TRUEBLUE, INC., 10-K filed on 2/22/2019
Annual Report
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Document and Entity Information - USD ($)
$ in Billions
12 Months Ended
Dec. 30, 2018
Jan. 31, 2019
Jul. 01, 2018
Document and Entity Information [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Dec. 30, 2018    
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
Trading Symbol TBI    
Entity Registrant Name TrueBlue, Inc.    
Entity Central Index Key 0000768899    
Current Fiscal Year End Date --12-30    
Entity Well-Known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Filer Category Large Accelerated Filer    
Entity Emerging Growth Company false    
Entity Small Business false    
Entity Shell Company false    
Entity Common Stock, Shares Outstanding   40,074,000  
Entity Public Float     $ 1.1
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CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Dec. 30, 2018
Dec. 31, 2017
Current assets:    
Cash and cash equivalents $ 46,988 $ 28,780
Accounts receivable, net of allowance for doubtful accounts of $5,026 and $4,344 355,373 374,273
Prepaid expenses, deposits and other current assets 22,141 20,605
Income tax receivable 5,325 4,621
Total current assets 429,827 428,279
Property and equipment, net 57,671 60,163
Restricted cash and investments 235,443 239,231
Deferred income taxes, net 4,388 3,783
Goodwill 237,287 226,694
Intangible assets, net 91,408 104,615
Workers' compensation claim receivables net of valuation allowance 44,915 45,048
Other assets, net 13,905 1,218
Total assets 1,114,844 1,109,031
Current liabilities:    
Accounts payable and other accrued expenses 69,814 55,091
Accrued wages and benefits 77,089 76,894
Current portion of workers’ compensation claims reserve 76,421 77,218
Other current liabilities 2,202 3,216
Total current liabilities 225,526 212,419
Workers’ compensation claims reserve, less current portion 190,025 197,105
Long-term debt, less current portion 80,000 116,489
Long-term deferred compensation liabilities 21,747 21,866
Other long-term liabilities 6,107 6,305
Total liabilities 523,405 554,184
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; 40,054 and 41,098 shares issued and outstanding 1 1
Accumulated other comprehensive loss (14,649) (6,804)
Retained earnings 606,087 561,650
Total shareholders’ equity 591,439 554,847
Total liabilities and shareholders’ equity $ 1,114,844 $ 1,109,031
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CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($)
shares in Thousands, $ in Thousands
Dec. 30, 2018
Dec. 31, 2017
Allowance for doubtful accounts $ 5,026 $ 4,344
Preferred stock, par value (in dollars per share) $ 0.131 $ 0.131
Preferred stock, shares authorized 20,000 20,000
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 100,000 100,000
Common stock, shares issued 40,054 41,098
Common stock, shares outstanding 40,054 41,098
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CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME (LOSS) - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Dec. 30, 2018
Dec. 31, 2017
Jan. 01, 2017
Revenue from services $ 2,499,207 $ 2,508,771 $ 2,750,640
Cost of services 1,833,607 1,874,298 2,070,922
Gross profit 665,600 634,473 679,718
Selling, general and administrative expense 550,632 510,794 546,477
Depreciation and amortization 41,049 46,115 46,692
Goodwill and intangible asset impairment charge 0 0 103,544
Income (loss) from operations 73,919 77,564 (16,995)
Interest expense (4,881) (5,494) (7,166)
Interest and other income 6,625 5,480 3,821
Interest and other income (expense), net 1,744 (14) (3,345)
Income (loss) before tax expense (benefit) 75,663 77,550 (20,340)
Income tax expense (benefit) 9,909 22,094 (5,089)
Net income (loss) $ 65,754 $ 55,456 $ (15,251)
Net income (loss) per common share:      
Basic (in dollars per share) $ 1.64 $ 1.35 $ (0.37)
Diluted (in dollars per share) $ 1.63 $ 1.34 $ (0.37)
Weighted average shares outstanding:      
Basic (in shares) 39,985 41,202 41,648
Diluted (in shares) 40,275 41,441 41,648
Other comprehensive income (loss):      
Total other comprehensive income (loss), net of tax $ (6,320) $ 4,629 $ 2,580
Comprehensive income (loss) 59,434 60,085 (12,671)
Foreign currency translation adjustment      
Other comprehensive income (loss):      
Foreign currency translation adjustment, net of tax (6,320) 3,355 1,830
Unrealized gain on investments, net of tax      
Other comprehensive income (loss):      
Unrealized gain on investments, net of tax $ 0 $ 1,274 $ 750
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CONSOLIDATED STATEMENTS OF SHARHOLDERS' EQUITY CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($)
shares in Thousands, $ in Thousands
Total
Common stock
Retained earnings
Accumulated other comprehensive income
Beginning balance (in shares) at Dec. 25, 2015   42,024    
Beginning balance at Dec. 25, 2015 $ 535,573 $ 1 $ 549,585 $ (14,013)
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Net income (loss) (15,251)      
Other comprehensive income (loss), net of tax 2,580     2,580
Purchases and retirement of common stock (in shares)   (332)    
Purchases and retirement of common stock (5,748)   (5,748)  
Issuances under equity plans, including tax benefits (in shares)   445    
Issuances under equity plans, including tax benefits (1,338)   (1,338)  
Stock-based compensation (in shares)   34    
Stock-based compensation 9,363   9,363  
Ending balance (in shares) at Jan. 01, 2017   42,171    
Ending balance at Jan. 01, 2017 525,179 $ 1 536,611 (11,433)
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Net income (loss) 55,456      
Other comprehensive income (loss), net of tax 4,629     4,629
Purchases and retirement of common stock (in shares)   (1,530)    
Purchases and retirement of common stock (36,680)   (36,680)  
Issuances under equity plans, including tax benefits (in shares)   418    
Issuances under equity plans, including tax benefits (1,481)   (1,481)  
Stock-based compensation (in shares)   39    
Stock-based compensation 7,744   7,744  
Change in accounting standard cumulative-effect adjustment $ 0      
Ending balance (in shares) at Dec. 31, 2017 41,098 41,098    
Ending balance at Dec. 31, 2017 $ 554,847 $ 1 561,650 (6,804)
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Net income (loss) 65,754      
Other comprehensive income (loss), net of tax (6,320)     (6,320)
Purchases and retirement of common stock (in shares)   (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  
Change in accounting standard cumulative-effect adjustment $ (1,525)   1,525 (1,525)
Ending balance (in shares) at Dec. 30, 2018 40,054 40,054    
Ending balance at Dec. 30, 2018 $ 591,439 $ 1 $ 606,087 $ (14,649)
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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
12 Months Ended
Dec. 30, 2018
Dec. 31, 2017
Jan. 01, 2017
Cash flows from operating activities:      
Net income (loss) $ 65,754 $ 55,456 $ (15,251)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
Depreciation and amortization 41,049 46,115 46,692
Goodwill and intangible asset impairment charge 0 0 103,544
Provision for doubtful accounts 10,042 6,808 8,308
Stock-based compensation 13,876 7,744 9,363
Deferred income taxes (1,929) 2,440 (25,355)
Other operating activities 5,154 2,349 6,859
Changes in operating assets and liabilities, net of amounts acquired and divested:      
Accounts receivable 11,640 (28,483) 112,785
Income tax receivable (996) 14,875 9,450
Other assets (12,928) 5,289 470
Accounts payable and other accrued expenses 2,855 (10,569) (4,101)
Accrued wages and benefits (1,447) (2,888) (7,313)
Workers’ compensation claims reserve (7,877) (1,048) 11,070
Other liabilities 499 2,046 4,182
Net cash provided by operating activities 125,692 100,134 260,703
Cash flows from investing activities:      
Capital expenditures (17,054) (21,958) (29,042)
Acquisition of businesses, net of cash acquired (22,742) 0 (72,476)
Divestiture of business 10,587 0 0
Purchases of restricted investments (12,941) (50,601) (42,648)
Maturities of restricted investments 21,635 20,157 17,244
Other 0 (1,979) 2,979
Net cash used in investing activities (20,515) (54,381) (123,943)
Cash flows from financing activities:      
Purchases and retirement of common stock (34,818) (36,680) (5,748)
Net proceeds from employee stock purchase plans and stock options exercised 1,503 1,646 1,542
Common stock repurchases for taxes upon vesting of restricted stock (3,404) (3,127) (2,851)
Net change in revolving credit facility (15,900) (16,607) (105,579)
Payments on debt (22,397) (2,267) (2,456)
Payment of contingent consideration at acquisition date fair value 0 (18,300) 0
Other 0 0 (29)
Net cash used in financing activities (75,016) (75,335) (115,121)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (1,542) 191 1,772
Net change in cash, cash equivalents and restricted cash 28,619 (29,391) 23,411
Cash, cash equivalents and restricted cash, beginning of period 73,831 103,222 79,811
Cash, cash equivalents and restricted cash, end of period 102,450 73,831 103,222
Interest 4,373 3,811 4,083
Income taxes 12,898 4,593 10,312
Property, plant, and equipment purchased but not yet paid 1,553 375 1,471
Divestiture non-cash consideration 798 0 0
Non-cash acquisition adjustments $ 0 $ 0 $ 3,783
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
12 Months Ended
Dec. 30, 2018
Accounting Policies [Abstract]  
Significant Accounting Policies [Text Block]
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 growth and improve productivity. We serve clients in a wide variety of industries through our PeopleReady segment which offers industrial staffing services, our PeopleManagement segment which offers contingent and productivity-based on-site industrial staffing services, and our PeopleScout segment which offers recruitment process outsourcing and managed service provider services. We are headquartered in Tacoma, Washington.
Basis of presentation
The consolidated financial statements include the accounts of TrueBlue and all of its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Fiscal period end
The consolidated 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 fiscal years consisting of 52 weeks, all quarters will consist of 13 weeks. The fiscal year ended 2016 included 53 weeks, with the 53rd week falling in our fourth quarter. All other years presented include 52 weeks.
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. 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 temporary 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 (Loss). 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 worker’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 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 not material 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 employees’ contracts. The costs to fulfill these contracts are not material 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 selling, general and administrative expense were $8.1 million, $7.3 million and $7.8 million in fiscal 2018, 2017 and 2016, 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 doubtful accounts
Accounts receivable are recorded at the invoiced amount. We establish an allowance for doubtful accounts for estimated losses resulting from the failure of our clients to make required payments. The allowance for doubtful accounts is determined based on current collection efforts, historical collection trends, write-off experience, client credit risk and current economic data. The allowance for doubtful accounts is reviewed quarterly and represents our best estimate of the amount of probable credit losses. Past due balances are written off when it is probable the receivable will not be collected.
