false--12-27Q120200000768899P1Y42880006379000001000000001000000003859300036128000385930003612800060000000.1310.131200000002000000000000.020 0000768899 2019-12-30 2020-03-29 0000768899 2020-04-13 0000768899 2019-12-29 0000768899 2020-03-29 0000768899 2018-12-31 2019-03-31 0000768899 2018-12-30 0000768899 2019-03-31 0000768899 tbi:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateBondSecuritiesMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AssetBackedSecuritiesMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MunicipalBondsMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2019-12-29 0000768899 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AssetBackedSecuritiesMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AssetBackedSecuritiesMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateBondSecuritiesMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-29 0000768899 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MunicipalBondsMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:AssetBackedSecuritiesMember 2019-12-29 0000768899 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-29 0000768899 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:MunicipalBondsMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateBondSecuritiesMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MunicipalBondsMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateBondSecuritiesMember 2019-12-29 0000768899 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-03-29 0000768899 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-12-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AssetBackedSecuritiesMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateBondSecuritiesMember 2020-03-29 0000768899 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AssetBackedSecuritiesMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MunicipalBondsMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MunicipalBondsMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateBondSecuritiesMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MunicipalBondsMember 2020-03-29 0000768899 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:AssetBackedSecuritiesMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateBondSecuritiesMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateBondSecuritiesMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AssetBackedSecuritiesMember 2020-03-29 0000768899 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2020-03-29 0000768899 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2020-03-29 0000768899 tbi:RestrictedAssetsMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:MunicipalBondsMember 2020-03-29 0000768899 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsNonrecurringMember 2020-03-29 0000768899 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember 2020-03-29 0000768899 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsNonrecurringMember 2020-03-29 0000768899 us-gaap:FairValueMeasurementsNonrecurringMember 2019-12-30 2020-03-29 0000768899 us-gaap:CorporateBondSecuritiesMember 2019-12-29 0000768899 us-gaap:AssetBackedSecuritiesMember 2019-12-29 0000768899 us-gaap:MunicipalBondsMember 2019-12-29 0000768899 us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2019-12-29 0000768899 tbi:RestrictedCashandInvestmentsMember 2020-03-29 0000768899 us-gaap:CorporateBondSecuritiesMember 2020-03-29 0000768899 us-gaap:MunicipalBondsMember 2020-03-29 0000768899 us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2020-03-29 0000768899 us-gaap:AssetBackedSecuritiesMember 2020-03-29 0000768899 tbi:PeopleManagementMember 2020-03-29 0000768899 tbi:PeopleReadyMember 2019-12-29 0000768899 tbi:PeopleManagementMember 2019-12-30 2020-03-29 0000768899 tbi:PeopleScoutMember 2019-12-30 2020-03-29 0000768899 tbi:PeopleReadyMember 2019-12-30 2020-03-29 0000768899 tbi:PeopleManagementMember 2019-12-29 0000768899 tbi:PeopleReadyMember 2020-03-29 0000768899 tbi:PeopleScoutMember 2020-03-29 0000768899 tbi:PeopleScoutMember 2019-12-29 0000768899 us-gaap:CustomerRelationshipsMember 2019-12-29 0000768899 us-gaap:TrademarksAndTradeNamesMember 2019-12-29 0000768899 us-gaap:TechnologyBasedIntangibleAssetsMember 2019-12-29 0000768899 us-gaap:TrademarksAndTradeNamesMember 2020-03-29 0000768899 us-gaap:CustomerRelationshipsMember 2020-03-29 0000768899 us-gaap:TechnologyBasedIntangibleAssetsMember 2020-03-29 0000768899 tbi:OnsiteMember tbi:PeopleManagementMember 2019-12-30 2020-03-29 0000768899 tbi:OnsiteMember us-gaap:CustomerRelationshipsMember tbi:PeopleManagementMember 2020-03-29 0000768899 srt:MaximumMember 2020-03-29 0000768899 tbi:RPOMember us-gaap:CustomerRelationshipsMember tbi:PeopleScoutMember 2020-03-29 0000768899 tbi:RPOMember tbi:PeopleScoutMember 2019-12-30 2020-03-29 0000768899 srt:MinimumMember 2020-03-29 0000768899 tbi:MSPMember tbi:PeopleScoutMember 2019-12-30 2020-03-29 0000768899 tbi:RPOMember tbi:PeopleScoutMember 2020-03-29 0000768899 tbi:MSPMember tbi:PeopleScoutMember 2020-03-29 0000768899 us-gaap:TrademarksAndTradeNamesMember 2020-03-29 0000768899 tbi:OnsiteMember tbi:PeopleManagementMember 2019-12-29 0000768899 us-gaap:TrademarksAndTradeNamesMember 2019-12-29 0000768899 tbi:BelowLimitMember 2019-12-30 2020-03-29 0000768899 tbi:AboveLimitMember 2019-12-30 2020-03-29 0000768899 tbi:AboveLimitMember 2018-12-31 2019-12-29 0000768899 tbi:BelowLimitMember 2018-12-31 2019-12-29 0000768899 us-gaap:RevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-03-29 0000768899 tbi:SwinglineLoanMember 2020-03-16 0000768899 us-gaap:RevolvingCreditFacilityMember 2020-03-16 2020-03-16 0000768899 us-gaap:RevolvingCreditFacilityMember us-gaap:BaseRateMember 2019-12-30 2020-03-29 0000768899 us-gaap:RevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-12-30 2020-03-29 0000768899 srt:MinimumMember us-gaap:LetterOfCreditMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-12-30 2020-03-29 0000768899 tbi:SwinglineLoanMember 2020-03-29 0000768899 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-03-16 2020-03-16 0000768899 srt:MaximumMember us-gaap:LetterOfCreditMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-12-30 2020-03-29 0000768899 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember us-gaap:BaseRateMember 2019-12-30 2020-03-29 0000768899 us-gaap:RevolvingCreditFacilityMember us-gaap:BaseRateMember 2020-03-29 0000768899 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember us-gaap:BaseRateMember 2019-12-30 2020-03-29 0000768899 us-gaap:LetterOfCreditMember 2020-03-16 0000768899 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember 2019-12-30 2020-03-29 0000768899 us-gaap:RevolvingCreditFacilityMember 2020-03-29 0000768899 us-gaap:RevolvingCreditFacilityMember 2019-12-29 0000768899 us-gaap:RevolvingCreditFacilityMember 2020-03-16 0000768899 tbi:SwinglineLoanMember 2019-12-29 0000768899 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember us-gaap:BaseRateMember 2020-03-16 2020-03-16 0000768899 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember us-gaap:BaseRateMember 2020-03-16 2020-03-16 0000768899 us-gaap:LetterOfCreditMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-12-30 2020-03-29 0000768899 us-gaap:RevolvingCreditFacilityMember us-gaap:BaseRateMember 2020-03-16 2020-03-16 0000768899 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-03-16 2020-03-16 0000768899 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember 2019-12-30 2020-03-29 0000768899 srt:MaximumMember 2019-12-30 2020-03-29 0000768899 srt:MinimumMember 2019-12-30 2020-03-29 0000768899 us-gaap:RetainedEarningsMember 2019-12-30 2020-03-29 0000768899 us-gaap:CommonStockMember 2019-12-29 0000768899 us-gaap:RetainedEarningsMember 2018-12-31 2019-03-31 0000768899 us-gaap:CommonStockMember 2019-03-31 0000768899 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-30 2020-03-29 0000768899 us-gaap:CommonStockMember 2018-12-30 0000768899 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 2019-03-31 0000768899 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0000768899 us-gaap:RetainedEarningsMember 2019-12-29 0000768899 us-gaap:CommonStockMember 2019-12-30 2020-03-29 0000768899 us-gaap:CommonStockMember 2020-03-29 0000768899 us-gaap:CommonStockMember 2018-12-31 2019-03-31 0000768899 us-gaap:RetainedEarningsMember 2019-03-31 0000768899 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-29 0000768899 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-29 0000768899 us-gaap:RetainedEarningsMember 2018-12-30 0000768899 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-30 0000768899 us-gaap:RetainedEarningsMember 2020-03-29 0000768899 us-gaap:CommonStockMember 2020-02-28 2020-02-28 0000768899 us-gaap:CommonStockMember 2019-10-16 0000768899 2020-02-28 2020-02-28 0000768899 tbi:HumanResourceOutsourcingMember tbi:PeopleScoutMember 2019-12-30 2020-03-29 0000768899 tbi:ContingentStaffingMember tbi:PeopleManagementMember 2018-12-31 2019-03-31 0000768899 tbi:ContingentStaffingMember tbi:PeopleReadyMember 2019-12-30 2020-03-29 0000768899 tbi:ContingentStaffingMember tbi:PeopleReadyMember 2018-12-31 2019-03-31 0000768899 tbi:ContingentStaffingMember tbi:PeopleManagementMember 2019-12-30 2020-03-29 0000768899 tbi:HumanResourceOutsourcingMember tbi:PeopleScoutMember 2018-12-31 2019-03-31 0000768899 us-gaap:CorporateMember 2019-12-30 2020-03-29 0000768899 tbi:PeopleScoutMember 2018-12-31 2019-03-31 0000768899 us-gaap:CorporateMember 2018-12-31 2019-03-31 0000768899 tbi:PeopleReadyMember 2018-12-31 2019-03-31 0000768899 tbi:PeopleManagementMember 2018-12-31 2019-03-31 0000768899 us-gaap:SubsequentEventMember 2020-04-06 0000768899 us-gaap:SubsequentEventMember 2020-03-30 2020-06-28 xbrli:shares iso4217:USD xbrli:shares xbrli:pure tbi:employee iso4217:USD tbi:security
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 29, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-14543
____________________________________ 
image0a18.jpg
TrueBlue, Inc.
(Exact name of registrant as specified in its charter)
______________________________________ 
 
Washington
 
91-1287341
 
 
(State of incorporation)
 
(I.R.S. employer identification no.)
 

