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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: September 25, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-14543
____________________________________ 
tbi-20220925_g1.jpg
TrueBlue, Inc.
(Exact name of registrant as specified in its charter)
______________________________________ 
Washington91-1287341
(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 classTrading Symbol(s)Name of each exchange on which registered
Common stock, no par valueTBINew 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 October 18, 2022, there were 32,718,640 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.






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Table of Contents

PART I. FINANCIAL INFORMATION
Item 1.
CONSOLIDATED FINANCIAL STATEMENTS
TRUEBLUE, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except par value data)September 25,
2022
December 26,
2021
ASSETS
Current assets:
Cash and cash equivalents$43,779 $49,896 
Accounts receivable, net of allowance of $3,286 and $6,687
328,763 353,882 
Prepaid expenses and other current assets26,464 31,614 
Income tax receivable9,624 9,681 
Total current assets408,630 445,073 
Property and equipment, net92,324 88,090 
Restricted cash and investments208,659 221,026 
Deferred income taxes, net27,614 29,330 
Goodwill93,441 94,538 
Intangible assets, net17,300 22,211 
Operating lease right-of-use assets, net51,338 55,197 
Workers’ compensation claims receivable, net64,768 61,386 
Other assets, net18,707 16,375 
Total assets$982,781 $1,033,226 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued expenses$53,838 $77,172 
Accrued wages and benefits89,899 100,173 
Income tax payable2,017  
Current portion of workers’ compensation claims reserve55,574 61,596 
Current operating lease liabilities11,995 12,097 
Other current liabilities9,747 7,508 
Total current liabilities223,070 258,546 
Workers’ compensation claims reserve, less current portion196,315 194,598 
Long-term deferred compensation liabilities23,888 28,806 
Long-term operating lease liabilities51,074 54,927 
Other long-term liabilities1,620 3,282 
Total liabilities495,967 540,159 
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; 32,693 and 34,861 shares issued and outstanding
1 1 
Accumulated other comprehensive loss(20,397)(15,747)
Retained earnings507,210 508,813 
Total shareholders’ equity486,814 493,067 
Total liabilities and shareholders’ equity$982,781 $1,033,226 
See accompanying notes to consolidated financial statements
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Table of Contents

TRUEBLUE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(unaudited)
Thirteen weeks ended
Thirty-nine weeks ended
(in thousands, except per share data)September 25,
2022
September 26,
2021
September 25,
2022
September 26,
2021
Revenue from services$575,721 $577,031 $1,696,489 $1,551,692 
Cost of services 419,802 430,529 1,242,194 1,158,148 
Gross profit155,919 146,502 454,295 393,544 
Selling, general and administrative expense124,351 118,748 366,953 326,657 
Depreciation and amortization7,483 6,426 22,015 20,405 
Income from operations24,085 21,328 65,327 46,482 
Interest expense and other income, net703 581 1,098 1,880 
Income before tax expense24,788 21,909 66,425 48,362 
Income tax expense4,092 3,267 11,197 6,938 
Net income$20,696 $18,642 $55,228 $41,424 
Net income per common share:
Basic$0.64 $0.53 $1.67 $1.19 
Diluted$0.63 $0.53 $1.65 $1.17 
Weighted average shares outstanding:
Basic32,434 34,873 33,023 34,788 
Diluted32,818 35,475 33,511 35,255 
Other comprehensive income (loss):
Foreign currency translation adjustment$(3,053)$(1,296)$(4,650)$(806)
Comprehensive income$17,643 $17,346 $50,578 $40,618 
See accompanying notes to consolidated financial statements
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Table of Contents

TRUEBLUE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Thirty-nine weeks ended
(in thousands)September 25,
2022
September 26,
2021
Cash flows from operating activities:
Net income$55,228 $41,424 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization22,015 20,405 
Provision for credit losses3,352 2,881 
Stock-based compensation7,675 10,149 
Deferred income taxes2,046 445 
Non-cash lease expense9,694 11,173 
Other operating activities8,772 (1,484)
Changes in operating assets and liabilities:
Accounts receivable21,388 (53,626)
Income taxes receivable and payable186 963 
Operating lease right-of-use asset 7,150 
Other assets(564)(7,003)
Accounts payable and other accrued expenses(22,935)3,212 
Accrued wages and benefits(10,277)24,278 
Deferred employer payroll taxes (57,066)
Workers’ compensation claims reserve(4,304)3,075 
Operating lease liabilities(9,673)(10,017)
Other liabilities(2,529)4,598 
Net cash provided by operating activities80,074 557 
Cash flows from investing activities:
Capital expenditures(22,685)(28,772)
Purchases of restricted available-for-sale investments (29)
Sales of restricted available-for-sale investments 793 
Purchases of restricted held-to-maturity investments(4,950) 
Maturities of restricted held-to-maturity investments23,697 18,346 
Net cash used in investing activities(3,938)(9,662)
Cash flows from financing activities:
Purchases and retirement of common stock(60,939) 
Net proceeds from employee stock purchase plans 780 754 
Common stock repurchases for taxes upon vesting of restricted stock(4,347)(3,035)
Other(203)(270)
Net cash used in financing activities(64,709)(2,551)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(2,482)(613)
Net change in cash, cash equivalents and restricted cash8,945 (12,269)
Cash, cash equivalents and restricted cash, beginning of period103,185 118,612 
Cash, cash equivalents and restricted cash, end of period$112,130 $106,343 
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest$828 $1,174 
Income taxes$8,907 $5,522 
Operating lease liabilities$11,824 $12,402 
Non-cash transactions:
Property and equipment purchased but not yet paid$3,131 $2,394 
Right-of-use assets obtained in exchange for new operating lease liabilities$7,015 $10,739 
See accompanying notes to consolidated financial statements
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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.
