U.S. Treasury instruments available during the year in which the liability was incurred. The weighted average discount rate was 1.8% and 2.0% at December 27, 2020 and December 29, 2019, respectively. Payments made against self-insured claims are made over a weighted average period of approximately 5.5 years as of December 27, 2020.
The following table presents a reconciliation of the undiscounted workers’ compensation reserve to the discounted workers’ compensation reserve for the periods presented:
(in thousands)December 27,
2020
December 29,
2019
Undiscounted workers’ compensation reserve$273,502 $274,934 
Less discount on workers’ compensation reserve18,009 19,316 
Workers’ compensation reserve, net of discount255,493 255,618 
Less current portion66,007 73,020 
Long-term portion$189,486 $182,598 
Payments made against self-insured claims were $52.8 million, $63.1 million and $64.7 million for the years ended December 27, 2020, December 29, 2019 and December 30, 2018, respectively.
Our workers’ compensation reserve includes estimated expenses related to excess claims, and we record a corresponding receivable for the insurance coverage on excess claims based on the contractual policy agreements we have with insurance carriers. We discount this reserve and corresponding receivable to its estimated net present value using the discount rates based on average returns of “risk-free” U.S. Treasury instruments available during the year in which the liability was incurred. At December 27, 2020 and December 29, 2019, the weighted average rate was 1.3% and 2.4%, respectively. The claim payments are made and the corresponding reimbursements from our insurance carriers are received over an estimated weighted average period of approximately 17 years. The discounted workers’ compensation reserve for excess claims was $54.0 million and $45.3 million, and the corresponding receivable for the insurance on excess claims, net of valuation allowance was $52.9 million and $44.6 million as of December 27, 2020 and December 29, 2019, respectively.
The activity related to the allowance for insurance receivable was as follows:
(in thousands)202020192018
Beginning balance$629 $3,314 $3,778 
Cumulative-effect adjustment (1)72 — — 
Charged to expense13 120 120 
Release of allowance(629)(2,805)(584)
Ending balance$85 $629 $3,314 
(1)As a result of our adoption of the accounting standard for credit losses, we recognized a cumulative-effect adjustment to our insurance receivable valuation allowance of $0.1 million as of the beginning of the first quarter of 2020. Refer to Note 1: Summary of Significant Accounting Policies for further details.

Management evaluates the adequacy of the workers’ compensation reserves in conjunction with an independent quarterly actuarial assessment. Factors considered in establishing and adjusting these reserves include, among other things:
changes in medical and time loss (“indemnity”) costs;
changes in mix between medical only and indemnity claims;
regulatory and legislative developments impacting benefits and settlement requirements;
type and location of work performed;
impact of safety initiatives; and
positive or adverse development of claims, which considers the potential impact of COVID-19.
The table below presents the estimated future payout of our discounted workers’ compensation claims reserve for the next five years and thereafter as of December 27, 2020:
(in thousands)
2021$66,007 
202235,200 
202320,077 
202413,204 
20259,508 
Thereafter57,478 
Sub-total201,474 
Excess claims (1)54,019 
Total$255,493 
(1)Estimated expenses related to claims above our self-insured limits for which we have a corresponding receivable for the insurance coverage based on contractual policy agreements.
Workers’ compensation cost consists primarily of changes in self-insurance reserves net of changes in discount, monopolistic jurisdictions’ premiums, insurance premiums and other miscellaneous expenses. Workers’ compensation cost of $49.4 million, $60.2 million and $69.2 million was recorded in cost of services on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 27, 2020, December 29, 2019 and December 30, 2018, respectively.
v3.20.4
LONG-TERM DEBT (Note)
12 Months Ended
Dec. 27, 2020
Debt Disclosure [Abstract]  
LONG-TERM DEBT LONG-TERM DEBTOn March 16, 2020, we entered into a first amendment to our credit agreement with Bank of America, N.A., Wells Fargo Bank, N.A., PNC Bank, N.A., KeyBank, N.A. and HSBC Bank USA, N.A. dated as of July 13, 2018, which extended the maturity of the revolving credit facility established thereunder (the “Revolving Credit Facility”) to March 16, 2025 and modified certain other terms. On June 24, 2020, we entered into a second amendment to our credit agreement (the “Second Amendment”), which modified terms of our financial covenants as well as certain other provisions of the Revolving Credit Facility. On January 28, 2021, we entered into a third amendment to our credit agreement (the “Third Amendment”), which clarified the definition of the Asset Coverage Ratio financial covenant of the Revolving Credit Facility. The Third Amendment was effective as of December 27, 2020 (refer to Note 16: Subsequent Event for details of the Third Amendment).