1015 A Street, Tacoma, Washington 98402
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code:    (253383-9101
______________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, no par value
TBI
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.        Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
 Non-accelerated filer
 
Smaller reporting company
Emerging growth company
 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of April 13, 2020, there were 36,126,189 shares of the registrant’s common stock outstanding.

 



TrueBlue, Inc.
Table of Contents
  
  
Page
PART I. FINANCIAL INFORMATION
Item 1.
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
 
 
 







 
Page - 2

Table of Contents


PART I. FINANCIAL INFORMATION
Item 1.
CONSOLIDATED FINANCIAL STATEMENTS
TRUEBLUE, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except par value data)
March 29,
2020
December 29,
2019
ASSETS
 
 
Current assets:
 
 
Cash and cash equivalents
$
265,260

$
37,608

Accounts receivable, net of allowance for doubtful accounts of $6,379 and $4,288
292,988

342,303

Prepaid expenses, deposits and other current assets
24,987

30,717

Income tax receivable
10,169

11,105

Total current assets
593,404

421,733

Property and equipment, net
67,036

66,150

Restricted cash and investments
218,907

230,932

Deferred income taxes, net
26,665

3,228

Goodwill
93,290

237,498

Intangible assets, net
34,630

73,673

Operating lease right-of-use assets
39,234

41,082

Workers’ compensation claims receivable, net
44,572

44,624

Other assets, net
17,407

17,235

Total assets
$
1,135,145

$
1,136,155

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
Current liabilities:
 
 
Accounts payable and other accrued expenses
$
39,291

$
68,406

Accrued wages and benefits
55,871

67,604

Current portion of workers’ compensation claims reserve
69,353

73,020

Operating lease current liabilities
14,554

14,358

Other current liabilities
7,980

7,418

Total current liabilities
187,049

230,806

Workers’ compensation claims reserve, less current portion
184,102

182,598

Long-term debt
293,500

37,100

Long-term deferred compensation liabilities
23,460

26,765

Operating lease long-term liabilities
26,744

28,849

Other long-term liabilities
4,348

4,064

Total liabilities
719,203

510,182

 
 
 
Commitments and contingencies (Note 7)


 
 
 
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; 36,128 and 38,593 shares issued and outstanding
1

1

Accumulated other comprehensive loss
(19,863
)
(13,238
)
Retained earnings
435,804

639,210

Total shareholders’ equity
415,942

625,973

Total liabilities and shareholders’ equity
$
1,135,145

$
1,136,155

See accompanying notes to consolidated financial statements

 
Page - 3

Table of Contents


TRUEBLUE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(unaudited)
 
Thirteen weeks ended
(in thousands, except per share data)
March 29,
2020
March 31,
2019
Revenue from services
$
494,252

$
552,352

Cost of services
368,093

405,657

Gross profit
126,159

146,695

Selling, general and administrative expense
117,381

127,980

Depreciation and amortization
9,094

9,952

Goodwill and intangible asset impairment charge
175,189


Income (loss) from operations
(175,505
)
8,763

Interest expense
(543
)
(722
)
Interest and other income
806

1,275

Interest and other income (expense), net
263

553

Income (loss) before tax expense (benefit)
(175,242
)
9,316

Income tax expense (benefit)
(24,748
)
1,040

Net income (loss)
$
(150,494
)
$
8,276

 
 
 
Net income (loss) per common share:
 
 
Basic
$
(4.04
)
$
0.21

Diluted
$
(4.04
)
$
0.21

 
 
 
Weighted average shares outstanding:
 
 
Basic
37,255

39,366

Diluted
37,255

39,735

 
 
 
Other comprehensive income (loss):
 
 
Foreign currency translation adjustment
$
(6,625
)
$
1,326

Comprehensive income (loss)
$
(157,119
)
$
9,602

See accompanying notes to consolidated financial statements

 
Page - 4

Table of Contents


TRUEBLUE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
Thirteen weeks ended
(in thousands)
March 29,
2020
March 31,
2019
Cash flows from operating activities:
 
 
Net income (loss)
$
(150,494
)
$
8,276

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
Depreciation and amortization
9,094

9,952

Goodwill and intangible asset impairment charge
175,189


Provision for doubtful accounts
3,289

1,778

Stock-based compensation
1,508

3,606

Deferred income taxes
(23,432
)
3,209

Non-cash lease expense
3,763

3,565

Other operating activities
5,375

(1,841
)
Changes in operating assets and liabilities:
 
 
Accounts receivable
45,407

26,558

Income tax receivable
435

(3,645
)
Other assets
5,958

(5,274
)
Accounts payable and other accrued expenses
(28,443
)
(9,878
)
Accrued wages and benefits
(11,733
)
(10,266
)
Workers’ compensation claims reserve
(2,163
)
(4,380
)
Operating lease liabilities
(3,811
)
(3,414
)
Other liabilities
(2,334
)
3,268

Net cash provided by operating activities
27,608

21,514

Cash flows from investing activities:
 
 
Capital expenditures
(7,028
)
(5,862
)
Purchases of restricted available-for-sale investments
(1,149
)
(3,070
)
Sales of restricted available-for-sale investments
1,269

1,886

Maturities of restricted held-to-maturity investments
6,168

8,451

Net cash provided by (used in) investing activities
(740
)
1,405

Cash flows from financing activities:
 
 
Purchases and retirement of common stock
(52,348
)
(5,303
)
Net proceeds from employee stock purchase plans
323

380

Common stock repurchases for taxes upon vesting of restricted stock
(1,792
)
(1,438
)
Net change in Revolving Credit Facility
256,400

(37,800
)
Other
(508
)
(69
)
Net cash provided by (used in) financing activities
202,075

(44,230
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(1,738
)
314

Net change in cash, cash equivalents and restricted cash
227,205

(20,997
)
Cash, cash equivalents and restricted cash, beginning of period
92,371

102,450

Cash, cash equivalents and restricted cash, end of period
$
319,576

$
81,453

Supplemental disclosure of cash flow information:
 
 
Cash paid (received) during the period for:
 
 
Interest
$
394

$
667

Income taxes
(1,751
)
1,448

Operating lease liabilities
4,440

4,344

Non-cash transactions:
 
 
Property and equipment purchased but not yet paid
322

807

Right-of-use assets obtained in exchange for new operating lease liabilities
2,422

4,698

See accompanying notes to consolidated financial statements

 
Page - 5

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 1:    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”) and rules and regulations of the Securities and Exchange Commission for interim financial information. 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 December 29, 2019. The results of operations for the thirteen weeks ended March 29, 2020, are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period.

Going concern assessment and management's plans

Due to the adverse impacts of COVID-19 on our business operations, including anticipated future revenue and operating cash flow declines, we expect to fund operations over the next 12 months with funds borrowed on our revolving credit facility. However, if we continue to experience significant revenue declines, which is likely to occur, we would likely not meet one or more of our financial covenants under our revolving credit facility within the next 12 months. Our failure to comply with these covenants would result in an event of default, which, if not cured or waived, could require us to repay these borrowings before their due date. Refer to Note 6: Long-Term Debt for additional details of our revolving credit facility.

We are actively working with our banks to seek an amendment or waiver. In the event we are unsuccessful in these efforts with our banks, management plans to take further action to expand the current cost reduction programs, eliminate all nonessential capital expenditure projects, accelerate working capital improvement initiatives, and complete the sale of certain assets to provide supplemental liquidity. In the absence of an amendment or waiver of covenants related to the revolving credit facility we believe our plans, if executed, would result in adequate cash flows to support our ongoing operations.