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
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 26, 2021. The results of operations for the thirty-nine weeks ended September 25, 2022 are not necessarily indicative of the results expected for the full fiscal year nor for any other fiscal period.
Goodwill and indefinite-lived intangible assets
We evaluate goodwill and indefinite-lived intangible assets for impairment on an annual basis as of the first day of our fiscal second quarter, or 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 general economic conditions, deterioration in industry environment, changes in cost factors, declining operating performance indicators, legal factors, competition, client engagement, changes in the carrying amount of net assets, sale or disposition of a significant portion of a reporting unit, or a sustained decrease in share price. We monitor the existence of potential impairment indicators throughout the fiscal year.
Goodwill
We test for goodwill impairment at the reporting unit level. We consider our operating segments to be our reporting units for goodwill impairment testing. Our operating segments with remaining goodwill are PeopleReady, PeopleManagement Centerline, PeopleScout RPO and PeopleScout MSP.
When evaluating goodwill for impairment, we have the option to first assess qualitative factors to determine whether it is more likely than not the fair value of a reporting unit is less than its carrying amount. Qualitative factors include macroeconomic conditions, industry and market conditions, and overall company financial performance. If, after assessing the totality of events and circumstances, we determine that it is more likely than not the fair value of the reporting unit is greater than its carrying amount, a quantitative impairment test is unnecessary.
If necessary, the quantitative impairment test involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit. If the fair value exceeds the carrying value, we conclude that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value of the goodwill. We consider a reporting unit’s fair value to be substantially in excess of its carrying value at a 20% premium or greater.
We performed our annual goodwill impairment test as of the first day of our fiscal second quarter of 2022. Based on our assessment of qualitative factors, we concluded it was more likely than not that the fair value of each reporting unit exceeded its carrying value, and the goodwill associated with each reporting unit was not impaired. As such, it was not necessary to perform a quantitative impairment analysis. Additionally, we did not identify any events or conditions that make it more likely than not that an impairment may have occurred during the period from March 28, 2022 to September 25, 2022. Accordingly, no impairment loss was recognized for the thirty-nine weeks ended September 25, 2022.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Indefinite-lived intangible assets
We have indefinite-lived intangible assets related to our Staff Management and PeopleScout trade names. We evaluate our indefinite-lived intangible assets for impairment on an annual basis as of the first day of our fiscal second quarter, or whenever events or circumstances make it more likely than not that an impairment may have occurred. These events or circumstances could include significant change in general economic conditions, deterioration in industry environment, changes in cost factors, declining operating performance indicators, legal factors, competition, client engagement, or sale or disposition of a significant portion of the business. We monitor the existence of potential impairment indicators throughout the fiscal year.
When evaluating indefinite-lived intangible assets for impairment, we have the option to first assess qualitative factors to determine whether it is more likely than not the fair value of the indefinite-lived intangible is less than its carrying amount. Qualitative factors include macroeconomic conditions, industry and market conditions, and overall company financial performance. If, after assessing the totality of events and circumstances, we determine that it is more likely than not the fair value of the indefinite-lived intangible is greater than its carrying amount, a quantitative impairment test is unnecessary.
If necessary, the quantitative impairment test utilizes 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.
We performed our annual impairment test for 2022 as of the first day of our fiscal second quarter. Based on our assessment of qualitative factors, we concluded it was more likely than not that the fair value of our indefinite-lived intangible assets exceeded their carrying value and were not impaired. As such, it was not necessary to perform a quantitative impairment analysis. Additionally, we did not identify any events or conditions that make it more likely than not that an impairment may have occurred during the period from March 28, 2022 to September 25, 2022. Accordingly, no impairment loss was recognized for the thirty-nine weeks ended September 25, 2022.
Recently adopted accounting standards
There were no new accounting standards adopted during the thirty-nine weeks ended September 25, 2022 that had an impact on our financial statements.
Recently issued accounting standards not yet adopted
There are no accounting standards 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:
September 25, 2022
(in thousands)Total fair valueQuoted prices in active markets for identical assets (level 1)Significant other observable inputs (level 2)Significant unobservable inputs (level 3)
Cash and cash equivalents$43,779 $43,779 $ $ 
Restricted cash and cash equivalents68,351 68,351   
Cash, cash equivalents and restricted cash (1)$112,130 $112,130 $ $ 
Municipal debt securities$46,342 $ $46,342 $ 
Corporate debt securities62,770  62,770  
Agency mortgage-backed securities61  61  
U.S. government and agency securities948  948  
Restricted investments classified as held-to-maturity (2)$110,121 $ $110,121 $ 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

December 26, 2021
(in thousands)Total fair valueQuoted prices in active markets for identical assets (level 1)Significant other observable inputs (level 2)Significant unobservable inputs (level 3)
Cash and cash equivalents$49,896 $49,896 $ $ 
Restricted cash and cash equivalents53,289 53,289   
Cash, cash equivalents and restricted cash (1)$103,185 $103,185 $ $ 
Municipal debt securities$58,505 $ $58,505 $ 
Corporate debt securities78,357  78,357  
Agency mortgage-backed securities152  152  
U.S. government and agency securities1,070  1,070  
Restricted investments classified as held-to-maturity (2)$138,084 $ $138,084 $ 
(1)Cash, cash equivalents and restricted cash include money market funds and deposits.
