What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-02-22 compared with 2020-02-24 · 483 added, 420 removed, 685 unchanged (57% of the section changed)

4 unchanged sentences

We have audited the accompanying consolidated balance sheets of TrueBlue, Inc.

and subsidiaries (the “Company”) as of December 29, 2019 and December 30, 2018 , and the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended December 29, 2019 and the related notes and schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “financial statements”).

and subsidiaries (the “Company”) as of December 27, 2020 and December 29, 2019, and the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended December 27, 2020 and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 27, 2020 and December 29, 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 27, 2020, in conformity with accounting principles generally accepted in the United States of America.

14 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill - SIMOS Reporting Unit - Refer to Note 6 to the Financial Statements

Goodwill – PeopleScout Reporting Unit –- Refer to Notes 1 and 6 to the Financial Statements

Critical Audit Matter Description

The Company’s evaluation of the SIMOS Insourcing Solutions Reporting Unit (“SIMOS”) goodwill for impairment involves the comparison of the estimated reporting unit fair value to its carrying value.

The Company equally weighted the discounted cash flow model and market approach to estimate fair value, which requires management to make significant estimates and assumptions related to forecasts of future revenues and earnings.

Changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge, or both.

The total goodwill balance as of December 29, 2019 (the measurement date) allocated to SIMOS was $35 million.

The estimated fair value of SIMOS exceeded its carrying value by approximately 7% as of the measurement date.

Based on the fact that the estimated fair value of the SIMOS reporting unit exceeded the carrying values, no impairment was recognized.

Given the nature of SIMOS’ operations, the method used to determine its fair value, and the difference between its fair value and carrying value, auditing management’s judgments regarding forecasts of future revenue and cash flows for SIMOS involved enhanced auditor judgment.

The Company’s evaluation of the goodwill held by the PeopleScout Reporting Unit (“PeopleScout”) for impairment involves comparison of the estimated reporting unit fair value to its carrying value.

The Company equally weighted the discounted cash flow model and market approach to estimate fair value, which required management to make significant estimates and assumptions related to forecasts of future revenues and earnings.

Changes in these assumptions could have a significant impact on the fair value, the amount of any goodwill impairment charge, or both.

The goodwill balance as of March 29, 2020 (the measurement date) allocated to PeopleScout was $115.8 million.

The estimated carrying value of PeopleScout exceeded its fair value by $92.2 million as of the measurement date, resulting in an impairment charge of the same amount.

The remaining goodwill balance allocated to PeopleScout following the March 29, 2020 impairment test was $23.6 million.

Given the significant judgments made by management to estimate the fair value of PeopleScout in order to determine the amount of the recorded impairment, auditing management’s judgments regarding forecasts of future revenue and cash flows for PeopleScout, including the expected impacts of the COVID-19 global pandemic on future revenues and operations, involved enhanced auditor judgment.

How the Critical Audit Matter was Addressed in the Audit

Our audit procedures related to forecasts of future revenue and earnings for the SIMOS reporting unit included the following, among others:

Our audit procedures related to forecasts of future revenue and earnings for the PeopleScout reporting unit included the following, among others:

• We tested the effectiveness of controls over management’s evaluation of goodwill for impairment, including those over the forecast of future revenue and earnings.

We evaluated management’s ability to accurately forecast future revenues and earnings by comparing actual results to management’s historical forecasts.

We evaluated the reasonableness of management’s revenue and earnings forecast by comparing the forecasts to:

• We evaluated management’s ability to accurately forecast future revenues and earnings and evaluated the reasonableness of management’s revenue and earnings forecast by comparing the forecasts to:

◦ Historical revenues and earnings;

Internal communications between management, brand presidents, and the Board of Directors, including assessment of current and future growth opportunities.

We further evaluated the reasonableness of management’s forecast by evaluating alternative assumptions about future revenue and cash flows, using both the Company’s internal information and analyst and industry reports.

◦ Internal communications between management, brand presidents, and the Board of Directors;

◦ Management’s assessment of current and future growth opportunities;

◦ Externally sourced macroeconomic projections, including consideration of the historical correlation of PeopleScout revenue and earnings to such macroeconomic indicators.

• We further evaluated the reasonableness of management’s forecast by evaluating assumptions about future revenue and cash flows, using both the Company’s internal information, and analyst and industry reports.

Workers’ Compensation Claims Reserves - Refer to Note 1 and Note 7 to the Financial Statements

9 unchanged sentences

◦ Making selections of the underlying data that served as the basis for the actuarial analysis, including claims payments and related expenses, to evaluate whether the inputs to the actuarial estimate were accurate;

Comparing management’s prior-year assumptions of expected future cost of claims and related expenses to actuals incurred during the current year to identify potential bias in the determination of the workers’ compensation reserves.

◦ Comparing management’s prior-year assumptions of expected future cost of claims and related expenses to actual claims expense incurred during the current year to identify potential bias in the determination of the workers’ compensation reserves.

• With the assistance of our actuarial specialists, we developed independent estimates of the reserves and compared our estimates to the Company’s recorded reserves.

5 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value data)

(in thousands, except par value data) December 27,

2020 December 29,

Current assets:

Cash and cash equivalents $ 62,507 $ 37,608

Accounts receivable, net of allowance for doubtful accounts of $4,288 and $5,026

Prepaid expenses, deposits and other current assets

Accounts receivable, net of allowance of $ 2,921 and $ 4,288

278,343 342,303

Prepaid expenses and other current assets 26,137 30,717

Income tax receivable 11,898 11,105

3 unchanged sentences

Deferred income taxes, net 30,019 3,228

Goodwill 94,873 237,498

Intangible assets, net 28,929 73,673

Operating lease right-of-use assets

Operating lease right-of-use assets, net 65,940 41,082

Workers’ compensation claims receivable, net 52,934 44,624

Other assets, net 16,729 17,235

Total assets $ 980,577 $ 1,136,155

LIABILITIES AND SHAREHOLDERS’ EQUITY

3 unchanged sentences

Current portion of workers’ compensation claims reserve 66,007 73,020

Operating lease current liabilities

Current operating lease liabilities 13,938 14,358

Other current liabilities 4,166 7,418

3 unchanged sentences

Long-term deferred compensation liabilities 26,361 26,765

Operating lease long-term liabilities

Long-term operating lease liabilities 54,797 28,849

Other long-term liabilities 3,776 4,064

12 unchanged sentences

TRUEBLUE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data) 2020 2019 2018

1 unchanged sentence

Cost of services 1,405,715 1,748,831 1,843,760

Gross profit 440,645 619,948 655,447

Selling, general and administrative expense 408,307 516,220 540,479

Depreciation and amortization 32,031 37,549 41,049

Income from operations

Interest expense

Interest and other income

Interest and other income (expense), net

Income before tax expense

Income tax expense

Net income per common share:

Goodwill and intangible asset impairment charge 175,189 — —

Income (loss) from operations ( 174,882 ) 66,179 73,919

Interest expense and other income, net 1,620 3,865 1,744

Income (loss) before tax expense (benefit) ( 173,262 ) 70,044 75,663

Income tax expense (benefit) ( 31,421 ) 6,971 9,909

Net income (loss) $ ( 141,841 ) $ 63,073 $ 65,754

Net income (loss) per common share:

Basic $ ( 4.01 ) $ 1.63 $ 1.64

Diluted $ ( 4.01 ) $ 1.61 $ 1.63

Weighted average shares outstanding:

Basic 35,365 38,778 39,985

Diluted 35,365 39,179 40,275

Other comprehensive income (loss):

Foreign currency translation adjustment $ ( 1,590 ) $ 1,411 $ ( 6,320 )

Unrealized gain on investments, net of tax

Total other comprehensive income (loss), net of tax ( 1,590 ) 1,411 ( 6,320 )

Comprehensive income

Comprehensive income (loss) $ ( 143,431 ) $ 64,484 $ 59,434

See accompanying notes to consolidated financial statements

1 unchanged sentence

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Accumulated other comprehensive loss

Total shareholders ’ equity

(in thousands)

Retained earnings

January 1, 2017

Other comprehensive income, net of tax

Common stock Accumulated other comprehensive loss Total shareholders ’ equity

(in thousands) Shares Amount Retained earnings

Balances, December 31, 2017

41,098 $ 1 $ 561,650 $ ( 6,804 ) $ 554,847

— — 65,754 — 65,754

Foreign currency translation adjustment — — — ( 6,320 ) ( 6,320 )

Purchases and retirement of common stock

( 1,371 ) — ( 34,818 ) — ( 34,818 )

Issuances under equity plans, including tax benefits

299 — ( 1,900 ) — ( 1,900 )

Stock-based compensation 28 — 13,876 — 13,876

December 31, 2017

Other comprehensive loss, net of tax

Change in accounting standard cumulative-effect adjustment — — 1,525 ( 1,525 ) —

Balances, December 30, 2018

40,054 1 606,087 ( 14,649 ) 591,439

— — 63,073 — 63,073

Foreign currency translation adjustment — — — 1,411 1,411

Purchases and retirement of common stock ( 1,855 ) — ( 38,826 ) — ( 38,826 )

1 unchanged sentence

Stock-based compensation 29 — 9,769 — 9,769

Change in accounting standard cumulative-effect adjustment

December 30, 2018

Other comprehensive income, net of tax

Balances, December 29, 2019

38,593 1 639,210 ( 13,238 ) 625,973

— — ( 141,841 ) — ( 141,841 )

Foreign currency translation adjustment — — — ( 1,590 ) ( 1,590 )

Purchases and retirement of common stock ( 3,557 ) — ( 52,346 ) — ( 52,346 )

1 unchanged sentence

Stock-based compensation 28 — 9,113 — 9,113

December 29, 2019

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

Balances, December 27, 2020

35,493 $ 1 $ 452,017 $ ( 14,828 ) $ 437,190

See accompanying notes to consolidated financial statements

3 unchanged sentences

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss) $ ( 141,841 ) $ 63,073 $ 65,754

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 32,031 37,549 41,049

Goodwill and intangible asset impairment charge 175,189 — —

Provision for doubtful accounts 6,300 7,661 10,042

6 unchanged sentences

Income tax receivable ( 1,122 ) ( 6,480 ) ( 996 )

Other assets ( 2,124 ) ( 12,575 ) ( 12,928 )

Accounts payable and other accrued expenses ( 6,561 ) 6,921 3,029

13 unchanged sentences

Maturities of restricted held-to-maturity investments 27,561 28,254 19,644

Other 205 — —

Net cash used in investing activities ( 34,411 ) ( 21,631 ) ( 20,515 )

5 unchanged sentences

Payments on debt — — ( 22,397 )

Payment of contingent consideration at acquisition date fair value

Other ( 1,540 ) ( 296 ) —

Net cash used in financing activities ( 92,502 ) ( 82,915 ) ( 75,016 )

4 unchanged sentences

Supplemental disclosure of cash flow information:

Cash paid during the period for:

Cash paid (received) during the period for:

Interest $ 3,149 $ 2,432 $ 4,373

Income taxes ( 3,441 ) 12,166 12,898

Operating lease liabilities 16,995 17,643 —

12 unchanged sentences

Basis of presentation

The consolidated financial statements include the accounts of TrueBlue and all of its wholly-owned subsidiaries.

The consolidated financial statements (“financial statements”) include the accounts of TrueBlue and all of its wholly-owned subsidiaries.

Intercompany balances and transactions have been eliminated in consolidation.

The consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

Reclassifications

Certain immaterial prior year amounts have been reclassified within current liabilities on our Consolidated Balance Sheets and Consolidated Statements of Cash Flows to conform to current year presentation.

Certain previously reported amounts have been reclassified to conform to the current presentation.