The amended credit agreement provides for a revolving line of credit of up to $300.0 million with an option, subject to lender approval, to increase the amount to $450.0 million. Included in the Revolving Credit Facility is a $30.0 million sub-limit for “Swingline” loans and a $125.0 million sub-limit for letters of credit. At December 27, 2020, $6.1 million was utilized by outstanding standby letters of credit, leaving $293.9 million unused under the Revolving Credit Facility, which is constrained by our most restrictive covenant making $160.9 million available for additional borrowings. At December 29, 2019, $37.1 million was drawn on the Revolving Credit Facility, which included a $17.1 million Swingline loan.
Under the terms of the Revolving Credit Facility, we pay a variable rate of interest on funds borrowed under the revolving line of credit in excess of the Swingline loans, based on the U.S. Dollar London Interbank Offered Rate (“LIBOR”) plus an applicable spread between 1.25% and 3.50%. Alternatively, at our option, we may pay interest based on a base rate plus an applicable spread between 0.25% and 1.50%. The base rate is the greater of the prime rate (as announced by Bank of America), or the federal funds rate plus 0.50%. The applicable spread on LIBOR was 3.50% through the end of fiscal 2020, and will be determined by the consolidated leverage ratio thereafter, as defined in the amended credit agreement.
Under the terms of the Revolving Credit Facility, we are required to pay a variable rate of interest on funds borrowed under the Swingline loan based on the base rate plus applicable spread between 0.25% and 1.50%, as described above.
A commitment fee between 0.25% and 0.50% is applied against the Revolving Credit Facility’s unused borrowing capacity, with the specific rate determined by the consolidated leverage ratio, as defined in the amended credit agreement. Letters of credit are priced at a margin between 1.00% and 3.25%, plus a fronting fee of 0.50%.
Obligations under the Revolving Credit Facility are guaranteed by TrueBlue and material U.S. domestic subsidiaries, and are secured by substantially all of the assets of TrueBlue and material U.S. domestic subsidiaries. The amended credit agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, including, among others, financial covenants. The Second Amendment suspended testing of certain covenant through June 27, 2021 (second quarter of 2021).
The following financial covenants, as defined in the Second and Third Amendments, are currently in effect through the second quarter of 2021:
Asset Coverage Ratio of greater than 1.00, defined as the ratio of 60% of accounts receivable to the difference of total debt outstanding and unrestricted cash in excess of $50.0 million, subject to certain minimums. As of December 27, 2020, our asset coverage ratio was 27.4.
Liquidity greater than $150.0 million, defined as the sum of unrestricted cash and availability under the aggregate revolving commitments. As of December 27, 2020, our liquidity was greater than $150.0 million at $356.4 million.
The following financial covenant, as defined in the Second Amendment, will be in effect for the first and second quarter of 2021:
EBITDA, as defined in the amended credit agreement, greater than $12.0 million for the trailing three quarters ending Q1 2021 and greater than $15.0 million for the trailing four quarters ending Q2 2021. As of December 27, 2020, EBITDA for the trailing three and four quarters was $35.6 million and $47.0 million, respectively.
The following financial covenants, as defined in the Second Amendment, will be in effect starting the third quarter of 2021 and thereafter:
Consolidated leverage ratio greater than 4.00 for the third and fourth quarters of 2021 and greater than 3.00 thereafter, defined as our funded indebtedness divided by trailing twelve months consolidated EBITDA, as defined in the amended credit agreement.
Consolidated fixed charge coverage ratio greater than 1.25, defined as the trailing twelve months bank-adjusted cash flow divided by cash interest expense.