(2)Refer to Note 3: Restricted Cash and Investments for additional details on our held-to-maturity debt securities.
NOTE 3:    RESTRICTED CASH AND INVESTMENTS
The following is a summary of the carrying value of our restricted cash and investments:
(in thousands)September 25,
2022
December 26,
2021
Cash collateral held by insurance carriers$29,345 $28,957 
Cash and cash equivalents held in Trust 38,377 21,590 
Investments held in Trust115,065 135,419 
Company-owned life insurance policies25,243 32,318 
Other restricted cash and cash equivalents629 2,742 
Total restricted cash and investments$208,659 $221,026 
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 September 25, 2022 and December 26, 2021, were as follows:
September 25, 2022
(in thousands)Amortized costGross unrealized gainsGross unrealized lossesFair value
Municipal debt securities$47,188 $ $(846)$46,342 
Corporate debt securities66,817  (4,047)62,770 
Agency mortgage-backed securities63  (2)61 
U.S. government and agency securities997  (49)948 
Total held-to-maturity investments$115,065 $ $(4,944)$110,121 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

December 26, 2021
(in thousands)Amortized costGross unrealized gainsGross unrealized lossesFair value
Municipal debt securities$56,346 $2,159 $ $58,505 
Corporate debt securities77,925 995 (563)78,357 
Agency mortgage-backed securities148 4  152 
U.S. government and agency securities1,000 70  1,070 
Total held-to-maturity investments$135,419 $3,228 $(563)$138,084 
The amortized cost and fair value by contractual maturity of our held-to-maturity investments are as follows:
September 25, 2022
(in thousands)Amortized costFair value
Due in one year or less$21,527 $21,326 
Due after one year through five years93,538 88,795 
Total held-to-maturity investments$115,065 $110,121 
Actual maturities may differ from contractual maturities because the issuers of certain debt securities have the right to call or prepay their obligations without penalty. We have no significant concentrations of counterparties in our held-to-maturity investment portfolio.
Deferred compensation investments and company-owned life insurance policies
We hold company-owned life insurance policies to support our deferred compensation liability. During the year ended December 26, 2021, we also held mutual funds and money market funds. As of December 26, 2021, all of the mutual funds and money market funds were converted into company-owned life insurance policies. Unrealized gains and losses related to investments still held at September 25, 2022 and September 26, 2021, which are included in selling, general and administrative expense on our Consolidated Statements of Operations and Comprehensive Income, were as follows:
Thirteen weeks ended
Thirty-nine weeks ended
(in thousands)September 25,
2022
September 26,
2021
September 25,
2022
September 26,
2021
Unrealized gains (losses)$(1,516)$391 $(7,076)$2,817 
NOTE 4:    SUPPLEMENTAL BALANCE SHEET INFORMATION
Accounts receivable allowance for credit losses
The activity related to the accounts receivable allowance for credit losses was as follows:
Thirty-nine weeks ended
(in thousands)September 25,
2022
September 26,
2021
Beginning balance$6,687 $2,921 
Current period provision3,352 2,881 
Write-offs(6,731)(1,827)
Foreign currency translation(22)(11)
Ending balance$3,286 $3,964 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Prepaid expenses and other current assets
(in thousands)September 25,
2022
December 26,
2021
Prepaid software agreements$9,681 $10,078 
Other prepaid expenses9,852 8,858 
Other current assets6,931 12,678 
Prepaid expenses and other current assets$26,464 $31,614 
NOTE 5:    WORKERS' COMPENSATION INSURANCE AND RESERVES
We provide workers’ compensation insurance for our associates and permanent employees. The majority of our current workers’ compensation insurance policies cover claims for a particular event above our deductible limit, on a “per occurrence” basis. Effective July 1, 2022, we increased our deductible limit from $2.0 million to $5.0 million, on a “per occurrence” basis. This results in our business being substantially self-insured.
Our workers’ compensation reserve for claims below the deductible limit is discounted to its estimated net present value using discount rates based on average returns of “risk-free” U.S. Treasury instruments available during the year in which the liability was incurred. The weighted average discount rate was 1.7% and 1.6% at September 25, 2022 and December 26, 2021, respectively. Payments made against self-insured claims are made over a weighted average period of approximately 5.5 years as of September 25, 2022.
The following table presents a reconciliation of the undiscounted workers’ compensation reserve to the discounted workers’ compensation reserve for the periods presented:
(in thousands)September 25,
2022
December 26,
2021
Undiscounted workers’ compensation reserve$269,441 $273,000 
Less discount on workers’ compensation reserve17,552 16,806 
Workers’ compensation reserve, net of discount251,889 256,194 
Less current portion55,574 61,596 
Long-term portion$196,315 $194,598 
Payments made against self-insured claims were $28.1 million and $32.0 million for the thirty-nine weeks ended September 25, 2022 and September 26, 2021, respectively.