Specifically, the company has made certain reclassifications between cost of services and selling, general and administrative expense (“SG&A”) to more accurately reflect the costs of delivering our services.

Such reclassifications did not have a significant impact on the company’s gross profit or SG&A expense.

Fiscal period end

The consolidated financial statements are presented on a 52/53-week fiscal year-end basis, with the last day of the fiscal year ending on the Sunday closest to the last day of December.

In fiscal years consisting of 53 weeks, the final quarter will consist of 14 weeks while fiscal years consisting of 52 weeks, all quarters will consist of 13 weeks.

The financial statements are presented on a 52/53-week fiscal year-end basis, with the last day of the fiscal year ending on the Sunday closest to the last day of December.

In fiscal years consisting of 53 weeks, the final quarter will consist of 14 weeks, while in fiscal years consisting of 52 weeks, all quarters will consist of 13 weeks.

All years presented include 52 weeks.

Use of estimates

Preparing financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.

Estimates in our financial statements include, but are not limited to, purchase accounting, allowance for credit losses, estimates for asset and goodwill impairments, stock-based performance awards, assumptions underlying self-insurance reserves, contingent legal, regulatory and government incentive liabilities, and the potential outcome of future tax consequences of events that have been recognized in the financial statements.

Actual results and outcomes may differ from these estimates and assumptions.

We also considered COVID-19 related impacts to our estimates, as appropriate, within our financial statements and there may be changes to those estimates in future periods.

However, we believe that the accounting estimates used are appropriate after considering the increased uncertainties surrounding the severity and duration of COVID-19.

These estimates and assumptions are subject to inherent uncertainties, which may result in actual future amounts differing from reported estimated amounts.

Revenue recognition

We account for a contract when both parties to the contract have approved the contract, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable.

Consolidated revenues are presented net of intercompany eliminations.

Additionally, consolidated revenues are recognized net of any discounts, allowances and sales incentives, including rebates.

Revenues are recognized over time using an output measure, as the control of the promised services is transferred to the client, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.

1 unchanged sentence

Revenue includes billable travel and other reimbursable costs and are reported net of sales, use or other transaction taxes collected from clients and remitted to taxing authorities.

Payment terms vary by client and the services offered, however we do not extend payment terms beyond one year.

Payment terms vary by client and the services

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

offered, however we do not extend payment terms beyond one year.

Substantially all of our contracts include payment terms of 90 days or less.

3 unchanged sentences

• We demonstrate control over the services provided to our clients by being the employer of record for the individuals performing the service.

We establish our worker’s billing rate.

• We establish our associate’s billing rate.

Contingent staffing

2 unchanged sentences

We do not incur costs to obtain our contingent staffing contracts.

Costs are incurred to fulfill some contingent staffing contracts, however these costs are not material and are expensed as incurred.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Costs are incurred to fulfill some contingent staffing contracts, however these costs are immaterial and are expensed as incurred.

Human resource outsourcing

2 unchanged sentences

We do not incur costs to obtain our outsourced recruitment of permanent employee contracts.

The costs to fulfill these contracts are not material and are expensed as incurred.

The costs to fulfill these contracts are immaterial and are expensed as incurred.

Unsatisfied performance obligations

6 unchanged sentences

We expense advertisements as of the first date the advertisements take place.

Advertising expenses included in selling, general and administrative (“SG&A”) expense were $ 6.8 million , $ 8.1 million and $ 7.3 million in fiscal 2019 , 2018 and 2017 , respectively.

Advertising expenses included in SG&A were $ 5.5 million, $ 6.8 million and $ 8.1 million in fiscal 2020, 2019 and 2018, respectively.

Cash, cash equivalents and marketable securities

5 unchanged sentences

We manage our cash equivalents and marketable securities as a single portfolio of highly liquid securities.

Accounts receivable and allowance for doubtful accounts

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts receivable and allowance for credit losses

Accounts receivable are recorded at the invoiced amount.

We establish an allowance for doubtful accounts for estimated losses resulting from the failure of our clients to make required payments.

The allowance for doubtful accounts is determined based on current collection efforts, historical collection trends, write-off experience, client credit risk and current economic data.

The allowance for doubtful accounts is reviewed quarterly and represents our best estimate of the amount of probable credit losses.

We establish an estimate for the allowance for credit losses resulting from the failure of our clients to make required payments by applying an aging schedule to pools of assets with similar risk characteristics.

Based on an analysis of the risk characteristics of our clients and associated receivables, we have concluded our pools are as follows:

• PeopleReady and Centerline Drivers (“Centerline”) have a large, diverse set of clients, generally with frequent, low dollar invoices due to the daily nature of the work we perform.

This results in high turnover in accounts receivable and lower rates of non-payment.

• PeopleManagement On-Site has a smaller number of clients, and follows a contractual billing schedule.

The invoice amounts are higher than that of PeopleReady and Centerline, with longer payment terms.

• PeopleScout has a smaller number of clients, and generally sends invoices on a consolidated basis for a client.

Invoice amounts are generally higher for PeopleScout than for PeopleManagement On-Site, with similar payment terms.

When specific clients are identified as no longer sharing the same risk profile as their current pool, they are removed from the pool and evaluated separately.

The credit loss rates applied to each aging category by pool are based on current collection efforts, historical collection trends, write-off experience, client credit risk, current economic data and forecasted information.

The allowance for credit loss is reviewed monthly and represents our best estimate of the amount of expected credit losses.

Each month, past due or delinquent balances are identified based upon a review of aged receivables performed by collections and operations.

Past due balances are written off when it is probable the receivable will not be collected.

Changes in the allowance for credit losses are recorded in SG&A on the Consolidated Statements of Operations and Comprehensive Income (Loss).

As a result of our adoption of the accounting standard for current expected credit losses (“CECL”), we recognized a cumulative-effect adjustment to our account receivable allowance of $ 0.5 million as of the beginning of the first quarter of 2020.

Restricted cash and investments

3 unchanged sentences

In the event that an investment is downgraded, it is replaced with a highly-rated investment grade security.

We review for impairment on a quarterly basis and do not consider temporary unrealized losses to be an impairment.

We establish an allowance for credit loss for our held-to-maturity debt securities using a discounted cash flow method including a probability of default rate based on the issuer’s credit rating.

We report the entire change in present value as credit loss expense (or reversal of credit loss expense) in cost of services on the Consolidated Statements of Operations and Comprehensive Income (Loss).

The cumulative-effect adjustment to our held-to-maturity debt securities as a result of adopting CECL as of the beginning of the first quarter of 2020 was immaterial, as was the allowance as of December 27, 2020.

We have an agreement with American International Group, Inc.

1 unchanged sentence

Placing the collateral in the Trust allows us to manage the investment of the assets and provides greater protection of those assets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair value of financial instruments and investments

3 unchanged sentences

Inputs are valued using quoted market prices in active markets for identical assets or liabilities.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Inputs other than quoted prices in active markets for identical assets and liabilities are used.

5 unchanged sentences

The carrying value of our accounts receivable, accounts payable and other accrued expenses, and accrued wages and benefits approximates fair value due to their short-term nature.

In addition to mutual funds and money market funds, we also have company owned life insurance policies that support our deferred compensation liability.

In addition to mutual funds and money market funds, we also have company owned life insurance policies that fund our deferred compensation liability.

Company owned life insurance policies are carried at cash surrender value, which approximates fair value.

5 unchanged sentences

We compute depreciation using the straight-line method over the estimated useful lives of the assets as follows:

Software 3 - 8

Computers, furniture and equipment 3 - 10

7 unchanged sentences

Software maintenance and training costs are expensed in the period incurred.

We conduct our branch office operations from leased locations.

We conduct our branch operations from leased locations.

We also lease office spaces for our centralized support functions, office equipment, and machinery for use at client sites.

Many leases require variable payments of property taxes, insurance, and

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

common area maintenance, in addition to base rent.

Many leases require variable payments of property taxes, insurance, and common area maintenance, in addition to base rent.

The variable portion of these lease payments is not included in our right-of-use assets or lease liabilities.

Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred and are included in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income.

The terms of our lease agreements generally range from three to five years , some containing options to renew or cancel.

We determine if an arrangement meets the definition of a lease at inception, at which time we also perform an analysis to determine whether the lease qualifies as operating or financing.

Operating leases are included in operating lease right-of-use assets and operating lease current and long-term liabilities on our Consolidated Balance Sheets.

The terms of our lease agreements generally range from three to five years , with some as high as 15 years and many containing options to renew.

Under the majority of our leases, we have the right to terminate the lease with 90 days’ notice.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operating leases are included in operating lease right-of-use assets, net and current and long-term operating lease liabilities on our Consolidated Balance Sheets.

Lease expense for operating leases is recognized on a straight-line basis over the lease term and is included in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income.

1 unchanged sentence

Lease expense for financing leases is recognized as depreciation of the right-of-use asset and interest expense.

Financing leases are immaterial to our financial statements.

Lease right-of-use assets and lease liabilities are measured using the present value of future minimum lease payments over the lease term at commencement date.

11 unchanged sentences

We consider our operating segments to be our reporting units for goodwill impairment testing.

Our operating segments are PeopleReady, Centerline Drivers (“Centerline”), Staff Management | SMX (“Staff Management”), SIMOS Insourcing Solutions (“SIMOS”), PeopleScout, and PeopleScout MSP.

Our operating segments are PeopleReady, PeopleManagement Centerline, PeopleManagement On-Site, PeopleScout RPO, and PeopleScout MSP.

The impairment test involves comparing the fair value of each reporting unit to its carrying value, including goodwill.

1 unchanged sentence

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.

If the carrying value of the reporting unit exceeds its fair value, we recognize an impairment charge in an amount equal to the excess, not to exceed the carrying value of the goodwill.

Determining the fair value of a reporting unit involves the use of significant estimates and assumptions to evaluate the impact of operational and macroeconomic changes on each reporting unit.

8 unchanged sentences

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 goodwill impairment tests for 2019 , 2018 and 2017 , and determined that the estimated fair values exceeded the carrying amounts for our reporting units.

Accordingly, no impairment loss was recognized for the years ended December 29, 2019 , December 30, 2018 or December 31, 2017 .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We have indefinite-lived intangible assets related to our Staff Management and PeopleScout trade names.

During the first quarter of 2020, certain events made it more likely than not that an impairment had occurred and accordingly, we performed an interim impairment test as of the last day of our fiscal first quarter.

As a result, we recorded an impairment charge of $ 140.5 million with respect to our PeopleScout RPO, PeopleScout MSP and PeopleManagement On-Site reporting units.

Refer to Note 6:

Goodwill and Intangible Assets for further details.

There were no goodwill impairment charges recorded during fiscal 2019 nor 2018.

We have indefinite-lived intangible assets related to our Staff Management | SMX and PeopleScout trade names.

We test our trade names annually for impairment, and when indications of potential impairment exist.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We performed our annual indefinite-lived intangible asset impairment test for 2020, 2019 and 2018, and determined that the estimated fair values exceeded the carrying amounts for our indefinite-lived trade names.

Accordingly, no impairment loss was recognized for the years ended December 29, 2019 , December 30, 2018 or December 31, 2017 .

Accordingly, no impairment charge was recognized for the years ended December 27, 2020, December 29, 2019 or December 30, 2018.

Other long-lived assets

2 unchanged sentences

We have finite-lived intangible assets related to acquired company customers, trade names/trademarks, and technology, as well as purchased trade names/trademarks.

During fiscal 2020, we recorded a non-cash impairment charge for our PeopleScout RPO and PeopleManagement On-Site client relationship intangible assets of $ 34.7 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 27, 2020.

Refer to Note 6:

Goodwill and Intangible Assets for further details.