Our financial statements have been prepared under the assumption that we will continue as a going concern.
Recently adopted accounting standards
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 (“CECL”), which requires the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance requires the application of a current expected credit loss model, which is a new impairment model based on expected losses. Under this model, an entity recognizes an allowance for expected credit losses based on historical experience, current conditions, and forecasted information rather than the previous methodology of delaying recognition of credit losses until it is probable a loss has been incurred. This guidance was adopted at the beginning of the first quarter of 2020. We were required to apply the new standard by means of a cumulative-effect adjustment to opening retained earnings as of the beginning of the first quarter of 2020. The total impact upon adoption to opening retained earnings was immaterial to both the individual financial assets affected as well as in the aggregate.
The following policies have been updated to reflect our adoption of the new standard on accounting for credit losses on financial instruments.
Accounts receivable and allowance for credit losses
Accounts receivable are recorded at the invoiced amount. We establish an allowance for credit loss of estimated losses resulting from the failure of our clients to make required payments by applying an aging schedule to pools of assets with similar risk characteristics. Based on an analysis of the risk characteristics of our clients and associated receivables, we have concluded our pools are as follows:

 
Page - 6

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


PeopleReady and Centerline Drivers (“Centerline”) have a large, diverse set of clients, generally with frequent, low dollar invoices due to the daily nature of the work we perform. This results in high turnover in accounts receivable and lower rates of non-payment.
PeopleManagement On-site has a smaller number of clients, and follows a contractual billing schedule. The invoice amounts are higher than that of PeopleReady and Centerline, with longer payment terms.
PeopleScout has a smaller number of clients, and generally sends invoices on a consolidated basis for a client. Invoice amounts are generally higher for PeopleScout than for PeopleManagement On-site, with similar payment terms.
When specific clients are identified as no longer sharing the same risk profile as their current pool, they are removed from the pool and evaluated separately. The credit loss rates applied to each aging category by pool are based on current collection efforts, historical collection trends, write-off experience, client credit risk and current economic data. The allowance for credit loss is reviewed quarterly and represents our best estimate of the amount of expected credit losses. Each month, past due or delinquent balances are identified based upon a review of aged receivables performed by collections and operations. Past due balances are written off when it is probable the receivable will not be collected. Changes in the allowance for credit losses are recorded in selling, general and administrative (“SG&A”) expense on the Consolidated Statements of Operations and Comprehensive Income (Loss).
In response to the rapidly changing market conditions, we have taken all appropriate steps to assess the impact to our accounts receivable allowance for credit losses. Given the dynamic nature, it is difficult to estimate the economic impact caused by COVID–19 on this allowance. However, we believe the allowance for credit loss for accounts receivable as of March 29, 2020, is our best estimate of the amount of expected credit losses. Should actual results deviate from what we have currently estimated, our allowance for credit losses could change significantly.
The activity related to the allowance for credit losses for accounts receivable during the thirteen weeks ended March 29, 2020 was as follows:
(in thousands)
 
Beginning balance
$
4,288

Cumulative-effect adjustment (1)
524

Current period provision
2,660

Write-offs, net (2)
(1,093
)
Ending balance
$
6,379

(1)
As a result of our adoption of the accounting standard for credit losses, we recognized a cumulative-effect adjustment to our account receivable allowance of $0.5 million as of the beginning of the first quarter of 2020.
(2)
Write-offs charged against the allowance are presented net of recoveries collected as the recoveries were immaterial for the thirteen weeks ended March 29, 2020.
Restricted cash and investments
We establish an allowance for credit loss for our held-to-maturity debt securities using a discounted cash flow method including a probability of default rate based on the issuer credit rating. We report the entire change in present value as credit loss expense (or reversal of credit loss expense) in cost of services on the Consolidated Statements of Operations and Comprehensive Income (Loss). The cumulative-effect adjustment to our held-to-maturity debt securities as a result of adopting CECL as of the beginning of the first quarter of 2020 was immaterial, as was the allowance as of March 29, 2020.
Workers’ compensation claims reserves
We establish an allowance for credit loss for our insurance receivables using a probability of default and loss given default method, with the probability of default rate based on the third-party insurance carrier credit rating. Changes in the allowance for credit losses are recorded in cost of services on the Consolidated Statements of Operations and Comprehensive Income (Loss). The cumulative-effect adjustment to our workers’ compensation insurance receivables as a result of adopting CECL as of the beginning of the first quarter of 2020 was immaterial, as was the allowance as of March 29, 2020.

 
Page - 7

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Reclassifications
Certain previously reported amounts have been reclassified to conform to the current presentation. Specifically, the company has made certain reclassifications between cost of services and SG&A expense to more accurately reflect the costs of delivering our services. Such reclassifications did not have a significant impact on the company’s gross profit or SG&A expense.
Certain immaterial prior year amounts have also been reclassified within cash flows from investing activities on our Consolidated Statements of Cash Flows to conform to current year presentation.
Recently issued accounting pronouncements not yet adopted
There are no accounting pronouncements which have not yet been adopted that are expected to have a significant impact on our financial statements and related disclosures.
NOTE 2:    FAIR VALUE MEASUREMENT
Assets measured at fair value on a recurring basis
Our assets measured at fair value on a recurring basis consisted of the following:
 
March 29, 2020
(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)
Cash and cash equivalents
$
265,260

$
265,260

$

$

Restricted cash and cash equivalents
54,316

54,316



Cash, cash equivalents and restricted cash (1)
$
319,576

$
319,576

$

$

 
 
 
 
 
Municipal debt securities
$
73,093

$

$
73,093

$

Corporate debt securities
70,136


70,136


Agency mortgage-backed securities
1,155


1,155


U.S. government and agency securities
1,068


1,068


Restricted investments classified as held-to-maturity
$
145,452

$

$
145,452

$

 
 
 
 
 
Deferred compensation investments (2)
$
11,546

$
11,546

$

$

 
December 29, 2019
(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)
Cash and cash equivalents
$
37,608

$
37,608

$

$

Restricted cash and cash equivalents
54,763

54,763



Cash, cash equivalents and restricted cash (1)
$
92,371

$
92,371

$

$

 
 
 
 
 
Municipal debt securities
$
74,236

$

$
74,236

$

Corporate debt securities
76,068


76,068


Agency mortgage-backed securities
1,376


1,376


U.S. government and agency securities
1,051


1,051


Restricted investments classified as held-to-maturity
$
152,731

$

$
152,731

$

 
 
 
 
 
Deferred compensation investments (2)
$
13,670

$
13,670

$

$

(1)
Cash, cash equivalents and restricted cash consist of money market funds, deposits and investments with original maturities of three months or less.
(2)
Deferred compensation investments consist of mutual funds and money market funds.

 
Page - 8

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


There were no material transfers between level 1, level 2 and level 3 of the fair value hierarchy during the thirteen weeks ended March 29, 2020 or March 31, 2019.
Assets measured at fair value on a nonrecurring basis
We measure the fair value of certain non-financial assets on a nonrecurring basis, including goodwill and certain intangible assets. During the first quarter of 2020, we performed an interim impairment test as of the last day of our first fiscal quarter due to current market conditions. As a result of that test, we recognized an impairment charge of $175.2 million during the thirteen weeks ended March 29, 2020, comprised as follows:
 
March 29, 2020
(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
$
93,290

$

$

$
93,290

$
(140,489
)
Client relationships
$
27,108



27,108

(34,700
)
Total
$
120,398

$

$

$
120,398

$
(175,189
)
Goodwill and client relationship intangible assets with a total carrying value of $295.6 million were written down to their fair value of $120.4 million, resulting in an impairment charge of $175.2 million, which was recorded in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the thirteen weeks ended March 29, 2020. Refer to Note 4: Goodwill and Intangible Assets for additional details on the impairment charge and valuation methodologies.
NOTE 3:    RESTRICTED CASH AND INVESTMENTS
The following is a summary of the carrying value of our restricted cash and investments:
(in thousands)
March 29,
2020
December 29,
2019
Cash collateral held by insurance carriers
$
24,684

$
24,612

Cash and cash equivalents held in Trust
26,641

23,681

Investments held in Trust
142,761

149,373

Deferred compensation investments
11,546

13,670

Company owned life insurance policies
10,284

13,126

Other restricted cash and cash equivalents
2,991

6,470

Total restricted cash and investments
$
218,907

$
230,932


Held-to-maturity
Restricted cash and investments include collateral that has been provided or pledged to insurance carriers for workers’ compensation and state workers’ compensation programs. Our insurance carriers and certain state workers’ compensation programs require us to collateralize a portion of our workers’ compensation obligation. The collateral typically takes the form of cash and cash equivalents and highly rated investment grade securities, primarily in debt and asset-backed securities. The majority of our collateral obligations are held in a trust 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 March 29, 2020 and December 29, 2019, were as follows:

 
Page - 9

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 
March 29, 2020
(in thousands)
Amortized cost
Gross unrealized gains
Gross unrealized losses
Fair value
Municipal debt securities
$
71,124

$
1,969

$

$
73,093

Corporate debt securities
69,539

908

(311
)
70,136

Agency mortgage-backed securities
1,116

39


1,155

U.S. government and agency securities
1,000

68


1,068

Total held-to-maturity investments
$
142,779

$
2,984

$
(311
)
$
145,452

 
December 29, 2019
(in thousands)
Amortized cost
Gross unrealized gains
Gross unrealized losses
Fair value
Municipal debt securities
$
72,017