Our workers’ compensation reserve includes estimated expenses related to claims above our self-insured limits (“excess claims”), and we record a corresponding receivable for the insurance coverage on excess claims based on the contractual policy agreements we have with insurance carriers. We discount this reserve and corresponding receivable to its estimated net present value using the discount rates based on average returns of “risk-free” U.S. Treasury instruments available during the year in which the liability was incurred. The rates used to discount excess claims incurred during the thirty-nine weeks ended September 25, 2022 and fifty-two weeks ended December 26, 2021 were 2.5% and 1.8%, 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 $66.2 million and $62.7 million, as of September 25, 2022 and December 26, 2021, respectively. The discounted receivables from insurance companies, net of valuation allowance, were $64.8 million and $61.4 million as of September 25, 2022 and December 26, 2021, 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 $6.9 million and $13.3 million was recorded in cost of services on our Consolidated Statements of Operations and Comprehensive Income for the thirteen weeks ended September 25, 2022 and September 26, 2021, respectively, and $28.0 million and $32.7 million for the thirty-nine weeks ended September 25, 2022 and September 26, 2021, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 6:    LONG-TERM DEBT
We have a revolving 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., which provides for a revolving line of credit of up to $300.0 million, and is currently set to mature on March 16, 2025 (“Revolving Credit Facility”). We have an option to increase the amount to $450.0 million, subject to lender approval. Included in the Revolving Credit Facility is a $30.0 million sub-limit for “Swingline” loans and a $125.0 million sub-limit for letters of credit. At September 25, 2022, $7.2 million was utilized by outstanding standby letters of credit, leaving $292.8 million unused under the Revolving Credit Facility. At December 26, 2021, $6.2 million was utilized by outstanding standby letters of credit.
Under the terms of the Revolving Credit Facility, we pay a variable rate of interest on funds borrowed under the revolving line of credit in excess of the Swingline loans, based on the U.S. Dollar London Interbank Offered Rate (“LIBOR”) plus an applicable spread between 1.25% and 3.50%. Alternatively, at our option, we may pay interest based on a base rate plus an applicable spread between 0.25% and 1.50%. The base rate is the greater of the prime rate (as announced by Bank of America), or the federal funds rate plus 0.50%. The applicable spread is determined by the consolidated leverage ratio, as defined in the Revolving Credit Facility.
Under the terms of the Revolving Credit Facility, we are required to pay a variable rate of interest on funds borrowed under the Swingline loan based on the base rate plus applicable spread between 0.25% and 1.50%, as described above.
A commitment fee between 0.25% and 0.50% is applied against the Revolving Credit Facility’s unused borrowing capacity, with the specific rate determined by the consolidated leverage ratio, as defined in the second amendment to our credit agreement. Letters of credit are priced at a margin between 1.00% and 3.25%, plus a fronting fee of 0.50%.
Obligations under the Revolving Credit Facility are guaranteed by TrueBlue and material U.S. domestic subsidiaries, and are secured by substantially all of the assets of TrueBlue and material U.S. domestic subsidiaries. The second amendment to our credit agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, including, among others, financial covenants.
The following financial covenants, as defined in the second amendment to our credit agreement, were in effect as of September 25, 2022:
Consolidated leverage ratio less than 3.00, defined as our funded indebtedness divided by trailing twelve months consolidated EBITDA, as defined in the amended credit agreement. As of September 25, 2022, our consolidated leverage ratio was 0.05.
Consolidated fixed charge coverage ratio greater than 1.25, defined as the trailing twelve months bank-adjusted cash flow divided by cash interest expense. As of September 25, 2022, our consolidated fixed charge ratio was 102.63.
As of September 25, 2022, we were in compliance with all effective covenants related to the Revolving Credit Facility.
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)September 25,
2022
December 26,
2021
Cash collateral held by workers’ compensation insurance carriers$23,497 $23,056 
Cash and cash equivalents held in Trust38,377 21,590 
Investments held in Trust115,065 135,419 
Letters of credit (1)6,077 6,160 
Surety bonds (2)21,898 21,969 
Total collateral commitments$204,914 $208,194 
(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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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 and are immaterial. We also believe that the aggregate range of reasonably possible losses for the Company's exposure in excess of the amount accrued is expected to be immaterial to the Company. It remains possible that despite our current belief, material differences in actual outcomes or changes in management's evaluation or predictions could arise that could have a material effect on the Company's financial condition, results of operations or cash flows.
NOTE 8:    SHAREHOLDERS' EQUITY
Changes in the balance of each component of shareholders’ equity during the reporting periods were as follows:
Thirteen weeks ended
Thirty-nine weeks ended
(in thousands)September 25,
2022
September 26,
2021
September 25,
2022
September 26,
2021
Common stock shares
Beginning balance32,684 35,510 34,861 35,493 
Purchases and retirement of common stock  (2,234) 
Net issuance under equity plans, including tax benefits9 (55)66 (72)
Stock-based compensation   34 
Ending balance32,693 35,455 32,693 35,455 
Common stock amount
Beginning balance$1 $1 $1 $1 
Current period activity— — — — 
Ending balance1 1 1 1 
Retained earnings
Beginning balance483,296 479,567 508,813 452,017 
Net income20,696 18,642 55,228 41,424 
Purchases and retirement of common stock (1)  (60,939) 
Net issuance under equity plans, including tax benefits30 (133)(3,567)(2,281)
Stock-based compensation3,188 3,233 7,675 10,149 
Ending balance507,210 501,309 507,210 501,309 
Accumulated other comprehensive loss
Beginning balance, net of tax(17,344)(14,338)(15,747)(14,828)
Foreign currency translation adjustment(3,053)(1,296)(4,650)(806)
Ending balance, net of tax(20,397)(15,634)(20,397)(15,634)
Total shareholders’ equity ending balance$486,814 $485,676 $486,814 $485,676 
(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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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 any discrete items 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 full year pre-tax 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 income tax rate for the thirty-nine weeks ended September 25, 2022 was 16.9%. The difference between the statutory federal income tax rate of 21% and our effective tax rate was primarily due to hiring tax credits, including the 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 result from state income taxes and certain non-deductible and non-taxable items.