As of December 27, 2020, we were in compliance with all effective covenants related to the Revolving Credit Facility.
v3.20.4
COMMITMENTS AND CONTINGENCIES (Note)
12 Months Ended
Dec. 27, 2020
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES COMMITMENTS AND CONTINGENCIES
Workers’ compensation commitments
We have provided our insurance carriers and certain states with commitments in the form and amounts listed below:
(in thousands)December 27,
2020
December 29,
2019
Cash collateral held by workers’ compensation insurance carriers$22,253 $22,256 
Cash and cash equivalents held in Trust29,410 23,681 
Investments held in Trust152,247 149,373 
Letters of credit (1)6,095 6,202 
Surety bonds (2)20,616 20,731 
Total collateral commitments$230,621 $222,243 
(1)We have agreements with certain financial institutions to issue letters of credit as collateral.
(2)Our surety bonds are issued by independent insurance companies on our behalf and bear annual fees based on a percentage of the bond, which are determined by each independent surety carrier. These fees do not exceed 2.0% of the bond amount, subject to a minimum charge. The terms of these bonds are subject to review and renewal every one to four years and most bonds can be canceled by the sureties with as little as 60 days’ notice.

Operating leases

We have contractual commitments in the form of operating leases related to office space, vehicles and equipment. Our leases have remaining terms of up to 16 years. Most leases include one or more options to renew, which can extend the lease term up to 10 years. The exercise of lease renewal options is at our sole discretion. Typically, at the commencement of a lease, we are not reasonably certain we will exercise renewal options, and accordingly they are not considered in determining the initial lease term. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We rent or sublease real estate to third parties in limited circumstances.

Operating lease costs were comprised of the following:
(in thousands)20202019
Operating lease costs$16,607 $17,333 
Short-term lease costs7,781 7,110 
Other lease costs (1)
3,922 4,722 
Total lease costs
$28,310 $29,165 
(1)Other lease costs include immaterial variable lease costs, net of sublease income.

Other information related to our operating leases was as follows:
December 27,
2020
December 29,
2019
Weighted average remaining lease term in years9.04.1
Weighted average discount rate5.0%5.0%
Future non-cancelable minimum lease payments under our operating lease commitments as of December 27, 2020, are as follows for each of the next five years and thereafter:
(in thousands)
20217,164 
202212,415 
202310,149 
20247,420 
20255,165 
Thereafter
36,252 
Total undiscounted future non-cancelable minimum lease payments (1)
78,565 
Less: Imputed interest (2)
9,830 
Present value of lease liabilities
$68,735 
(1)Operating lease payments exclude approximately $2.4 million of legally binding minimum lease payments for leases signed but not yet commenced.
(2)Amount necessary to reduce net minimum lease payments to present value calculated using our incremental borrowing rates, which are consistent with the lease terms at adoption date (for those leases in existence as of the adoption date of the new lease standard) or lease inception (for those leases entered into after the adoption date).
Purchase obligations
Purchase obligations include agreements to purchase goods and services in the ordinary course of business that are enforceable, legally binding and specify all significant terms. Purchase obligations do not include agreements that are cancellable without significant penalty. We had $39.4 million of purchase obligations as of December 27, 2020, of which $22.5 million are expected to be paid in 2021.
Legal contingencies and developments
We are involved in various proceedings arising in the normal course of conducting business. We believe the liabilities included in our financial statements reflect the probable loss that can be reasonably estimated. The resolution of those proceedings is not expected to have a material effect on our results of operations or financial condition.
v3.20.4
SHAREHOLDERS' EQUITY (Note)
12 Months Ended
Dec. 27, 2020
Equity [Abstract]  
SHAREHOLDERS' EQUITY SHAREHOLDERS’ EQUITY
Common stock
Shares of common stock outstanding include shares of unvested restricted stock. Unvested restricted stock included in reportable shares outstanding was 0.9 million and 0.8 million shares as of December 27, 2020 and December 29, 2019, respectively.
On September 15, 2017, our Board authorized a $100.0 million share repurchase program of our outstanding common stock. On October 16, 2019, our Board authorized a $100.0 million share repurchase program of our outstanding common stock. These share repurchase programs do not obligate us to acquire any particular amount of common stock and do not have an expiration date. We may choose to purchase shares in the open market, from individual holders, through an accelerated share repurchase program or otherwise.