Restricted cash and investments
Cash and investments pledged as collateral and restricted to use for 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 are 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 review for impairment on a quarterly basis and do not consider temporary unrealized losses to be an impairment.
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 quoted prices 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 classified as available-for-sale 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. 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
Buildings
40
Computers and software
3 - 10
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 (Loss).
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 ten 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 office operations from leased locations. We also lease office spaces for our centralized support functions, vehicles and equipment. Many leases require payment of property taxes, insurance and common area maintenance, in addition to rent. The terms of our lease agreements generally range from three to five years, majority containing options to renew or cancel with 90 days notice.
Operating lease expense is included within selling, general and administrative expense on our Consolidated Statements of Operations and Comprehensive Income (Loss). For operating leases that contain predetermined fixed escalations of the minimum rent, we recognize the related rent expense on a straight-line basis from the date we take possession of the property to the end of the minimum lease term. We record any difference between the straight-line rent amounts and amounts payable under the leases as part of deferred rent, in accrued liabilities or long-term liabilities, as appropriate.
Cash or lease incentives received upon entering into certain operating leases (“tenant allowances”) are recognized on a straight-line basis as a reduction to rent from the date we take possession of the property through the end of the initial lease term. We record the unamortized portion of tenant allowances as a part of deferred rent, in accrued liabilities or long-term liabilities, as appropriate.
Intangible assets and other long-lived assets
Long-lived assets include property and equipment, and finite-lived intangible assets. These assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable.
We have indefinite-lived intangible assets related to our Staff Management | SMX (“Staff Management”) and PeopleScout trade names. We test our trade names annually for impairment, and when indications of potential impairment exist.
Goodwill
We evaluate goodwill and indefinite-lived intangible assets for impairment on an annual basis as of the first day of our second quarter, or more frequently if an event occurs or circumstances change that would indicate impairment may exist. 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.
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 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 selling, general and administrative expense on the Consolidated Statements of Operations and Comprehensive Income (Loss). 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 selling, general and administrative expense on the Consolidated Statements of Operations and Comprehensive Income (Loss).
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” U.S. Treasury instruments, 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 on the Consolidated Statements of Operations and Comprehensive Income (Loss) in the period when the changes in estimates 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 associated with the actuarially 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.
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 and tax credits that we expect will not be utilized within the permitted carryforward periods as of December 30, 2018 and December 31, 2017.
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 workers 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 other current liabilities on our Consolidated Balance Sheets. The total deferred compensation liability is largely offset by deferred compensation mutual funds classified as available-for-sale recorded in restricted cash and investments on our Consolidated Balance Sheets. These mutual funds are measured at fair value, with changes in market value recognized in selling, general and administrative expense on our Consolidated Statements of Operations and Comprehensive Income (Loss).
Stock-based compensation
Under various plans, officers, employees and non-employee directors have received or may receive grants of stock, restricted stock awards, performance share units or options 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 the stock’s fair market value on the grant date. For restricted stock and 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 consolidated 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 (“OCI”), when applicable. Currency gains and losses on intercompany loans with international subsidiaries are included, net of tax, in OCI.
Purchases and retirement of our common stock
We purchase our common stock under a program authorized by our Board of Directors. 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 (loss) per share
Basic net income (loss) per share is calculated by dividing net income (loss) 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. Anti-dilutive shares associated with our stock options relate to those stock options with an exercise price higher than the average market value of our stock during the periods presented.
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 doubtful accounts, estimates for asset and goodwill impairments, stock-based performance awards, assumptions underlying self-insurance reserves, contingent legal and regulatory 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.
Recently adopted accounting standards
Stock compensation
In May 2017, the Financial Accounting Standing Board (“FASB”) issued guidance to provide clarity and reduce diversity in practice when accounting for a change to the terms or conditions of share-based payment awards. The objective was to reduce the scope of transactions that would require modification accounting. Disclosure requirements remain unchanged. This amended guidance was effective for our fiscal years and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue), with early adoption permitted. We adopted this guidance for our fiscal first quarter of 2018. The adoption of the new standard did not have a material impact on our financial statements.
Business combinations
In January 2017, the FASB issued guidance clarifying the definition of a business, which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. This guidance was effective for fiscal years and interim periods beginning December 15, 2017 (Q1 2018 for TrueBlue) on a prospective basis. This standard did not have a material impact on our financial statements.
Restricted cash and cash equivalents
In November 2016, the FASB issued guidance to amend the presentation of restricted cash and restricted cash equivalents on the statement of cash flows. The standard requires restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This amended guidance was effective for fiscal years and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue). We adopted this guidance for our fiscal first quarter of 2018 using the retrospective transition method. Accordingly, the change in restricted cash and cash equivalents is no longer segregated on our Consolidated Statements of Cash Flows, and the $21.5 million and $19.8 million previously presented in the investing section for the years ended December 31, 2017 and January 1, 2017, respectively, are now included when reconciling the beginning-of-period and end-of-period cash, cash equivalents and restricted cash shown on our Consolidated Statements of Cash Flows.
Accounting for income taxes - intra-entity asset transfers
In October 2016, the FASB issued guidance on the accounting for income tax effects of intercompany sales or transfers of assets other than inventory. The guidance requires entities to recognize the income tax impact of an intra-entity sale or transfer of an asset other than inventory when the sale or transfer occurs, rather than when the asset has been sold to an outside party. This guidance was effective for fiscal years and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue). The guidance requires a modified retrospective application with a cumulative catch-up adjustment to opening retained earnings. We adopted this guidance for our fiscal first quarter of 2018. The adoption of the new standard did not have a material impact on our financial statements.
Statement of cash flows classification
In August 2016, the FASB issued guidance relating to how certain cash receipts and cash payments should be presented and classified in the statement of cash flows. The update was intended to reduce the existing diversity in practice. The amended guidance was effective for fiscal years, and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue). We adopted this guidance for our fiscal first quarter of 2018. The adoption of the new standard did not have an impact on our financial statements.
Financial instruments – recognition, measurement, presentation, and disclosure
In January 2016, the FASB issued guidance on the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The guidance was effective for annual and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue). Early adoption of the amendments in the guidance was not permitted, with limited exceptions. The guidance required a cumulative-effect adjustment be made to reclassify unrealized gains and losses related to available-for-sale equity securities from accumulated other comprehensive income, to retained earnings as of the beginning of the fiscal year of adoption. We adopted this guidance as of the first day of our fiscal first quarter of 2018 and reclassified from accumulated other comprehensive loss to retained earnings, $1.5 million in unrealized gains, net of tax on available-for-sale equity securities. Beginning in Q1 2018, change in market value for our available-for-sale equity securities is included in selling, general and administrative expense on our Consolidated Statements of Operation and Comprehensive Income (Loss).
Revenue from contracts with customers
In May 2014, the FASB issued guidance outlining a single comprehensive model for accounting for revenue arising from contracts with clients, which supersedes the previous revenue recognition accounting guidance. The guidance was effective for annual and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue). This guidance required an entity to recognize revenue when it transfers promised goods or services to clients in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We adopted this new guidance as of January 1, 2018 using the modified retrospective transition method. Results for reporting periods beginning after January 1, 2018 are presented under the new revenue recognition guidance, while prior period amounts were not adjusted and continue to be reported in accordance with previous accounting guidance. The adoption of this new guidance did not have a material impact on our consolidated financial statements as of the adoption date, or for the year ended December 30, 2018, except for expanded disclosures.
Recently issued accounting pronouncements not yet adopted
Intangibles-goodwill and other-internal-use software