NOTE 10:    NET INCOME PER SHARE
Diluted common shares were calculated as follows:
Thirteen weeks ended
Thirty-nine weeks ended
(in thousands, except per share data)September 25,
2022
September 26,
2021
September 25,
2022
September 26,
2021
Net income$20,696 $18,642 $55,228 $41,424 
Weighted average number of common shares used in basic net income per common share32,434 34,873 33,023 34,788 
Dilutive effect of non-vested stock-based awards384 602 488 467 
Weighted average number of common shares used in diluted net income per common share32,818 35,475 33,511 35,255 
Net income per common share:
Basic$0.64 $0.53 $1.67 $1.19 
Diluted$0.63 $0.53 $1.65 $1.17 
Anti-dilutive shares485 24 439 47 
NOTE 11:    SEGMENT INFORMATION
Our operating segments and reportable segments are described below:
Our PeopleReady reportable segment provides blue-collar, contingent staffing through the PeopleReady operating segment. PeopleReady provides on-demand and skilled labor in a broad range of industries that include construction, manufacturing and logistics, warehousing and distribution, retail, waste and recycling, energy, hospitality, and general labor.
Our PeopleManagement reportable segment provides contingent labor and outsourced industrial workforce solutions, primarily on-site at the client’s facility, through the following operating segments, which we have aggregated into one reportable segment in accordance with U.S. GAAP:
PeopleManagement On-Site: On-site management and recruitment for the contingent industrial workforce of manufacturing, warehousing and distribution facilities; and
PeopleManagement Centerline: Recruitment and management of contingent and dedicated commercial drivers to the transportation and distribution industries.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Our PeopleScout reportable segment provides high-volume, permanent employee recruitment process outsourcing, employer branding services and management of outsourced labor service providers through the following operating segments, which we have aggregated into one reportable segment in accordance with U.S. GAAP:
PeopleScout RPO: Outsourced recruitment of permanent employees on behalf of clients and employer branding services; and
PeopleScout MSP: Management of multiple third-party staffing vendors on behalf of clients.
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
Thirty-nine weeks ended
(in thousands)September 25,
2022
September 26,
2021
September 25,
2022
September 26,
2021
Revenue from services:
Contingent staffing
PeopleReady$334,639 $349,056 $958,272 $908,764 
PeopleManagement163,618 157,789 489,375 461,899 
Human resource outsourcing
PeopleScout77,464 70,186 248,842 181,029 
Total company$575,721 $577,031 $1,696,489 $1,551,692 
The following table presents a reconciliation of segment profit to income before tax expense:
Thirteen weeks ended
Thirty-nine weeks ended
(in thousands)September 25,
2022
September 26,
2021
September 25,
2022
September 26,
2021
Segment profit:
PeopleReady$28,732 $24,690 $65,276 $54,987 
PeopleManagement4,463 2,360 11,670 8,697 
PeopleScout10,707 9,778 42,272 24,672 
Total segment profit43,902 36,828 119,218 88,356 
Corporate unallocated expense(9,396)(7,667)(23,225)(20,593)
Third-party processing fees for hiring tax credits(162)(419)(486)(584)
Amortization of software as a service assets(729)(670)(2,175)(1,989)
PeopleReady technology upgrade costs(1,858) (6,156) 
COVID-19 government subsidies, net 92  4,131 
Other benefits (costs)(189)(410)166 (2,434)
Depreciation and amortization (7,483)(6,426)(22,015)(20,405)
Income from operations24,085 21,328 65,327 46,482 
Interest expense and other income, net703 581 1,098 1,880 
Income before tax expense$24,788 $21,909 $66,425 $48,362 
Asset information by reportable segment is not presented as we do not manage our segments on a balance sheet basis.

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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 our ongoing 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 of Financial Condition and Results of Operations” (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.
BUSINESS OVERVIEW
TrueBlue, Inc. (the “company,” “TrueBlue,” “we,” “us” and “our”) is a leading provider of specialized workforce solutions that help our clients improve productivity and grow their businesses. Client demand for contingent workforce solutions and outsourced recruiting services is cyclical and dependent on the overall strength of the economy and labor market, as well as trends in workforce flexibility. During periods of rising economic uncertainty, clients reduce their contingent labor in response to lower volumes and reduced appetite for expanding production or inventory, which reduces the demand for our services. That environment also reduces demand for permanent placement recruiting, whether outsourced or in-house. However, as the economy emerges from periods of uncertainty, contingent labor providers are uniquely positioned to respond quickly to increasing demand for labor and rapidly fill new or temporary positions, replace absent employees, and convert fixed labor costs to variable costs. Similarly, companies often reduce their in-house recruiting teams during economic downturns, and turn to hybrid or fully outsourced recruiting models during periods of rapid re-hiring and high employee turnover. In order to competitively differentiate our services in these highly fragmented industries, we are committed to executing our digital strategies, combined with a focus on improving operational efficiencies in order to gain market share. We have implemented these core strategies for each of our business segments: PeopleReady, PeopleManagement and PeopleScout.