As part of the existing share repurchase plans, on February 28, 2020 we entered into an accelerated share repurchase (“ASR”) agreement with a third-party financial institution to repurchase $40.0 million of our common stock. Under the ASR agreement, we paid $40.0 million to the financial institution and received an initial delivery of 2,150,538 shares in the first quarter of 2020, which represented 80% of the total shares we expected to receive based on the market price at the time of the initial delivery. This transaction was initiated prior to the medical community’s acknowledgment of the expected severity of the impact COVID-19 would have on the U.S.
The final number of shares delivered upon settlement of the agreement was determined by the volume weighted average price of our shares over the term of the ASR agreement, less the agreed-upon discount. On July 2, 2020, we settled our ASR agreement resulting in the receipt of 626,948 additional shares from the third-party financial institution. The total number of shares delivered under the ASR agreement was 2,777,486 with a volume weighted average price over the term of the ASR agreement of $14.40. During the year ended December 27, 2020, we repurchased an additional 779,068 shares in the open market, for a volume weighted average price of $15.85.
As of December 27, 2020, $66.7 million remains available for repurchase of common stock under the 2019 authorization. The second amendment to our credit agreement prohibits us from repurchasing shares until July 1, 2021.
Preferred stock
We have authorized 20.0 million shares of blank check preferred stock. The blank check preferred stock is issuable in one or more series, each with such designations, preferences, rights, qualifications, limitations and restrictions as our Board may determine and set forth in supplemental resolutions at the time of issuance, without further shareholder action. The initial series of blank check preferred stock authorized by the Board was designated as Series A Preferred Stock. We had no outstanding shares of preferred stock in any of the years presented.
v3.20.4
STOCK-BASED COMPENSATION (Note)
12 Months Ended
Dec. 27, 2020
Share-based Payment Arrangement [Abstract]  
STOCK-BASED COMPENSATION STOCK-BASED COMPENSATION
We record stock-based compensation expense for restricted and unrestricted stock awards, performance share units, and shares purchased under an employee stock purchase plan.
Our 2016 Omnibus Incentive Plan, effective May 11, 2016 (“Incentive Plan”), provides for the issuance or delivery of up to 1.5 million shares of our common stock over the full term of the Incentive Plan.
Restricted and unrestricted stock awards and performance share units

Under the Incentive Plan, restricted stock awards are granted to executive officers and key employees and vest annually over three or four years. Effective 2020, restricted stock awards are granted to members of our Board and vest over an eight month period, or receipt of the shares may be deferred until after a director leaves the Board. Prior to 2020, unrestricted stock awards were granted to members of our Board which vested immediately, or receipt of the shares could be deferred until after a director left the Board. Restricted and unrestricted stock-based compensation expense is calculated based on the grant-date market value. We recognize compensation expense on a straight-line basis over the vesting period, net of estimated forfeitures.
Effective 2020, performance share units are only granted to executive officers. Prior to 2020, performance share units were also granted to certain employees. Vesting of the performance share units is contingent upon the achievement of return on equity goals at the end of each three-year performance period. Each performance share unit is equivalent to one share of common stock. Compensation expense is calculated based on the grant-date market value of our stock and is recognized ratably over the performance period for the performance share units which are expected to vest. Our estimate of the performance units expected to vest is reviewed and adjusted as appropriate each quarter.
Restricted and unrestricted stock awards and performance share units activity for the year ended December 27, 2020, was as follows:
(shares in thousands)SharesWeighted- average grant-date price
Non-vested at beginning of period1,371 $26.45 
Granted848 $17.06 
Vested(448)$24.55 
Forfeited(248)$22.61 
Non-vested at the end of the period1,523 $22.77 
The weighted average grant-date price of restricted and unrestricted stock awards and performance share units granted during the years 2020, 2019 and 2018 was $17.06, $23.05 and $26.87, respectively. As of December 27, 2020, total unrecognized stock-based compensation expense related to non-vested restricted stock and performance share units, net of forfeitures, was approximately $12.4 million and $1.0 million, respectively, which are estimated to be recognized over a weighted average period of 1.7 years. The total fair value of restricted shares vested during fiscal 2020, 2019 and 2018 was $8.6 million, $8.2 million and $9.9 million, respectively. Total fair value of performance shared vested during fiscal 2020 was $2.0 million. No performance shares vested during fiscal 2019 or 2018.