In August 2018, the FASB issued guidance on accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. This new standard is intended to reduce complexity for the accounting for costs of implementing a cloud computing service arrangement. The standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Currently, we expense internal development labor as incurred. The new guidance will require those costs to be capitalized with the related amortization recorded in selling, general and administrative expense. In addition, capitalized development costs are required to be recorded as a prepaid asset (other asset) rather than a fixed asset, and license fees incurred during the development period should be expensed as incurred. We intend to early adopt the standard prospectively in Q1 2019, which will not have an impact on our consolidated financial statements.
Leases
In February 2016, the FASB issued guidance on lease accounting. The new guidance will continue to classify leases as either finance or operating, but will result in the lessee recognizing most operating leases on the balance sheet as right-of-use assets and lease liabilities. This guidance is effective for annual and interim periods beginning after December 15, 2018 (Q1 2019 for TrueBlue), with early adoption permitted. In July 2018, the FASB amended the standard to provide transition relief for comparative reporting, allowing companies to adopt the provisions of the new standard using a modified retrospective transition method on the adoption date, with a cumulative-effect adjustment to retained earnings recorded on the date of adoption. We have elected to adopt the standard using the transition relief provided in the July amendment. In preparation for adoption of the standard, we have implemented internal controls and key system functionality to enable the preparation of financial information.
We expect adoption of the standard to result in the recognition of operating lease right-of-use assets of approximately $33 million and corresponding lease liabilities of approximately $34 million as of the first day of our fiscal first quarter in 2019. The difference between the right-of-use asset and lease liability relates to the existing deferred rent liability associated with the leases to be capitalized. The existing deferred rent liability, which is the difference between the straight-line lease expense and cash paid, will reduce the right-of-use asset, upon adoption. Our accounting for capital leases will remain substantially unchanged. Adoption of the standard will not have a material impact on our Consolidated Statements of Operation and Comprehensive Income (Loss).
Financial instruments – credit losses
In June 2016, the FASB issued guidance on accounting for credit losses on financial instruments. This guidance sets forth a current expected credit loss model, which requires measurement of all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This guidance replaces the incurred loss impairment methodology under current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. We will be required to use a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. This guidance is effective for annual and interim periods beginning after December 15, 2019 (Q1 2020 for TrueBlue) with early adoption permitted no sooner than Q1 2019. A modified retrospective approach is required for all investments, except debt securities for which an other-than-temporary impairment had been recognized prior to the effective date, which will require a prospective transition approach. We plan to adopt this guidance on the effective date and are currently evaluating the impact of this standard on our consolidated financial statements, including accounting policies, processes and systems.
Other
Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.
v3.10.0.1
REVENUE RECOGNITION REVENUE RECOGNITION
12 Months Ended
Dec. 30, 2018
Revenue Recognition [Abstract]  
REVENUE RECOGNITION
REVENUE RECOGNITION
The following table presents our revenue disaggregated by major source:
 