There were no long-lived asset impairment charges recorded during fiscal 2019 nor 2018.

We capitalize implementation costs incurred in a cloud computing arrangement that is a service contract.

15 unchanged sentences

These estimates include claims that have been reported but not settled and claims that have been incurred but not reported.

Treasury instruments, which are evaluated on a quarterly basis.

These reserves, which reflect potential liabilities to be paid in future periods based on estimated payment patterns, are discounted to estimated net present value using discount rates based on average returns of “risk-free” United States (“U.S.”) Treasury instruments available during the year in which the liability was incurred, which are evaluated on a quarterly basis.

We evaluate the reserves regularly throughout the year and make adjustments accordingly.

2 unchanged sentences

Our workers’ compensation reserves include estimated expenses related to claims above our self-insured limits (“excess claims”) and a corresponding receivable for the insurance coverage on excess claims based on the contractual policy agreements we have with insurance companies.

We discount the liability and its corresponding receivable to its estimated net present value using the “risk-free” rates associated with the actuarially determined weighted average lives of our excess claims.

We discount the liability and its corresponding receivable to its estimated net present value using the “risk-free” rates available during the year in which the liability was incurred, and associated with the actuarial determined weighted average lives of our excess claims.

When appropriate, based on our best estimate, we record a valuation allowance against the insurance receivable to reflect amounts that may not be realized.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We also establish an allowance for credit loss for our insurance receivables using a probability of default and losses expected upon default method, with the probability of default rate based on the third-party insurance carrier’s credit rating.

Changes in the allowance for credit losses are recorded in cost of services on the Consolidated Statements of Operations and Comprehensive Income (Loss).

The cumulative-effect adjustment to our workers’ compensation insurance receivables as a result of adopting CECL as of the beginning of the first quarter of 2020 was immaterial, as was the allowance as of December 27, 2020.

Legal contingency reserves and regulatory liabilities

From time to time we are subject to compliance audits by federal, state and local authorities relating to a variety of regulations including wage and hour laws, taxes, workers’ compensation, immigration, and safety.

In addition, we are subject to legal

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

proceedings in the ordinary course of our operations.

In addition, we are subject to legal proceedings in the ordinary course of our operations.

We establish accruals for contingent legal and regulatory liabilities when management determines that it is probable that a legal claim will result in an adverse outcome and the amount of liability can be reasonably estimated.

2 unchanged sentences

Income taxes and related valuation allowance

We account for income taxes by recording taxes payable or receivable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns.

These expected future tax consequences are measured based on provisions of tax law as currently enacted;

3 unchanged sentences

In determining whether a valuation allowance is appropriate, we consider whether it is more likely than not that all or some portion of our deferred tax assets will not be realized, based in part upon management’s judgments regarding future events and past operating results.

Based on that analysis, we have determined that a valuation allowance is appropriate for certain net operating losses and tax credits that we expect will not be utilized within the permitted carryforward periods as of December 29, 2019 and December 30, 2018 .

Based on that analysis, we have determined that a valuation allowance is appropriate for certain net operating losses (“NOLs”) and tax credits that we expect will not be utilized within the permitted carryforward periods as of December 27, 2020 and December 29, 2019.

A significant driver of fluctuations in our effective income tax rate is the Work Opportunity Tax Credit (“WOTC”).

1 unchanged sentence

Based on historical results and business trends, we estimate the amount of WOTC we expect to earn related to wages of the current year.

However, the estimate is subject to variation because 1) a small percentage of our workers qualify for one or more of the many targeted categories;

However, the estimate is subject to variation because 1) a small percentage of our associates qualify for one or more of the many targeted categories;

2) the targeted categories are subject to different incentive credit rates and limitations;

6 unchanged sentences

The Plan allows participants to direct their account based on the investment options determined by TrueBlue and offers discretionary matching contributions.

The current portion of the deferred compensation liability is included in other current liabilities on our Consolidated Balance Sheets.

The current portion of the deferred compensation liability is included in accrued wages and benefits on our Consolidated Balance Sheets.

The total deferred compensation liability is largely offset by deferred compensation mutual funds, money market funds and company owned life insurance policies recorded in restricted cash and investments on our Consolidated Balance Sheets.

3 unchanged sentences

Stock-based compensation

Under various plans, officers, employees and non-employee directors have received or may receive grants of stock, restricted stock awards, performance share units or options to purchase common stock.

Under various plans, officers, employees and non-employee directors have received or may receive grants of stock, restricted stock awards, or performance share units to purchase common stock.

We also have an employee stock purchase plan (“ESPP”).

Compensation expense for restricted stock awards and performance share units is generally recognized on a straight-line basis over the vesting period, based on the stock’s fair market value on the grant date.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Compensation expense for restricted stock awards and performance share units is generally recognized on a straight-line basis over the vesting period, based on our stock’s fair market value on the grant date.

For performance share unit grants issued with performance conditions, compensation expense is recognized over each vesting period based on assessment of the likelihood of meeting these conditions.

2 unchanged sentences

Foreign currency

Our consolidated financial statements are reported in U.S.

Our financial statements are reported in U.S.

Assets and liabilities of international subsidiaries with non-U.S.

1 unchanged sentence

dollars at the exchange rates in effect on the balance sheet date.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

expenses for each subsidiary are translated to U.S.

Revenues and expenses for each subsidiary are translated to U.S.

dollars using a weighted average rate for the relevant reporting period.

1 unchanged sentence

Purchases and retirement of our common stock

We purchase our common stock under a program authorized by our Board of Directors.

We purchase our common stock under a program authorized by our Board of Directors (the “Board”).

Under applicable Washington State law, shares purchased are not displayed separately as treasury stock on the Consolidated Balance Sheets and are treated as authorized but unissued shares.

7 unchanged sentences

Anti-dilutive shares primarily include non-vested restricted stock and performance share units for which the sum of the assumed proceeds, including unrecognized compensation expense, exceeds the average stock price during the periods presented.

Anti-dilutive shares associated with our stock options relate to those stock options with an exercise price higher than the average market value of our stock during the periods presented.

Use of estimates

Preparing financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.

Estimates in our consolidated financial statements include, but are not limited to, purchase accounting, allowance for doubtful accounts, estimates for asset and goodwill impairments, stock-based performance awards, assumptions underlying self-insurance reserves, contingent legal and regulatory liabilities, and the potential outcome of future tax consequences of events that have been recognized in the consolidated financial statements.

Actual results and outcomes may differ from these estimates and assumptions.

Recently adopted accounting standards

Intangibles-goodwill and other-internal-use software

In August 2018, the Financial Accounting Standards Board (“FASB”) issued new guidance on accounting for implementation costs incurred in a cloud computing arrangement that is a service contract.

The standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

Previously, we expensed the cost of internal development labor as incurred.

The new guidance requires these costs be capitalized with the related amortization recorded in SG&A expense.

In addition, capitalized development costs are required to be recorded as a prepaid asset rather than a fixed asset, and license fees incurred during the development period are expensed as incurred.

The standard is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted.

We elected to early adopt this new standard prospectively as of the first day of our fiscal first quarter in 2019.

There was no impact on our consolidated financial statements upon adoption.

In February 2016, the FASB issued guidance on lease accounting.

The new guidance continues to classify leases as either finance or operating, but results in the lessee recognizing most operating leases on the balance sheet as right-of-use assets and lease liabilities.

This guidance was effective for annual and interim periods beginning after December 15, 2018 (Q1 2019 for TrueBlue), with early adoption permitted.

In July 2018, the FASB amended the standard to provide transition relief for comparative reporting, allowing companies to adopt the provisions of the new standard using a modified retrospective transition method on the adoption date, with a cumulative-effect adjustment to retained earnings recorded on the date of adoption.

We elected to adopt the standard

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

We evaluate performance based on segment revenue and segment profit.

Segment revenue is net of intercompany eliminations.

Segment profit includes revenue, related cost of services, and ongoing operating expenses directly attributable to the reportable segment.

Segment profit excludes goodwill and intangible asset impairment charges, depreciation and amortization expense, unallocated corporate general and administrative expense, interest expense, other income and expense, income taxes, and other adjustments not considered to be ongoing.

Government incentives

On March 27, 2020, the U.S.

government enacted the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), which among other things, provides employer payroll tax credits for wages paid to employees who are unable to work during the COVID-19 outbreak.

Also, the Canadian government enacted the Canada Emergency Wage Subsidy and the Australian government enacted the JobKeeper subsidy to help employers offset a portion of their employee wages for a limited period.

We elected to treat qualified government incentives from the U.S., Canada and Australian governments as offsets to the related operating expenses.

During fiscal 2020, the qualified payroll tax credits and government subsidies reduced our operating expenses by $ 9.9 million on our Consolidated Statement of Operations and Comprehensive Income (Loss).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

using the transition relief provided in the July amendment.

We implemented internal controls and key system functionality to enable the reporting of financial information.

We elected the three practical expedients allowed for implementation of the new standard but did not utilize the hindsight practical expedient.

Accordingly, we did not reassess:

1) whether any expired or existing contracts are or contain leases;

2) the lease classification for any expired or existing leases;

3) initial direct costs for any existing leases.

We also elected the practical expedient to not separate non-lease components from the lease components to which they relate, and instead account for them as a single lease component.

Accordingly, all fixed expenses associated with a lease contract are accounted for as lease expenses.

Adoption of the new standard resulted in the recording of operating right-of-use assets and lease liabilities of $ 39 million and $ 41 million , respectively, as of the first day of our fiscal first quarter of 2019.

The difference between the right-of-use assets and lease liabilities relates to the deferred rent liability balance as of the end of fiscal 2018 associated with the leases capitalized.

The deferred rent liability, which was the difference between the straight-line lease expense and cash paid, reduced the right-of-use asset upon adoption.

Our accounting for finance leases remained substantially unchanged.

The standard did not materially impact our Consolidated Statements of Operations and Comprehensive Income or our Consolidated Statements of Cash Flows.

Recently issued accounting pronouncements not yet adopted

In June 2016, the FASB issued guidance on accounting for credit losses on financial instruments.

Recently adopted accounting standards

Credit losses

In June 2016, the Financial Accounting Standards Board issued guidance on accounting for credit losses on financial instruments.

This guidance sets forth a current expected credit loss model, which requires the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

The guidance requires the application of a current expected credit loss model, which is a new impairment model based on expected losses.

Under this model, an entity recognizes an allowance for expected credit losses based on historical experience, current conditions and forecasted information rather than the current methodology of delaying recognition of credit losses until it is probable a loss has been incurred.

This guidance is effective for fiscal years beginning after December 15, 2019 (Q1 2020 for TrueBlue) with early adoption permitted.

We plan to adopt the new guidance in Q1 2020 related to our trade accounts receivables, held-to-maturity debt securities, and insurance receivable, and expect the total impact upon adoption to be immaterial.

No other new accounting pronouncement issued or effective during the fiscal year had, or is expected to have, a significant impact on our consolidated financial statements and related disclosures.

Under this model, an entity recognizes an allowance for expected credit losses based on historical experience, current conditions, and forecasted information rather than the previous methodology of delaying recognition of credit losses until it is probable a loss has been incurred.

This guidance was adopted at the beginning of the first quarter of 2020.

We were required to apply the new standard by means of a cumulative-effect adjustment to opening retained earnings as of the beginning of the first quarter of 2020.

The total impact upon adoption to opening retained earnings was immaterial to both the individual financial assets affected as well as in the aggregate.

Recently issued accounting pronouncements not yet adopted

There are no new accounting pronouncements, issued or effective during the fiscal year, that are expected to have a significant impact on our financial statements and related disclosures.