Employee Stock Purchase Plan
Our ESPP reserves 1.0 million shares of common stock for purchase. The plan allows eligible employees to contribute up to 10% of their earnings toward the monthly purchase of the company’s common stock. The employee’s purchase price is 85.0% of the lesser of the fair market value of shares on either the first day or the last day of each month. We consider our ESPP to be a component of our stock-based compensation and accordingly we recognize compensation expense over the requisite service period for stock purchases made under the plan. The requisite service period begins on the enrollment date and ends on the purchase date, the duration of which is one month.
The following table summarizes transactions under our ESPP from fiscal 2020, 2019 and 2018:
(shares in thousands)SharesAverage price per share
Issued during fiscal202068 $13.46 
Issued during fiscal201973 $18.31 
Issued during fiscal201868 $22.17 
Stock-based compensation expense
Total stock-based compensation expense for fiscal years 2020, 2019 and 2018, which is included in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income (Loss), was $9.1 million, $9.8 million and $13.9 million, respectively. The related tax benefit was $1.9 million, $2.1 million and $2.9 million for fiscal 2020, 2019 and 2018, respectively.
v3.20.4
DEFINED CONTRIBUTION PLANS (Note)
12 Months Ended
Dec. 27, 2020
Retirement Benefits [Abstract]  
DEFINED CONTRIBUTION PLANS DEFINED CONTRIBUTION PLANSWe offer both qualified and non-qualified defined contribution plans to eligible employees. Participating employees may elect to defer and contribute a portion of their eligible compensation. The plans offer discretionary matching contributions. The liability for the non-qualified plan was $30.6 million and $31.2 million as of December 27, 2020 and December 29, 2019, respectively, of which $4.2 million and $4.4 million have been included in Accrued wages and benefits on our Consolidated Balance Sheets. The expense for our qualified and non-qualified deferred compensation plans, including our discretionary matching contributions, totaled $3.7 million, $5.5 million and $5.3 million for fiscal 2020, 2019 and 2018, respectively, and is recorded in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income (Loss).
v3.20.4
INCOME TAXES (Note)
12 Months Ended
Dec. 27, 2020
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The provision for income taxes is comprised of the following:
(in thousands)202020192018
Current taxes:
Federal$(7,318)$(933)$5,088 
State(382)3,835 5,208 
Foreign3,045 2,806 1,542 
Total current taxes(4,655)5,708 11,838 
Deferred taxes:
Federal(22,416)846 (1,283)
State(3,369)1,216 120 
Foreign(981)(799)(766)
Total deferred taxes(26,766)1,263 (1,929)
Provision for income taxes$(31,421)$6,971 $9,909 
The items accounting for the difference between income taxes computed at the statutory federal income tax rate and income taxes reported on the Consolidated Statements of Operations and Comprehensive Income are as follows:
(in thousands, except percentages)2020%2019%2018%
Income tax expense (benefit) based on statutory rate$(36,385)21.0 %$14,709 21.0 %$15,889 21.0 %
Increase (decrease) resulting from:
State income taxes, net of federal benefit(6,631)3.8 3,666 5.3 3,826 5.1 
Job and other tax credits, net(7,719)4.5 (13,627)(19.4)(12,303)(16.3)
Benefit from the CARES Act(2,939)1.7 — — — — 
Non-deductible goodwill impairment charge21,849 (12.6)— — — — 
Non-deductible/non-taxable items124 (0.1)1,559 2.2 1,191 1.6 
Foreign taxes(977)0.5 282 0.4 735 1.0 
Other, net1,257 (0.7)382 0.5 571 0.7 
Total tax expense (benefit)$(31,421)18.1 %$6,971 10.0 %$9,909 13.1 %
Our effective tax rate for fiscal 2020 was 18.1%. The difference between the statutory federal income tax rate of 21.0% and our effective income tax rate results primarily from a nondeductible goodwill and intangible asset impairment charge, the impact of the CARES Act and the federal WOTC. Other differences result from state and foreign income taxes, certain non-deductible expenses, tax exempt interest, and tax effects of stock-based compensation.