Year ended
 
December 30, 2018
(in thousands)
PeopleReady
PeopleManagement
PeopleScout
Consolidated
Revenue from services:
 
 
 
 
Contingent staffing
$
1,522,076

$
728,254

$

$
2,250,330

Human resource outsourcing


248,877

248,877

Total company
$
1,522,076

$
728,254

$
248,877

$
2,499,207

v3.10.0.1
ACQUISITIONS AND DIVESTITURE
12 Months Ended
Dec. 30, 2018
Business Combinations [Abstract]  
Acquisitions
ACQUISITIONS AND DIVESTITURE
2018 acquisition
Effective June 12, 2018, we acquired all of the outstanding equity interests of TMP Holdings LTD (“TMP”), through PeopleScout, for a cash purchase price of $22.7 million, net of cash acquired of $7.0 million. TMP is a mid-sized recruitment process outsourcing (“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 $2.7 million for the year ended December 30, 2018, which are included in selling, general and administrative expense on the Consolidated Statements of Operations and Comprehensive Income (Loss) and cash flows from operating activities on the Consolidated Statements of Cash Flows for the year ended December 30, 2018.
The following table reflects our final 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

Purchase price allocated as follows:
 
Accounts receivable
$
9,770

Prepaid expenses, deposits and other current assets
337

Property and equipment
435

Customer relationships
6,286

Trade names/trademarks
1,738

Total assets acquired
18,566

Accounts payable and other accrued expenses
9,139

Accrued wages and benefits
1,642

Income tax payable
205

Deferred income tax liability
1,444

Total liabilities assumed
12,430

Net identifiable assets acquired
6,136

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 value
Estimated useful life in years
Customer relationships
$
6,286

3,7
Trade names/trademarks
1,738

14
Total acquired identifiable intangible assets
$
8,024

 

The acquired assets and assumed liabilities of TMP are included on our Consolidated Balance Sheet as of December 30, 2018, and the results of its operations and cash flows are reported on our Consolidated Statements of Operations and Comprehensive Income (Loss) and Consolidated Statements of Cash Flows for the period from June 12, 2018 to December 30, 2018. The amount of revenue from TMP included on our Consolidated Statements of Operations and Comprehensive Income (Loss) was $31.0 million from the acquisition date to December 30, 2018. The acquisition of TMP was not material 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 purchase 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, which began in April 2018. The outstanding balance is included in prepaid expenses, deposits and other current assets on the Consolidated Balance Sheets. The remaining purchase price balance consists of the preliminary working capital adjustment, which is included in prepaid expenses, deposits and other current assets on the Consolidated Balance Sheets. The company recognized a pre-tax gain on the divestiture of $0.7 million, which is 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.
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.
2016 acquisition
Effective January 4, 2016, we acquired certain assets and assumed certain liabilities of the RPO business of Aon Hewitt for a cash purchase price of $72.5 million, net of the final working capital adjustment. We amended our existing credit facility to temporarily increase the borrowing capacity by $30.0 million, which was used to fund the acquisition. The RPO business of Aon Hewitt broadened our PeopleScout RPO services and has been fully integrated into our PeopleScout reportable segment.
We incurred acquisition and integration-related costs of $6.6 million in connection with the acquisition of the RPO business of Aon Hewitt, which are included in selling, general and administrative expense on the Consolidated Statements of Operations and Comprehensive Income (Loss) and cash flows from operating activities on the Consolidated Statements of Cash Flows for the year ended January 1, 2017.
The following table reflects our final allocation of the purchase price:
(in thousands)
Purchase price allocation
Cash purchase price, net of working capital adjustment
$
72,476

Purchase price allocated as follows:
 
Accounts receivable
$
12,272

Prepaid expenses, deposits and other current assets
894

Customer relationships
34,900

Technologies
400

  Total assets acquired
48,466

Accrued wages and benefits
1,025

Other long-term liabilities
456

  Total liabilities assumed
1,481

Net identifiable assets acquired
46,985

Goodwill (1)
25,491

Total consideration allocated
$
72,476


(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 the RPO business of Aon Hewitt. Goodwill is deductible for income tax purposes over 15 years as of January 4, 2016.
Intangible assets include identifiable intangible assets for customer relationships and developed technologies. We estimated the fair value of the acquired identifiable intangible assets, which are subject to amortization, using the income approach for customer relationships and the cost approach for developed technologies. No residual value was estimated for any of the intangible assets.
The following table sets forth the components of identifiable intangible assets and their estimated useful lives as of January 4, 2016:
(in thousands, except for estimated useful lives, in years)
Estimated fair value
Estimated useful lives in years
Customer relationships
$
34,900

9
Technologies
400

3
Total acquired identifiable intangible assets
$
35,300

 

The amount of revenue from the RPO business of Aon Hewitt included on our Consolidated Statements of Operations and Comprehensive Income (Loss) was $66.5 million for the period from the acquisition date to January 1, 2017. The acquired operations have been fully integrated with our existing PeopleScout operations.
The acquisition of the RPO business of Aon Hewitt was not material to our consolidated results of operations and as such, pro forma financial information was not required.
v3.10.0.1
FAIR VALUE MEASUREMENT
12 Months Ended
Dec. 30, 2018
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENT
FAIR VALUE MEASUREMENT
Assets and liabilities measured at fair value on a recurring basis
Our assets and liabilities measured at fair value on a recurring basis consisted of the following:
 
December 30, 2018
(in thousands)
Total fair value
Quoted prices in active markets for identical assets (level 1)
Significant other observable inputs (level 2)
Significant unobservable inputs (level 3)
Financial assets:
 
 
 
 
Cash and cash equivalents
$
46,988

$
46,988

$

$

Restricted cash and cash equivalents
55,462

55,462



Cash, cash equivalents and restricted cash (1)
$
102,450

$
102,450

$

$

 
 
 
 
 
Deferred compensation mutual funds classified as available-for-sale
$
23,363

$
23,363

$

$

 
 
 
 
 
Municipal debt securities
$
76,690

$

$
76,690

$

Corporate debt securities
75,432


75,432


Agency mortgage-backed securities
2,531


2,531


U.S. government and agency securities
988


988


Restricted investments classified as held-to-maturity
$
155,641

$

$
155,641

$

 
December 31, 2017
(in thousands)
Total fair value
Quoted prices in active markets for identical assets (level 1)
Significant other observable inputs (level 2)
Significant unobservable inputs (level 3)
Financial assets:
 
 
 
 
Cash and cash equivalents
$
28,780

$
28,780

$

$

Restricted cash and cash equivalents
45,051

45,051



Cash, cash equivalents and restricted cash (1)
$
73,831

$
73,831

$

$

 
 
 
 
 
Deferred compensation mutual funds classified as available-for-sale
$
22,428

$
22,428

$

$

 
 
 
 
 
Municipal debt securities
$
83,366

$

$
83,366

$

Corporate debt securities
83,791


83,791


Agency mortgage-backed securities
4,062


4,062


U.S. government and agency securities
1,019


1,019


Restricted investments classified as held-to-maturity
$
172,238

$

$
172,238

$

(1)
Cash, cash equivalents and restricted cash consist of money market funds, deposits, and investments with original maturities of three months or less.
There were no material transfers between level 1, level 2 and level 3 of the fair value hierarchy during the years ended December 30, 2018 and December 31, 2017.
Assets measured at fair value on a nonrecurring basis
We measure certain non-financial assets on a non-recurring basis, including goodwill and certain intangible assets. As a result of those measurements, we recognized impairment charges of $103.5 million during the year ended January 1, 2017, as follows:
 
January 1, 2017
(in thousands)
Total fair value
Quoted prices in active markets for identical assets (level 1)
Significant other observable inputs (level 2)
Significant unobservable inputs (level 3)
Total impairment loss
Goodwill
$
42,629

