TRUEBLUE, INC., 10-Q filed on 5/1/2017
Quarterly Report
Document and Entity Information
3 Months Ended
Apr. 2, 2017
Apr. 17, 2017
Document and Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Apr. 02, 2017 
 
Document Fiscal Year Focus
2017 
 
Document Fiscal Period Focus
Q1 
 
Trading Symbol
TBI 
 
Entity Registrant Name
TrueBlue, Inc. 
 
Entity Central Index Key
0000768899 
 
Current Fiscal Year End Date
--12-31 
 
Entity Well-Known Seasoned Issuer
Yes 
 
Entity Voluntary Filers
No 
 
Entity Current Reporting Status
Yes 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
42,559,240 
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Apr. 2, 2017
Jan. 1, 2017
Current assets:
 
 
Cash and cash equivalents
$ 26,083 
$ 34,970 
Accounts receivable, net of allowance for doubtful accounts of $4,544 and $5,160
302,082 
352,606 
Prepaid expenses, deposits and other current assets
20,005 
21,373 
Income tax receivable
9,306 
18,854 
Total current assets
357,476 
427,803 
Property and equipment, net
64,118 
63,998 
Restricted cash and investments
228,120 
231,193 
Deferred income taxes, net
6,004 
6,770 
Goodwill
225,952 
224,223 
Intangible assets, net
120,569 
125,671 
Other assets, net
48,528 
50,787 
Total assets
1,050,767 
1,130,445 
Current liabilities:
 
 
Accounts payable and other accrued expenses
51,429 
66,758 
Accrued wages and benefits
63,711 
79,782 
Current portion of workers' compensation claims reserve
75,532 
79,126 
Contingent consideration
22,100 
21,600 
Current portion of long-term debt
24,556 
2,267 
Other current liabilities
1,366 
1,602 
Total current liabilities
238,694 
251,135 
Workers’ compensation claims reserve, less current portion
199,861 
198,225 
Long-term debt, less current portion
55,140 
135,362 
Other long-term liabilities
23,287 
20,544 
Total liabilities
516,982 
605,266 
Commitments and contingencies
   
   
Shareholders’ equity:
 
 
Preferred stock, $0.131 par value, 20,000 shares authorized; No shares issued and outstanding
Common stock, no par value, 100,000 shares authorized; 42,550 and 42,171 shares issued and outstanding
Accumulated other comprehensive loss
(8,896)
(11,433)
Retained earnings
542,680 
536,611 
Total shareholders’ equity
533,785 
525,179 
Total liabilities and shareholders’ equity
$ 1,050,767 
$ 1,130,445 
CONSOLIDATED BALANCE SHEETS (Parentheticals) (USD $)
In Thousands, except Share data, unless otherwise specified
Apr. 2, 2017
Jan. 1, 2017
Allowance for doubtful accounts
$ 4,544 
$ 5,160 
Preferred stock, par value (in dollars per share)
$ 0.131 
$ 0.131 
Preferred stock, shares authorized
20,000,000 
20,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value (in dollars per share)
$ 0 
$ 0 
Common stock, shares authorized
100,000,000 
100,000,000 
Common stock, shares issued
42,550,000 
42,171,000 
Common stock, shares outstanding
42,550,000 
42,171,000 
CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Apr. 2, 2017
Mar. 25, 2016
Revenue from services
$ 568,244 
$ 645,980 
Cost of services
428,815 
495,468 
Gross profit
139,429 
150,512 
Selling, general and administrative expense
121,844 
130,624 
Depreciation and amortization
11,174 
11,289 
Income from operations
6,411 
8,599 
Interest expense
(1,232)
(1,969)
Interest and other income
1,306 
950 
Interest and other income (expense), net
74 
(1,019)
Income before tax expense
6,485 
7,580 
Income tax expense
1,811 
612 
Net income
4,674 
6,968 
Net income per common share:
 
 
Basic (in dollars per share)
$ 0.11 
$ 0.17 
Diluted (in dollars per share)
$ 0.11 
$ 0.17 
Weighted average shares outstanding:
 
 
Basic (in shares)
41,637 
41,502 
Diluted (in shares)
41,937 
41,798 
Other comprehensive income:
 
 
Total other comprehensive income, net of tax
2,537 
2,477 
Comprehensive income
7,211 
9,445 
Foreign currency translation adjustment
 
 
Other comprehensive income:
 
 
Foreign currency translation adjustment
1,800 
2,401 
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
 
 
Other comprehensive income:
 
 
Unrealized gain on investments, net of tax
$ 737 
$ 76 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Apr. 2, 2017
Mar. 25, 2016
Cash flows from operating activities:
 
 
Net income
$ 4,674 
$ 6,968 
Adjustments to reconcile net income to net cash from operating activities:
 
 
Depreciation and amortization
11,174 
11,289 
Provision for doubtful accounts
1,446 
1,308 
Stock-based compensation
3,304 
3,179 
Deferred income taxes
726 
(1,083)
Other operating activities
937 
1,014 
Changes in operating assets and liabilities:
 
 
Accounts receivable
49,077 
147,067 
Income tax receivable
9,565 
14,742 
Other assets
3,627 
(3,668)
Accounts payable and other accrued expenses
(15,015)
(9,681)
Accrued wages and benefits
(16,071)
(16,153)
Workers’ compensation claims reserve
(1,957)
3,731 
Other liabilities
2,488 
1,792 
Net cash provided by operating activities
53,975 
160,505 
Cash flows from investing activities:
 
 
Capital expenditures
(6,167)
(3,876)
Acquisition of business
(72,000)
Change in restricted cash and cash equivalents
14,039 
(3,592)
Purchases of restricted investments
(14,975)
(11,222)
Maturities of restricted investments
4,423 
3,164 
Net cash used in investing activities
(2,680)
(87,526)
Cash flows from financing activities:
 
 
Net proceeds from stock option exercises and employee stock purchase plans
491 
477 
Common stock repurchases for taxes upon vesting of restricted stock
(2,400)
(2,229)
Net change in Revolving Credit Facility
(57,367)
(78,988)
Payments on debt
(567)
(756)
Other
171 
Net cash used in financing activities
(59,843)
(81,325)
Effect of exchange rate changes on cash and cash equivalents
(339)
453 
Net change in cash and cash equivalents
(8,887)
(7,893)
CASH AND CASH EQUIVALENTS, beginning of period
34,970 
29,781 
CASH AND CASH EQUIVALENTS, end of period
26,083 
21,888 
Supplemental Cash Flow Information [Abstract]
 
 
Interest
755 
1,321 
Income taxes
(8,487)
(12,983)
Property, plant, and equipment purchased but not yet paid
1,161 
2,087 
Non-cash acquisition adjustments
$ 0 
$ 4,610 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant Accounting Policies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial statement preparation
The accompanying unaudited consolidated financial statements (“financial statements”) of TrueBlue, Inc. (the “Company,” “TrueBlue,” “we,” “us,” and “our”) are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures usually found in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The financial statements reflect all adjustments which, in the opinion of management, are necessary to fairly state the financial statements for the interim periods presented. We follow the same accounting policies for preparing both quarterly and annual financial statements.

These financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2017. The results of operations for the thirteen weeks ended April 2, 2017, are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period.

Recently adopted accounting standards

In March 2016, the Financial Accounting Standards Board (“FASB”) issued guidance to simplify employee share-based payment accounting. The simplifications include several aspects of accounting for share-based payment transactions (referred to as stock-based compensation within our financial statements), including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. We adopted this standard on January 2, 2017, and have applied the standard requiring recognition of excess tax deficiencies and tax benefits to the income statement prospectively. The adoption of the new standard did not have a material impact to our consolidated financial statements. Management has elected to continue to estimate forfeitures of share-based awards.

Recently issued accounting pronouncements not yet adopted

In January 2017, FASB issued guidance to simplify the subsequent measurement of goodwill by eliminating the requirement to perform a Step 2 impairment test to compute the implied fair value of goodwill. Instead, companies will only compare the fair value of a reporting unit to its carrying value (Step 1) and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized may not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. This amended guidance is effective for fiscal years and interim periods beginning after December 15, 2019 (Q1 2020 for TrueBlue), with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We plan to early adopt this guidance for our fiscal 2017 annual impairment test. We do not expect the adoption of this guidance to have a material impact on our financial statements.

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 is effective for fiscal years and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue), with early adoption permitted. We plan to adopt this guidance on the effective date. Changes in restricted cash and cash equivalents recorded in cash flows from investing were $14.0 million and $3.6 million for the thirteen weeks ended April 2, 2017 and March 25, 2016, respectively.

In October 2016, 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 is effective for fiscal years and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue), with early adoption permitted. The guidance will require a modified retrospective application with a cumulative catch-up adjustment to opening retained earnings. We plan to adopt this guidance on the effective date and do not expect the adoption of this guidance to have a material impact on our financial statements.

In August 2016, the FASB issued an accounting standards update relating to how certain cash receipts and cash payments should be presented and classified in the statement of cash flows. The update is intended to reduce the existing diversity in practice. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 (Q1 2018 for TrueBlue), with early adoption permitted, including adoption in an interim period. The adoption of the amendment should be applied using the retrospective transition method, if practicable. We plan to adopt this amendment on the effective date and do not expect the adoption of this guidance to have a material impact on our financial statements.

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 replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and some off-balance sheet exposures, as well as trade account receivables. This guidance is effective for fiscal years 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 assessing the impact of the adoption of this guidance on our financial statements.

In February 2016, the FASB issued guidance on lease accounting. The new guidance will continue to classify leases as either finance or operating and will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet, with classification affecting the pattern of expense recognition in the statement of income. This guidance is effective for annual and interim periods beginning after December 15, 2018 (Q1 2019 for TrueBlue), and early adoption is permitted. A modified retrospective approach is required for all leases existing or entered into after the beginning of the earliest comparative period in the consolidated financial statements. We plan to adopt the guidance on the effective date. We are currently evaluating the impact of this guidance on our financial statements and expect that a majority of our operating lease commitments will be recognized on our Consolidated Balance Sheets as operating lease liabilities and right-of-use assets upon adoption. We do not expect the adoption of this guidance to have a material impact on the pattern of expense recognition in our Consolidated Statements of Operations and Comprehensive Income.

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 is effective for annual and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue). Early adoption of the amendments in the guidance is not permitted, with limited exceptions, and should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. We plan to adopt the guidance on the effective date. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
 
In May 2014, the FASB issued guidance outlining a single comprehensive model for accounting for revenue arising from contracts with customers, which supersedes the current revenue recognition guidance. This guidance requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance requires enhanced disclosures, including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition. The guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments as well as assets recognized from costs incurred to obtain or fulfill a contract. The guidance provides two methods of initial adoption: retrospective for all periods presented (full retrospective), or through a cumulative adjustment in the year of adoption (modified retrospective). Since the issuance of the original standard, the FASB has issued several other subsequent updates including the following: 1) clarification of the implementation guidance on principal versus agent considerations; 2) further guidance on identifying performance obligations in a contract as well as clarifications on the licensing implementation guidance; and 3) additional guidance and practical expedients in response to identified implementation issues. The effective date is for annual and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue). We expect to adopt the guidance using the modified retrospective approach.

We established a cross-functional implementation team consisting of representatives from across our business segments and various departments. We are utilizing a bottoms-up approach to analyze the impact of the standard on our various revenue streams by reviewing our current contracts with customers, accounting policies, and business practices to identify potential differences that would result from applying the requirements of the new standard. We are in the process of identifying appropriate changes to our business processes, systems, and controls to support recognition and disclosure under the new standard.

We have been closely monitoring FASB activity related to the new standard to conclude on specific interpretive issues. During 2016, we made significant progress toward completing our evaluation of the potential impact that adopting the new standard will have on our consolidated financial statements. Revenue on the majority of our contracts with customers will continue to be recognized over time as services are rendered. The impact of adopting this new guidance primarily relates to deferring contract costs and estimating variable consideration when the estimation will not result in the reversal of that revenue in subsequent periods. We do not anticipate this will have a material impact on our financial reporting other than expanded disclosures. However, the full extent of the impact is subject to the completion of our assessment.