The non-cash impairment charge of $175.2 million, recorded in the first quarter of 2020, includes $84.7 million (tax effect of $21.8 million) related to reporting units from stock acquisitions and accordingly are not deductible for tax purposes. The remaining impairment charges of $90.5 million (tax effect of $23.3 million) related to reporting units from asset acquisitions and accordingly are deductible for tax purposes.
U.S. and international components of income before tax expense was as follows:
(in thousands)202020192018
U.S.$(148,492)$61,610 $73,051 
International(24,770)8,434 2,612 
Income (loss) before tax expense (benefit)$(173,262)$70,044 $75,663 
The components of deferred tax assets and liabilities were as follows:
(in thousands)December 27,
2020
December 29,
2019
Deferred tax assets:
Allowance for doubtful accounts$991 $973 
Workers’ compensation— 817 
Accounts payable and other accrued expenses7,933 3,818 
Net operating loss carryforwards3,679 2,085 
Tax credit carryforwards18,461 9,528 
Accrued wages and benefits7,938 5,148 
Deferred compensation10,130 6,622 
Lease liabilities21,771 8,670 
Other1,047 969 
Total71,950 38,630 
Valuation allowance(3,072)(1,780)
Total deferred tax asset, net of valuation allowance68,878 36,850 
Deferred tax liabilities:
Prepaid expenses, deposits and other current assets(1,840)(1,282)
Lease right-of-use assets(20,692)(7,985)
Depreciation and amortization(13,274)(24,355)
Workers’ compensation(3,053)— 
Total deferred tax liabilities(38,859)(33,622)
Deferred income taxes, net$30,019 $3,228 
Deferred taxes related to our foreign currency translation were immaterial for fiscal 2020, 2019 and 2018.
The activity related to the income tax valuation allowance was as follows:
(in thousands)202020192018
Beginning balance$1,780 $2,079 $2,508 
Charged to expense1,292 — — 
Release of allowance— (299)(429)
Ending balance$3,072 $1,780 $2,079 
The following table summarizes our NOLs and credit carryforwards along with their respective valuation allowance as of December 27, 2020:
(in thousands)Carryover tax benefitValuation allowanceExpected
benefit
Year expiration begins
Year-end tax attributes:
Federal WOTCs$17,049 $— $17,049 2039
State NOLs2,949 (931)2,018 Various
Foreign NOLs730 (730)— Various
California Enterprise Zone credits1,411 (1,411)— 2023
Foreign alternative minimum tax credits1,103 — 1,103 2028
Total$23,242 $(3,072)$20,170 
As of December 27, 2020, our liability for unrecognized tax benefits was $1.9 million. If recognized, $1.5 million would impact our effective tax rate. We do not believe the amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the year ended December 27, 2020. This liability is recorded in other long-term liabilities on our Consolidated
Balance Sheets. In general, the tax years 2017 through 2019 remain open to examination by the major taxing jurisdictions where we conduct business.
The following table summarizes the activity related to our unrecognized tax benefits:
(in thousands)202020192018
Beginning balance$2,078 $2,190 $2,210 
Increases for tax positions related to the current year218 318 377 
Reductions due to lapsed statute of limitations(366)(430)(397)
Ending balance$1,930 $2,078 $2,190 
We recognize interest and penalties related to unrecognized tax benefits within income tax expense on the accompanying Consolidated Statements of Operations and Comprehensive Income. Accrued interest and penalties are included within other long-term liabilities on the Consolidated Balance Sheets. Related to the unrecognized tax benefits noted above, we accrued an immaterial amount for interest and penalties during fiscal 2020 and, in total, as of December 27, 2020, have recognized a liability for penalties of $0.2 million and interest of $1.1 million.