PeopleReady
PeopleReady, our largest segment by revenue, provides clients with access to qualified associates through a wide range of staffing solutions for on-demand contingent general and skilled labor. PeopleReady connects people with work in a broad range of industries through our network of branches across all 50 states in the United States (“U.S.”), Canada and Puerto Rico, and increasingly through our industry-leading mobile app, JobStackTM. JobStack creates a virtual exchange between our associates and clients, and allows our branch resources to expand their recruiting, sales and service delivery efforts. JobStack is competitively differentiating our services, expanding our reach into new demographics, and improving our service delivery and work order fill rates. Our primary focus at PeopleReady is the use of digitalization to supplement our nationwide footprint, improve our operating efficiency and effectiveness, and gain market share.
PeopleManagement
PeopleManagement, our second largest segment by revenue, provides recruitment and on-site management of a facility’s contingent industrial workforce throughout the U.S., Canada and Puerto Rico. In comparison with PeopleReady, services are larger in scale and longer in duration, and dedicated service teams are located at the client’s facility as an integral part of the production and logistics process. We offer scalable solutions to meet the volume requirements of labor-intensive manufacturing, warehousing and distribution facilities, by providing large-scale sourcing, screening, recruiting and management of the contingent workforce. PeopleManagement also provides dedicated and contingent commercial drivers to the transportation and distribution industries through our Centerline Drivers (“Centerline”) brand. Centerline matches drivers to each client’s specific needs, allowing them to improve productivity, control costs, ensure compliance and deliver improved
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MANAGEMENT’S DISCUSSION AND ANALYSIS


service. Our primary focus at PeopleManagement continues to be growing our client base by targeting local and underserved markets, as well as investing in customer and associate care programs to improve retention.
PeopleScout
PeopleScout, our smallest segment by revenue, offers recruitment process outsourcing (“RPO”) and managed service provider (“MSP”) solutions to a wide variety of industries and geographies, primarily in the U.S., Canada, the United Kingdom and Australia. PeopleScout provides RPO services that manage talent solutions spanning the global economy and talent advisory capabilities supporting total workforce needs. Our programs deliver improved talent quality and candidate experience, faster hiring, increased scalability, lower cost of recruitment, greater flexibility, and improved regulatory compliance. We leverage our proprietary technology platform (AffinixTM) for sourcing, screening and delivering a permanent workforce, along with dedicated service delivery teams to work as an integrated partner with our clients. PeopleScout also includes our MSP business, which manages our clients’ contingent labor programs including vendor selection, performance management, compliance monitoring and risk management. Our primary focus at PeopleScout is focused on leveraging our strong brand reputation, continuing to invest in our sales team, and using our proprietary technology platform (Affinix) to capture opportunities in an industry that is expanding rapidly post-pandemic.
Fiscal third quarter of 2022 highlights
Total company revenue remained relatively unchanged at $575.7 million for the thirteen weeks ended September 25, 2022, compared to the same period in the prior year. PeopleReady revenue declined 4.1% primarily due to slowing demand as clients face uncertainty and paused their use of contingent labor. PeopleManagement revenue grew 3.7%, fueled by demand for commercial driving services. PeopleScout revenue grew 10.4% due to higher volumes at existing clients and project work for new clients who are utilizing our services to fulfill short-term hiring needs.
Total company gross profit as a percentage of revenue for the thirteen weeks ended September 25, 2022 increased by 170 basis points to 27.1%, compared to 25.4% for the same period in the prior year. This increase was primarily driven by lower workers’ compensation costs and higher bill rates, which have increased ahead of pay rates.
Total company selling, general and administrative (“SG&A”) expense increased 4.7% to $124.4 million, for the thirteen weeks ended September 25, 2022, compared to the same period in the prior year. The overall increase in SG&A expense was primarily related to employee compensation and investments in technology.
While total company revenue was relatively unchanged, improvements in gross profit as a percentage of revenue resulted in net income improving 11.0% to $20.7 million for the thirteen weeks ended September 25, 2022, compared to the same period in the prior year.
As of September 25, 2022, we were in a strong financial position with cash and cash equivalents of $43.8 million, no outstanding debt, and $292.8 million available under our revolving credit agreement (“Revolving Credit Facility”), for total liquidity of $336.6 million.
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RESULTS OF OPERATIONS
Total company results
The following table presents selected financial data:
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(in thousands, except percentages and per share data)Sep 25,
2022
% of revenueSep 26,
2021
% of revenueSep 25,
2022
% of revenueSep 26,
2021
% of revenue
Revenue from services$575,721 $577,031 $1,696,489 $1,551,692 
Gross profit$155,919 27.1 %$146,502 25.4 %$454,295 26.8 %$393,544 25.4 %
Selling, general and administrative expense124,351 21.6 118,748 20.6 366,953 21.6 326,657 21.1 
Depreciation and amortization7,483 1.3 6,426 1.1 22,015 1.3 20,405 1.3 
Income from operations24,085 4.2 %21,328 3.7 %65,327 3.9 %46,482 3.0 %
Interest expense and other income, net703 581 1,098 1,880 
Income before tax expense24,788 21,909 66,425 48,362 
Income tax expense4,092 3,267 11,197 6,938 
Net income$20,696 3.6 %$18,642 3.2 %$55,228 3.3 %$41,424 2.7 %
Net income per diluted share$0.63 $0.53 $1.65 $1.17 
Revenue from services
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(in thousands, except percentages)Sep 25,
2022
Growth (decline) %Segment % of totalSep 26,
2021
Segment % of totalSep 25,
2022
Growth (decline)
%
Segment % of totalSep 26,
2021
Segment % of total
Revenue from services:
PeopleReady $334,639 (4.1)%58.1 %$349,056 60.5 %$958,272 5.4 %56.5 %$908,764 58.5 %
PeopleManagement163,618 3.7 %28.4 157,789 27.3 489,375 5.9 %28.8 461,899 29.8 
PeopleScout77,464 10.4 %13.5 70,186 12.2 248,842 37.5 %14.7 181,029 11.7 
Total company$575,721 (0.2)%100.0 %$577,031 100.0 %$1,696,489 9.3 %100.0 %$1,551,692 100.0 %
Total company revenue was relatively unchanged at $575.7 million for the thirteen weeks ended September 25, 2022, and grew 9.3% to $1.7 billion for the thirty-nine weeks ended September 25, 2022, compared to the same periods in the prior year, respectively. Growth for the thirty-nine weeks ended September 25, 2022 was driven by higher demand for our services within all segments compared to the same period in the prior year.