ACQUISITION AND DIVESTITURE

2018 acquisition

Effective June 12, 2018, we acquired all of the outstanding equity interests of TMP Holdings LTD (“TMP”), through its subsidiary PeopleScout, Inc.

Effective June 12, 2018, we acquired all of the outstanding equity interests of TMP Holdings LTD (“TMP”), through our subsidiary PeopleScout, Inc.

for a cash purchase price of $ 22.7 million, net of cash acquired of $ 7.0 million.

1 unchanged sentence

This acquisition increases our ability to win multi-continent engagements by adding a physical presence in Europe, referenceable clients and employer branding capabilities.

We incurred acquisition and integration-related costs of $ 1.6 million and $ 2.7 million for the years ended December 29, 2019 and December 30, 2018 , respectively, which are included in SG&A expense on the Consolidated Statements of Operations and Comprehensive Income and cash flows from operating activities on the Consolidated Statements of Cash Flows.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We incurred acquisition and integration-related costs of $ 1.6 million and $ 2.7 million for the years ended December 29, 2019 and December 30, 2018, respectively, which were included in SG&A expense on the Consolidated Statements of Operations and Comprehensive Income (Loss) and cash flows from operating activities on the Consolidated Statements of Cash Flows.

The following table reflects the allocation of the purchase price, net of cash acquired, to the fair value of the assets acquired and liabilities assumed:

(in thousands)

Purchase price allocation

(in thousands) Purchase price allocation

Cash purchase price, net of cash acquired $ 22,742

11 unchanged sentences

Net identifiable assets acquired 6,136

Goodwill (1) 16,606

Total consideration allocated $ 22,742

(1) Goodwill represents the expected synergies with our existing business, the acquired assembled workforce, potential new clients and future cash flows after the acquisition of TMP, and is non-deductible for income tax purposes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Intangible assets include identifiable intangible assets for customer relationships and trade names/trademarks.

1 unchanged sentence

The following table sets forth the components of identifiable intangible assets, their estimated fair values and useful lives as of June 12, 2018:

(in thousands, except for estimated useful lives, in years)

Estimated fair value

Estimated useful life in years

(in thousands, except for estimated useful lives, in years) Estimated fair value Estimated useful life in years

Customer relationships - other $ 2,809 3

2 unchanged sentences

Total acquired identifiable intangible assets $ 8,024

The results of TMP’s operations and cash flows reported for 2018 on our Consolidated Statements of Operations and Comprehensive Income and Consolidated Statements of Cash Flows relate to the period from June 12, 2018 to December 30, 2018 .

Revenue from TMP included in our Consolidated Statements of Operations and Comprehensive Income was $ 31.0 million from the acquisition date to December 30, 2018 , and $ 51.3 million for the year ended December 29, 2019 .

The acquisition of TMP was not material to our consolidated results of operations and as such, pro forma financial information was not required.

The results of TMP’s operations and cash flows reported for 2018 on our Consolidated Statements of Operations and Comprehensive Income (Loss) and Consolidated Statements of Cash Flows relate to the period from June 12, 2018 to December 30, 2018.

Revenue from TMP included in our Consolidated Statements of Operations and Comprehensive Income (Loss) was $ 31.0 million from the acquisition date to December 30, 2018, and $ 51.3 million and $ 46.0 million for the years ended December 29, 2019 and December 27, 2020, respectively.

The acquisition of TMP was immaterial to our consolidated results of operations and as such, pro forma financial information was not required.

2018 divestiture

Effective March 12, 2018, we divested substantially all the assets and certain liabilities of PlaneTechs, LLC (“PlaneTechs”) for a sales price of $ 11.4 million, of which $ 8.5 million was paid in cash, and $ 1.6 million in a note receivable, with monthly principal payments of $ 0.1 million beginning in April 2018.

The outstanding balance as of December 30, 2018 was included in prepaid expenses, deposits and other current assets on the Consolidated Balance Sheets, and fully repaid as of December 29, 2019.

The remaining purchase price balance consisted of the preliminary working capital adjustment, which was included in prepaid expenses, deposits and other current assets on the Consolidated Balance Sheets.

The company recognized a pre-tax gain on the divestiture of $ 0.7 million , which was included in interest and other income on the Consolidated Statements of Operations and Comprehensive Income for the year ended December 30, 2018 .

The balance was fully repaid as of December 29, 2019.

The remaining purchase price balance consisted of the preliminary working capital adjustment, which was included in prepaid expenses and other current assets on the Consolidated Balance Sheets.

The company recognized a pre-tax gain on the divestiture of $ 0.7 million, which was included in interest and other income on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 30, 2018.

Fiscal first quarter revenue through the closing date of the divestiture for the PlaneTechs business of $ 8.0 million was reported in the PeopleManagement reportable segment for the year ended December 30, 2018.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The divestiture of PlaneTechs did not represent a strategic shift with a major effect on the company’s operations and financial results and, therefore was not reported as discontinued operations in the Consolidated Balance Sheets or Consolidated Statements of Operations and Comprehensive Income for the periods presented.

FAIR VALUE MEASUREMENT

Assets measured at fair value on a recurring basis

Our assets measured at fair value on a recurring basis consisted of the following:

December 27, 2020

(in thousands)

Total fair value

Quoted prices in active markets for identical assets (level 1)

Significant other observable inputs (level 2)

Significant unobservable inputs (level 3)

(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 $ 62,507 $ 62,507 $ — $ —

1 unchanged sentence

Cash, cash equivalents and restricted cash (1)

$ 118,612 $ 118,612 $ — $ —

Municipal debt securities $ 70,723 $ — $ 70,723 $ —

4 unchanged sentences

Deferred compensation investments (3) $ 5,915 $ 5,915 $ — $ —

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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)

(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 $ — $ —

1 unchanged sentence

Cash, cash equivalents and restricted cash (1)

$ 92,371 $ 92,371 $ — $ —

Municipal debt securities $ 74,236 $ — $ 74,236 $ —

5 unchanged sentences

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

(2) Refer to Note 4 :

Restricted Cash and Investments for additional details on our held-to-maturity debt securities.

(3) Deferred compensation investments consist of mutual funds and money market funds.

There were no material transfers between level 1, level 2 and level 3 of the fair value hierarchy during the years ended December 29, 2019 or December 30, 2018 .

Assets measured at fair value on a nonrecurring basis

We measure certain non-financial assets on a non-recurring basis, including goodwill and certain intangible assets.

We measure the fair value of certain non-financial assets on a non-recurring basis, including goodwill and certain intangible assets.

During the first quarter of 2020, we performed an interim impairment test as of the last day of our first fiscal quarter (March 29, 2020).

As a result of the test, goodwill and client relationship intangible assets with a total carrying value of $ 221.6 million were written down to their fair value, and an impairment charge of $ 175.2 million was recognized on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 27, 2020.

There were no goodwill or intangible asset impairment charges recorded during fiscal 2019 or 2018.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Refer to Note 6:

Goodwill and Intangible Assets for additional details on the impairment charge and valuation methodologies.

The impairment was comprised as follows:

March 29, 2020

(in thousands) Total fair value Quoted prices in active markets for identical assets (level 1) Significant other observable inputs (level 2) Significant unobservable inputs (level 3) Total impairment charge

Goodwill $ 31,705 $ — $ — $ 31,705 $ ( 140,489 )

Client relationships 14,700 — — 14,700 ( 34,700 )

Total $ 46,405 $ — $ — $ 46,405 $ ( 175,189 )

RESTRICTED CASH AND INVESTMENTS

The following is a summary of the carrying value of our restricted cash and investments:

(in thousands)

(in thousands) December 27,

2020 December 29,

Cash collateral held by insurance carriers $ 26,025 $ 24,612

5 unchanged sentences

Total restricted cash and investments $ 240,534 $ 230,932

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Held-to-maturity

2 unchanged sentences

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 Trust.

The majority of our collateral obligations are held in a Trust.

The amortized cost and estimated fair value of our held-to-maturity investments held in Trust, aggregated by investment category as of December 27, 2020 and December 29, 2019, were as follows:

December 27, 2020

(in thousands)

Amortized cost

Gross unrealized gains

Gross unrealized losses

Municipal debt securities

Corporate debt securities

Agency mortgage-backed securities

government and agency securities

Total held-to-maturity investments

December 30, 2018

(in thousands)

Amortized cost

Gross unrealized gains

Gross unrealized losses

Municipal debt securities

Corporate debt securities

Agency mortgage-backed securities

government and agency securities

Total held-to-maturity investments

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimated fair value and gross unrealized losses of all investments classified as held-to-maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 29, 2019 and December 30, 2018 , were as follows:

December 29, 2019

Less than 12 months

12 months or more

(in thousands)

Estimated fair value

Unrealized losses

Estimated fair value

Unrealized losses

Estimated fair value

Unrealized losses

(in thousands) Amortized cost Gross unrealized gains Gross unrealized losses Fair value

Municipal debt securities $ 67,287 $ 3,436 $ — $ 70,723

4 unchanged sentences

December 29, 2019

Less than 12 months

12 months or more

(in thousands)

Estimated fair value

Unrealized losses

Estimated fair value

Unrealized losses

Estimated fair value

Unrealized losses

(in thousands) Amortized cost Gross unrealized gains Gross unrealized losses Fair value

Municipal debt securities $ 72,017 $ 2,219 $ — $ 74,236

3 unchanged sentences

Total held-to-maturity investments $ 149,373 $ 3,394 $ ( 36 ) $ 152,731

The total number of held-to-maturity securities in an unrealized loss position as of December 29, 2019 and December 30, 2018 were 17 and 93 , respectively.

The unrealized losses were the result of interest rate increases.

Since the decline in estimated fair value is attributable to changes in interest rates and not credit quality, and the company has the intent and ability to hold these debt securities until recovery of amortized cost or 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:

December 27, 2020

(in thousands)

Amortized cost

(in thousands) Amortized cost Fair value

Due in one year or less $ 20,307 $ 20,446

4 unchanged sentences

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 December 29, 2019 and December 30, 2018 , were $ 2.8 million gain and $ 3.4 million loss for the years then ended, respectively, and are included in SG&A expense on the Consolidated Statements of Operations and Comprehensive Income.

Deferred compensation investments and company-owned life insurance policies

We hold mutual funds, money market funds and company-owned life insurance policies to support our deferred compensation liability.

Unrealized gains and losses related to these investments still held at December 27, 2020, December 29, 2019 and December 30, 2018, included in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income (Loss), were as follows:

(in thousands) 2020 2019 2018

Unrealized gains (losses) $ 723 $ 2,814 $ ( 3,400 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PROPERTY AND EQUIPMENT, NET

Property and equipment are stated at cost and consist of the following:

SUPPLEMENTAL BALANCE SHEET INFORMATION

Accounts receivable allowance

Due to the uncertain economic environment, it is difficult to estimate the full impact caused by COVID–19 on our clients.

However, the allowance for credit loss for accounts receivable as of December 27, 2020 is our best estimate of the amount of expected credit losses.

Should actual results deviate from what we have currently estimated, our allowance for credit losses could change significantly.

The activity related to the allowance for accounts receivable was as follows:

(in thousands) 2020 2019 2018

Beginning balance $ 4,288 $ 5,026 $ 4,344

Cumulative-effect adjustment (1) 524 — —

Current period provision 6,300 7,661 10,042

Write-offs ( 8,181 ) ( 8,358 ) ( 9,349 )

Foreign currency translation ( 10 ) ( 41 ) ( 11 )

Ending balance $ 2,921 $ 4,288 $ 5,026

(1) As a result of our adoption of the accounting standard for credit losses, we recognized a cumulative-effect adjustment to our account receivable allowance of $ 0.5 million as of the beginning of the first quarter of 2020.