v3.20.4
NET INCOME (LOSS) PER SHARE (Note)
12 Months Ended
Dec. 27, 2020
Earnings Per Share [Abstract]  
NET INCOME (LOSS) PER SHARE NET INCOME (LOSS) PER SHARE
Diluted common shares were calculated as follows:
(in thousands, except per share data)202020192018
Net income (loss)$(141,841)$63,073 $65,754 
Weighted average number of common shares used in basic net income (loss) per common share35,365 38,778 39,985 
Dilutive effect of non-vested restricted stock— 401 290 
Weighted average number of common shares used in diluted net income (loss) per common share35,365 39,179 40,275 
Net income (loss) per common share:
Basic$(4.01)$1.63 $1.64 
Diluted$(4.01)$1.61 $1.63 
Anti-dilutive shares894 225 538 
Since we reported a loss for the year ended December 27, 2020, all potentially dilutive securities were antidilutive and accordingly, basic net loss per share and diluted net loss per share were equal.
v3.20.4
SEGMENT INFORMATION (Note)
12 Months Ended
Dec. 27, 2020
Segment Reporting [Abstract]  
SEGMENT INFORMATION SEGMENT INFORMATION
Our operating segments and reportable segments are described below:
Our PeopleReady reportable segment provides blue-collar, contingent staffing through the PeopleReady operating segment. PeopleReady provides on-demand and skilled labor in a broad range of industries that include construction, manufacturing and logistics, warehousing and distribution, retail, waste and recycling, energy, hospitality, and general labor.
Our PeopleManagement reportable segment provides contingent labor and outsourced industrial workforce solutions, primarily on-site at the client’s facility, through the following operating segments, which we have aggregated into one reportable segment in accordance with U.S. GAAP:
On-site: On-site management and recruitment for the contingent industrial workforce of manufacturing, warehouse, and distribution facilities; and
Centerline Drivers: Recruitment and management of contingent and dedicated commercial drivers to the transportation and distribution industries.
Effective March 12, 2018, we divested the PlaneTechs business within our PeopleManagement reportable segment. For additional information, see Note 2: Acquisition and Divestiture.
Our PeopleScout reportable segment provides high-volume, permanent employee recruitment process outsourcing, employer branding services and management of outsourced labor service providers through the following operating segments, which we have aggregated into one reportable segment in accordance with U.S. GAAP:
PeopleScout RPO: Outsourced recruitment of permanent employees on behalf of clients and employer branding services; and
PeopleScout MSP: Management of multiple third-party staffing vendors on behalf of clients.
Effective June 12, 2018, we acquired TMP through PeopleScout. Accordingly, the results associated with the acquisition are included in our PeopleScout operating segment. For additional information, see Note 2: Acquisition and Divestiture.
The following table presents our revenue disaggregated by major source and segment and a reconciliation of segment revenue from services to total company revenue:
(in thousands)202020192018
Revenue from services
Contingent staffing
PeopleReady$1,099,462 $1,474,062 $1,522,076 
PeopleManagement586,822 642,233 728,254 
Human resource outsourcing
PeopleScout160,076 252,484 248,877 
Total company$1,846,360 $2,368,779 $2,499,207 
The following table presents a reconciliation of segment profit to income before tax expense:
(in thousands)202020192018
Segment profit:
PeopleReady$43,200 $82,106 $85,998 
PeopleManagement11,717 12,593 21,627 
PeopleScout4,525 37,831 47,383 
59,442 132,530 155,008 
Corporate unallocated (20,714)(21,870)(26,066)
Work Opportunity Tax Credit processing fees(495)(960)(985)
Acquisition/integration costs— (1,562)(2,672)
Goodwill and intangible asset impairment charge(175,189)— — 
Gain on deferred compensation assets(1,725)(495)— 
Workforce reduction costs(12,570)(3,301)— 
COVID-19 government subsidies, net6,211 — — 
Other benefits (costs)2,189 (614)(10,317)
Depreciation and amortization (32,031)(37,549)(41,049)
Income (loss) from operations(174,882)66,179 73,919 
Interest expense and other income, net1,620 3,865 1,744 
Income (loss) before tax expense (benefit)$(173,262)$70,044 $75,663 
Asset information by reportable segment is not presented since we do not manage our segments on a balance sheet basis.
Our international operations are primarily in Canada, Australia and the United Kingdom. Revenue by region was as follows:
(in thousands, except percentages)2020%2019%2018%
United States$1,729,171 93.7 %$2,222,543 93.8 %$2,369,024 94.8 %
International operations117,189 6.3 146,236 6.2 130,183 5.2 
Total revenue from services$1,846,360 100.0 %$2,368,779 <