Other accounting standards that have been issued or proposed 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 consolidated financial statements upon adoption.
FAIR VALUE MEASUREMENT
FAIR VALUE MEASUREMENT
FAIR VALUE MEASUREMENT
Our assets and liabilities measured at fair value on a recurring basis consisted of the following (in thousands):
 
April 2, 2017
 
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 (1)
$
26,083

 
$
26,083

 
$

 
$

Restricted cash and cash equivalents (1)
54,105

 
54,105

 

 

Other restricted assets (2)
18,717

 
18,717

 

 

Restricted investments classified as held-to-maturity
155,687

 

 
155,687

 

 
 
 
 
 
 
 
 
Financial liabilities:
 
 
 
 
 
 
 
Contingent consideration (3)
22,100

 

 

 
22,100

 
January 1, 2017
 
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 (1)
$
34,970

 
$
34,970

 
$

 
$

Restricted cash and cash equivalents (1)
67,751

 
67,751

 

 

Other restricted assets (2)
16,925

 
16,925

 

 

Restricted investments classified as held to maturity
145,953

 

 
145,953

 

 
 
 
 
 
 
 
 
Financial liabilities:
 
 
 
 
 
 
 
Contingent consideration (3)
21,600

 

 

 
21,600


(1)
Cash equivalents and restricted cash equivalents consist of money market funds, deposits, and investments with original maturities of three months or less.
(2)
Other restricted assets primarily consist of deferred compensation plan accounts, which are comprised of mutual funds classified as available-for-sale securities.
(3)
The estimated fair value of the contingent consideration associated with the acquisition of SIMOS Insourcing Solutions Corporation (“SIMOS”), which was estimated using a probability-adjusted discounted cash flow model.

The following table presents the change in the estimated fair value of our liability for contingent consideration measured using significant unobservable inputs (Level 3) for the thirteen weeks ended April 2, 2017, as follows (in thousands):
Fair value measurement at beginning of period
 
$
21,600

Accretion on contingent consideration
 
500

Fair value measurement at end of period
 
$
22,100


Our liability for contingent consideration represents the future payment of additional consideration for the acquisition of SIMOS. The preliminary achievement of the defined performance milestone occurred in the fourth quarter of 2016, however the final determination is subject to a verification period through the payout date in the second quarter of 2017. Amortization of the present value discount is recorded in Interest expense on the Consolidated Statements of Operations and Comprehensive Income.

There were no material transfers between Level 1, Level 2, and Level 3 of the fair value hierarchy during the thirteen weeks ended April 2, 2017 or March 25, 2016.
RESTRICTED CASH AND INVESTMENTS
RESTRICTED CASH AND INVESTMENTS
RESTRICTED CASH AND INVESTMENTS

Restricted cash and investments consist principally of 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”). Our investments have not resulted in any other-than-temporary impairments.
The following is a summary of our restricted cash and investments (in thousands):
 
April 2,
2017
 
January 1,
2017
Cash collateral held by insurance carriers
$
28,771

 
$
34,910

Cash and cash equivalents held in Trust
25,334

 
32,841

Investments held in Trust
155,298

 
146,517

Other (1)
18,717

 
16,925

Total restricted cash and investments
$
228,120

 
$
231,193


(1)
Primarily consists of deferred compensation plan accounts, which are comprised of mutual funds classified as available-for-sale securities.
The following tables present fair value disclosures for our held-to-maturity investments, which are carried at amortized cost (in thousands):
 
April 2, 2017
 
Amortized Cost
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Fair Value
Municipal debt securities
$
78,589

 
$
822

 
$
(585
)
 
$
78,826

Corporate debt securities
70,268

 
355

 
(229
)
 
70,394

Agency mortgage-backed securities
5,442

 
40

 
(19
)
 
5,463

U.S. government and agency securities
999

 
5

 

 
1,004

 
$
155,298

 
$
1,222

 
$
(833
)
 
$
155,687

 
January 1, 2017
 
Amortized Cost
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Fair Value
Municipal debt securities
$
71,618

 
$
443

 
$
(865
)
 
$
71,196

Corporate debt securities
68,934

 
212

 
(352
)
 
68,794

Agency mortgage-backed securities
5,965

 
30

 
(32
)
 
5,963

 
$
146,517

 
$
685

 
$
(1,249
)
 
$
145,953


The amortized cost and fair value by contractual maturity of our held-to-maturity investments are as follows (in thousands):
 
April 2, 2017
 
Amortized Cost
 
Fair Value
Due in one year or less
$
17,644

 
$
17,680

Due after one year through five years
72,939

 
73,300

Due after five years through ten years
64,715

 
64,707

 
$
155,298

 
$
155,687


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.
WORKERS' COMPENSATION INSURANCE AND RESERVES
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.
Our workers’ compensation reserve for claims below the deductible limit is discounted to its estimated net present value using discount rates based on average returns of “risk-free” U.S. Treasury instruments available during the year in which the liability was incurred. The weighted average discount rate was 1.6% at April 2, 2017 and January 1, 2017. Payments made against self-insured claims are made over a weighted average period of approximately 4.5 years at April 2, 2017.
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):
 
April 2,
2017
 
January 1,
2017
Undiscounted workers’ compensation reserve
$
290,810

 
$
292,169

Less discount on workers’ compensation reserve
15,417

 
14,818

Workers' compensation reserve, net of discount
275,393

 
277,351

Less current portion
75,532

 
79,126

Long-term portion
$
199,861

 
$
198,225


Payments made against self-insured claims were $15.9 million and $18.9 million for the thirteen weeks ended April 2, 2017 and March 25, 2016, 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. The claim payments are made and the corresponding reimbursements from our insurance carriers are received over an estimated weighted average period of approximately 15 years. The discounted workers’ compensation reserve for excess claims was $50.6 million and $52.9 million as of April 2, 2017 and January 1, 2017, respectively. The discounted receivables from insurance companies, net of valuation allowance, were $46.6 million and $48.9 million as of April 2, 2017 and January 1, 2017, respectively, and are included in Other assets, net on the accompanying Consolidated Balance Sheets.
Workers’ compensation expense of $19.8 million and $24.1 million was recorded in Cost of services for the thirteen weeks ended April 2, 2017 and March 25, 2016, respectively.
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES

Workers’ compensation commitments

We have provided our insurance carriers and certain states with commitments in the form and amounts listed below (in thousands):
 
April 2,
2017
 
January 1,
2017
Cash collateral held by workers’ compensation insurance carriers
$
28,132

 
$
28,066

Cash and cash equivalents held in Trust
25,334

 
32,841

Investments held in Trust
155,298

 
146,517

Letters of credit (1)
7,783

 
7,982

Surety bonds (2)
20,430

 
20,440

Total collateral commitments
$
236,977

 
$
235,846



(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.
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.
INCOME TAXES
Income Taxes
INCOME TAXES

Our tax provision or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment. Our quarterly tax provision and our quarterly estimate of our annual effective tax rate are subject to variation due to several factors, including variability in accurately predicting our pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, tax credits, audit developments, changes in law, regulations and administrative practices, and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income. For example, the impact of discrete items, tax credits, and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower. Except as required under U.S. tax law, we do not provide for U.S. taxes on undistributed earnings of our foreign subsidiaries since we consider those earnings to be permanently invested outside of the U.S.