Prepaid expenses and other current assets

(in thousands) December 27,

2020 December 29,

Prepaid software agreements $ 8,643 $ 9,576

Other prepaid expenses 8,631 7,761

Other current assets 8,863 13,380

Prepaid expenses and other current assets $ 26,137 $ 30,717

Property and equipment

(in thousands) December 27,

2020 December 29,

Buildings and land $ 44,479 $ 43,621

Software 127,715 132,378

Computers, furniture and equipment 42,846 57,770

6 unchanged sentences

Depreciation expense of property and equipment totaled $ 21.9 million, $ 19.7 million and $ 20.3 million for the years ended December 27, 2020, December 29, 2019 and December 30, 2018, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accrued wages and benefits

(in thousands) December 27,

2020 December 29,

Deferred employer payroll tax $ 55,420 $ —

Other accrued wages and benefits 67,237 67,604

Accrued wages and benefits $ 122,657 $ 67,604

On March 27, 2020, the U.S.

government enacted the CARES Act, which among other things, provided employer payroll tax credits for wages paid to employees who were unable to work during the COVID-19 outbreak.

Additionally, we were allowed to delay payments for the employer portion of social security taxes (6.2% of taxable wages) incurred between March 27, 2020 and December 31, 2020, for both our temporary associates and permanent employees.

We anticipate the deferred amount will be paid by September 15, 2021.

GOODWILL AND INTANGIBLE ASSETS

The following table reflects changes in the carrying amount of goodwill during the period by reportable segments:

(in thousands)

PeopleManagement

Total company

December 31, 2017

(in thousands) PeopleReady PeopleManagement PeopleScout Total company

Balance at December 30, 2018

Goodwill before impairment $ 106,304 $ 81,092 $ 144,970 $ 332,366

Accumulated impairment loss

Accumulated impairment charge ( 46,210 ) ( 33,700 ) ( 15,169 ) ( 95,079 )

Goodwill, net 60,094 47,392 129,801 237,287

Divested goodwill before impairment (1)

Divested accumulated impairment loss (1)

Acquired goodwill (2)

Foreign currency translation — — 211 211

December 30, 2018

Balance at December 29, 2019

Goodwill before impairment 106,304 81,092 145,181 332,577

Accumulated impairment loss

Accumulated impairment charge ( 46,210 ) ( 33,700 ) ( 15,169 ) ( 95,079 )

Goodwill, net 60,094 47,392 130,012 237,498

Impairment charge — ( 45,901 ) ( 94,588 ) ( 140,489 )

Foreign currency translation — — ( 2,136 ) ( 2,136 )

December 29, 2019

Balance at December 27, 2020

Goodwill before impairment 106,304 81,092 143,045 330,441

Accumulated impairment loss

Accumulated impairment charge ( 46,210 ) ( 79,601 ) ( 109,757 ) ( 235,568 )

Goodwill, net $ 60,094 $ 1,491 $ 33,288 $ 94,873

Effective March 12, 2018, we divested our PlaneTechs business.

As a result of this divestiture, we eliminated the remaining goodwill balance of the PlaneTechs business, which was a part of our PeopleManagement reportable segment.

For additional information, see Note 2:

Acquisition and Divestiture .

Effective June 12, 2018, we acquired TMP through PeopleScout.

Accordingly, the goodwill associated with the acquisition has been assigned to our PeopleScout reportable segment based on the purchase price allocation.

For additional information, see Note 2:

Acquisition and Divestiture .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

The following table presents our purchased finite-lived intangible assets:

December 29, 2019

December 30, 2018

(in thousands)

Gross carrying amount

December 27, 2020 December 29, 2019

(in thousands) Gross carrying amount Accumulated

amortization Net

amount Gross carrying amount Accumulated

amortization Net

Finite-lived intangible assets (1):

1 unchanged sentence

Trade names/trademarks 2,088 ( 585 ) 1,503 2,052 ( 441 ) 1,611

Technologies — — — 600 ( 520 ) 80

Total finite-lived intangible assets $ 115,470 $ ( 92,541 ) $ 22,929 $ 151,951 $ ( 84,278 ) $ 67,673

(1) Excludes assets that are fully amortized.

(2) Balances at December 27, 2020 are net of impairment charge of $ 34.7 million.

Amortization expense of our finite-lived intangible assets was $ 10.1 million, $ 17.9 million and $ 20.8 million for the years ended December 27, 2020, December 29, 2019 and December 30, 2018, respectively.

1 unchanged sentence

(in thousands)

Thereafter 820

Total future amortization $ 22,929

1 unchanged sentence

We also held indefinite-lived trade names/trademarks of $ 6.0 million as of December 27, 2020 and December 29, 2019.

Impairment tests

Based on our 2019 annual impairment test, the estimated fair value of our SIMOS reporting unit was in excess of its carrying value by approximately 10 % .

The current carrying value of goodwill for this reporting unit is $ 35 million .

There are two key clients that individually account for more than 10% of revenue for the SIMOS reporting unit.

For each client we service multiple sites.

The loss of a key client, loss of a significant number of key sites, or a downturn in the economy could give rise to an impairment.

Should any one of these events occur, we may need to record an impairment loss to goodwill for the amount by which the carrying value exceeds its fair value, not to exceed the total amount of goodwill.

All other reporting units’ fair values were substantially in excess of their respective carrying values.

Accordingly, there was no impairment loss recognized for the year ended December 29, 2019 .

Effective December 30, 2019 (the first day of fiscal 2020), our SIMOS and Staff Management reporting units were combined into one reporting unit (On-site) due to common customers and contingent workers, similar nature of services and economic characteristics.

Staff Management’s fair value was substantially in excess of its carrying value as of the annual impairment test by approximately 48 % and there were no indicators of impairment during the interim period.

Therefore, no interim impairment test was required for this reporting unit.

Based on the annual impairment test for SIMOS, the estimated fair value was in excess of its carrying value by approximately 10 % .

Because the estimated fair value of goodwill for SIMOS was not substantially in excess of its carrying value, we tested the SIMOS reporting unit for impairment prior to the combination with Staff Management.

The result of the most recent impairment test indicated the estimated fair value remains in excess of carrying value by approximately 7 % .

Therefore, no impairment loss was recognized.

Interim impairment test

During the first quarter of 2020, the following events made it more likely than not that an impairment had occurred and accordingly, we performed an interim impairment test as of the last day of our fiscal first quarter (March 29, 2020).

We experienced a significant decline in our stock price during the first quarter of 2020.

As a result of the decline in stock price, our market capitalization fell significantly below the recorded value of our consolidated net assets.

The reduced market capitalization reflected the expected continued weakness in pricing and demand for our staffing services in a volatile economic climate.

This was further impacted in March 2020 by COVID-19, which created a sudden global economic shock.

We experienced a significant drop in client demand associated with government and societal actions taken to address COVID-19.

We expected significant decreases to our revenues and corresponding operating results to continue due to weakness in pricing and demand for our services during the severe economic downturn.

While demand was expected to recover in the future, the rate of recovery was expected to vary by geography and industry depending on the economic impact caused by COVID-19 and the rate at which infections would decline to a contained level.

Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions to evaluate the impact of operating and macroeconomic changes on each reporting unit.

The fair value of each

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

reporting unit was estimated using a combination of a discounted cash flow methodology and the market valuation approach using publicly traded company multiples in similar businesses.

This analysis required significant judgments, including estimation of future cash flows, which was dependent on internally developed forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows would occur, and determination of our weighted average cost of capital, which was risk-adjusted to reflect the specific risk profile of the reporting unit being tested.

The weighted average cost of capital used ranged from 11.5 % to 12.0 %.

The combined fair values for all reporting units were then reconciled to our aggregate market value of our shares of common stock on the date of valuation, while considering a reasonable control premium.

As a result of this impairment test, we concluded that the carrying amounts of goodwill for our PeopleScout RPO, PeopleScout MSP and PeopleManagement On-Site reporting units exceeded their implied fair values and we recorded a non-cash impairment charge of $ 140.5 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 27, 2020.

The goodwill carrying value of $ 45.9 million for our PeopleManagement On-Site reporting unit was fully impaired.

The goodwill impairment charge for PeopleScout RPO and PeopleScout MSP was $ 92.2 million and $ 2.4 million, respectively.

Annual impairment test

Given the proximity of our interim impairment measurement date (last day of our fiscal first quarter - March 29, 2020) to our annual goodwill impairment measurement date (first day of our fiscal second quarter - March 30, 2020), we performed a qualitative assessment to determine whether it was more likely than not that the fair value of any of our reporting units was less than the carrying value.

We considered the current and expected future economic and market conditions surrounding COVID-19 and concluded that it was not more likely than not that the goodwill associated with our reporting units were impaired as of the first day of our fiscal second quarter.

Therefore, a quantitative assessment was not performed as of March 30, 2020.

Additionally, we did not identify any events or conditions that make it more likely than not that an impairment may have occurred during the period from March 30, 2020 to December 27, 2020.

The remaining goodwill balances for PeopleScout RPO and PeopleScout MSP were $ 23.6 million and $ 9.7 million , respectively, as of December 27, 2020.

Should actual results decline further or longer than we have currently estimated, the remaining goodwill balances may be further impaired.

We will continue to closely monitor the operational performance of these reporting units.

Finite-lived intangible assets

Interim impairment test

With the decrease in demand for our services due to the economic impact caused by the response to COVID-19, we lowered our future expectations, which was the primary trigger of the impairment test as of the last day of our fiscal first quarter (March 29,2020) for certain of our acquired client relationships intangible assets.

As a result of this impairment test, we recorded a non-cash impairment charge for our PeopleScout RPO and PeopleManagement On-Site client relationship intangible assets of $ 34.7 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 27, 2020.

The impairment charge for PeopleScout RPO and PeopleManagement On-Site client relationship intangible assets was $ 25.0 million and $ 9.7 million, respectively.

Considerable management judgment was necessary to determine key assumptions, including projected revenue of acquired clients and an appropriate discount rate of 12.0 %.

Additionally, we did not identify any events or conditions that make it more likely than not that an impairment may have occurred during the period from March 30, 2020 to December 27, 2020.

The remaining client relationship intangible asset balances related to assets impaired for PeopleScout RPO and PeopleManagement On-Site were $ 5.1 million and $ 7.2 million, respectively, as of December 27, 2020.

Indefinite-lived intangible assets

Interim impairment test

We performed an interim impairment test of our indefinite-lived intangible assets as of the last day of our first fiscal quarter (March 29, 2020) for 2020 and determined that the estimated fair values exceeded the carrying amounts for our indefinite-lived trade names.

Accordingly, no impairment charge was recognized.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Annual impairment test

Given the proximity of our interim impairment measurement date (last day of our fiscal first quarter - March 29, 2020) to our annual indefinite-lived trade names impairment measurement date (first day of our fiscal second quarter - March 30, 2020), we performed a qualitative assessment to determine whether it was more likely than not that the fair value of any of our indefinite-lived trade names was less than the carrying value.

We concluded that it was not more likely than not that the indefinite-lived intangible assets associated with our Staff Management | SMX and PeopleScout trade names were impaired as of the first day of our fiscal second quarter.

Therefore, a quantitative assessment was not performed as of March 30, 2020.

Additionally, we did not identify any events or conditions that make it more likely than not that an impairment may have occurred during the period from March 30, 2020 to December 27, 2020.

WORKERS’ COMPENSATION INSURANCE AND RESERVES

We provide workers’ compensation insurance for our contingent and permanent employees.

We provide workers’ compensation insurance for our associates and permanent employees.

The majority of our current workers’ compensation insurance policies cover claims for a particular event above a $ 2.0 million deductible limit, on a “per occurrence” basis.