$

$

$
42,629

$
(65,869
)
Customer relationships
11,100



11,100

(28,900
)
Trade names/trademarks
3,600



3,600

(8,775
)
Total
$
57,329

$

$

$
57,329

$
(103,544
)

Goodwill, finite-lived customer relationships, finite-lived trade names/trademarks intangible assets and indefinite-lived trade names/trademarks intangible assets with a total carrying value of $160.8 million were written down to their fair value of $57.3 million, resulting in an impairment charge of $103.5 million, which was recorded in earnings for the year ended January 1, 2017.
There were no goodwill or intangible asset impairment charges recorded during fiscal 2018 or 2017.
v3.10.0.1
RESTRICTED CASH AND INVESTMENTS
12 Months Ended
Dec. 30, 2018
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 30,
2018
December 31,
2017
Cash collateral held by insurance carriers
$
24,182

$
22,926

Restricted cash and cash equivalents
28,021

16,113

Restricted investments classified as held-to-maturity
156,618

171,752

Deferred compensation mutual funds, classified as available-for-sale
23,363

22,428

Other restricted cash and cash equivalents
3,259

6,012

Total restricted cash and investments
$
235,443

$
239,231


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 at the Bank of New York Mellon (“Trust”).
The amortized cost and estimated fair value of our held-to-maturity investments held in trust, aggregated by investment category as of December 30, 2018 and December 31, 2017, were as follows:
 
December 30, 2018
(in thousands)
Amortized cost
Gross unrealized gain
Gross unrealized loss
Fair value
Municipal debt securities
$
76,750

$
456

$
(516
)
$
76,690

Corporate debt securities
76,310

30

(908
)
75,432

Agency mortgage-backed securities
2,559

5

(33
)
2,531

U.S. government and agency securities
999


(11
)
988

 
$
156,618

$
491

$
(1,468
)
$
155,641

 
December 31, 2017
(in thousands)
Amortized cost
Gross unrealized gain
Gross unrealized loss
Fair value
Municipal debt securities
$
82,770

$
974

$
(378
)
$
83,366

Corporate debt securities
83,916

309

(434
)
83,791

Agency mortgage-backed securities
4,066

22

(26
)
4,062

U.S. government and agency securities
1,000

19


1,019

 
$
171,752

$
1,324

$
(838
)
$
172,238


The estimated fair value and gross unrealized losses of all investments classified as held-to-maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 30, 2018 and December 31, 2017, were as follows:
 
December 30, 2018
 
Less than 12 months
 
12 months or more
 
Total
(in thousands)
Estimated fair value
Unrealized losses
 
Estimated fair value
Unrealized losses
 
Estimated fair value
Unrealized losses
Municipal debt securities
$
12,803

$
(74
)
 
$
22,638

$
(442
)
 
$
35,441

$
(516
)
Corporate debt securities
22,567

(277
)
 
44,463

(631
)
 
67,030

(908
)
Agency mortgage-backed securities
385


 
1,375

(33
)
 
1,760

(33
)
U.S. government and agency securities
988

(11
)
 


 
988

(11
)
Total held-to-maturity investments
$
36,743

$
(362
)
 
$
68,476

$
(1,106
)
 
$
105,219

$
(1,468
)
 
December 31, 2017
 
Less than 12 months
 
12 months or more
 
Total
(in thousands)
Estimated fair value
Unrealized losses
 
Estimated fair value
Unrealized losses
 
Estimated fair value
Unrealized losses
Municipal debt securities
$
23,078

$
(124
)
 
$
9,631

$
(254
)
 
$
32,709

$
(378
)
Corporate debt securities
48,952

(311
)
 
10,081

(123
)
 
59,033

(434
)
Agency mortgage-backed securities
1,362

(10
)
 
888

(16
)
 
2,250

(26
)
Total held-to-maturity investments
$
73,392

$
(445
)
 
$
20,600

$
(393
)
 
$
93,992

$
(838
)

The total number of held-to-maturity securities that had unrealized losses as of December 30, 2018 and December 31, 2017 were 93 and 83, respectively. The unrealized losses were the result of interest rate increases. Since the decline in estimated fair value is attributable to changes in interest rates and not credit quality, and the company has the intent and ability to hold these debt securities until recovery of amortized cost or maturity, the company does not consider these investments other than temporarily impaired.
The amortized cost and fair value by contractual maturity of our held-to-maturity investments are as follows:
 
December 30, 2018
(in thousands)
Amortized cost
Fair value
Due in one year or less
$
27,158

$
27,014

Due after one year through five years
86,606

86,107

Due after five years through ten years
42,854

42,520

 
$
156,618

$
155,641


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.
Available-for-sale
We hold mutual funds classified as available-for-sale to support our deferred compensation liability. Unrealized losses of $3.4 million, related to equity investments still held at December 30, 2018, were included in selling, general and administrative expense on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 30, 2018.
v3.10.0.1
PROPERTY AND EQUIPMENT, NET
12 Months Ended
Dec. 30, 2018
Property, Plant and Equipment [Abstract]  
PROPERTY AND EQUIPMENT, NET
PROPERTY AND EQUIPMENT, NET
Property and equipment are stated at cost and consist of the following:
(in thousands)
December 30,
2018
December 31,
2017
Buildings and land
$
41,300

$
37,672

Computers and software
154,724

149,835

Furniture and equipment
16,632

15,527

Construction in progress
8,350

7,157

Gross property and equipment
221,006

210,191

Less accumulated depreciation
(163,335
)
(150,028
)
Property and equipment, net
$
57,671

$
60,163


Capitalized software costs, net of accumulated depreciation, were $19.4 million and $21.9 million as of December 30, 2018 and December 31, 2017, 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 $20.3 million, $24.7 million and $21.6 million for the years ended December 30, 2018, December 31, 2017 and January 1, 2017, respectively.
v3.10.0.1
GOODWILL AND INTANGIBLE ASSETS
12 Months Ended
Dec. 30, 2018
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)
PeopleReady
PeopleManagement
PeopleScout
Total company
Balance at January 1, 2017
 
 
 
 
Goodwill before impairment
$
106,304

$
100,146

$
129,852

$
336,302

Accumulated impairment loss
(46,210
)
(50,700
)
(15,169
)
(112,079
)
Goodwill, net
60,094

49,446

114,683

224,223

 
 
 
 
 
Foreign currency translation


2,471

2,471

 
 
 
 
 
Balance at December 31, 2017
 
 
 
 
Goodwill before impairment
106,304

100,146

132,323

338,773

Accumulated impairment loss
(46,210
)
(50,700
)
(15,169
)
(112,079
)
Goodwill, net
60,094

49,446

117,154

226,694

 
 
 
 
 
Divested goodwill before impairment (1)

(19,054
)

(19,054
)
Divested accumulated impairment loss (1)

17,000


17,000

Acquired goodwill (2)


16,606

16,606

Foreign currency translation


(3,959
)
(3,959
)
 
 
 
 
 
Balance at December 30, 2018
 
 
 
 
Goodwill before impairment
106,304

81,092

144,970

332,366

Accumulated impairment loss
(46,210
)
(33,700
)
(15,169
)
(95,079
)
Goodwill, net
$
60,094