$
2,219

$

$
74,236

Corporate debt securities
75,000

1,102

(34
)
76,068

Agency mortgage-backed securities
1,357

21

(2
)
1,376

U.S. government and agency securities
999

52


1,051

Total held-to-maturity investments
$
149,373

$
3,394

$
(36
)
$
152,731


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 March 29, 2020 and December 29, 2019, were as follows:
 
March 29, 2020
 
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
Corporate debt securities
$
23,488

$
(311
)
 
$

$

 
$
23,488

$
(311
)
Total held-to-maturity investments
$
23,488

$
(311
)
 
$

$

 
$
23,488

$
(311
)
 
December 29, 2019
 
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
Corporate debt securities
$
15,920

$
(32
)
 
$
2,765

$
(2
)
 
$
18,685

$
(34
)
Agency mortgage-backed securities


 
276

(2
)
 
276

(2
)
Total held-to-maturity investments
$
15,920

$
(32
)

$
3,041

$
(4
)

$
18,961

$
(36
)

The total number of held-to-maturity securities in an unrealized loss position as of March 29, 2020 and December 29, 2019 were 16 and 17, respectively. The unrealized losses were the result of net interest rate increases over the maturity of the respective securities. 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 until maturity, we do 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:
 
March 29, 2020
(in thousands)
Amortized cost
Fair value
Due in one year or less
$
26,080

$
26,145

Due after one year through five years
88,541

90,049

Due after five years through ten years
28,158

29,258

Total held-to-maturity investments
$
142,779

$
145,452



 
Page - 10

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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.
Equity investments
We hold mutual funds and money market funds to support our deferred compensation liability. Unrealized gains and losses related to equity investments still held at March 29, 2020 and March 31, 2019, totaled a $2.9 million loss and a $2.4 million gain for the thirteen weeks then ended, respectively, and are included in SG&A expense on the Consolidated Statements of Operations and Comprehensive Income (Loss).
NOTE 4:    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
December 29, 2019
 
 
 
 
Goodwill before impairment
106,304

81,092

145,181

332,577

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

47,392

130,012

237,498

 
 
 
 
 
 
Impairment loss

(45,901
)
(94,588
)
(140,489
)
Foreign currency translation


(3,719
)
(3,719
)
 
 
 
 
 
 
Balance at
March 29, 2020
 
 
 
 
Goodwill before impairment
106,304

81,092

141,462

328,858

Accumulated impairment loss
(46,210
)
(79,601
)
(109,757
)
(235,568
)
Goodwill, net
$
60,094

$
1,491

$
31,705

$
93,290


Intangible assets
Finite-lived intangible assets
The following table presents our purchased finite-lived intangible assets:
 
March 29, 2020
 
December 29, 2019
(in thousands)
Gross carrying amount
Accumulated
amortization
Net
carrying
amount
 
Gross carrying amount
Accumulated
amortization
Net
carrying
amount
Finite-lived intangible assets (1):
 
 
 
 
 
 
 
Client relationships (2)
$
98,181

$
(71,073
)
$
27,108

 
$
149,299

$
(83,317
)
$
65,982

Trade names/trademarks
1,939

(467
)
1,472

 
2,052

(441
)
1,611

Technologies
600

(550
)
50

 
600

(520
)
80

Total finite-lived intangible assets
$
100,720

$
(72,090
)
$
28,630

 
$
151,951

$
(84,278
)
$
67,673

(1)
Excludes assets that are fully amortized.
(2)
Balance at March 29, 2020 is net of impairment loss of $34.7 million recorded in the thirteen weeks ended March 29, 2020.
Amortization expense of our finite-lived intangible assets was $4.0 million and $5.1 million for the thirteen weeks ended March 29, 2020 and March 31, 2019, respectively.
Indefinite-lived intangible assets
We also held indefinite-lived trade names/trademarks of $6.0 million as of March 29, 2020 and December 29, 2019.

 
Page - 11

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Impairments
Goodwill
We evaluate goodwill for impairment on an annual basis as of the first day of our fiscal second quarter, and whenever events or circumstances make it more likely than not that an impairment may have occurred. These events or circumstances could include a significant change in the business climate, operating performance indicators, competition, client engagement, legal factors, or sale or disposition of a significant portion of a reporting unit. We monitor the existence of potential impairment indicators throughout the fiscal year. During the first quarter of 2020, the following events made it more likely than not that an impairment had occurred and accordingly, we performed an interim impairment test as of the last day of our fiscal first quarter.
We experienced a significant decline in our stock price during the first quarter of 2020. As a result of the decline in stock price, our market capitalization fell significantly below the recorded value of our consolidated net assets. The reduced market capitalization reflected the expected continued weakness in pricing and demand for our staffing services in a volatile economic climate. This was further impacted in March 2020 by the COVID-19 pandemic which created a sudden economic shock both globally and domestically. The response in the United States and Canada has generally been to require that the populous remain at home unless they are working in an “essential” role as defined by state governments. We are continuing to support our clients during this period of time, many of whom are essential businesses, but volumes have declined substantially. Most industries we serve have been impacted by a significant decrease in demand for their products and services, and as a result, demand for our services has decreased. We expect significant decreases to our revenues and corresponding operating results as we experience continued weakness in pricing and demand for our services during this severe economic downturn. While we expect to see demand recover in the future, our expectation is that the rate of recovery will vary by geography and industry depending on the economic impact caused by COVID-19 and the rate at which infections decline to a contained level.
Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions to evaluate the impact of operating and macroeconomic changes on each reporting unit. The fair value of each reporting unit was estimated using a combination of a discounted cash flow methodology and the market valuation approach using publicly traded company multiples in similar businesses. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internally developed forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows 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 impairment test was risk-adjusted to reflect the specific risk profile of the reporting units and ranged from 11.5% to 12.0%. The combined fair values for all reporting units were then reconciled to our aggregate market value of our shares of common stock on the date of valuation, while considering a reasonable control premium. As a result of this impairment test, we concluded that the carrying amounts of goodwill for PeopleScout RPO, PeopleScout MSP and PeopleManagement On-Site reporting units exceeded their implied fair values and we recorded a non-cash impairment loss of $140.5 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the thirteen weeks ended March 29, 2020. The total goodwill carrying value of $45.9 million for PeopleManagement On-site reporting unit was fully impaired. The goodwill impairment charge for PeopleScout RPO and PeopleScout MSP was $92.2 million and $2.4 million, respectively, leaving a remaining goodwill balance of $22.0 million and $9.7 million, respectively as of March 29, 2020. Should actual results decline further or longer than we have currently estimated, the remaining goodwill balances may be further impaired. We will continue to closely monitor the operational performance of these reporting units as it relates to goodwill impairment.
Finite-lived intangible assets
We generally record acquired intangible assets that have finite useful lives, such as client relationships, in connection with business combinations. We review intangible assets that have finite useful lives and other long-lived assets whenever an event or change in circumstances indicates that the carrying value of the asset may not be recoverable. Factors considered important that could result in an impairment review include, but are not limited to, significant underperformance relative to historical or planned operating results or significant changes in business strategies. We estimate the recoverability of these assets by comparing the carrying amount of the asset to the future undiscounted cash flows that we expect the asset to generate. An impairment loss is recognized when the estimated undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value based on discounted cash flow analysis or other valuation techniques. With the decrease in demand for our services due to the economic impact caused by the response to COVID-19, we lowered our future expectations, which was the primary trigger of an impairment to our acquired client relationships intangible assets for our PeopleScout RPO and PeopleManagement On-Site reporting units of $34.7 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the

 
Page - 12

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


thirteen weeks ended March 29, 2020. The impairment charge for PeopleScout RPO and PeopleManagement On-site reporting units was $25.0 million and $9.7 million, respectively, leaving a remaining client relationship balance of $6.2 million and $8.5 million, respectively as of March 29, 2020. Considerable management judgment was necessary to determine key assumptions, including projected revenue of acquired clients and an appropriate discount rate of 12.0%. Should actual results decline further or longer than we have currently estimated, the remaining goodwill balances may be further impaired.
Indefinite-lived intangible assets
We have indefinite-lived intangible assets related to our Staff Management and PeopleScout trade names. We test our trade names annually for impairment, and when indicators of potential impairment exist. We utilize the relief from royalty method to determine the fair value of each of our trade names. If the carrying value exceeds the fair value, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value. Management uses considerable judgment to determine key assumptions, including projected revenue, royalty rates and appropriate discount rates.
We performed an interim impairment test of our indefinite-lived intangible assets as of the last day of our first fiscal quarter for 2020 and determined that the estimated fair values exceeded the carrying amounts for our indefinite-lived trade names. Accordingly, no impairment loss was recognized for the thirteen weeks ended March 29, 2020.
NOTE 5:    WORKERS’ COMPENSATION INSURANCE AND RESERVES
We provide workers’ compensation insurance for our contingent 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 2.0% at March 29, 2020 and December 29, 2019. Payments made against self-insured claims are made over a weighted average period of approximately 5 years as of March 29, 2020.
The following table presents a reconciliation of the undiscounted workers’ compensation reserve to the discounted workers’ compensation reserve for the periods presented:
(in thousands)
March 29,
2020
December 29,
2019
Undiscounted workers’ compensation reserve
$
272,179

$
274,934

Less discount on workers’ compensation reserve
18,724

19,316

Workers’ compensation reserve, net of discount
253,455

255,618

Less current portion
69,353

73,020

Long-term portion
$
184,102

$
182,598


Payments made against self-insured claims were $14.6 million and $15.3 million for the thirteen weeks ended March 29, 2020 and March 31, 2019, 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 March 29, 2020 and December 29, 2019, the weighted average rate was 2.2% and 2.4%, respectively. The claim payments are made and the corresponding reimbursements from our insurance carriers are received over an estimated weighted average period of approximately 17 years. The discounted workers’ compensation reserve for excess claims was $45.6 million and $45.3 million, and the corresponding gross receivable for the insurance on excess claims was $44.6 million and $45.3 million as of March 29, 2020 and December 29, 2019, respectively.
Workers’ compensation cost consists primarily of changes in self-insurance reserves net of changes in discount, monopolistic jurisdictions’ premiums, insurance premiums and other miscellaneous expenses. Workers’ compensation cost of $14.3 million and $11.9 million was recorded in cost of services on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the thirteen weeks ended March 29, 2020 and March 31, 2019, respectively.