This results in our being substantially self-insured.

For workers’ compensation claims originating in Washington, North Dakota, Ohio, Wyoming, Canada and Puerto Rico (our “monopolistic jurisdictions”), we pay workers’ compensation insurance premiums and obtain full coverage under government-administered programs (with the exception of PeopleReady in Ohio where we have a self-insured policy).

Accordingly, because we are not the primary obligor, our consolidated financial statements do not reflect the liability for workers’ compensation claims in these monopolistic jurisdictions.

Our workers’ compensation reserve is established using estimates of the future cost of claims and related expenses that have been reported but not settled, as well as those that have been incurred but not reported.

Our workers’ compensation reserve for claims below the deductible limit is discounted to its estimated net present value using discount rates based on average returns of “risk-free” U.S.

Treasury instruments available during the year in which the liability was incurred.

The weighted average discount rate was 2.0 % at December 29, 2019 and December 30, 2018 .

The weighted average discount rate was 1.8 % and 2.0 % at December 27, 2020 and December 29, 2019, respectively.

Payments made against self-insured claims are made over a weighted average period of approximately 5.5 years as of December 27, 2020.

The following table presents a reconciliation of the undiscounted workers’ compensation reserve to the discounted workers’ compensation reserve for the periods presented:

(in thousands)

(in thousands) December 27,

2020 December 29,

Undiscounted workers’ compensation reserve $ 273,502 $ 274,934

9 unchanged sentences

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 $ 45.3 million and $ 48.2 million as of December 29, 2019 and December 30, 2018 , respectively.

The discounted receivables from insurance companies, net of valuation allowance, were $ 44.6 million and $ 44.9 million as of December 29, 2019 and December 30, 2018 , respectively.

The discounted workers’ compensation reserve for excess claims was $ 54.0 million and $ 45.3 million, and the corresponding receivable for the insurance on excess claims, net of valuation allowance was $ 52.9 million and $ 44.6 million as of December 27, 2020 and December 29, 2019, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The activity related to the allowance for insurance receivable was as follows:

(in thousands) 2020 2019 2018

Beginning balance $ 629 $ 3,314 $ 3,778

Cumulative-effect adjustment (1) 72 — —

Charged to expense 13 120 120

Release of allowance ( 629 ) ( 2,805 ) ( 584 )

Ending balance $ 85 $ 629 $ 3,314

(1) As a result of our adoption of the accounting standard for credit losses, we recognized a cumulative-effect adjustment to our insurance receivable valuation allowance of $ 0.1 million as of the beginning of the first quarter of 2020.

Refer to Note 1:

Summary of Significant Accounting Policies for further details.

Management evaluates the adequacy of the workers’ compensation reserves in conjunction with an independent quarterly actuarial assessment.

5 unchanged sentences

• impact of safety initiatives;

positive or adverse development of claims.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• positive or adverse development of claims, which considers the potential impact of COVID-19.

The table below presents the estimated future payout of our discounted workers’ compensation claims reserve for the next five years and thereafter as of December 27, 2020:

(in thousands)

2021 $ 66,007

Thereafter 57,478

Sub-total 201,474

Excess claims (1) 54,019

Total $ 255,493

(1) Estimated expenses related to claims above our self-insured limits for which we have a corresponding receivable for the insurance coverage based on contractual policy agreements.

Workers’ compensation cost consists primarily of changes in self-insurance reserves net of changes in discount, monopolistic jurisdictions’ premiums, insurance premiums and other miscellaneous expenses.

Workers’ compensation cost of $ 60.2 million , $ 69.2 million and $ 83.7 million was recorded in cost of services on our Consolidated Statements of Operations and Comprehensive Income for the years ended December 29, 2019 , December 30, 2018 and December 31, 2017 , respectively.

Workers’ compensation cost of $ 49.4 million, $ 60.2 million and $ 69.2 million was recorded in cost of services on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 27, 2020, December 29, 2019 and December 30, 2018, respectively.

LONG-TERM DEBT

On July 13, 2018 , we entered into a credit agreement with Bank of America, N.A., Wells Fargo Bank, N.A., PNC Bank, N.A., KeyBank, N.A.

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.

(“Revolving Credit Facility”).

The 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 our agreement is a $ 30.0 million sub-limit for Swingline loans and a $ 125.0 million sub-limit for letters of credit.

At December 29, 2019 , $ 37.1 million was utilized as a draw on the facility, which included a $ 17.1 million Swingline loan, and $ 6.2 million was utilized by outstanding standby letters of credit, leaving $ 256.7 million available under the Revolving Credit Facility for additional borrowings.

At December 30, 2018 , $ 80.0 million was utilized as a draw on the facility.

Under the terms of the 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 % .

dated as of July 13, 2018, which extended the maturity of the revolving credit facility established thereunder (the “Revolving Credit Facility”) to March 16, 2025 and modified certain other terms.

On June 24, 2020, we entered into a second amendment to our credit agreement (the “Second Amendment”), which modified terms of our financial covenants as well as certain other provisions of the Revolving Credit Facility.

On January 28, 2021, we entered into a third amendment to our credit agreement (the “Third Amendment”), which clarified the definition of the Asset Coverage Ratio financial covenant of the Revolving Credit Facility.

The Third Amendment was effective as of December 27, 2020 (refer to Note 16:

Subsequent Event for details of the Third Amendment).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amended credit agreement provides for a revolving line of credit of up to $ 300.0 million with an option, subject to lender approval, to increase the amount to $ 450.0 million.

Included in the Revolving Credit Facility is a $ 30.0 million sub-limit for “Swingline” loans and a $ 125.0 million sub-limit for letters of credit.

At December 27, 2020, $ 6.1 million was utilized by outstanding standby letters of credit, leaving $ 293.9 million unused under the Revolving Credit Facility, which is constrained by our most restrictive covenant making $ 160.9 million available for additional borrowings.

At December 29, 2019, $ 37.1 million was drawn on the Revolving Credit Facility, which included a $ 17.1 million Swingline loan.

Under the terms of the Revolving Credit Facility, we pay a variable rate of interest on funds borrowed under the revolving line of credit in excess of the Swingline loans, based on the U.S.

Dollar London Interbank Offered Rate (“LIBOR”) plus an applicable spread between 1.25 % and 3.50 %.

Alternatively, at our option, we may pay interest based on a base rate plus an applicable spread between 0.25 % and 1.50 %.

The base rate is the greater of the prime rate (as announced by Bank of America), the federal funds rate plus 0.50 % , or the one-month LIBOR rate plus 1.00 % .

The applicable spread is determined by the consolidated leverage ratio, as defined in the credit agreement.

At December 29, 2019 , the applicable spread on LIBOR was 1.25 % and the index rate was 1.69 % , resulting in an interest rate of 2.94 % .

Under the terms of the 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 December 29, 2019 , the applicable spread on the base rate was 0.25 % and the base rate was 4.75 % , resulting in an interest rate of 5.00 % .

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.

The base rate is the greater of the prime rate (as announced by Bank of America), or the federal funds rate plus 0.50 %.

The applicable spread on LIBOR was 3.50 % through the end of fiscal 2020, and will be determined by the consolidated leverage ratio thereafter, as defined in the amended credit agreement.

Under the terms of the Revolving Credit Facility, we are required to pay a variable rate of interest on funds borrowed under the Swingline loan based on the base rate plus applicable spread between 0.25 % and 1.50 %, as described above.

A commitment fee between 0.25 % and 0.50 % is applied against the Revolving Credit Facility’s unused borrowing capacity, with the specific rate determined by the consolidated leverage ratio, as defined in the amended credit agreement.

Letters of credit are priced at a margin between 1.00 % and 3.25 %, plus a fronting fee of 0.50 %.

Obligations under the agreement are guaranteed by TrueBlue and material U.S.

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 agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, including, among others, financial covenants based on our leverage and fixed charge coverage ratios, as defined in the credit agreement.

We are currently in compliance with all covenants related to the Revolving Credit Facility.

The amended credit agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, including, among others, financial covenants.

The Second Amendment suspended testing of certain covenant through June 27, 2021 (second quarter of 2021).

The following financial covenants, as defined in the Second and Third Amendments, are currently in effect through the second quarter of 2021:

• Asset Coverage Ratio of greater than 1.00 , defined as the ratio of 60 % of accounts receivable to the difference of total debt outstanding and unrestricted cash in excess of $ 50.0 million, subject to certain minimums.

As of December 27, 2020, our asset coverage ratio was 27.4 .

• Liquidity greater than $ 150.0 million, defined as the sum of unrestricted cash and availability under the aggregate revolving commitments.

As of December 27, 2020, our liquidity was greater than $ 150.0 million at $ 356.4 million.

The following financial covenant, as defined in the Second Amendment, will be in effect for the first and second quarter of 2021:

• EBITDA, as defined in the amended credit agreement, greater than $ 12.0 million for the trailing three quarters ending Q1 2021 and greater than $ 15.0 million for the trailing four quarters ending Q2 2021.

As of December 27, 2020, EBITDA for the trailing three and four quarters was $ 35.6 million and $ 47.0 million, respectively.

The following financial covenants, as defined in the Second Amendment, will be in effect starting the third quarter of 2021 and thereafter:

• Consolidated leverage ratio greater than 4.00 for the third and fourth quarters of 2021 and greater than 3.00 thereafter, defined as our funded indebtedness divided by trailing twelve months consolidated EBITDA, as defined in the amended credit agreement.

• Consolidated fixed charge coverage ratio greater than 1.25 , defined as the trailing twelve months bank-adjusted cash flow divided by cash interest expense.

As of December 27, 2020, we were in compliance with all effective covenants related to the Revolving Credit Facility.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS AND CONTINGENCIES

Workers’ compensation commitments

Our insurance carriers and certain state workers’ compensation programs require us to collateralize a portion of our workers’ compensation obligation, for which they become responsible should we become insolvent.

The collateral typically takes the form

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of cash and cash equivalents, highly-rated investment grade debt securities, letters of credit, and/or surety bonds.

On a regular basis these entities assess the amount of collateral they will require from us relative to our workers’ compensation obligation.

The majority of our collateral obligations are held in the Trust.

We have provided our insurance carriers and certain states with commitments in the form and amounts listed below:

(in thousands)

(in thousands) December 27,

2020 December 29,

Cash collateral held by workers’ compensation insurance carriers $ 22,253 $ 22,256

18 unchanged sentences

(in thousands) 2020 2019

December 29, 2019

Operating lease costs $ 16,607 $ 17,333

2 unchanged sentences

Total lease costs

Other lease costs include immaterial variable lease costs and sublease income.

$ 28,310 $ 29,165

(1) Other lease costs include immaterial variable lease costs, net of sublease income.

Other information related to our operating leases was as follows:

10 unchanged sentences

(2) Amount necessary to reduce net minimum lease payments to present value calculated using our incremental borrowing rates, which are consistent with the lease terms at adoption date (for those leases in existence as of the adoption date of the new lease standard) or lease inception (for those leases entered into after the adoption date).

Future non-cancelable minimum lease payments under our operating lease commitments as of December 30, 2018 were as follows for each of the next five years and thereafter:

(in thousands)

Total future non-cancelable minimum lease payments

Total lease expense for fiscal 2018 and 2017 was $ 27.3 million and $ 25.9 million , respectively.

Purchase obligations

Purchase obligations include agreements to purchase goods and services in the ordinary course of business that are enforceable, legally binding and specify all significant terms.

Purchase obligations do not include agreements that are cancelable without significant penalty.

Purchase obligations do not include agreements that are cancellable without significant penalty.

We had $ 39.4 million of purchase obligations as of December 27, 2020, of which $ 22.5 million are expected to be paid in 2021.