$
47,392

$
129,801

$
237,287

(1)
Effective March 12, 2018, we entered divested our PlaneTechs business. As a result of this divestiture, we eliminated the remaining goodwill balance of the PlaneTechs business, which was a part of our PeopleManagement reportable segment. For additional information, see Note 3: Acquisitions and Divestiture.
(2)
Effective June 12, 2018, we acquired TMP Holdings LTD, through PeopleScout. Accordingly, the goodwill associated with the acquisition has been assigned to our PeopleScout reportable segment based on our final purchase price allocation. For additional information, see Note 3: Acquisitions and Divestiture.
Intangible assets
Finite-lived intangible assets
The following table presents our purchased finite-lived intangible assets:
 
December 30, 2018
 
December 31, 2017
(in thousands)
Gross carrying amount
Accumulated
amortization
Net
carrying
amount
 
Gross carrying amount
Accumulated
amortization
Net
carrying
amount
Finite-lived intangible assets (1):
 
 
 
 
 
 
 
Customer relationships
$
153,704

$
(70,887
)
$
82,817

 
$
148,114

$
(53,801
)
$
94,313

Trade names/trademarks
2,580

(1,069
)
1,511

 
4,149

(3,736
)
413

Non-compete agreements



 
1,400

(1,377
)
23

Technologies
9,800

(8,720
)
1,080

 
17,500

(13,588
)
3,912

Total finite-lived intangible assets
$
166,084

$
(80,676
)
$
85,408

 
$
171,163

$
(72,502
)
$
98,661

(1)
Excludes assets that are fully amortized.
Finite-lived intangible assets include customer relationships and trade names/trademarks of $6.3 million and $1.7 million, respectively, as of the acquisition date, based on our final purchase price allocation relating to our acquisition of TMP Holdings LTD. For additional information, see Note 3: Acquisitions and Divestiture.
Amortization expense of our finite-lived intangible assets was $20.8 million, $21.4 million and $25.1 million for the years ended December 30, 2018, December 31, 2017 and January 1, 2017, respectively.
The following table provides the estimated future amortization of finite-lived intangible assets as of December 30, 2018:
(in thousands)
 
2019
$
18,986

2020
17,354

2021
14,049

2022
13,201

2023
11,593

Thereafter
10,225

Total future amortization
$
85,408


Indefinite-lived intangible assets
We also held indefinite-lived trade names/trademarks of $6.0 million as of December 30, 2018 and December 31, 2017.
Impairments
There were no goodwill or intangible asset impairment charges recorded during fiscal 2018 or 2017.
2016 impairments
We performed our annual goodwill impairment analysis as of the first day of our second quarter of fiscal 2016. This analysis required significant 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. The weighted average cost of capital used in our most recent annual impairment test was risk-adjusted to reflect the specific risk profile of the reporting units and ranged from 12.0% to 17.0%.
As a result of our test we recorded a goodwill impairment charge of $65.9 million relating to the Staff Management, PlaneTechs and hrX reporting units as follows:
Staff Management: In April 2016, we were notified by our former largest client of its plans to reduce the use of contingent labor and realign its contingent labor vendors for warehousing. Our former largest client announced it would be reducing the use of our services for its warehouse fulfillment centers in the United States and focusing our services on its planned expansion of distribution service sites to a national network for delivery direct to the client.
Goodwill impairment - We estimated that the change in scope of our services would decrease revenues by approximately $125 million compared to the prior year. As a result, we lowered our future expectations, which resulted in a goodwill impairment charge of $33.7 million.
Intangible asset impairment - The significant decrease in scope of services by our former largest client required us to lower our future expectations, which was the primary trigger of an impairment charge to our acquired customer relationships intangible asset of $28.9 million and indefinite-lived intangible assets trade name of $4.5 million. Considerable management judgment was necessary to determine key assumptions, including projected revenue, royalty rates, and an appropriate discount rate of 13.0% for the customer relationships intangibles asset and 17.0% for the indefinite-lived trade-name. In addition, we utilized the relief from royalty method to determine the fair value of Staff Management’s indefinite-lived trade name using a royalty rate of 10.0%.
PlaneTechs: Revenue declined significantly compared to fiscal 2015 as large projects were completed for a major aviation client and its supply chain and anticipated projects did not occur to the extent expected. PlaneTechs had been diversifying from providing services to one primary client without offsetting growth in the broader aviation and transportation marketplace. As a result of significantly underperforming against expectations and increased future uncertainty, we lowered our future expectations, which resulted in a goodwill impairment charge of $17.0 million.
hrX: Sales of this service line included our internally developed applicant tracking software (“ATS”). ATS sales and prospects underperformed against our expectations. As a result of underperforming against our expectations and increased future uncertainty in client demand, we lowered our future expectations, which resulted in a goodwill impairment charge of $15.2 million. Note, our PeopleScout and hrX service lines were combined during fiscal 2016 and now represent a single operating segment (PeopleScout).
Spartan and CLP Resources: In the third quarter of fiscal 2016, we finalized the changes to the organizational and reporting structure of our Labor Ready, Spartan Staffing and CLP Resources service lines, which resulted in them merging into one service line. The combined service line was re-branded as PeopleReady. As a result, we recognized an impairment charge of $4.3 million for the remaining net book value of the Spartan and CLP Resources trade name/trademarks intangible assets.
v3.10.0.1
WORKERS' COMPENSATION INSURANCE AND RESERVES
12 Months Ended
Dec. 30, 2018
Workers' Compensation Insurance and Reserves [Abstract]  
WORKERS' COMPENSATION INSURANCE AND RESERVES
WORKERS’ COMPENSATION INSURANCE AND RESERVES
We provide workers’ compensation insurance for our temporary 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.
For workers’ compensation claims originating in Washington, North Dakota, Ohio, Wyoming, Canada and Puerto Rico (our “monopolistic jurisdictions”), we pay workers’ compensation insurance premiums and obtain full coverage under government-administered programs (with the exception of our PeopleReady service lines in the state of Ohio where we have a self-insured policy). Accordingly, because we are not the primary obligor, our financial statements do not reflect the liability for workers’ compensation claims in these monopolistic jurisdictions. Our workers’ compensation reserve is established using estimates of the future cost of claims and related expenses that have been reported but not settled, as well as those that have been incurred but not reported.
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 2.0% and 1.8% at December 30, 2018 and December 31, 2017, respectively. Payments made against self-insured claims are made over a weighted average period of approximately 4.5 years at December 30, 2018.
The table below presents a reconciliation of the undiscounted workers’ compensation reserve to the discounted workers’ compensation reserve for the periods presented as follows:
(in thousands)
December 30,
2018
December 31,
2017
Undiscounted workers’ compensation reserve
$
284,625

$
293,600

Less discount on workers’ compensation reserve
18,179

19,277

Workers’ compensation reserve, net of discount
266,446

274,323

Less current portion
76,421

77,218

Long-term portion
$
190,025

$
197,105


Payments made against self-insured claims were $64.7 million, $66.8 million and $73.6 million for the years ended December 30, 2018, December 31, 2017 and January 1, 2017, respectively.
Our workers’ compensation reserve includes estimated expenses related to claims above our self-insured limits (“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 30, 2018 and December 31, 2017, the weighted average rate was 2.9% and 2.5%, respectively. The claim payments are made and the corresponding reimbursements from our insurance carriers are received over an estimated weighted average period of approximately 16 years. The discounted workers’ compensation reserve for excess claims was $48.2 million and $48.8 million as of December 30, 2018 and December 31, 2017, respectively. The discounted receivables from insurance companies, net of valuation allowance, were $44.9 million and $45.0 million as of December 30, 2018 and December 31, 2017, respectively, and are included in other assets, net on the accompanying Consolidated Balance Sheets.
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.
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 30, 2018:
(in thousands)
 