Our effective tax rate for the thirteen weeks ended April 2, 2017 was 27.9%. The principal difference between the statutory federal income tax rate of 35.0% and our effective income tax rate results primarily from the federal Work Opportunity Tax Credit. This tax credit is designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates. Other differences between the statutory federal income tax rate of 35.0% and our effective tax rate result from state and foreign income taxes, certain non-deductible expenses, and tax effects of share based compensation.
NET INCOME PER SHARE
NET INCOME PER SHARE
NET INCOME PER SHARE

Diluted common shares were calculated as follows (in thousands, except per share amounts):
 
Thirteen weeks ended
 
April 2, 2017
 
March 25, 2016
Net income
$
4,674

 
$
6,968

 
 
 
 
Weighted average number of common shares used in basic net income per common share
41,637

 
41,502

Dilutive effect of non-vested restricted stock
300

 
296

Weighted average number of common shares used in diluted net income per common share
41,937

 
41,798

Net income per common share:
 
 
 
Basic
$
0.11

 
$
0.17

Diluted
$
0.11

 
$
0.17

 
 
 
 
Anti-dilutive shares
159

 
284

ACCUMULATED OTHER COMPREHENSIVE LOSS
ACCUMULATED OTHER COMPREHENSIVE LOSS
ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in the balance of each component of accumulated other comprehensive loss during the reporting periods were as follows (in thousands):
 
Thirteen weeks ended
 
Foreign currency translation adjustment
 
Unrealized gain (loss) on investments (1)
 
Total other comprehensive income (loss), net of tax
April 2, 2017
 
 
 
 
 
Balance at beginning of period
$
(11,684
)
 
$
251

 
$
(11,433
)
Current period other comprehensive income
1,800

 
737

 
2,537

Balance at end of period
$
(9,884
)
 
$
988

 
$
(8,896
)
 
 
 
 
 
 
March 25, 2016
 
 
 
 
 
Balance at beginning of period
$
(13,514
)
 
$
(499
)
 
$
(14,013
)
Current period other comprehensive income
2,401

 
76

 
2,477

Balance at end of period
$
(11,113
)
 
$
(423
)
 
$
(11,536
)


(1)
Consists of deferred compensation plan accounts, which are comprised of mutual funds classified as available-for-sale securities. The tax impact on unrealized gain on available-for-sale securities was de minimis for the thirteen weeks ended April 2, 2017 and March 25, 2016.

There were no material reclassifications out of accumulated other comprehensive loss during the thirteen weeks ended April 2, 2017 or March 25, 2016.
SEGMENT INFORMATION
SEGMENT INFORMATION
SEGMENT INFORMATION

Commencing in the fourth quarter of 2016, we changed our internal reporting structure to better align our operations with customer needs and how our chief operating decision maker, our Chief Executive Officer, currently evaluates financial results to determine resource allocation and assess performance. As a result of this change, our former Staffing Services reportable segment has been separated into two reportable segments, PeopleReady and PeopleManagement, and our former Managed Services reportable segment has been renamed PeopleScout. In addition, we changed our methodology for allocating certain corporate costs to our segments, which decreased our corporate unallocated expenses. The prior year amounts have been recast to reflect this change for consistency purposes.

Our service lines, which are our operating segments, and our reportable segments are described below:

Our PeopleReady reportable segment provides blue-collar contingent staffing through the PeopleReady service line. PeopleReady provides on-demand and skilled labor in the retail, manufacturing, warehousing, logistics, energy, construction, hospitality, and others industries.
Our PeopleManagement reportable segment provides primarily on-premise contingent staffing and on-premise management of those contingent staffing services through the following operating segments, which we aggregated into one reportable segment in accordance with U.S. GAAP:
Staff Management | SMX: Exclusive recruitment and on-premise management of a facility’s contingent industrial workforce;
SIMOS Insourcing Solutions: On-premise management and recruitment of warehouse/distribution operations;
Centerline Drivers: Recruitment and management of temporary and dedicated drivers to the transportation and distribution industries; and
PlaneTechs: Skilled mechanics and technicians, including on-premise management thereof, to the aviation and transportation industries.

Our PeopleScout reportable segment provides high-volume permanent employee recruitment process outsourcing and management of outsourced labor service providers through the following operating segments, which we aggregated into one reportable segment in accordance with U.S. GAAP:
PeopleScout: Outsourced recruitment of permanent employees on behalf of clients; and
PeopleScout MSP: Management of multiple third party staffing vendors on behalf of clients.

We have two primary measures of segment performance: revenue from services and segment earnings before interest, taxes, depreciation and amortization (“Segment EBITDA”). Segment EBITDA includes net sales to third parties, related cost of sales, and selling, general and administrative expenses directly attributable to the reportable segment together with certain allocated corporate general and administrative expenses. Segment EBITDA excludes unallocated corporate general and administrative expenses.

The following table presents a reconciliation of segment revenue from services to total company revenue (in thousands):
 
Thirteen weeks ended
 
April 2, 2017
 
March 25, 2016
Revenue from services (1)
 
 
 
PeopleReady
$
332,624

 
$
356,010

PeopleManagement
191,686

 
246,427

PeopleScout
43,934

 
43,543

Total Company
$
568,244

 
$
645,980


(1)
There were no material revenue transactions between our reportable segments.

The following table presents a reconciliation of Segment EBITDA to income before tax expense (in thousands):
 
Thirteen weeks ended
 
April 2, 2017
 
March 25, 2016
Segment EBITDA (1)
 
 
 
PeopleReady
$
9,722

 
$
11,555

PeopleManagement
5,533

 
6,353

PeopleScout
8,665

 
8,010

 
23,920

 
25,918

Corporate unallocated
(6,335
)
 
(6,030
)
Depreciation and amortization
(11,174
)
 
(11,289
)
Income from operations
6,411

 
8,599

Interest and other income (expense), net
74

 
(1,019
)
Income before tax expense
$
6,485

 
$
7,580

(1)
Segment EBITDA was previously referred to as segment income from operations. This change had no impact on the amounts reported.


Asset information by reportable segment is not presented since we do not manage our segments on a balance sheet basis.
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS
SUBSEQUENT EVENT

In April 2017, we paid additional consideration of $22.5 million related to the acquisition of SIMOS. Achievement of the defined performance milestone occurred in the fourth quarter of 2016, however the final determination was subject to a verification period through the payout due date in the second quarter of 2017. The fair value of the contingent consideration liability as of April 2, 2017 was $22.1 million.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
Financial statement preparation
The accompanying unaudited consolidated financial statements (“financial statements”) of TrueBlue, Inc. (the “Company,” “TrueBlue,” “we,” “us,” and “our”) are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures usually found in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The financial statements reflect all adjustments which, in the opinion of management, are necessary to fairly state the financial statements for the interim periods presented. We follow the same accounting policies for preparing both quarterly and annual financial statements.

These financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2017. The results of operations for the thirteen weeks ended April 2, 2017, are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period.

Recently adopted accounting standards

In March 2016, the Financial Accounting Standards Board (“FASB”) issued guidance to simplify employee share-based payment accounting. The simplifications include several aspects of accounting for share-based payment transactions (referred to as stock-based compensation within our financial statements), including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. We adopted this standard on January 2, 2017, and have applied the standard requiring recognition of excess tax deficiencies and tax benefits to the income statement prospectively. The adoption of the new standard did not have a material impact to our consolidated financial statements. Management has elected to continue to estimate forfeitures of share-based awards.

Recently issued accounting pronouncements not yet adopted

In January 2017, FASB issued guidance to simplify the subsequent measurement of goodwill by eliminating the requirement to perform a Step 2 impairment test to compute the implied fair value of goodwill. Instead, companies will only compare the fair value of a reporting unit to its carrying value (Step 1) and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized may not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. This amended guidance is effective for fiscal years and interim periods beginning after December 15, 2019 (Q1 2020 for TrueBlue), with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We plan to early adopt this guidance for our fiscal 2017 annual impairment test. We do not expect the adoption of this guidance to have a material impact on our financial statements.

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 is effective for fiscal years and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue), with early adoption permitted. We plan to adopt this guidance on the effective date. Changes in restricted cash and cash equivalents recorded in cash flows from investing were $14.0 million and $3.6 million for the thirteen weeks ended April 2, 2017 and March 25, 2016, respectively.

In October 2016, 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 is effective for fiscal years and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue), with early adoption permitted. The guidance will require a modified retrospective application with a cumulative catch-up adjustment to opening retained earnings. We plan to adopt this guidance on the effective date and do not expect the adoption of this guidance to have a material impact on our financial statements.

In August 2016, the FASB issued an accounting standards update relating to how certain cash receipts and cash payments should be presented and classified in the statement of cash flows. The update is intended to reduce the existing diversity in practice. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 (Q1 2018 for TrueBlue), with early adoption permitted, including adoption in an interim period. The adoption of the amendment should be applied using the retrospective transition method, if practicable. We plan to adopt this amendment on the effective date and do not expect the adoption of this guidance to have a material impact on our financial statements.

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 replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and some off-balance sheet exposures, as well as trade account receivables. This guidance is effective for fiscal years 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 assessing the impact of the adoption of this guidance on our financial statements.

In February 2016, the FASB issued guidance on lease accounting. The new guidance will continue to classify leases as either finance or operating and will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet, with classification affecting the pattern of expense recognition in the statement of income. This guidance is effective for annual and interim periods beginning after December 15, 2018 (Q1 2019 for TrueBlue), and early adoption is permitted. A modified retrospective approach is required for all leases existing or entered into after the beginning of the earliest comparative period in the consolidated financial statements. We plan to adopt the guidance on the effective date. We are currently evaluating the impact of this guidance on our financial statements and expect that a majority of our operating lease commitments will be recognized on our Consolidated Balance Sheets as operating lease liabilities and right-of-use assets upon adoption. We do not expect the adoption of this guidance to have a material impact on the pattern of expense recognition in our Consolidated Statements of Operations and Comprehensive Income.

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 is effective for annual and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue). Early adoption of the amendments in the guidance is not permitted, with limited exceptions, and should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. We plan to adopt the guidance on the effective date. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
 
In May 2014, the FASB issued guidance outlining a single comprehensive model for accounting for revenue arising from contracts with customers, which supersedes the current revenue recognition guidance. This guidance requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance requires enhanced disclosures, including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition. The guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments as well as assets recognized from costs incurred to obtain or fulfill a contract. The guidance provides two methods of initial adoption: retrospective for all periods presented (full retrospective), or through a cumulative adjustment in the year of adoption (modified retrospective). Since the issuance of the original standard, the FASB has issued several other subsequent updates including the following: 1) clarification of the implementation guidance on principal versus agent considerations; 2) further guidance on identifying performance obligations in a contract as well as clarifications on the licensing implementation guidance; and 3) additional guidance and practical expedients in response to identified implementation issues. The effective date is for annual and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue). We expect to adopt the guidance using the modified retrospective approach.

We established a cross-functional implementation team consisting of representatives from across our business segments and various departments. We are utilizing a bottoms-up approach to analyze the impact of the standard on our various revenue streams by reviewing our current contracts with customers, accounting policies, and business practices to identify potential differences that would result from applying the requirements of the new standard. We are in the process of identifying appropriate changes to our business processes, systems, and controls to support recognition and disclosure under the new standard.

We have been closely monitoring FASB activity related to the new standard to conclude on specific interpretive issues. During 2016, we made significant progress toward completing our evaluation of the potential impact that adopting the new standard will have on our consolidated financial statements. Revenue on the majority of our contracts with customers will continue to be recognized over time as services are rendered. The impact of adopting this new guidance primarily relates to deferring contract costs and estimating variable consideration when the estimation will not result in the reversal of that revenue in subsequent periods. We do not anticipate this will have a material impact on our financial reporting other than expanded disclosures. However, the full extent of the impact is subject to the completion of our assessment.

Other accounting standards that have been issued or proposed 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 consolidated financial statements upon adoption.
FAIR VALUE MEASUREMENT (Tables)
Our assets and liabilities measured at fair value on a recurring basis consisted of the following (in thousands):
 
April 2, 2017
 
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 (1)
$
26,083

 
$
26,083

 
$

 
$

Restricted cash and cash equivalents (1)
54,105

 
54,105

 

 

Other restricted assets (2)
18,717

 
18,717

 

 

Restricted investments classified as held-to-maturity
155,687

 

 
155,687

 

 
 
 
 
 
 
 
 
Financial liabilities:
 
 
 
 
 
 
 
Contingent consideration (3)
22,100

 

 

 
22,100

 
January 1, 2017
 
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 (1)
$
34,970

 
$
34,970

 
$

 
$

Restricted cash and cash equivalents (1)
67,751

 
67,751

 

 

Other restricted assets (2)
16,925

 
16,925

 

 

Restricted investments classified as held to maturity
145,953

 

 
145,953

 

 
 
 
 
 
 
 
 
Financial liabilities:
 
 
 
 
 
 
 
Contingent consideration (3)
21,600

 

 

 
21,600


(1)
Cash equivalents and restricted cash equivalents consist of money market funds, deposits, and investments with original maturities of three months or less.
(2)
Other restricted assets primarily consist of deferred compensation plan accounts, which are comprised of mutual funds classified as available-for-sale securities.
(3)
The estimated fair value of the contingent consideration associated with the acquisition of SIMOS Insourcing Solutions Corporation (“SIMOS”), which was estimated using a probability-adjusted discounted cash flow model.