1 unchanged sentence

We are involved in various proceedings arising in the normal course of conducting business.

We believe the liabilities included in our consolidated financial statements reflect the probable loss that can be reasonably estimated.

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.

SHAREHOLDERS’ EQUITY

On September 15, 2017, our Board of Directors authorized a $ 100.0 million share repurchase program of our outstanding common stock.

The share repurchase program does not obligate us to acquire any particular amount of common stock and does not have an expiration date.

During the year ended December 29, 2019 , we used $ 38.9 million under this program to repurchase shares at an average share price of $ 21.04 .

As of December 29, 2019 , $ 19.0 million remains available for repurchase of common stock under this authorization.

On October 16, 2019, our Board of Directors authorized an additional $ 100.0 million share repurchase program.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Shares of common stock outstanding include shares of unvested restricted stock.

Unvested restricted stock included in reportable shares outstanding was 0.9 million and 0.8 million shares as of December 27, 2020 and December 29, 2019, respectively.

On September 15, 2017, our Board authorized a $ 100.0 million share repurchase program of our outstanding common stock.

On October 16, 2019, our Board authorized a $ 100.0 million share repurchase program of our outstanding common stock.

These share repurchase programs do not obligate us to acquire any particular amount of common stock and do not have an expiration date.

We may choose to purchase shares in the open market, from individual holders, through an accelerated share repurchase program or otherwise.

As part of the existing share repurchase plans, on February 28, 2020 we entered into an accelerated share repurchase (“ASR”) agreement with a third-party financial institution to repurchase $ 40.0 million of our common stock.

Under the ASR agreement, we paid $ 40.0 million to the financial institution and received an initial delivery of 2,150,538 shares in the first quarter of 2020, which represented 80% of the total shares we expected to receive based on the market price at the time of the initial delivery.

This transaction was initiated prior to the medical community’s acknowledgment of the expected severity of the impact COVID-19 would have on the U.S.

The final number of shares delivered upon settlement of the agreement was determined by the volume weighted average price of our shares over the term of the ASR agreement, less the agreed-upon discount.

On July 2, 2020, we settled our ASR agreement resulting in the receipt of 626,948 additional shares from the third-party financial institution.

The total number of shares delivered under the ASR agreement was 2,777,486 with a volume weighted average price over the term of the ASR agreement of $ 14.40 .

During the year ended December 27, 2020, we repurchased an additional 779,068 shares in the open market, for a volume weighted average price of $ 15.85 .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 27, 2020, $ 66.7 million remains available for repurchase of common stock under the 2019 authorization.

The second amendment to our credit agreement prohibits us from repurchasing shares until July 1, 2021.

Preferred stock

We have authorized 20.0 million shares of blank check preferred stock.

The blank check preferred stock is issuable in one or more series, each with such designations, preferences, rights, qualifications, limitations and restrictions as our Board of Directors may determine and set forth in supplemental resolutions at the time of issuance, without further shareholder action.

The initial series of blank check preferred stock authorized by the Board of Directors was designated as Series A Preferred Stock.

The blank check preferred stock is issuable in one or more series, each with such designations, preferences, rights, qualifications, limitations and restrictions as our Board may determine and set forth in supplemental resolutions at the time of issuance, without further shareholder action.

The initial series of blank check preferred stock authorized by the Board was designated as Series A Preferred Stock.

We had no outstanding shares of preferred stock in any of the years presented.

4 unchanged sentences

Under the Incentive Plan, restricted stock awards are granted to executive officers and key employees and vest annually over three or four years .

Unrestricted stock awards granted to our Board of Directors vest immediately, or receipt of the shares may be deferred until after a director leaves the Board of Directors.

Effective 2020, restricted stock awards are granted to members of our Board and vest over an eight month period, or receipt of the shares may be deferred until after a director leaves the Board.

Prior to 2020, unrestricted stock awards were granted to members of our Board which vested immediately, or receipt of the shares could be deferred until after a director left the Board.

Restricted and unrestricted stock-based compensation expense is calculated based on the grant-date market value.

We recognize compensation expense on a straight-line basis over the vesting period, net of estimated forfeitures.

Performance share units have been granted to executive officers and certain key employees.

Commencing in 2017, vesting of the performance share units is contingent upon the achievement of return on equity goals at the end of each three -year performance period, previously vesting was contingent upon the achievement of revenue and profitability growth goals.

Effective 2020, performance share units are only granted to executive officers.

Prior to 2020, performance share units were also granted to certain employees.

Vesting of the performance share units is contingent upon the achievement of return on equity goals at the end of each three-year performance period.

Each performance share unit is equivalent to one share of common stock.

2 unchanged sentences

Restricted and unrestricted stock awards and performance share units activity for the year ended December 27, 2020, was as follows:

(shares in thousands)

Weighted- average grant-date price

(shares in thousands) Shares Weighted- average grant-date price

Non-vested at beginning of period 1,371 $ 26.45

Granted 848 $ 17.06

Vested ( 448 ) $ 24.55

Forfeited ( 248 ) $ 22.61

Non-vested at the end of the period 1,523 $ 22.77

The weighted average grant-date price of restricted and unrestricted stock awards and performance share units granted during the years 2020, 2019 and 2018 was $ 17.06 , $ 23.05 and $ 26.87 , respectively.

As of December 29, 2019 , total unrecognized stock-based compensation expense related to non-vested restricted stock was approximately $ 13.2 million , which is estimated to be recognized over a weighted average period of 1.7 years .

As of December 29, 2019 , total unrecognized stock-based compensation expense related to performance share units was approximately $ 1.6 million , which is estimated to be recognized over a weighted average period of 1.7 years .

As of December 27, 2020, total unrecognized stock-based compensation expense related to non-vested restricted stock and performance share units, net of forfeitures, was approximately $ 12.4 million and $ 1.0 million, respectively, which are estimated to be recognized over a weighted average period of 1.7 years.

The total fair value of restricted shares vested during fiscal 2020, 2019 and 2018 was $ 8.6 million, $ 8.2 million and $ 9.9 million, respectively.

Total fair value of performance shared vested during fiscal 2020 was $ 2.0 million.

No performance shares vested during fiscal 2019 or 2018.

The total fair value of performance shares vested during fiscal 2017 was $ 2.9 million .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock options

Our Incentive Plan provides for both nonqualified stock options and incentive stock options (collectively, “stock options”) for directors, officers and certain employees.

We issue new shares of common stock upon exercise of stock options.

All of our stock options are vested and expire if not exercised within seven years from the date of grant.

We had no stock option activity for fiscal 2019 and 2018 and de minimis activity for fiscal 2017 .

Employee Stock Purchase Plan

Our ESPP reserves for purchase 1.0 million shares of common stock.

Our ESPP reserves 1.0 million shares of common stock for purchase.

The plan allows eligible employees to contribute up to 10 % of their earnings toward the monthly purchase of the company’s common stock.

3 unchanged sentences

The following table summarizes transactions under our ESPP from fiscal 2020, 2019 and 2018:

(shares in thousands)

Average price per share

(shares in thousands) Shares Average price per share

Issued during fiscal 2020 68 $ 13.46

2 unchanged sentences

Stock-based compensation expense

Total stock-based compensation expense for fiscal years 2019 , 2018 and 2017 , which is included in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income, was $ 9.8 million , $ 13.9 million and $ 7.7 million , respectively.

Total stock-based compensation expense for fiscal years 2020, 2019 and 2018, which is included in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income (Loss), was $ 9.1 million, $ 9.8 million and $ 13.9 million, respectively.

The related tax benefit was $ 1.9 million, $ 2.1 million and $ 2.9 million for fiscal 2020, 2019 and 2018, respectively.

3 unchanged sentences

The plans offer discretionary matching contributions.

The liability for the non-qualified plans was $ 26.8 million and $ 25.4 million as of December 29, 2019 and December 30, 2018 , respectively.

The expense for our qualified and non-qualified deferred compensation plans, including our discretionary matching contributions, totaled $ 5.5 million , $ 5.3 million and $ 6.1 million for fiscal 2019 , 2018 and 2017 , respectively, and is recorded in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The liability for the non-qualified plan was $ 30.6 million and $ 31.2 million as of December 27, 2020 and December 29, 2019, respectively, of which $ 4.2 million and $ 4.4 million have been included in Accrued wages and benefits on our Consolidated Balance Sheets.

The expense for our qualified and non-qualified deferred compensation plans, including our discretionary matching contributions, totaled $ 3.7 million, $ 5.5 million and $ 5.3 million for fiscal 2020, 2019 and 2018, respectively, and is recorded in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income (Loss).

The provision for income taxes is comprised of the following:

1 unchanged sentence

Current taxes:

Federal $ ( 7,318 ) $ ( 933 ) $ 5,088

State ( 382 ) 3,835 5,208

Foreign 3,045 2,806 1,542

Total current taxes ( 4,655 ) 5,708 11,838

Deferred taxes:

Federal ( 22,416 ) 846 ( 1,283 )

State ( 3,369 ) 1,216 120

Foreign ( 981 ) ( 799 ) ( 766 )

Total deferred taxes ( 26,766 ) 1,263 ( 1,929 )

Provision for income taxes $ ( 31,421 ) $ 6,971 $ 9,909

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The items accounting for the difference between income taxes computed at the statutory federal income tax rate and income taxes reported on the Consolidated Statements of Operations and Comprehensive Income are as follows:

(in thousands, except percentages) 2020 % 2019 % 2018 %

Income tax expense based on statutory rate

Income tax expense (benefit) based on statutory rate $ ( 36,385 ) 21.0 % $ 14,709 21.0 % $ 15,889 21.0 %

Increase (decrease) resulting from:

State income taxes, net of federal benefit ( 6,631 ) 3.8 3,666 5.3 3,826 5.1

Tax credits, net

Transition to the U.S.

Tax Cuts and Job Act

Job and other tax credits, net ( 7,719 ) 4.5 ( 13,627 ) ( 19.4 ) ( 12,303 ) ( 16.3 )

Benefit from the CARES Act ( 2,939 ) 1.7 — — — —

Non-deductible goodwill impairment charge 21,849 ( 12.6 ) — — — —

Non-deductible/non-taxable items 124 ( 0.1 ) 1,559 2.2 1,191 1.6

Foreign taxes ( 977 ) 0.5 282 0.4 735 1.0

Total taxes on income

Other, net 1,257 ( 0.7 ) 382 0.5 571 0.7

Total tax expense (benefit) $ ( 31,421 ) 18.1 % $ 6,971 10.0 % $ 9,909 13.1 %

Our effective tax rate for fiscal 2020 was 18.1 %.

The difference between the statutory federal income tax rate of 21.0 % and our effective income tax rate results primarily from the federal WOTC.

This tax credit is designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates.

During fiscal 2019 , we recognized $ 1.4 million of tax benefits from prior year WOTC.

Other differences between the statutory federal income tax rate of 21.0 % and our effective tax rate of 10.0 % result from state and foreign income taxes, certain non-deductible expenses, tax exempt interest, and tax effects of stock-based compensation.

The difference between the statutory federal income tax rate of 21.0 % and our effective income tax rate results primarily from a nondeductible goodwill and intangible asset impairment charge, the impact of the CARES Act and the federal WOTC.

Other differences result from state and foreign income taxes, certain non-deductible expenses, tax exempt interest, and tax effects of stock-based compensation.

The non-cash impairment charge of $ 175.2 million, recorded in the first quarter of 2020, includes $ 84.7 million (tax effect of $ 21.8 million) related to reporting units from stock acquisitions and accordingly are not deductible for tax purposes.

The remaining impairment charges of $ 90.5 million (tax effect of $ 23.3 million) related to reporting units from asset acquisitions and accordingly are deductible for tax purposes.

and international components of income before tax expense was as follows:

(in thousands) 2020 2019 2018

$ ( 148,492 ) $ 61,610 $ 73,051

International ( 24,770 ) 8,434 2,612

Income before tax expense

Income (loss) before tax expense (benefit) $ ( 173,262 ) $ 70,044 $ 75,663

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of deferred tax assets and liabilities were as follows:

(in thousands)

(in thousands) December 27,

2020 December 29,

Deferred tax assets:

7 unchanged sentences

Lease liabilities 21,771 8,670

Other 1,047 969

Total 71,950 38,630

Valuation allowance ( 3,072 ) ( 1,780 )

4 unchanged sentences

Depreciation and amortization ( 13,274 ) ( 24,355 )

Workers’ compensation ( 3,053 ) —

Total deferred tax liabilities ( 38,859 ) ( 33,622 )

Net deferred tax asset, end of year

Deferred taxes related to our foreign currency translation were de minimis for fiscal 2019 , 2018 and 2017 .

The following table summarizes our net operating losses (“NOLs”) and credit carryforwards along with their respective valuation allowance as of December 29, 2019 :

Deferred income taxes, net $ 30,019 $ 3,228

Deferred taxes related to our foreign currency translation were immaterial for fiscal 2020, 2019 and 2018.

The activity related to the income tax valuation allowance was as follows:

(in thousands) 2020 2019 2018

Carryover tax benefit

Valuation allowance

Year expiration begins

Beginning balance $ 1,780 $ 2,079 $ 2,508

Charged to expense 1,292 — —

Release of allowance — ( 299 ) ( 429 )

Ending balance $ 3,072 $ 1,780 $ 2,079

The following table summarizes our NOLs and credit carryforwards along with their respective valuation allowance as of December 27, 2020:

(in thousands) Carryover tax benefit Valuation allowance Expected

benefit Year expiration begins

Year-end tax attributes:

Federal WOTCs $ 17,049 $ — $ 17,049 2039

State NOLs 2,949 ( 931 ) 2,018 Various

Foreign NOLs 730 ( 730 ) — Various

California Enterprise Zone credits 1,411 ( 1,411 ) — 2023

Foreign alternative minimum tax credits 1,103 — 1,103 2028

Total $ 23,242 $ ( 3,072 ) $ 20,170

As of December 27, 2020, our liability for unrecognized tax benefits was $ 1.9 million.

1 unchanged sentence

We do not believe the amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the year ended December 27, 2020.

This liability is recorded in other non-current liabilities on our Consolidated Balance Sheets.

In general, the tax years 2016 through 2018 remain open to examination by the major taxing jurisdictions where we conduct business.

This liability is recorded in other long-term liabilities on our Consolidated

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Balance Sheets.

In general, the tax years 2017 through 2019 remain open to examination by the major taxing jurisdictions where we conduct business.

The following table summarizes the activity related to our unrecognized tax benefits:

(in thousands) 2020 2019 2018

Balance, beginning of fiscal year

Beginning balance $ 2,078 $ 2,190 $ 2,210

Increases for tax positions related to the current year 218 318 377

Reductions due to lapsed statute of limitations ( 366 ) ( 430 ) ( 397 )

Balance, end of fiscal year

Ending balance $ 1,930 $ 2,078 $ 2,190

We recognize interest and penalties related to unrecognized tax benefits within income tax expense on the accompanying Consolidated Statements of Operations and Comprehensive Income.

Accrued interest and penalties are included within other long-term liabilities on the Consolidated Balance Sheets.

Related to the unrecognized tax benefits noted above, we accrued a de minimis amount for interest and penalties during fiscal 2019 and, in total, as of December 29, 2019 , have recognized a liability for penalties of $ 0.2 million and interest of $ 1.0 million .

NET INCOME PER SHARE

Related to the unrecognized tax benefits noted above, we accrued an immaterial amount for interest and penalties during fiscal 2020 and, in total, as of December 27, 2020, have recognized a liability for penalties of $ 0.2 million and interest of $ 1.1 million.

NET INCOME (LOSS) PER SHARE

Diluted common shares were calculated as follows:

(in thousands, except per share data) 2020 2019 2018

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

Net income (loss) $ ( 141,841 ) $ 63,073 $ 65,754

Weighted average number of common shares used in basic net income (loss) per common share 35,365 38,778 39,985

Dilutive effect of non-vested restricted stock — 401 290

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

Net income per common share:

Weighted average number of common shares used in diluted net income (loss) per common share 35,365 39,179 40,275

Net income (loss) per common share:

Basic $ ( 4.01 ) $ 1.63 $ 1.64

Diluted $ ( 4.01 ) $ 1.61 $ 1.63

Anti-dilutive shares 894 225 538

ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in the balance of each component of accumulated other comprehensive loss during the reporting periods were as follows:

December 29, 2019

December 30, 2018

(in thousands)

Foreign currency translation adjustment

Unrealized gain on investments, net of tax (1)

Total other comprehensive (loss), net of tax

Foreign currency translation adjustment

Unrealized gain on investments, net of tax (1)

Total other comprehensive (loss), net of tax

Balance at beginning of period

Current period other comprehensive income (loss)

Change in accounting standard cumulative-effect adjustment (2)

Balance at end of period

Consisted of deferred compensation plan accounts, comprised of mutual funds and money market funds previously classified as available-for-sale securities, prior to our adoption of the new accounting standard for equity investments in the fiscal first quarter of 2018.

As a result of our adoption of the new accounting standard for equity investments issued by the FASB in January 2016, $ 1.5 million in unrealized gains, net of tax on equity securities previously classified as available-for-sale were reclassified from accumulated other

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

comprehensive loss to retained earnings as of the beginning of fiscal 2018.

There were no other material reclassifications out of accumulated other comprehensive loss during the year ended December 30, 2018 , and there were no reclassifications out of accumulated other comprehensive loss during the year ended December 29, 2019 .

Since we reported a loss for the year ended December 27, 2020, all potentially dilutive securities were antidilutive and accordingly, basic net loss per share and diluted net loss per share were equal.

SEGMENT INFORMATION

Our operating segments, also referred to as service lines, and reportable segments are described below:

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, waste and recycling, hospitality, general labor and others.

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.

Staff Management | SMX and SIMOS Insourcing Solutions :

On-site management and recruitment for the contingent industrial workforce of manufacturing, warehouse, and distribution facilities;

1 unchanged sentence

Recruitment and management of contingent and dedicated commercial drivers to the transportation and distribution industries.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Effective March 12, 2018 , we divested the PlaneTechs business within our PeopleManagement reportable segment.

1 unchanged sentence

Acquisition and Divestiture.

Our PeopleScout reportable segment provides high-volume, permanent employee recruitment process outsourcing, and management of outsourced labor service providers through the following operating segments, which we have aggregated into one reportable segment in accordance with U.S.

PeopleScout :

Outsourced recruitment of permanent employees on behalf of clients;

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.

• PeopleScout RPO :

Outsourced recruitment of permanent employees on behalf of clients and employer branding services;

• PeopleScout MSP :

2 unchanged sentences

Accordingly, the results associated with the acquisition are included in our PeopleScout operating segment.

TMP is a mid-sized RPO and employer branding service provider operating in the United Kingdom.

This acquisition increases our ability to win multi-continent engagements by adding a physical presence in Europe, referenceable clients and employer branding capabilities.

F or additional information, see Note 2 :

Acquisitions and Divestiture .

We evaluate performance based on segment revenue and segment profit.

Inter-segment revenue is minimal.

Commencing in the fiscal first quarter of 2018, we revised our internal segment performance measure to be segment profit, rather than the previously reported segment earnings before interest, taxes, depreciation and amortization (segment EBITDA).

Segment profit includes revenue, related cost of services, and ongoing operating expenses directly attributable to the reportable segment.

Segment profit excludes goodwill and intangible impairment charges, depreciation and amortization expense, unallocated corporate general and administrative expense, interest, other adjustments not considered to be ongoing.

The prior year amounts have been recast to reflect this change for consistency purposes .

Acquisition and Divestiture .

The following table presents our revenue disaggregated by major source and segment and a reconciliation of segment revenue from services to total company revenue:

2 unchanged sentences

Contingent staffing

PeopleReady $ 1,099,462 $ 1,474,062 $ 1,522,076

PeopleManagement 586,822 642,233 728,254

Human resource outsourcing

PeopleScout 160,076 252,484 248,877

Total company $ 1,846,360 $ 2,368,779 $ 2,499,207

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents a reconciliation of segment profit to income before tax expense:

1 unchanged sentence

Segment profit:

PeopleReady $ 43,200 $ 82,106 $ 85,998

PeopleManagement 11,717 12,593 21,627

PeopleScout 4,525 37,831 47,383

59,442 132,530 155,008

Corporate unallocated ( 20,714 ) ( 21,870 ) ( 26,066 )

1 unchanged sentence

Acquisition/integration costs — ( 1,562 ) ( 2,672 )

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

Gain on deferred compensation assets ( 1,725 ) ( 495 ) —

Workforce reduction costs ( 12,570 ) ( 3,301 ) —

COVID-19 government subsidies, net 6,211 — —

Other benefits (costs) 2,189 ( 614 ) ( 10,317 )

Depreciation and amortization ( 32,031 ) ( 37,549 ) ( 41,049 )

Income from operations

Interest and other income (expense), net

Income before tax expense

Income (loss) from operations ( 174,882 ) 66,179 73,919

Interest expense and other income, net 1,620 3,865 1,744

Income (loss) before tax expense (benefit) $ ( 173,262 ) $ 70,044 $ 75,663

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our international operations are primarily in Canada, Australia and the United Kingdom.

7 unchanged sentences

• No single client represented 10.0% or more of our PeopleReady reportable segment revenue for fiscal 2020, 2019, or 2018.

One client represented 10.0 % of our PeopleManagement reportable segment revenue for fiscal 2019 .

No single client represented 10.0% or more of our PeopleManagement reportable segment revenue for fiscal 2018 or 2017 .

• One client represented 10.1 % and 10.0 % of our PeopleManagement reportable segment revenue for fiscal 2020 and 2019, respectively.

No single client represented 10.0% or more of our PeopleManagement reportable segment revenue for fiscal 2018.

• One client represented 10.1 %, 12.5 % and 13.3 % of our PeopleScout reportable segment revenue for fiscal 2020, 2019 and 2018, respectively.

Another client represented 10.1 % of our PeopleScout reportable segment revenue for fiscal 2017 .

Net property and equipment located in international operations was approximately 6.5 % and 6.8 % of total property and equipment as of December 27, 2020 and December 29, 2019, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

(in thousands, except per share data)

Revenue from services

Cost of services

Selling, general and administrative expense

Depreciation and amortization

Income from operations

Interest expense

Interest and other income

Interest and other income (expense), net

Income before tax expense

Income tax expense

Net income per common share:

Revenue from services

Cost of services

Selling, general and administrative expense

Depreciation and amortization

Income from operations

Interest expense

Interest and other income

Interest and other income (expense), net

Income before tax expense

Income tax expense

Net income per common share:

SUBSEQUENT EVENT

On January 28, 2021, we entered into the Third Amendment of our Revolving Credit Facility, which clarified the definition of the Asset Coverage Ratio financial covenant.

The effective date of the Third Amendment was the last day of fiscal 2020 (December 27, 2020).

The Third Amendment clarified the difference between the total outstanding balance of the Revolving Credit Facility and 60.0 % of accounts receivable and unrestricted cash in excess of $ 50.0 million may not be less than zero.

If the amount is less than zero, then the Asset Coverage Ratio is defined as the ratio of 60.0 % of accounts receivable to total debt outstanding.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data