2019
$
76,421

2020
41,654

2021
23,690

2022
15,236

2023
10,309

Thereafter
50,907

Sub-total
218,217

Excess claims (1)
48,229

Total
$
266,446

(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 expense consists primarily of changes in self-insurance reserves net of changes in discount, monopolistic jurisdictions’ premiums, insurance premiums and other miscellaneous expenses. Workers’ compensation expense of $69.2 million, $83.7 million and $94.0 million was recorded in cost of services for the years ended December 30, 2018, December 31, 2017 and January 1, 2017, respectively.
v3.10.0.1
LONG-TERM DEBT
12 Months Ended
Dec. 30, 2018
Debt Disclosure [Abstract]  
Long-term Debt
LONG-TERM DEBT
The components of our borrowings were as follows:
(in thousands)
December 30,
2018
December 31,
2017
Revolving Credit Facility
$
80,000

$
95,900

Term Loan

22,856

Total debt
80,000

118,756

Less current portion

2,267

Long-term debt, less current portion
$
80,000

$
116,489


Revolving credit facility
On July 13, 2018, we entered into a 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. (“Revolving Credit Facility”). The agreement provides for a revolving line of credit of up to $300 million with an option, subject to lender approval, to increase the amount to $450 million, and matures in five years. At December 30, 2018, $80.0 million was utilized as a draw on the facility and $6.9 million was utilized by outstanding standby letters of credit, leaving $213.1 million available under the Revolving Credit Facility for additional borrowings.
Under the terms of the agreement, we pay a variable rate of interest on funds borrowed based on the London Interbank Offered Rate (“LIBOR”) plus an applicable spread between 1.25% and 2.50%. Alternatively, at our option, we may pay interest based on a base rate plus an applicable spread between 0.25% and 1.50%. The applicable spread is determined by the consolidated leverage ratio, as defined in the credit agreement. The base rate is the greater of the prime rate (as announced by Bank of America), the federal funds rate plus 0.50%, or the one-month LIBOR rate plus 1.00%. At December 30, 2018, the applicable spread on LIBOR was 1.50% and the weighted average index rate was 2.46%, resulting in a weighted average interest rate of 3.96%.
A commitment fee between 0.250% and 0.375% 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 credit agreement. Letters of credit are priced at a margin between 1.00% and 2.25%, plus a fronting fee of 0.50%. Obligations under the agreement 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 agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, including, among others, financial covenants based on our leverage and fixed charge coverage ratios, as defined in the credit agreement. We are currently in compliance with all covenants related to the Revolving Credit Facility.
Term loan agreement
On June 25, 2018, we pre-paid in full our outstanding obligations of approximately $22.0 million with Synovus Bank, terminating all commitments under this term loan (the “Term Loan”) dated February 4, 2013 (as subsequently amended). We did not incur any early termination penalties in connection with the termination of the Term Loan.
v3.10.0.1
COMMITMENTS AND CONTINGENCIES
12 Months Ended
Dec. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
Workers’ compensation commitments
Our insurance carriers and certain state workers’ compensation programs require us to collateralize a portion of our workers’ compensation obligation, for which they become responsible should we become insolvent. The collateral typically takes the form of cash and cash equivalents, highly-rated investment grade debt securities, letters of credit, and/or surety bonds. On a regular basis these entities assess the amount of collateral they will require from us relative to our workers’ compensation obligation. The majority of our collateral obligations are held in the Trust.
We have provided our insurance carriers and certain states with commitments in the form and amounts listed below:
(in thousands)
December 30,
2018
December 31,
2017
Cash collateral held by workers’ compensation insurance carriers
$
22,264

$
22,148

Cash and cash equivalents held in Trust
28,021

16,113

Investments held in Trust
156,618

171,752

Letters of credit (1)
6,691

7,748

Surety bonds (2)
21,881

19,829

Total collateral commitments
$
235,475

$
237,590


(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 and equipment. Future non-cancelable minimum lease payments under our operating lease commitments as of December 30, 2018 are as follows for each of the next five years and thereafter:
(in thousands)
 
2019
$
8,337

2020
7,192

2021
4,990

2022
2,442

2023
1,324

Thereafter
699

Total future non-cancelable minimum lease payments
$
24,984


Operating leases are generally renewed in the normal course of business, and most of the options are negotiated at the time of renewal. However, for the majority of our office space leases, we have the right to cancel the lease, typically within 90 days of notification. Accordingly, we have not included the leases with these cancellation provisions in our disclosure of future minimum lease payments. Total rent expense for fiscal 2018, 2017 and 2016 was $27.3 million, $25.9 million and $26.5 million, respectively.
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 cancelable without significant penalty. We had $28.0 million of purchase obligations as of December 30, 2018, of which $14.7 million are expected to be paid in 2019.
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.
v3.10.0.1
SHAREHOLDERS' EQUITY
12 Months Ended
Dec. 30, 2018
Equity [Abstract]  
SHAREHOLDERS' EQUITY
SHAREHOLDERS’ EQUITY
Common stock
On September 15, 2017, our Board of Directors authorized a $100.0 million share repurchase program of our outstanding common stock. The share repurchase program does not obligate us to acquire any particular amount of common stock and does not have an expiration date. During the year ended December 30, 2018, we used $34.8 million under this program to repurchase shares at an average share price of $25.40.
Shares of common stock outstanding include shares of unvested restricted stock. Unvested restricted stock included in reportable shares outstanding was 0.7 million and 0.8 million shares as of December 30, 2018 and December 31, 2017, respectively.
Preferred stock
We have authorized 20 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 of Directors 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 of Directors was designated as Series A Preferred Stock. We had no outstanding shares of preferred stock in any of the years presented.
v3.10.0.1
STOCK-BASED COMPENSATION
12 Months Ended
Dec. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [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 1.54 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. Unrestricted stock awards granted to our Board of Directors vest immediately. 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.
Performance share units have been granted to executive officers and certain key employees. Commencing in 2017, 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, previously vesting was contingent upon the achievement of revenue and profitability growth goals. 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 30, 2018, was as follows:
(shares in thousands)
Shares
Weighted- average grant-date price
Non-vested at beginning of period
1,321