The following table presents the change in the estimated fair value of our liability for contingent consideration measured using significant unobservable inputs (Level 3) for the thirteen weeks ended April 2, 2017, as follows (in thousands):
Fair value measurement at beginning of period
 
$
21,600

Accretion on contingent consideration
 
500

Fair value measurement at end of period
 
$
22,100

RESTRICTED CASH AND INVESTMENTS (Tables)
The following is a summary of our restricted cash and investments (in thousands):
 
April 2,
2017
 
January 1,
2017
Cash collateral held by insurance carriers
$
28,771

 
$
34,910

Cash and cash equivalents held in Trust
25,334

 
32,841

Investments held in Trust
155,298

 
146,517

Other (1)
18,717

 
16,925

Total restricted cash and investments
$
228,120

 
$
231,193


(1)
Primarily consists of deferred compensation plan accounts, which are comprised of mutual funds classified as available-for-sale securities.
The following tables present fair value disclosures for our held-to-maturity investments, which are carried at amortized cost (in thousands):
 
April 2, 2017
 
Amortized Cost
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Fair Value
Municipal debt securities
$
78,589

 
$
822

 
$
(585
)
 
$
78,826

Corporate debt securities
70,268

 
355

 
(229
)
 
70,394

Agency mortgage-backed securities
5,442

 
40

 
(19
)
 
5,463

U.S. government and agency securities
999

 
5

 

 
1,004

 
$
155,298

 
$
1,222

 
$
(833
)
 
$
155,687

 
January 1, 2017
 
Amortized Cost
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Fair Value
Municipal debt securities
$
71,618

 
$
443

 
$
(865
)
 
$
71,196

Corporate debt securities
68,934

 
212

 
(352
)
 
68,794

Agency mortgage-backed securities
5,965

 
30

 
(32
)
 
5,963

 
$
146,517

 
$
685

 
$
(1,249
)
 
$
145,953

The amortized cost and fair value by contractual maturity of our held-to-maturity investments are as follows (in thousands):
 
April 2, 2017
 
Amortized Cost
 
Fair Value
Due in one year or less
$
17,644

 
$
17,680

Due after one year through five years
72,939

 
73,300

Due after five years through ten years
64,715

 
64,707

 
$
155,298

 
$
155,687

WORKERS' COMPENSATION INSURANCE AND RESERVES (Tables)
Reconciliation of workers' compensation claims reserve
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):
 
April 2,
2017
 
January 1,
2017
Undiscounted workers’ compensation reserve
$
290,810

 
$
292,169

Less discount on workers’ compensation reserve
15,417

 
14,818

Workers' compensation reserve, net of discount
275,393

 
277,351

Less current portion
75,532

 
79,126

Long-term portion
$
199,861

 
$
198,225

COMMITMENTS AND CONTINGENCIES (Tables)
Schedule of workers’ compensation collateral commitments
We have provided our insurance carriers and certain states with commitments in the form and amounts listed below (in thousands):
 
April 2,
2017
 
January 1,
2017
Cash collateral held by workers’ compensation insurance carriers
$
28,132

 
$
28,066

Cash and cash equivalents held in Trust
25,334

 
32,841

Investments held in Trust
155,298

 
146,517

Letters of credit (1)
7,783

 
7,982

Surety bonds (2)
20,430

 
20,440

Total collateral commitments
$
236,977

 
$
235,846



(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.
NET INCOME PER SHARE (Tables)
Schedule of adjusted net income and diluted common shares
Diluted common shares were calculated as follows (in thousands, except per share amounts):
 
Thirteen weeks ended
 
April 2, 2017
 
March 25, 2016
Net income
$
4,674

 
$
6,968

 
 
 
 
Weighted average number of common shares used in basic net income per common share
41,637

 
41,502

Dilutive effect of non-vested restricted stock
300

 
296

Weighted average number of common shares used in diluted net income per common share
41,937

 
41,798

Net income per common share:
 
 
 
Basic
$
0.11

 
$
0.17

Diluted
$
0.11

 
$
0.17

 
 
 
 
Anti-dilutive shares
159

 
284

ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables)
Schedule of Comprehensive Loss
Changes in the balance of each component of accumulated other comprehensive loss during the reporting periods were as follows (in thousands):
 
Thirteen weeks ended
 
Foreign currency translation adjustment
 
Unrealized gain (loss) on investments (1)
 
Total other comprehensive income (loss), net of tax
April 2, 2017
 
 
 
 
 
Balance at beginning of period
$
(11,684
)
 
$
251

 
$
(11,433
)
Current period other comprehensive income
1,800

 
737

 
2,537

Balance at end of period
$
(9,884
)
 
$
988

 
$
(8,896
)
 
 
 
 
 
 
March 25, 2016
 
 
 
 
 
Balance at beginning of period
$
(13,514
)
 
$
(499
)
 
$
(14,013
)
Current period other comprehensive income
2,401

 
76

 
2,477

Balance at end of period
$
(11,113
)
 
$
(423
)
 
$
(11,536
)


(1)
Consists of deferred compensation plan accounts, which are comprised of mutual funds classified as available-for-sale securities. The tax impact on unrealized gain on available-for-sale securities was de minimis for the thirteen weeks ended April 2, 2017 and March 25, 2016.

SEGMENT INFORMATION (Tables)
Schedule of Segment Information
The following table presents a reconciliation of segment revenue from services to total company revenue (in thousands):
 
Thirteen weeks ended
 
April 2, 2017
 
March 25, 2016
Revenue from services (1)
 
 
 
PeopleReady
$
332,624

 
$
356,010

PeopleManagement
191,686

 
246,427

PeopleScout
43,934

 
43,543

Total Company
$
568,244

 
$
645,980


(1)
There were no material revenue transactions between our reportable segments.

The following table presents a reconciliation of Segment EBITDA to income before tax expense (in thousands):
 
Thirteen weeks ended
 
April 2, 2017
 
March 25, 2016
Segment EBITDA (1)
 
 
 
PeopleReady
$
9,722

 
$
11,555

PeopleManagement
5,533

 
6,353

PeopleScout
8,665

 
8,010

 
23,920

 
25,918

Corporate unallocated
(6,335
)
 
(6,030
)
Depreciation and amortization
(11,174
)
 
(11,289
)
Income from operations
6,411

 
8,599

Interest and other income (expense), net
74

 
(1,019
)
Income before tax expense
$
6,485

 
$
7,580

(1)
Segment EBITDA was previously referred to as segment income from operations. This change had no impact on the amounts reported.


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Summary of Significant Accounting Policies (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Apr. 2, 2017
Mar. 25, 2016
Summary of Significant Accounting Policies [Abstract]
 
 
Increase (Decrease) in Restricted Cash
$ (14,039)
$ 3,592 
FAIR VALUE MEASUREMENT (Details) (USD $)
In Thousands, unless otherwise specified
Apr. 2, 2017
Jan. 1, 2017
Fair Value Measurement [Line Items]
 
 
Other restricted assets
$ 18,717 
$ 16,925 
Restricted investments classified as held-to-maturity
155,687 
145,953 
Contingent consideration
22,100 
21,600 
Total Fair Value
 
 
Fair Value Measurement [Line Items]
 
 
Cash and cash equivalents
26,083 
34,970 
Total Fair Value |
Restricted Assets
 
 
Fair Value Measurement [Line Items]
 
 
Restricted cash and cash equivalents
54,105 
67,751 
Other restricted assets
18,717 
16,925 
Restricted investments classified as held-to-maturity
155,687 
145,953 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
 
Fair Value Measurement [Line Items]
 
 
Cash and cash equivalents
26,083 
34,970 
Contingent consideration
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Restricted Assets
 
 
Fair Value Measurement [Line Items]
 
 
Restricted cash and cash equivalents
54,105 
67,751 
Other restricted assets
18,717 
 
Restricted investments classified as held-to-maturity
Significant Other Observable Inputs (Level 2)
 
 
Fair Value Measurement [Line Items]
 
 
Cash and cash equivalents
Contingent consideration
Significant Other Observable Inputs (Level 2) |
Restricted Assets
 
 
Fair Value Measurement [Line Items]
 
 
Restricted cash and cash equivalents
Other restricted assets
Restricted investments classified as held-to-maturity
155,687 
145,953 
Significant Unobservable Inputs (Level 3)
 
 
Fair Value Measurement [Line Items]
 
 
Cash and cash equivalents
Significant Unobservable Inputs (Level 3) |
Restricted Assets
 
 
Fair Value Measurement [Line Items]
 
 
Restricted cash and cash equivalents
Other restricted assets
Restricted investments classified as held-to-maturity
SIMOS Insourcing Solutions Corporation
 
 
Fair Value Measurement [Line Items]
 
 
Contingent consideration
22,100 
 
SIMOS Insourcing Solutions Corporation |
Total Fair Value
 
 
Fair Value Measurement [Line Items]
 
 
Contingent consideration
22,100 
21,600 
SIMOS Insourcing Solutions Corporation |
Significant Unobservable Inputs (Level 3)
 
 
Fair Value Measurement [Line Items]
 
 
Contingent consideration
$ 22,100 
$ 21,600 
FAIR VALUE MEASUREMENT Changes in Fair Value of Recurring Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (Details) (SIMOS Insourcing Solutions Corporation [Member], Significant Unobservable Inputs (Level 3), Fair Value by Liability Class [Domain], USD $)
In Thousands, unless otherwise specified
3 Months Ended
Apr. 2, 2017
Apr. 2, 2017
Total Fair Value
Jan. 1, 2017
Total Fair Value
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
Fair value measurement at beginning of period
 
 
$ 21,600 
Accretion on contingent consideration
500 
 
 
Fair value measurement at end of period
 
$ 22,100 
 
RESTRICTED CASH AND INVESTMENTS (Details) (USD $)
In Thousands, unless otherwise specified
Apr. 2, 2017
Jan. 1, 2017
Restricted Cash and Investments [Line Items]
 
 
Cash collateral held by insurance carriers
$ 28,771 
$ 34,910 
Cash and cash equivalents held in Trust
25,334 
32,841 
Investments held in Trust
155,298 
146,517 
Other
18,717 
16,925 
Restricted cash and investments
228,120 
231,193 
Held-to-maturity Securities, Reconciliation to Fair Value [Abstract]
 
 
Gross Unrealized Gain
1,222 
685 
Gross Unrealized Loss
(833)
(1,249)
Fair Value
155,687 
145,953 
Held-to-maturity Securities, Investment Maturities, Fair Value [Abstract]
 
 
Fair Value
155,687 
145,953 
Municipal debt securities
 
 
Restricted Cash and Investments [Line Items]
 
 
Investments held in Trust
78,589 
71,618 
Held-to-maturity Securities, Reconciliation to Fair Value [Abstract]
 
 
Gross Unrealized Gain
822 
443 
Gross Unrealized Loss
(585)
(865)
Fair Value
78,826 
71,196 
Held-to-maturity Securities, Investment Maturities, Fair Value [Abstract]
 
 
Fair Value
78,826 
71,196 
Corporate debt securities
 
 
Restricted Cash and Investments [Line Items]
 
 
Investments held in Trust
70,268 
68,934 
Held-to-maturity Securities, Reconciliation to Fair Value [Abstract]
 
 
Gross Unrealized Gain
355 
212 
Gross Unrealized Loss
(229)
(352)
Fair Value
70,394 
68,794 
Held-to-maturity Securities, Investment Maturities, Fair Value [Abstract]
 
 
Fair Value
70,394 
68,794 
Agency mortgage-backed securities
 
 
Restricted Cash and Investments [Line Items]
 
 
Investments held in Trust
5,442 
5,965 
Held-to-maturity Securities, Reconciliation to Fair Value [Abstract]
 
 
Gross Unrealized Gain
40 
30 
Gross Unrealized Loss
(19)
(32)
Fair Value
5,463 
5,963 
Held-to-maturity Securities, Investment Maturities, Fair Value [Abstract]
 
 
Fair Value
5,463 
5,963 
U.S. government and agency securities
 
 
Restricted Cash and Investments [Line Items]
 
 
Investments held in Trust
999 
 
Held-to-maturity Securities, Reconciliation to Fair Value [Abstract]
 
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Fair Value
1,004 
 
Held-to-maturity Securities, Investment Maturities, Fair Value [Abstract]
 
 
Fair Value
1,004 
 
Restricted Cash and Investments [Member]
 
 
Restricted Cash and Investments [Line Items]
 
 
Investments held in Trust
155,298 
 
Held-to-maturity Securities, Reconciliation to Fair Value [Abstract]
 