 
Page - 13

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6:    LONG-TERM DEBT
On March 16, 2020, we entered into a first amendment to our credit agreement with Bank of America, N.A., Wells Fargo Bank, N.A., PNC Bank, N.A., KeyBank, N.A. and HSBC Bank USA, N.A. dated as of July 13, 2018 (the “Amendment,” the existing credit agreement as amended by the Amendment, the “Credit Agreement,” and the revolving credit facility established thereunder, the “Revolving Credit Facility”). The Amendment extended the maturity of the Revolving Credit Facility to March 16, 2025, and modified certain other terms.
The Credit Agreement provides for a revolving line of credit of up to $300.0 million with an option, subject to lender approval, to increase the amount to $450.0 million, and matures in five years. Included in the Credit Agreement is a $30.0 million sub-limit for Swingline loans and a $125.0 million sub-limit for letters of credit. At March 29, 2020, $293.5 million was drawn on the Revolving Credit Facility, which included a $10.0 million Swingline loan, and $6.2 million of standby letters of credit, leaving $0.3 million available under the Revolving Credit Facility for additional borrowings. At December 29, 2019, $37.1 million was drawn on the Revolving Credit Facility, which included a $17.1 million Swingline loan.
Under the terms of the Credit Agreement, we pay a variable rate of interest on funds borrowed under the revolving line of credit in excess of the Swingline loans, based on the 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 base rate is the greater of the prime rate (as announced by Bank of America), or the federal funds rate plus 0.50%. The applicable spread is determined by the consolidated leverage ratio, as defined in the credit agreement. At March 29, 2020, the applicable spread on LIBOR was 1.25% and the weighted average index rate was 1.00%, resulting in a weighted average interest rate of 2.25%.
Under the terms of the Credit Agreement, we are required to pay a variable rate of interest on funds borrowed under the Swingline loan based on the base rate plus applicable spread between 0.25% and 1.50%, as described above. At March 29, 2020, the applicable spread on the base rate was 0.25% and the base rate was 3.25%, resulting in an interest rate of 3.50%.
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 Credit 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 Credit 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. The leverage coverage ratio is our funded indebtedness divided by trailing twelve months consolidated EBITDA, as defined in the Credit Agreement, and we are required to maintain a ratio of less than 3.0. The fixed charge coverage ratio is trailing twelve months bank-adjusted cash flow divided by cash interest expense which is required to be greater than 1.25. As of March 29, 2020, we were in compliance with all covenants related to the Revolving Credit Facility as our leverage coverage ratio was 2.7 and our fixed charge coverage ratio was 40.8. If we continue to experience significant revenue declines, which is likely to occur, we would not meet one or more of our financial covenants under our Revolving Credit Facility within the next 12 months. Our failure to comply with these restrictive covenants would result in an event of default, which, if not cured or waived, could require us to repay these borrowings before their due date. Refer to Note 1: Summary of Significant Accounting Policies - Going concern assessment and management’s plans for additional details.

 
Page - 14

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7:    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)
March 29,
2020
December 29,
2019
Cash collateral held by workers’ compensation insurance carriers
$
22,317

$
22,256

Cash and cash equivalents held in Trust
26,641

23,681

Investments held in Trust
142,761

149,373

Letters of credit (1)
6,202

6,202

Surety bonds (2)
20,731

20,731

Total collateral commitments
$
218,652

$
222,243


(1)
We have agreements with certain financial institutions to issue letters of credit as collateral.
(2)
Our surety bonds are issued by independent insurance companies on our behalf and bear annual fees based on a percentage of the bond, which are determined by each independent surety carrier. These fees do not exceed 2.0% of the bond amount, subject to a minimum charge. The terms of these bonds are subject to review and renewal every one to four years and most bonds can be canceled by the sureties with as little as 60 days’ notice.
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.

 
Page - 15

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8:    SHAREHOLDERS’ EQUITY
Changes in the balance of each component of shareholders’ equity during the reporting periods were as follows:
 
Thirteen weeks ended
(in thousands)
March 29,
2020
March 31,
2019
 
 
 
Common stock shares
 
 
Beginning balance
38,593

40,054

Purchases and retirement of common stock
(2,930
)
(234
)
Issuances under equity plans, including tax benefits
415

308

Stock-based compensation
50

24

Ending balance
36,128

40,152

 
 
 
Common stock amount
 
 
Beginning balance
$
1

$
1

Current period activity


Ending balance
1

1

 
 
 
Retained earnings
 
 
Beginning balance
639,210

606,087

Net income (loss)
(150,494
)
8,276

Purchases and retirement of common stock (1)
(52,346
)
(5,303
)
Issuances under equity plans, including tax benefits
(1,471
)
(1,057
)
Stock-based compensation
1,507

3,606

Change in accounting standard cumulative-effect adjustment (2)
(602
)

Ending balance
435,804

611,609

 
 
 
Accumulated other comprehensive loss
 
 
Beginning balance, net of tax
(13,238
)
(14,649
)
Foreign currency translation adjustment
(6,625
)
1,326

Ending balance, net of tax
(19,863
)
(13,323
)
 
 
 
Total shareholders’ equity ending balance
$
415,942

$
598,287

(1)
Under applicable Washington State law, shares purchased are not displayed separately as treasury stock on our 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.
(2)
As a result of our adoption of the accounting standard for credit losses, we recognized a cumulative-effect adjustment to retained earnings of $0.6 million in the first quarter of 2020.
Share repurchase plan

On October 16, 2019, 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. We may choose to purchase shares in the open market, from individual holders, through an accelerated share repurchase program or otherwise. As of March 29, 2020, $66.7 million remains available for repurchase of common stock under the existing authorization.

 
Page - 16

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


As part of the existing share repurchase plan, on February 28, 2020 we entered into an accelerated share repurchase (“ASR”) agreement with a third-party financial institution to repurchase $40.0 million of our common stock. Under the ASR agreement, we paid $40.0 million to the financial institution and received an initial delivery of 2,150,538 shares, which represented 80% of the total shares we expect to receive based on the market price at the time of the initial delivery. This transaction was conducted prior to the medical community’s acknowledgment of the expected severity that COVID-19 would have on the United States.
The final number of shares delivered upon settlement of the agreement will be determined with reference to the volume weighted average price of our shares over the term of the ASR agreement, less the agreed-upon discount, which will end no later than July 2, 2020. Under the terms of the ASR agreement, upon settlement, we will either receive additional shares from the financial institution or be required to deliver additional shares or cash to the financial institution. We control the election to either deliver additional shares or cash to the financial institution, if required. As such, the forward stock purchase contract was considered indexed to our own stock and is classified as an equity instrument. The value of the initial shares received was recorded as a reduction to retained earnings, and the number of shares initially received was an immediate reduction in the weighted average common shares calculation for basic and diluted earnings per share.
NOTE 9:
INCOME TAXES
Our income tax provision or benefit 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 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 by jurisdiction, tax credits, government audit developments, changes in laws, regulations and administrative practices, and relative changes in 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.
Our effective tax rate for the thirteen weeks ended March 29, 2020 was 14.1%. The difference between the statutory federal income tax rate of 21.0% and our effective income tax rate results primarily from a non-deductible goodwill and intangible asset impairment charge, the Coronavirus Aid, Relief and Economic Security Act, and the federal Work Opportunity Tax Credit (“WOTC”). WOTC 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 21.0% and our effective tax rate of 14.1% result from state and foreign income taxes, certain non-deductible expenses, tax exempt interest, and tax effects of stock-based compensation.
NOTE 10:
NET INCOME (LOSS) PER SHARE
Diluted common shares were calculated as follows:
 
Thirteen weeks ended
(in thousands, except per share data)
March 29,
2020
March 31,
2019
Net income (loss)
$
(150,494
)
$
8,276

 
 
 
Weighted average number of common shares used in basic net income (loss) per common share
37,255

39,366

Dilutive effect of non-vested restricted stock

369

Weighted average number of common shares used in diluted net income (loss) per common share
37,255

39,735

 
 
 
Net income (loss) per common share:
 
 
Basic
$
(4.04
)
$
0.21

Diluted
$
(4.04
)
$
0.21

 
 
 
Anti-dilutive shares
602

336


NOTE 11:    SEGMENT INFORMATION
Our operating segments are based on the organizational structure for which financial results are regularly reviewed by our chief operating decision-maker, our Chief Executive Officer, to determine resource allocation and assess performance.