$
23.50

Granted
719

$
26.87

Vested
(428
)
$
24.29

Forfeited
(296
)
$
23.01

Non-vested at the end of the period
1,316

$
26.05


The weighted average grant-date price of restricted and unrestricted stock awards and performance share units granted during the years 2018, 2017 and 2016 was $26.87, $25.45 and $21.53, respectively. As of December 30, 2018, total unrecognized stock-based compensation expense related to non-vested restricted stock was approximately $12.6 million, which is estimated to be recognized over a weighted average period of 1.7 years. As of December 30, 2018, total unrecognized stock-based compensation expense related to performance share units was approximately $3.8 million, which is estimated to be recognized over a weighted average period of 1.8 years. The total fair value of restricted shares vested during fiscal 2018, 2017 and 2016 was $9.9 million, $6.9 million and $6.6 million, respectively. No performance shares vested during fiscal 2018. The total fair value of performance shares vested during fiscal 2017 and 2016 was $2.9 million and $3.3 million, respectively.
Stock options
Our Incentive Plan provides for both nonqualified stock options and incentive stock options (collectively, “stock options”) for directors, officers and certain employees. We issue new shares of common stock upon exercise of stock options. All of our stock options are vested and expire if not exercised within seven years from the date of grant. We had no stock option activity for fiscal 2018 and de minimis activity for fiscal 2017 and 2016.
Employee Stock Purchase Plan
Our Employee Stock Purchase Plan (“ESPP”) reserves for purchase 1.0 million shares of common stock. 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% 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 2018, 2017 and 2016:
(shares in thousands)
 
Shares
Average price per  share
Issued during fiscal
2018
68

$
22.17

Issued during fiscal
2017
72

$
20.43

Issued during fiscal
2016
87

$
17.51


Stock-based compensation expense
Total stock-based compensation expense for fiscal years 2018, 2017 and 2016, which is included in selling, general and administrative expense on our Consolidated Statements of Operations and Comprehensive Income (Loss), was $13.9 million, $7.7 million and $9.4 million, respectively. The related tax benefit was $2.9 million, $2.7 million and $3.3 million for fiscal 2018, 2017 and 2016, respectively.
v3.10.0.1
DEFINED CONTRIBUTION PLANS
12 Months Ended
Dec. 30, 2018
Retirement Benefits [Abstract]  
DEFINED CONTRIBUTION PLANS
DEFINED CONTRIBUTION PLANS
We 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 plans was $25.4 million and $24.1 million as of December 30, 2018 and December 31, 2017, respectively. The expense for our qualified and non-qualified deferred compensation plans, including our discretionary matching contributions, totaled $5.3 million, $6.1 million and $2.8 million for fiscal 2018, 2017 and 2016, respectively, and is recorded in selling, general and administrative expense on our Consolidated Statements of Operations and Comprehensive Income (Loss).
v3.10.0.1
INCOME TAXES
12 Months Ended
Dec. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES
The provision for income taxes is comprised of the following:
 
Years ended
(in thousands)
2018
2017
2016
Current taxes:
 
 
 
Federal
$
5,088

$
12,134

$
12,082

State
5,208

3,979

5,448

Foreign
1,542

3,545

2,677

Total current taxes
11,838

19,658

20,207

Deferred taxes:
 
 
 
Federal
(1,283
)
3,645

(20,693
)
State
120

(195
)
(4,064
)
Foreign
(766
)
(1,014
)
(539
)
Total deferred taxes
(1,929
)
2,436

(25,296
)
Provision for income taxes
$
9,909

$
22,094

$
(5,089
)

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 (Loss) are as follows:
 
Years ended
(in thousands, except percentages)
2018
%
2017
%
2016
%
Income tax expense (benefit) based on statutory rate
$
15,889

21.0
 %
$
27,140

35.0
 %
$
(7,119
)
35.0
 %
Increase (decrease) resulting from:
 
 
 
 
 
 
State income taxes, net of federal benefit
3,826

5.1

2,667

3.4

1,373

(6.8
)
Tax credits, net
(12,303
)
(16.3
)
(9,964
)
(12.9
)
(17,141
)
84.3

Transition to the U.S. Tax Cuts and Job Act
(194
)
(0.3
)
2,466

3.2



Non-deductible goodwill impairment charge




17,694

(87.0
)
Non-deductible/non-taxable items
1,191

1.6

1,157

1.5

630

(3.1
)
Foreign taxes
735

1.0

(342
)
(0.4
)
993

(4.8
)
Other, net
765

1.0

(1,030
)
(1.3
)
(1,519
)
7.4

Total taxes on income (loss)
$
9,909

13.1
 %
$
22,094

28.5
 %
$
(5,089
)
25.0
 %

Our effective tax rate for fiscal 2018 was 13.1%. The difference between the statutory federal income tax rate of 21.0% and our effective income tax rate results primarily from the federal Work Opportunity Tax Credit (“WOTC”). This tax credit is designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates. During fiscal 2018, we recognized $1.1 million of tax benefits from prior year WOTC. Other differences between the statutory federal income tax rate of 21.0% and our effective tax rate of 13.1% result from state and foreign income taxes, certain non-deductible expenses, tax exempt interest, and tax effects of stock-based compensation.
On December 22, 2017, Staff Accounting Bulletin No. 118 was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for income tax effects of the Tax Cuts and Jobs Act (the “Tax Act”). For the year ended December 30, 2018, we completed accounting for the Tax Act by recording immaterial adjustments to our transition tax and revaluation of net deferred tax assets at December 31, 2017. We also determined that unremitted earnings of our foreign subsidiaries should no longer remain subject to an indefinite reinvestment assertion and recorded a $0.4 million deferred tax liability related to foreign withholding taxes.
U.S. and international components of income (loss) before tax expense (benefit) was as follows:
 
Years ended
(in thousands)
2018
2017
2016
U.S.
$
73,051

$
69,119

$
(8,221
)
International
2,612

8,431

(12,119
)
Income (loss) before tax expense (benefit)
$
75,663

$
77,550

$
(20,340
)

The components of deferred tax assets and liabilities were as follows:
(in thousands)
December 30,
2018
December 31,
2017
Deferred tax assets:
 
 
Allowance for doubtful accounts
$
1,049

$
876

Workers’ compensation
4,162

1,420

Accounts payable and other accrued expenses
3,957

4,000

Net operating loss carryforwards
2,103

2,388

Tax credit carryforwards
1,562

1,615

Accrued wages and benefits
7,016

4,644

Deferred compensation
5,438

4,484

Other
636

841

Total
25,923

20,268

Valuation allowance
(2,079
)
(2,508
)
Total deferred tax asset, net of valuation allowance
23,844

17,760

Deferred tax liabilities:
 
 
Prepaid expenses, deposits and other current assets
(2,054
)
(2,096
)
Depreciation and amortization
(17,402
)
(11,881
)
Total deferred tax liabilities
(19,456
)
(13,977
)
Net deferred tax asset, end of year
$
4,388

$
3,783


Deferred taxes related to our foreign currency translation were de minimis for fiscal 2018, 2017 and 2016.
The following table summarizes our net operating losses (“NOLs”) and credit carryforwards along with their respective valuation allowance as of December 30, 2018:
(in thousands)
Carryover tax benefit
Valuation allowance
Expected
benefit
Year expiration begins
Year-end tax attributes:
 
 
 
 
State NOLs
$
1,373

$

$
1,373

Various
Foreign NOLs
730

(730
)

Various
California Enterprise Zone credits
1,562

(1,349
)
213

2023
Total
$
3,665

$
(2,079
)
$
1,586

 

As of December 30, 2018, our liability for unrecognized tax benefits was $2.2 million. If recognized, $1.7 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 30, 2018. This liability is recorded in other non-current liabilities on our Consolidated Balance Sheets. In general, the tax years 2015 through 2017 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:
 
Years ended