PeopleReady
PeopleReady revenue declined 4.1% to $334.6 million for the thirteen weeks ended September 25, 2022, compared to the same period in the prior year. The decline in revenue was primarily due to slowing demand as some clients paused the use of variable labor to supplement their core workforce. The decline in demand was partially offset by continued improvement in bill rates and job order fill rates.
PeopleReady revenue grew 5.4% to $958.3 million for the thirty-nine weeks ended September 25, 2022, compared to the same period in the prior year. PeopleReady’s revenue growth was driven by widespread client demand across most geographies during the first half of the year, worker supply improvements, and higher bill rates.
We believe our revenue growth has been supported by the use of our JobStack mobile app that digitally connects associates with work. During the third quarter of 2022, PeopleReady dispatched approximately 921,000 shifts via JobStack, compared to 940,000 for the same period in the prior year; however, our digital fill rate increased to 66%, compared to 58% for the same period in the prior year.
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PeopleManagement
PeopleManagement revenue grew 3.7% to $163.6 million for the thirteen weeks ended September 25, 2022, and grew 5.9% to $489.4 million for the thirty-nine weeks ended September 25, 2022, compared to the same periods in the prior year. PeopleManagement’s revenue growth was driven by demand for commercial driving services, as well as existing client growth during the first half of the year, despite the global supply chain challenges.
PeopleScout
PeopleScout revenue grew 10.4% to $77.5 million for the thirteen weeks ended September 25, 2022, and grew 37.5% to $248.8 million for the thirty-nine weeks ended September 25, 2022, compared to the same periods in the prior year. Revenue growth has been stimulated by historically high client employee turnover rates, creating increased demand at existing clients and project work for new clients who are utilizing our services to fulfill short-term hiring needs.
Gross profit
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(in thousands, except percentages)Sep 25, 2022Sep 26, 2021Sep 25, 2022Sep 26, 2021
Gross profit$155,919 $146,502 $454,295 $393,544 
Percentage of revenue27.1 %25.4 %26.8 %25.4 %
Gross profit as a percentage of revenue grew 170 basis points to 27.1% for the thirteen weeks ended September 25, 2022, compared to 25.4% for the same period in the prior year. Our staffing businesses contributed 180 basis points of expansion of which 110 basis points were attributable to lower workers’ compensation costs from a combination of favorable development of prior year reserves and fewer workplace injuries. An additional 100 basis points was a result of higher bill rates, which have increased ahead of pay rates. This expansion was partially offset by a contraction of 40 basis points, due to an unfavorable revenue shift toward our lower margin staffing businesses, as well as unfavorable changes in customer mix within our PeopleScout business.
Gross profit as a percentage of revenue grew 140 basis points to 26.8% for the thirty-nine weeks ended September 25, 2022, compared to 25.4% for the same period in the prior year. Our staffing businesses contributed 130 basis points of expansion, of which 70 basis points was attributable to higher bill rates, which have increased ahead of pay rates. An additional 40 basis points was attributable to lower workers’ compensation costs, and the remaining 20 basis points was due to favorable customer mix. Our PeopleScout business, which is our highest margin business, is becoming a larger portion of overall sales mix, and contributed 10 basis points of expansion.
SG&A expense
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(in thousands, except percentages)Sep 25, 2022Sep 26, 2021Sep 25, 2022Sep 26, 2021
Selling, general and administrative expense$124,351 $118,748 $366,953 $326,657 
Percentage of revenue21.6 %20.6 %21.6 %21.1 %
Total company SG&A expense increased by $5.6 million or 4.7% for the thirteen weeks ended September 25, 2022, compared to the same period in the prior year. SG&A expense related to employee compensation increased $2.0 million compared to the same period in the prior year. Also, the current period included $1.9 million of expenses related to investments we are making to upgrade our PeopleReady technology platform to better support our digital strategy.
Total company SG&A expense increased by $40.3 million or 12.3% for the thirty-nine weeks ended September 25, 2022, compared to the same period in the prior year. Employee compensation and other variable costs, incurred to support revenue growth of 9.3%, represented approximately $30 million of the increase. Also, SG&A expense in the current period included $6.2 million of expenses related to investments we are making to upgrade our PeopleReady technology platform to better support our digital strategy. These increases were partially offset by the reversal of $3.3 million in accrued compensation costs related to the resignation of our former Chief Executive Officer. SG&A expense in the prior period included a benefit of $4.0 million for government employment subsidies related to COVID-19 relief.