 
Fair Value
155,687 
 
Held-to-maturity Securities, Investment Maturities, Amortized Cost [Abstract]
 
 
Due in one year or less
17,644 
 
Due after one year through five years
72,939 
 
Due after five years through ten years
64,715 
 
Held-to-maturity Securities, Investment Maturities, Fair Value [Abstract]
 
 
Due in one year or less
17,680 
 
Due after one year through five years
73,300 
 
Due after five years through ten years
64,707 
 
Fair Value
$ 155,687 
 
WORKERS' COMPENSATION INSURANCE AND RESERVES - Reconciliation of Workers' Compensation Claims Reserve (Details) (USD $)
In Thousands, unless otherwise specified
Apr. 2, 2017
Jan. 1, 2017
Workers' Compensation Deductible Limit [Line Items]
 
 
Undiscounted workers’ compensation reserve
$ 290,810 
$ 292,169 
Less discount on workers' compensation reserve
15,417 
14,818 
Workers' compensation reserve, net of discount
275,393 
277,351 
Less current portion
75,532 
79,126 
Long-term portion
$ 199,861 
$ 198,225 
WORKERS' COMPENSATION INSURANCE AND RESERVES - Narrative (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 3 Months Ended 12 Months Ended
Apr. 2, 2017
Mar. 25, 2016
Jan. 1, 2017
Apr. 2, 2017
Below limit
Jan. 1, 2017
Below limit
Workers' Compensation Deductible Limit [Line Items]
 
 
 
 
 
Workers' compensation claim deductible limit
$ 2.0 
 
 
 
 
Weighted average rate
 
 
 
1.60% 
1.60% 
Weighted average period - claim payments below deductible limit
4 years 6 months 0 days 
 
 
 
 
Payments made against self-insured claims
15.9 
18.9 
 
 
 
Weighted average period - claim payments and receivables above deductible limit
15 years 
 
 
 
 
Excess claims
50.6 
 
52.9 
 
 
Workers' compensation claim receivables net of valuation allowance
46.6 
 
48.9 
 
 
Workers' compensation expense
$ 19.8 
$ 24.1 
 
 
 
COMMITMENTS AND CONTINGENCIES - Workers' Compensation Commitments (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Apr. 2, 2017
Jan. 1, 2017
Workers' Compensation Commitments [Line Items]
 
 
Cash collateral held by workers' compensation insurance carriers
$ 28,132 
$ 28,066 
Cash and cash equivalents held in Trust
25,334 
32,841 
Investments held in Trust
155,298 
146,517 
Letters of credit
7,783 
7,982 
Surety bonds
20,430 
20,440 
Total collateral commitments
$ 236,977 
$ 235,846 
Surety bonds annual fee limit, % of bond amount
2.00% 
 
Surety bonds required cancellation notice
60 days 
 
Minimum
 
 
Workers' Compensation Commitments [Line Items]
 
 
Surety bonds review and renewal period if elected
1 year 
 
Maximum
 
 
Workers' Compensation Commitments [Line Items]
 
 
Surety bonds review and renewal period if elected
4 years 
 
INCOME TAXES - Narrative (Details)
3 Months Ended
Apr. 2, 2017
Income Tax Disclosure [Abstract]
 
Effective income tax rate reconciliation, percent
27.90% 
Income tax expense (benefit) based on statutory rate
35.00% 
NET INCOME PER SHARE (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Apr. 2, 2017
Mar. 25, 2016
Earnings Per Share [Abstract]
 
 
Net income
$ 4,674 
$ 6,968 
Weighted average number of common shares used in basic net income per common share
41,637 
41,502 
Dilutive effect of non-vested restricted stock
300 
296 
Weighted average number of common shares used in diluted net income per common share
41,937 
41,798 
Net income per common share:
 
 
Basic (in dollars per share)
$ 0.11 
$ 0.17 
Diluted (in dollars per share)
$ 0.11 
$ 0.17 
Anti-dilutive shares
159 
284 
ACCUMULATED OTHER COMPREHENSIVE INCOME (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Apr. 2, 2017
Mar. 25, 2016
Accumulated Other Comprehensive Loss, Net of Tax [Roll Forward]
 
 
Balance at beginning of period
$ (11,433)
$ (14,013)
Current-period other comprehensive income
2,537 
2,477 
Balance at end of period
(8,896)
(11,536)
Foreign currency translation adjustment
 
 
Accumulated Other Comprehensive Loss, Net of Tax [Roll Forward]
 
 
Balance at beginning of period
(11,684)
(13,514)
Foreign currency translation adjustment, net of tax
1,800 
2,401 
Balance at end of period
(9,884)
(11,113)
Unrealized gain (loss) on marketable securities
 
 
Accumulated Other Comprehensive Loss, Net of Tax [Roll Forward]
 
 
Balance at beginning of period
251 
(499)
Unrealized gain (loss) on investments, net of tax
737 
76 
Balance at end of period
$ 988 
$ (423)
SEGMENT INFORMATION (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Apr. 2, 2017
Mar. 25, 2016
Segment Reporting Information [Line Items]
 
 
Revenue
$ 568,244 
$ 645,980 
Corporate unallocated
121,844 
130,624 
Depreciation and amortization
(11,174)
(11,289)
Income from operations
6,411 
8,599 
Interest and other income (expense), net
74 
(1,019)
Income before tax expense
6,485 
7,580 
Corporate Segment
 
 
Segment Reporting Information [Line Items]
 
 
Corporate unallocated
(6,335)
(6,030)
PeopleReady
 
 
Segment Reporting Information [Line Items]
 
 
Revenue
332,624 
356,010 
Segment EBITDA
9,722 
11,555 
PeopleManagement
 
 
Segment Reporting Information [Line Items]
 
 
Revenue
191,686 
246,427 
Segment EBITDA
5,533 
6,353 
PeopleScout
 
 
Segment Reporting Information [Line Items]
 
 
Revenue
43,934 
43,543 
Segment EBITDA
$ 8,665 
$ 8,010 
SUBSEQUENT EVENTS Subsequent event narrative (Details) (USD $)
0 Months Ended
Apr. 2, 2017
Jan. 1, 2017
Apr. 2, 2017
SIMOS Insourcing Solutions Corporation
Apr. 24, 2017
SIMOS Insourcing Solutions Corporation
Subsequent Event
Subsequent Event [Line Items]
 
 
 
 
Payments for previous acquisition
 
 
 
$ 22,500,000 
Contingent consideration
$ 22,100,000 
$ 21,600,000 
$ 22,100,000