 
Page - 17

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Our operating segments and reportable segments are described below:
Our PeopleReady reportable segment provides blue-collar, contingent staffing through the PeopleReady operating segment. PeopleReady provides on-demand and skilled labor in a broad range of industries that include construction, manufacturing and logistics, warehousing and distribution, retail, waste and recycling, energy, hospitality, general labor and others.
Our PeopleManagement reportable segment provides contingent labor and outsourced industrial workforce solutions, primarily on-site at the client’s facility, through the following operating segments, which we have aggregated into one reportable segment in accordance with U.S. GAAP:
On-site: On-site management and recruitment for the contingent industrial workforce of manufacturing, warehouse, and distribution facilities; and
Centerline Drivers: Recruitment and management of contingent and dedicated commercial drivers to the transportation and distribution industries.
Our PeopleScout reportable segment provides high-volume, permanent employee recruitment process outsourcing, employer branding services and management of outsourced labor service providers through the following operating segments, which we have aggregated into one reportable segment in accordance with U.S. GAAP:
PeopleScout: Outsourced recruitment of permanent employees on behalf of clients; and
PeopleScout MSP: Management of multiple third-party staffing vendors on behalf of clients.
We evaluate performance based on segment revenue and segment profit (loss). Inter-segment revenue is minimal. Segment profit (loss) includes revenue, related cost of services, and ongoing operating expenses directly attributable to the reportable segment. Segment profit (loss) excludes goodwill and intangible impairment charges, depreciation and amortization expense, unallocated corporate general and administrative expense, interest, other income and expense, income taxes, and other adjustments not considered to be ongoing.
The following table presents our revenue disaggregated by major source and segment and a reconciliation of segment revenue from services to total company revenue:
 
Thirteen weeks ended
(in thousands)
March 29,
2020
March 31,
2019
Revenue from services:
 
 
Contingent staffing
 
 
PeopleReady
$
299,294

$
326,868

PeopleManagement
141,614

158,044

Human resource outsourcing
 
 
PeopleScout
53,344

67,440

Total company
$
494,252

$
552,352



 
Page - 18

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The following table presents a reconciliation of segment profit to income (loss) before tax expense (benefit):
 
Thirteen weeks ended
(in thousands)
March 29,
2020
March 31,
2019
Segment profit (loss):
 
 
PeopleReady
$
7,655

$
11,470

PeopleManagement
(314
)
2,306

PeopleScout
2,508

10,427

 
9,849

24,203

Corporate unallocated
(5,209
)
(7,277
)
Work Opportunity Tax Credit processing fees
(135
)
(240
)
Acquisition/integration costs

(577
)
Goodwill and intangible asset impairment charge
(175,189
)

Other costs
4,273

2,606

Depreciation and amortization
(9,094
)
(9,952
)
Income (loss) from operations
(175,505
)
8,763

Interest and other income (expense), net
263

553

Income (loss) before tax expense (benefit)
$
(175,242
)
$
9,316


Asset information by reportable segment is not presented since we do not manage our segments on a balance sheet basis.
NOTE 12:    SUBSEQUENT EVENT
On April 6, 2020, in connection with our plan to reduce costs as a result of the economic impact caused by the response to COVID-19, we announced a workforce reduction and notified approximately 645 employees of their termination and furloughed approximately 100 employees. We currently anticipate incurring severance-based charges of approximately $8 million. The severance expense related to the workforce reduction will be recognized in the second quarter of 2020.
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMMENT ON FORWARD LOOKING STATEMENTS
Certain statements in this Form 10-Q, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, the impact of and proposed actions in response to COVID-19, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements involve risks and uncertainties, and future events and circumstances could differ significantly from those anticipated in the forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “goal,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially from those expressed or implied in our forward-looking statements, including the risks and uncertainties described in “Management’s Discussion and Analysis” (Part I, Item 2 of this Form 10-Q),“Quantitative and Qualitative Disclosures about Market Risk” (Part I, Item 3 of this Form 10-Q), and “Risk Factors” (Part II, Item 1A of this Form 10-Q). We undertake no duty to update or revise publicly any of the forward-looking statements after the date of this report or to conform such statements to actual results or to changes in our expectations, whether because of new information, future events, or otherwise.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide the reader of our accompanying unaudited consolidated financial statements (“financial statements”) with a narrative from the perspective of management on our financial condition, results of operations, liquidity and certain other factors that may affect future results. MD&A is provided as a supplement to, and should be read in conjunction with, our Annual Report on Form 10-K for the fiscal year ended December 29, 2019, and our financial statements and the accompanying notes to our financial statements.

 
Page - 19

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS




OVERVIEW

TrueBlue, Inc. (the “company,” “TrueBlue,” “we,” “us” and “our”) is a leading provider of specialized workforce solutions that help clients achieve business growth and improve productivity. In 2019, we connected approximately 724,000 people with work
and served approximately 139,000 clients. We report our business as three reportable segments: PeopleReady, PeopleManagement and PeopleScout. See Note 11: Segment Information, to our consolidated financial statements found in Item 1 of this Quarterly Report on Form 10-Q, for additional details on our operating segments and reportable segments. Our PeopleReady segment offers on-demand, industrial staffing; our PeopleManagement segment offers contingent, on-site industrial staffing and commercial driver services; and our PeopleScout segment offers recruitment process outsourcing (“RPO”) and managed service provider (“MSP”) solutions to a wide variety of industries.

The global economy and our business specifically have been dramatically affected by COVID-19. COVID-19 was first identified in Wuhan, China in late 2019, and subsequently declared a pandemic by the World Health Organization. To date, COVID-19 has surfaced in nearly all regions around the world and resulted in country-level quarantines, global travel restrictions and broad-based economic slowdowns. There are no reliable estimates of how long the pandemic will last or how many people are likely to be affected by it. For that reason, it is difficult to predict the short-term and the long-term impact of the pandemic on our business at this time. Our first priority, with regard to the COVID-19 pandemic, is to do everything we can to ensure the safety, health, and hygiene of our associates, employees, clients, suppliers and others with whom we partner in our business activities to continue our business operations in this unprecedented business environment. A number of states, counties and municipalities issued orders requiring persons who were not engaged in essential activities and businesses to remain at home. Other jurisdictions without stay-at-home orders required nonessential businesses to close. Our business remains open and we provide key services to essential businesses.

In response to these rapidly changing market conditions, we are taking all appropriate steps to reduce selling, general and administrative (“SG&A”) expense and other cash outflows. We have taken actions to reduce our operating expenses by approximately $95 million to $105 million in fiscal 2020 while preserving key strengths of our business, such as our branch footprint and technology innovation, to ensure we are prepared when business conditions improve. We entered fiscal 2020 from a position of strength given our balance sheet that included $37 million of debt and a comparable amount of cash. In March, we drew substantially all of the remaining availability on our $300 million revolving credit agreement (the “Credit Agreement,” and the revolving credit facility established thereunder, the “Revolving Credit Facility”) to further enhance our liquidity position and are taking steps to improve positive cash flow.

We continue to monitor this rapidly evolving situation and guidance from domestic and international authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations. There may be developments outside our control requiring us to adjust our operating plan. As such, given the dynamic nature of this situation, it is difficult to estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future. However, we do expect that it will have a material adverse impact on our future revenue, overall profitability and liquidity. For additional discussion on the uncertainties and business risks associated with COVID-19, refer to “Risk Factors” in Part II, Item 1A of this Form 10-Q.
First quarter of 2020 highlights
Revenue from services
Total company revenue declined 11% to $494 million for the thirteen weeks ended March 29, 2020, compared to the same period in the prior year. Revenue declined 7% for the first two months of 2020 compared to the same period in the prior year due primarily to less demand for our services as clients moderated contingent labor spend in response to lower volumes in light of continued economic uncertainty. Declines were broad-based across multiple geographies and industries. Revenue declined 16% in March compared to the same period in the prior year due to a significant drop in demand associated with government and societal actions to address the COVID-19 threat. In particular, the outbreak and preventive measures taken to help curb the spread had severe adverse impacts on our operations and business results in March. Many of the clients we serve have been severely impacted by COVID-19 and have stopped or significantly reduced their need for our staffing services, which has resulted in lower than expected revenue. Year-over-year weekly revenue trends rapidly decelerated in March culminating in a 32% decline in our PeopleReady business and a 30% decline in our PeopleManagement business during the last week of the quarter. PeopleScout bills monthly and accordingly, weekly trends are not available. Revenues have also been impacted by higher levels of unemployment making it easier for businesses to find labor on their own. We expect these two factors to have a significant adverse impact on our future revenue as well as our overall profitability and liquidity for as long as the negative economic impacts of COVID-19 are being

 
Page - 20

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS



experienced. Our business remains open and we provide key services to essential businesses such as health care, food processors, grocery stores, and government, which have experienced less pressure.
PeopleReady, our largest segment, experienced a revenue decline of 8%. PeopleManagement, our lowest margin segment, experienced a revenue decline of 10%. PeopleScout, our highest margin segment, experienced a revenue decline of 21%. In addition to less demand from existing clients, PeopleScout continues to experience the impact of the lower volume and margin from a large industrial client due to the client’s adverse business conditions in fiscal 2019.
Gross profit
Total company gross profit as a percentage of revenue for the thirteen weeks ended March 29, 2020 decreased by 110 basis points to 25.5%, compared to 26.6% for the same period in the prior year. Our PeopleScout business contributed approximately 100 basis points to the decline primarily due to continued impact of lower volume from a large, higher margin industrial client and the rapid revenue decline caused by the disruption of the COVID-19 pandemic which outpaced the reductions to our service delivery team.
Our staffing businesses contributed 50 basis points to the decline primarily due to a change in revenue mix associated with larger declines in our higher margin local accounts compared to our lower margin national accounts and energy-related businesses. This was largely offset by a benefit from a reduction in estimated costs to comply with the Affordable Care Act which were recorded in prior fiscal years, net of additional insurance coverage associated with former workers’ compensation carriers in liquidation in the prior year. We do not expect the benefit from lower affordable health care costs to reoccur.
Selling, general and administrative expense
Total company SG&A expense decreased by $11 million to $117 million, or 23.7% of revenue for the thirteen weeks ended March 29, 2020, compared to $128 million, or 23.2% of revenue for the same period in the prior year. The decrease in SG&A expense is primarily due to cost control programs put in place in 2019 in response to softening revenue trends. Commencing in the latter half of March 2020, we also initiated comprehensive actions to dramatically reduce costs in response to rapidly changing market conditions due to COVID-19 pandemic. We are taking all appropriate steps to reduce SG&A expense while preserving the key strengths of our business to ensure we are prepared for the time when business conditions improve. We will continue to monitor and manage our SG&A expense in the current environment.
Loss from operations
Total company loss from operations was $176 million for the thirteen weeks ended March 29, 2020, compared to income from operations of $9 million for the same period in the prior year. The loss for the first quarter of 2020 consisted almost entirely of a goodwill and intangible asset impairment charge of $175 million related to our acquisitions. The charge is a result of the adverse impact on expected future cash flows related to the current state of the economy. The charge does not impact our current cash, liquidity or banking covenants. In addition, we experienced a decrease in income from operations compared to the same period in the prior year due to the decline in revenue and gross profit, partially offset by the decrease in SG&A expense due to cost control programs.
Net loss
Net loss was $150 million, or $4.04 per diluted share for the thirteen weeks ended March 29, 2020, compared to net income of $8 million, or $0.21 per diluted share for the same period in the prior year. The net loss for the first quarter of 2020 included a goodwill and intangible asset impairment charge of $175 million ($152 million after tax or $4.08 per diluted share). The remaining $6 million decline was almost entirely driven by declining income from operations as a result of lower revenue and gross profit partially offset by a decline in SG&A expense due to cost control programs.
Additional highlights
We are focused on capital preservation as a top priority. In response to the rapidly changing market conditions, we have taken swift action to reduce operating costs and other cash outflows to preserve capital to fund working capital needs. We entered fiscal 2020 from a position of strength with a balance sheet that included $37 million of debt and a comparable amount of cash. On March 16, 2020, we extended the maturity of the Revolving Credit Facility to March 16, 2025, and under the Credit Agreement we have the option, subject to lender approval, to increase the Revolving Credit Facility to $450 million. In March, we drew substantially all of the remaining availability on our $300 million Revolving Credit Facility to further enhance our liquidity position. As of March 29, 2020, we had cash and cash equivalents of $265 million and total debt of $294 million.

We continue to monitor the rapidly evolving situation and guidance from domestic and international authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations. There may be

 
Page - 21

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS



developments outside our control requiring us to adjust our operating plan. As such, given the dynamic nature of this situation, it is difficult to estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future. A protracted recession will have a material adverse impact on our future revenue as well as our overall profitability, ability to fund working capital needs and comply with banking covenants.
RESULTS OF OPERATIONS
Total company results
The following table presents selected financial data:
 
Thirteen weeks ended
(in thousands, except percentages and per share data)
March 29,
2020
% of revenue
March 31,
2019
% of revenue
Revenue from services
$
494,252

 
$
552,352

 
Total revenue growth (decline) %
(10.5
)%
 
(0.4
)%
 
 
 
 
 
 
Gross profit
$
126,159

25.5
 %
$
146,695

26.6
%
Selling, general and administrative expense
117,381

23.7
 %
127,980

23.2
%
Depreciation and amortization
9,094

1.8
 %
9,952

1.8
%
Goodwill and intangible asset impairment charge
175,189

 

 
Income (loss) from operations
(175,505
)
(35.5
)%
8,763

1.6
%
Interest and other income (expense), net
263

 
553

 
Income (loss) before tax expense (benefit)
(175,242
)
 
9,316

 
Income tax expense (benefit)
(24,748
)
 
1,040

 
Net income (loss)
$
(150,494
)
(30.4
)%
$
8,276

1.5
%
 
 
 
 
 
Net income (loss) per diluted share
$
(4.04
)
 
$
0.21

 
We report our business as three reportable segments described below and in Note 11: Segment Information, to our consolidated financial statements found in Item 1 of this Quarterly Report on Form 10-Q.
PeopleReady provides access to reliable workers in the United States, Canada and Puerto Rico through a wide range of staffing solutions for on-demand contingent general and skilled labor. PeopleReady connects people to work in a broad range of industries that include construction, manufacturing and logistics, warehousing and distribution, waste and recycling, energy, retail, hospitality, and others. As of December 29, 2019, we had a network of 614 branches across all 50 states, Canada and Puerto Rico. Complementing our branch network is our mobile application, JobStackTM, which connects workers with jobs, creates a virtual exchange between our workers and clients, and allows our branch resources to expand their recruiting and sales efforts and service delivery. JobStack is helping to competitively differentiate our services, expand our reach into new demographics, and improve both service delivery and work order fill rates as we lead our business into a digital future.
PeopleManagement predominantly provides a wide range of on-site contingent staffing and workforce management solutions to larger multi-site manufacturing, distribution and fulfillment clients. In comparison with PeopleReady, services are larger in scale, longer in duration, and dedicated service teams are located at the client’s facility. Effective December 30, 2019 (first day of our 2020 fiscal year), we combined our two on-site contingent industrial workforce operating segments, Staff Management | SMX and SIMOS Insourcing Solutions into one operating segment titled “On-site,” which continues to be reported under PeopleManagement. On-site includes our branded service offerings for hourly and productivity-based industrial staffing solutions serving the same industries and similar clients. PeopleManagement also includes Centerline Drivers (“Centerline”), which specializes in dedicated and contingent commercial truck drivers to the transportation and distribution industries.
PeopleScout provides recruitment process outsourcing of end-to-end talent acquisition services from candidate sourcing and engagement through the onboarding of employees as well as employer branding services. Our solution is highly scalable and flexible, which allows for the outsourcing of all or a subset of skill categories across a series of recruitment, hiring and onboarding steps. Our solution delivers improved talent quality and candidate experience, faster hiring, increased scalability, lower cost of recruitment, greater flexibility, and increased compliance. Our clients outsource the recruitment process to PeopleScout in all major industries and jobs. We leverage our proprietary technology platform (AffinixTM) for sourcing, screening and delivering

 
Page - 22

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS



a permanent workforce, along with dedicated service delivery teams to work as an integrated partner with our clients. Affinix uses artificial intelligence and machine learning to search the web and source candidates, which means we can create the first slate of candidates for a job posting within minutes rather than days.
Our PeopleScout reportable segment also includes a managed service provider business, which provides clients with improved quality and cost management of their contingent labor vendors.
Revenue from services
Revenue from services by reportable segment was as follows:
 
Thirteen weeks ended
(in thousands, except percentages)
March 29,
2020
Growth (decline) %
Segment % of total
March 31,
2019
Segment % of total
Revenue from services:
 
 
 
 
PeopleReady
$
299,294

(8.4
)%
60.5
%
$
326,868

59.2
%
PeopleManagement
141,614

(10.4
)
28.7

158,044

28.6

PeopleScout
53,344

(20.9
)
10.8

67,440

12.2

          Total company
$
494,252

(10.5
)%
100.0
%
$
552,352

100.0
%

The workforce solutions business is dependent on the overall strength of the labor market. Clients tend to use contingent workers to supplement their existing workforce and generally hire permanent workers when long-term demand is expected to increase. As a consequence, our revenue from services tends to increase quickly when the economy begins to grow. Conversely, our revenue decreases quickly when the economy begins to weaken and thus contingent staff positions are eliminated, permanent hiring is frozen and turnover replacement diminishes.

The global economy and our business have been dramatically affected by the COVID-19 pandemic. To date, COVID-19 has surfaced in nearly all regions around the world and resulted in travel restrictions and business slowdowns or shutdowns. There are no reliable estimates of how long the pandemic will last or how many people are likely to be affected by it. Our first priority with regard to the COVID-19 pandemic is to do everything we can to ensure the safety, health and hygiene of our associates, employees, clients, suppliers and others with whom we partner in our business activities to continue our business operations in this unprecedented business environment. A number of states, counties and municipalities issued orders requiring persons who were not engaged in essential activities and businesses to remain at home. Other jurisdictions without stay-at-home orders required nonessential businesses to close. Our business remains open and we provide key services to essential businesses.

In response to these rapidly changing market conditions, we are taking all appropriate steps to reduce SG&A expense and other cash outflows. We continue to monitor the rapidly evolving situation and guidance from domestic and international authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations. There may be developments outside our control requiring us to adjust our operating plan. As such, given the dynamic nature of this situation, it is difficult to estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future. However, we do expect that it will have a material adverse impact on our future revenue as well as our overall profitability. For additional discussion on the uncertainties and business risks associated with COVID-19, refer to “Risk Factors” in Part II, Item 1A of this Form 10-Q.
PeopleReady
PeopleReady revenue declined to $299.3 million for the thirteen weeks ended March 29, 2020, an 8.4% decrease compared to the same period in the prior year. Revenue declined 5.1% for the first two months of 2020 compared to the same period in the prior year due primarily to less demand for our services as clients moderated contingent labor spend in response to lower volumes in light of continued economic uncertainty. Declines were broad-based across multiple geographies and industries. Revenue declined 13.7% for March 2020 compared to the same period in the prior year due to a significant drop in demand from our clients associated with actions to address the COVID-19 threat. Weekly revenue declines accelerated in the back half of March with declines of 19.9% and 32.3% for the last two weeks of the quarter, respectively, compared to the same period in the prior year. Many of the clients we serve have been severely impacted by COVID-19 and have stopped or significantly reduced their use of our staffing services, which has resulted in lower than expected revenue. We expect these two factors to have a significant adverse impact on our future revenue as well as our overall profitability and liquidity for as long as the negative economic impacts of COVID-19 are being experienced. Our business remains open and we provide key services to essential businesses such as health care, food processors, grocery, and government, which have experienced less pressure.

 
Page - 23

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS



We believe the decline was partially offset by the use of our industry-leading JobStack mobile application that digitally connects workers with jobs. During the first quarter of 2020, PeopleReady dispatched approximately 1 million shifts via JobStack and achieved a digital fill rate of 51% compared to 47% in the same period in the prior year. JobStack has an 89% worker adoption rate and was used by 23,500 clients in the first quarter of 2020, or an increase of over 50% compared to the same period in the prior year. The digital fill rate and client adoption increased 2.3% and 10.3%, respectively, during the first quarter of 2020 compared to the fourth quarter of 2019. JobStack is helping us safely connect people with work during this time of crisis.
PeopleManagement
PeopleManagement revenue declined to $141.6 million for the thirteen weeks ended March 29, 2020, a 10.4% decrease compared to the same period in the prior year. Revenue declined 8.1% for the first two months of 2020 compared to the same period in the prior year due primarily to less demand for our services as clients moderated contingent labor spend in response to lower volumes in light of continued economic uncertainty. Declines were broad-based across multiple industries. Revenue declined 14.1% for March 2020 compared to the same period in the prior year due to a significant drop in demand from our clients associated with actions to address the COVID-19 threat. Weekly revenue declines accelerated in the back half of March with declines of 15.1% and 29.6% for the last two weeks of the quarter respectively compared to the same period in the prior year. Many of the clients we serve have been severely impacted by COVID-19 and have stopped or significantly reduced their need for our staffing services, which has resulted in lower than expected revenue. We expect these two factors to have a significant adverse impact on our future revenue as well as our overall profitability and liquidity for as long as the negative economic impacts of COVID-19 are being experienced. Our business remains open and we provide key services to essential businesses such as health care, food processors, and grocery stores, which have experienced less pressure.
PeopleScout
PeopleScout revenue declined to $53.3 million for the thirteen weeks ended March 29, 2020, a 20.9% decrease compared to the same period in the prior year. Revenue declined 16.6% for the first two months of 2020 compared to the same period in the prior year due primarily to the impact of the substantially reduced project-based recruiting volumes at a large industrial client, which declined throughout 2019 due to the client’s adverse business conditions resulting in no order volume in the fourth quarter of 2019. Revenue declined 27.9% for March 2020 compared to the same period in the prior year due to less demand from existing clients resulting from the economic disruption caused by the COVID-19 pandemic. Our clients in the hospitality and airline industries were hit especially hard.
Gross profit
Gross profit was as follows:
 
Thirteen weeks ended
(in thousands, except percentages)
March 29, 2020
March 31, 2019
Gross profit
$
126,159

$
146,695

Percentage of revenue
25.5
%
26.6
%
Gross profit as a percentage of revenue declined to 25.5%, or 110 basis points for the thirteen weeks ended March 29, 2020, compared to 26.6% for the same period in the prior year. Our PeopleScout business contributed approximately 100 basis points to the decline primarily due to 60 basis points associated with substantially reduced project-based recruiting volumes from a large, higher margin industrial client which declined throughout 2019 due to the client’s adverse business conditions and 40 basis points associated with the rapid revenue decline caused by the disruption of the COVID-19 pandemic which outpaced our reductions to our service delivery team.
Our staffing businesses contributed 50 basis points to the decline primarily due to a change in revenue mix associated with larger declines in our higher margin local accounts compared to our lower margin national accounts and energy-related businesses. This was largely offset by a benefit from a reduction in estimated costs to comply with the Affordable Care Act which were recorded in prior fiscal years, net of additional insurance coverage associated with former workers’ compensation carriers in liquidation in the prior year. We do not expect the benefit from lower affordable health care costs to reoccur.


 
Page - 24

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS



Selling, general and administrative expense
SG&A expense was as follows:
 
Thirteen weeks ended
(in thousands, except percentages)
March 29, 2020
March 31, 2019
Selling, general and administrative expense
$
117,381

$
127,980

Percentage of revenue
23.7
%
23.2
%
Total company SG&A expense decreased by $10.6 million to $117.4 million, or 23.7% of revenue for the thirteen weeks ended March 29, 2020, compared to $128.0 million, or 23.2% of revenue for the same period in the prior year. The decrease in SG&A expense was primarily due to cost control programs put in place in fiscal 2019 in response to softening revenue trends. Commencing in the latter half of March 2020, we also initiated comprehensive actions to dramatically reduce costs in response to rapidly changing market conditions due to the COVID-19 pandemic. We are taking all appropriate steps to reduce SG&A expense while preserving the key strengths of our business to ensure we are prepared for the time when business conditions improve. We will continue to monitor and manage our SG&A expense in the current environment.
Depreciation and amortization
Depreciation and amortization was as follows:
 
Thirteen weeks ended
(in thousands, except percentages)
March 29, 2020
March 31, 2019
Depreciation and amortization
$
9,094

$
9,952

Percentage of revenue
1.8
%
1.8
%
Depreciation and amortization decreased primarily due to several intangible assets which became fully amortized in the second quarter of 2019, which resulted in a decline in amortization expense for the thirteen weeks ended March 29, 2020.
Goodwill and intangible asset impairment charge
A summary of the goodwill and intangible asset impairment charge by reportable segment is as follows:
(in thousands)
PeopleManagement
PeopleScout
Total company
Goodwill
45,901

94,588

140,489

Client relationships
9,700

25,000

34,700

Total
$
55,601

$
119,588

$
175,189

We evaluate goodwill for impairment on an annual basis as of the first day of our fiscal second quarter, and whenever events or circumstances make it more likely than not that an impairment may have occurred. These events or circumstances could include a significant change in the business climate, operating performance indicators, competition, client engagement, legal factors, or sale or disposition of a significant portion of a reporting unit. We monitor the existence of potential impairment indicators throughout the fiscal year. During the first quarter of 2020, the following events made it more likely than not that an impairment had occurred and accordingly, we performed an interim impairment test as of the last day of our fiscal first quarter of 2020.

 
Page - 25

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS



We experienced a significant decline in our stock price during the first quarter of 2020. As a result of the decline in stock price, our market capitalization fell significantly below the recorded value of our consolidated net assets. The reduced market capitalization reflected the expected continued weakness in pricing and demand for our services in an uncertain economic climate, which was further impacted in March 2020 by the COVID-19 pandemic. The response in the United States and Canada has generally been to require that the populous remain at home unless they are working in an “essential” role as defined by state governments. We are continuing to support our clients during this period of time, many of whom are essential businesses, but volumes have declined substantially. Most industries we serve have been impacted by a significant decrease in demand for their products and services, and as a result, demand for our services has decreased