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Depreciation and amortization
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(in thousands, except percentages)Sep 25, 2022Sep 26, 2021Sep 25, 2022Sep 26, 2021
Depreciation and amortization$7,483 $6,426 $22,015 $20,405 
Percentage of revenue1.3 %1.1 %1.3 %1.3 %
Depreciation and amortization increased for the thirteen weeks and thirty-nine weeks ended September 25, 2022 compared to the same periods in the prior year, due to certain assets placed into service during 2021, slightly offset by assets becoming fully amortized during 2021.
Income tax expense
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(in thousands, except percentages)Sep 25, 2022Sep 26, 2021Sep 25, 2022Sep 26, 2021
Income tax expense$4,092 $3,267 $11,197 $6,938 
Effective income tax rate16.5 %14.9 %16.9 %14.3 %
Our tax provision and our effective tax rate are subject to variation due to several factors, including variability in accurately predicting our annual pre-tax and taxable income and loss by jurisdiction, tax credits, government audit developments, changes in laws, regulations and administrative practices, and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income and loss. 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 or loss is lower.
The items creating a difference between income taxes computed at the statutory federal income tax rate and income taxes reported on the Consolidated Statements of Operations and Comprehensive Income are as follows:
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(in thousands, except percentages)Sep 25, 2022%Sep 26, 2021%Sep 25, 2022%Sep 26, 2021%
Income before tax expense$24,788 $21,909 $66,425 $48,362 
Federal income tax expense at statutory rate$5,206 21.0%$4,601 21.0%$13,950 21.0%$10,156 21.0%
Increase (decrease) resulting from:
State income taxes, net of federal benefit1,245 5.01,176 5.42,816 4.22,455 5.1
Hiring tax credits, net(2,689)(10.8)(2,935)(13.4)(6,539)(9.8)(6,341)(13.1)
Non-deductible and non-taxable items1,560 6.3436 2.01,979 3.0747 1.5
Other, net(1,230)(5.0)(11)(0.1)(1,009)(1.5)(79)(0.2)
Income tax expense$4,092 16.5%$3,267 14.9%$11,197 16.9%$6,938 14.3%
For the thirteen weeks ended September 25, 2022, we incurred income tax expense of $4.1 million and had an effective tax rate of 16.5%, compared to $3.3 million and 14.9% for the same period in the prior year. For the thirty-nine weeks ended September 25, 2022, we incurred income tax expense of $11.2 million and had an effective tax rate of 16.9%, compared to $6.9 million and 14.3% for the same period in the prior year.
The difference between the statutory federal income tax rate of 21% and our effective tax rate of 16.9% for the thirty-nine weeks ended September 25, 2022 was primarily due to the benefit of hiring tax credits, including the Work Opportunity Tax Credit (“WOTC”), partially offset by state income taxes and non-deductible market losses related to company-owned life insurance policies.
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WOTC, our primary hiring tax credit, is designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates. WOTC is generally calculated as a percentage of wages over a twelve-month period up to worker maximums by targeted groups. Based on historical results and business trends, we estimate the amount of WOTC we expect to earn related to wages of the current year. However, the estimate is subject to variation because 1) a small percentage of our workers qualify for one or more of the many targeted groups; 2) the targeted groups are subject to different incentive credit rates and limitations; 3) credits fluctuate depending on economic conditions and qualified worker retention periods; and 4) state and federal offices can delay their credit certification processing and have inconsistent certification rates. We recognize an adjustment to prior year hiring tax credits if credits certified by government offices differ from original estimates. The U.S. Congress has approved the WOTC program through the end of 2025.
Segment performance
We evaluate performance based on segment revenue and segment profit. Segment profit includes revenue, related cost of services, and ongoing operating expenses directly attributable to the reportable segment. Segment profit excludes goodwill and intangible asset impairment charges, depreciation and amortization expense, unallocated corporate general and administrative expense, interest expense, other income and expense, income taxes, and other adjustments not considered to be ongoing. 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 reportable segments, as well as a reconciliation of segment profit to income before tax expense.
Segment profit should not be considered a measure of financial performance in isolation or as an alternative to net income on the Consolidated Statements of Operations and Comprehensive Income in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and may not be comparable to similarly titled measures of other companies.
PeopleReady segment performance was as follows:
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(in thousands, except percentages)Sep 25, 2022Sep 26, 2021Sep 25, 2022Sep 26, 2021
Revenue from services$334,639 $349,056 $958,272 $908,764 
Segment profit$28,732 $24,690 $65,276 $54,987 
Percentage of revenue8.6 %7.1 %6.8 %6.1 %
PeopleReady segment profit grew $4.0 million and $10.3 million for the thirteen and thirty-nine weeks ended September 25, 2022, and also improved as a percentage of revenue, compared to the same periods in the prior year, respectively. Segment profit growth was primarily due to lower workers’ compensation costs and higher bill rates, which have increased ahead of pay rates.
PeopleManagement segment performance was as follows:
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(in thousands, except percentages)Sep 25, 2022Sep 26, 2021Sep 25, 2022Sep 26, 2021
Revenue from services$163,618 $157,789 $489,375 $461,899 
Segment profit $4,463 $2,360 $11,670 $8,697 
Percentage of revenue2.7 %1.5 %2.4 %1.9 %
PeopleManagement segment profit grew $2.1 million and $3.0 million for the thirteen and thirty-nine weeks ended September 25, 2022, and also improved as a percentage of revenue, compared to the same periods in the prior year, respectively. Segment profit growth was due to favorable business mix towards commercial driving services, favorable client mix within our On-Site operating segment toward our higher margin, productivity-based (cost per unit) pricing option, and lower recruiting and candidate marketing costs as the labor market improves.
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PeopleScout segment performance was as follows: