What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-16 compared with 2021-02-22 · 243 added, 357 removed, 811 unchanged (43% of the section changed)

19 unchanged sentences

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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

Critical Audit Matter Description

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 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 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;

◦ 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.

The critical audit matter communicated below is a matters arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Workers’ Compensation Claims Reserves - Refer to Note 1 and Note 6 to the Financial Statements

1 unchanged sentence

The Company bears the financial responsibility for a significant portion of expected losses under its workers’ compensation program and records reserves for workers’ compensation claims based on estimates of the future cost of claims and related expenses, which are discounted to their estimated net present value.

The determination of the undiscounted reserves requires significant estimates and assumptions related to the future cost of claims and related expenses for claims that have been reported but not settled, as well as those that have been incurred but not reported.

The determination of the undiscounted reserve requires significant estimates and assumptions related to the future cost of claims and related expenses for claims that have been reported but not settled, as well as those that have been incurred but not reported.

The undiscounted workers’ compensation obligation was $ 273.0 million as of December 26, 2021.

Given the fact that changes in actuarial assumptions could have a significant impact on the reserves, auditing management judgments regarding the workers’ compensation reserves, including estimates of the future cost of claims and related expenses, involved a high degree of auditor judgment, including the need to involve our actuarial specialists.

Given the fact that changes in actuarial assumptions could have a significant impact on the reserve, auditing management judgments regarding the workers’ compensation reserve, including estimates of the future cost of claims and related expenses, involved a high degree of auditor judgment, including the need to involve our actuarial specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the workers’ compensation reserves included the following, among others:

Our audit procedures related to the workers’ compensation reserve included the following, among others:

• We tested the effectiveness of controls over workers’ compensation, including those over payments and related expenses, claims data provided to the actuary, and review of actuarial results.

• We evaluated the methods and assumptions used by management to estimate the workers’ compensation reserves by:

◦ 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 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.

• We evaluated the methods and assumptions used by management to estimate the workers’ compensation reserve by:

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

◦ 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 reserve.

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

/s/ Deloitte & Touche, LLP

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Workers’ compensation claims reserve, less current portion 194,598 189,486

Long-term debt — 37,100

Long-term deferred compensation liabilities 28,806 26,361

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

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

Balances, December 29, 2019

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

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

Balances, December 27, 2020

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Stock-based compensation — — 13,943 — 13,943

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

Balances, December 26, 2021

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Goodwill and intangible asset impairment charge — 175,189 —

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

Provision for credit losses 6,493 6,300 7,661

Stock-based compensation 13,943 9,113 9,769

2 unchanged sentences

Other operating activities ( 1,968 ) ( 686 ) ( 1,589 )

Changes in operating assets and liabilities, net of amounts acquired and divested:

Changes in operating assets and liabilities

Accounts receivable ( 81,616 ) 57,146 5,450

Income tax receivable 1,602 ( 1,122 ) ( 6,480 )

Operating lease right-of-use asset 8,080 — —

Other assets ( 13,715 ) ( 2,124 ) ( 12,575 )

Accounts payable and other accrued expenses 16,425 ( 6,561 ) 6,921

Accrued wages and benefits 55,053 ( 9,494 ) ( 1,613 )

Other accrued wages and benefits 34,581 ( 2,012 ) ( 9,494 )

Deferred employer payroll taxes ( 57,065 ) 57,065 —

Workers’ compensation claims reserve 701 ( 125 ) ( 10,828 )

4 unchanged sentences

Capital expenditures ( 35,006 ) ( 27,066 ) ( 28,119 )

Acquisition of businesses, net of cash acquired — — ( 22,742 )

Divestiture of business — 215 10,587

Payments for company-owned life insurance ( 4,000 ) ( 12,031 ) ( 12,210 )

Proceeds from company-owned life insurance 832 — —

Purchases of restricted available-for-sale investments ( 43 ) ( 2,896 ) ( 7,667 )

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Net change in revolving credit facility — ( 37,100 ) ( 42,900 )

Payments on debt — — ( 22,397 )

Other ( 345 ) ( 1,540 ) ( 296 )

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Property and equipment purchased but not yet paid 3,949 1,347 993

Divestiture non-cash consideration — — 798

Right-of-use assets obtained in exchange for new operating lease liabilities 11,878 38,847 18,759

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(the “company,” “TrueBlue,” “we,” “us” and “our”) is a leading provider of specialized workforce solutions that help clients achieve business growth and improve productivity.

We serve clients in a wide variety of industries through our PeopleReady segment which offers on-demand, industrial staffing, our PeopleManagement segment which offers contingent, on-site industrial staffing and commercial driver services, and our PeopleScout segment which offers recruitment process outsourcing (“RPO”) and managed service provider (“MSP”) solutions to a wide variety of industries.

We serve clients in a wide variety of industries through our PeopleReady segment which offers general, industrial and skilled trade staffing, our PeopleManagement segment which offers contingent, on-site industrial staffing and commercial driver services, and our PeopleScout segment which offers recruitment process outsourcing (“RPO”) and managed service provider (“MSP”) solutions to a wide variety of industries.

We are headquartered in Tacoma, Washington.

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Reclassifications

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

Specifically, the company has made certain reclassifications between cost of services and 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.

Certain previously reported immaterial prior year amounts have been reclassified within current liabilities on our Consolidated Balance Sheets to conform to current year presentation.

Additionally, we have separately presented deferred employer payroll taxes from prior period reported amounts within operating activities on our Consolidated Statements of Cash Flows.

Fiscal period end

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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.

Estimates in our financial statements include, but are not limited to, acquisition method of 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.

We also considered the coronavirus pandemic (“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.

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

We primarily record revenue on a gross basis as a principal versus on a net basis as an agent on the Consolidated Statements of Operations and Comprehensive Income.

We primarily record revenue on a gross basis as a principal versus on a net basis as an agent on the Consolidated Statements of Operations and Comprehensive Income (Loss).

We have determined that gross reporting as a principal is the appropriate treatment based upon the following key factors:

• We maintain the direct contractual relationship with the client and are responsible for fulfilling the service promised to the client.

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

• We establish our associate’s billing rate.

• We demonstrate control over the services provided to our clients.

• We establish our billing rates.

Contingent staffing

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The client simultaneously receives and consumes the benefits of the services as they are provided.

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

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

We incur immaterial costs to obtain our contingent staffing contracts.

We have concluded that the amortization period for these costs would be less than one year and have elected to use the practical expedient to expense as incurred.

Also, we incur immaterial costs to fulfill some contingent staffing contracts, which are expensed as incurred.

Human resource outsourcing

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The client simultaneously receives and consumes the benefits of the services as they are provided.

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

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

We incur immaterial costs to obtain our outsourced recruitment of permanent employee contracts.

We have concluded that the amortization period for these costs would be less than one year and have elected to use the practical expedient to expense as incurred.

Also, we incur immaterial costs to fulfill these contracts, which are expensed as incurred.

Unsatisfied performance obligations

As a practical expedient, we do not disclose the value of unsatisfied performance obligations for (i) contracts with an expected original duration of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

As a practical expedient, we do not disclose the value of unsatisfied performance obligations for (i) contracts with an expected original duration of one year or less and (ii) contracts for which we recognize revenue at an amount for which we have the right to invoice for services performed.

Cost of services

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

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

Advertising expenses included in selling, general and administrative (“SG&A”) were $ 9.7 million, $ 5.5 million and $ 6.8 million in fiscal 2021, 2020 and 2019, respectively.

Cash, cash equivalents and marketable securities

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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.

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

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.

Changes in the allowance for credit losses are recorded in SG&A expense 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”) on the first day of fiscal 2020, we recognized a cumulative-effect adjustment to our accounts receivable allowance of $ 0.5 million as of that date.

Restricted cash and investments

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We have the positive intent and ability to hold our restricted investments until maturity in accordance with our investment policy and, accordingly, all of our restricted investments are classified as held-to-maturity.

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

In the event that an investment is downgraded below our investment policy criteria, it may be replaced with a new security.

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 26, 2021.

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For assets and liabilities recorded or disclosed at fair value on a recurring basis, we determine fair value based on the following:

The carrying value of cash and cash equivalents and mutual funds approximates fair value because of the short-term nature of these instruments.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

We use quoted prices for similar instruments in active markets or we estimate the fair value using a variety of valuation methodologies, which include observable inputs for comparable instruments and unobservable inputs.

For assets and liabilities with unobservable inputs, we typically rely on management’s estimates of assumptions that market participants would use in pricing the asset or liability.

Assets and liabilities with unobservable inputs.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The carrying value of our cash and cash equivalents and restricted cash approximates fair value because of the short-term maturity of those instruments.

We hold mutual funds and money market funds to support our deferred compensation liability, which are carried at fair value based on quoted market prices in active markets for identical assets.

We hold money market funds to support our workers’ compensation program and have historically held mutual funds and money market funds to support our deferred compensation liability, which are carried at fair value based on quoted market prices in active markets for identical assets.

There are inherent limitations when estimating the fair value of financial instruments, and the fair values reported are not necessarily indicative of the amounts that would be realized in current market transactions.

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

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

We 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.

We also hold certain restricted investments which collateralize workers’ compensation programs and are classified as held-to-maturity and carried at amortized cost on our Consolidated Balance Sheets.

We hold certain restricted investments to collateralize our workers’ compensation programs, which are classified as held-to-maturity and carried at amortized cost on our Consolidated Balance Sheets.

We determine the fair value of these restricted investments based on comparisons to similar financial instruments or financial models based on observable inputs to arrive at consensus pricing.

Certain items such as goodwill and other intangible assets are recognized or disclosed at fair value on a non-recurring basis.

We determine the fair value of these items using level 3 inputs.

We typically determine the fair value of these items using internal estimates and assumptions that market participants would use in pricing the asset or liability.

Property and equipment

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Non-capital expenditures associated with opening new locations are expensed as incurred.

When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss, net of proceeds, is reflected on the Consolidated Statements of Operations and Comprehensive Income.

Repairs and maintenance costs are charged directly to expense as incurred.

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

We conduct our branch operations from leased locations.

We conduct our branch operations primarily from leased locations.

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

1 unchanged sentence

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.

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.

1 unchanged sentence

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.

Financing leases are included in property and equipment, net, other current liabilities, and other long-term liabilities on our Consolidated Balance Sheets.

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 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 (Loss).

NOTES TO CONSOLIDATED 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.

3 unchanged sentences

We have lease agreements with lease and non-lease components, which are accounted for as a single lease component.

For leases with an initial non-cancelable lease term of less than one year and no option to purchase, we have elected not to recognize the lease on our Consolidated Balance Sheets and instead recognize rent payments on a straight-line basis over the lease term within SG&A expense on our Consolidated Statements of Operations and Comprehensive Income.

In addition, for those leases where the right to cancel the lease is available to both TrueBlue (as the lessee) and the lessor, the lease term is the initial non-cancelable period plus the notice period, which is typically 90 days, and not greater than one year.

1 unchanged sentence

We evaluate goodwill for impairment on an annual basis as of the first day of our fiscal second quarter, and whenever events or circumstances make it more likely than not that an impairment may have occurred.

These events or circumstances could include a significant change in the business climate, operating performance indicators, competition, client engagement, legal factors, or sale or disposition of a significant portion of a reporting unit.

These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, client engagement, or sale or disposition of a significant portion of a reporting unit.

We monitor the existence of potential impairment indicators throughout the fiscal year.

1 unchanged sentence

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

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

Our operating segments are PeopleReady, PeopleManagement On-Site, PeopleManagement Centerline, 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 charge 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 loss 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.

The fair value of each reporting unit is a weighted average of the income and market valuation approaches.

We estimate the fair value of each reporting unit using a weighted average of the income and market valuation approaches.

The income approach applies a fair value methodology based on discounted cash flows.

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The primary market multiples to which we compare are revenue and earnings before interest, taxes, depreciation, and amortization.

The income and market approaches were equally weighted in our most recent annual impairment test.

We base fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain.

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We consider a reporting unit’s fair value to be substantially in excess of its carrying value at a 20 % premium or greater.

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.

There were no goodwill impairment charges recorded during fiscal 2021 or 2019.

Refer to Note 5:

Goodwill and Intangible Assets for further details.

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

Goodwill and Intangible Assets for further details regarding the goodwill impairment charge recorded during fiscal 2020.

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 charge was recognized for the years ended December 27, 2020, December 29, 2019 or December 30, 2018.

We utilize the relief from royalty method to determine the fair value of each of our trade names.

If the carrying value exceeds the fair value, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value.

Management uses considerable judgment to determine key assumptions, including projected revenue, royalty rates and appropriate discount rates.

There were no indefinite-lived intangible asset impairment charges recorded during fiscal 2021, 2020 or 2019.

Other long-lived assets

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Other long-lived assets include property and equipment, lease right-of-use assets, finite-lived intangible assets and capitalized implementation costs for cloud computing arrangements that are service contracts.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 5:

Goodwill and Intangible Assets for further details.

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

There were no long-lived asset impairment charges recorded during fiscal 2021 or 2019.

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

Capitalized implementation costs are recorded as a prepaid asset in other assets, net on our Consolidated Balance Sheets, with the related amortization recorded in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income on a straight-line basis over the fixed, non-cancelable term of the associated arrangement plus any reasonably certain renewal periods.

Capitalized implementation costs are recorded as a prepaid asset in other assets, net on our Consolidated Balance Sheets, with the related amortization recorded in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income (Loss) on a straight-line basis over the fixed, non-cancelable term of the associated arrangement plus any reasonably certain renewal periods.

Software license fees incurred during the development period are expensed as incurred.

Business combinations

We account for our business acquisitions using the acquisition method of accounting.

The fair value of the net assets acquired and the results of the acquired business are included in the financial statements from the acquisition date forward.

We are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and results of operations during the reporting period.

Estimates are used in accounting for, among other things, the fair value of acquired net operating assets, property and equipment, intangible assets, useful lives of property and equipment, and amortizable lives for acquired intangible assets.

Any excess of the purchase consideration over the identified fair value of the assets and liabilities acquired is recognized as goodwill.

Goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date.

We estimate the fair value of acquired assets and liabilities as of the date of the acquisition based on information available at that time.

The initial valuation of these tangible and identifiable intangible assets and liabilities is subject to further management review and may change between the preliminary allocation and the final allocation.

All acquisition-related costs are expensed as incurred and recorded in SG&A expense on the Consolidated Statements of Operations and Comprehensive Income.

Additionally, we recognize liabilities for anticipated restructuring costs that will be necessary due to the elimination of excess capacity, redundant assets or unnecessary functions, and record them as SG&A expense on the Consolidated Statements of Operations and Comprehensive Income.

Workers’ compensation claims reserves

1 unchanged sentence

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

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

If the actual cost of such claims and related expenses exceeds the amounts estimated, additional reserves may be required.

Changes in reserve estimates are reflected in cost of services on the Consolidated Statements of Operations and Comprehensive Income in the period when the changes are made.

Changes in reserve estimates are reflected in cost of services on the Consolidated Statements of Operations and Comprehensive Income (Loss) in the period when the changes are made.

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

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

We discount this reserve and corresponding receivable to its estimated net present value using the discount rates based on average returns of “risk-free” U.S.

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

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.

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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 (“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.

Based on that analysis, we have determined that a valuation allowance is appropriate for certain net

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

operating losses (“NOLs”) and tax credits that we expect will not be utilized within the permitted carryforward periods as of December 26, 2021 and December 27, 2020.

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

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and 4) state and federal offices can delay their credit certification processing and have inconsistent certification rates.

We recognize additional prior year hiring credits if credits in excess of original estimates have been certified by government offices.

We recognize an adjustment to prior year hiring credits if credits certified by government offices differ from original estimates.

Deferred compensation plan

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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.

The mutual funds and money market funds are measured at fair value, with unrealized gains and losses recognized in SG&A expense, while realized gains and losses are recorded in other income on our Consolidated Statements of Operations and Comprehensive Income.

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

The carrying value of company-owned life insurance policies is based on the cash surrender value of the policies and, accordingly, approximates fair value.

Changes in the cash surrender value of the insurance policies are recorded in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income.

Changes in the cash surrender value of the company-owned life insurance policies are recorded in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income (Loss).

The deferred compensation mutual funds and money market funds are measured at fair value, with unrealized gains and losses recognized in SG&A expense, while realized gains and losses are recorded in other income on our Consolidated Statements of Operations and Comprehensive Income (Loss).

As of December 26, 2021, all of the mutual funds and money market funds have been converted into company-owned life insurance policies.

Stock-based compensation

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.

Under various plans, our Board of Directors (the “Board”), executive officers and key employees have received or may receive grants of restricted stock awards, restricted stock units or performance share units (collectively, “stock-based awards”).

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

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.

Compensation expense for stock-based awards 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.

We recognize compensation expense for only the portion of restricted stock and performance share units that is expected to vest, rather than record forfeitures when they occur.

If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in the future periods.

We recognize compensation expense for only the portion of stock-based awards that are expected to vest.

If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods.

Foreign currency

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Purchases and retirement of our common stock

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

We purchase our common stock under a program authorized by our 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.

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Furthermore, activity in our common stock account related to stock-based compensation is also recorded to retained earnings until such time as the reduction to retained earnings due to stock repurchases has been recovered.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net income per share

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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

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 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.

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

Also during fiscal 2020, the Canadian and Australian governments enacted subsidy programs to help employers offset a portion of their employee wages and rent for a limited period.

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

During fiscal 2021, Canadian subsidies reduced our operating expenses by $ 3.9 million on our Consolidated Statement of Operations and Comprehensive Income (Loss).

During 2020, U.S., Canadian and Australian subsidies reduced our operating expenses by $ 9.9 million on our Consolidated Statement of Operations and Comprehensive Income (Loss).

Additionally, under the CARES Act, 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.

Deferred employer payroll taxes of $ 59.9 million were paid in full on September 15, 2021.

Business combinations

We account for our business acquisitions using the acquisition method of accounting.

The fair value of the net assets acquired and the results of the acquired business are included in the financial statements from the acquisition date forward.

We are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and results of operations during the reporting period.

Any excess of the purchase consideration over the identified fair value of the assets and liabilities acquired is recognized as goodwill.

Goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date.

We estimate the fair value of acquired assets and liabilities as of the date of the acquisition based on information available at that time.

All acquisition-related costs are expensed as incurred and recorded in SG&A expense on the Consolidated Statements of Operations and Comprehensive Income (Loss).

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 our subsidiary PeopleScout, Inc.

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

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.

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

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

Accounts receivable 9,770

Prepaid expenses, deposits and other current assets 337

Property and equipment 435

Customer relationships 6,286

Trade names/trademarks 1,738

Total assets acquired 18,566

Accounts payable and other accrued expenses 9,139

Accrued wages and benefits 1,642

Income tax payable 205

Deferred income tax liability 1,444

Total liabilities assumed 12,430

Net identifiable assets acquired 6,136

Goodwill (1) 16,606

Total consideration allocated $ 22,742

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

We estimated the fair value of the acquired identifiable intangible assets, which are subject to amortization, using the income approach.

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

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

Customer relationships - other $ 2,809 3

Customer relationships - RPO 3,477 7

Trade names/trademarks 1,738 14

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 (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 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.

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

FAIR VALUE MEASUREMENT

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Deferred compensation investments (3) $ — $ — $ — $ —

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 27, 2020

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

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

(1) Cash, cash equivalents and restricted cash include money market funds and deposits.

(2) Refer to Note 3:

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

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

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

Refer to Note 3:

Restricted Cash and Investments for additional details on these investments.

As of December 26, 2021, all of the mutual funds and money market funds supporting the deferred compensation liability have been converted into company-owned life insurance policies.

Assets measured at fair value on a nonrecurring basis

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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 2021 or 2019.

1 unchanged sentence

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The impairment was comprised as follows:

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Total restricted cash and investments $ 221,026 $ 240,534

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Held-to-maturity

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Total held-to-maturity investments $ 152,247 $ 6,090 $ ( 41 ) $ 158,296

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amortized cost and fair value by contractual maturity of our held-to-maturity investments are as follows:

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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:

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

As of December 26, 2021, all of the mutual funds and money market funds were converted into company-owned life insurance policies.

Unrealized gains and losses related to these investments held at December 26, 2021, December 27, 2020 and December 29, 2019, included in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income (Loss), were as follows:

(in thousands) 2021 2020 2019

Unrealized gains (losses) $ 1,061 $ 723 $ 2,814

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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:

Accounts receivable allowance for credit losses

(in thousands) 2021 2020 2019

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Ending balance $ 6,687 $ 2,921 $ 4,288

(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.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Prepaid expenses and other current assets

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Construction in progress consists primarily of purchased and internally-developed software.

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.

Depreciation expense of property and equipment totaled $ 20.9 million, $ 21.9 million and $ 19.7 million for the fiscal years ended December 26, 2021, December 27, 2020 and December 29, 2019, 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

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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 )

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

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

Foreign currency translation — — ( 335 ) ( 335 )

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Goodwill, net $ 60,094 $ 1,491 $ 32,953 $ 94,538

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Intangible assets

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Trade names/trademarks 2,066 ( 737 ) 1,329 2,088 ( 585 ) 1,503

Technologies — — — 600 ( 520 ) 80

Total finite-lived intangible assets $ 104,082 $ ( 87,871 ) $ 16,211 $ 115,470 $ ( 92,541 ) $ 22,929

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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.

Amortization expense of our finite-lived intangible assets was $ 6.7 million, $ 10.1 million and $ 17.9 million for the fiscal years ended December 26, 2021, December 27, 2020 and December 29, 2019, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides the estimated future amortization of finite-lived intangible assets as of December 26, 2021:

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We also held indefinite-lived trade names/trademarks of $ 6.0 million as of December 26, 2021 and December 27, 2020.

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

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

There were no goodwill or intangible asset impairment charges recorded during fiscal 2021 or 2019.

2020 impairments

During the fiscal year ended December 27, 2020, 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).

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.

The charge was primarily the result of expected continued weakness in pricing and demand for our staffing services in a volatile economic climate, which resulted in a decline in our stock price.

The decline in stock price pushed our market capitalization significantly below the recorded value of our consolidated net assets.

This was further impacted by COVID-19, which created a significant drop in client demand.

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

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

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.

During the fiscal year ended December 27, 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).

The charge was primarily due to the decrease in demand for our services associated with government and societal actions taken to address the impact of COVID-19, which resulted in lower future expectations.

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

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

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

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Long-term portion $ 194,598 $ 189,486

Payments made against self-insured claims were $ 52.8 million, $ 63.1 million and $ 64.7 million for the years ended December 27, 2020, December 29, 2019 and December 30, 2018, respectively.

Our workers’ compensation reserve includes estimated expenses related to excess claims, and we record a corresponding receivable for the insurance coverage on excess claims based on the contractual policy agreements we have with insurance carriers.

Payments made against self-insured claims were $ 41.9 million, $ 52.8 million and $ 63.1 million for the fiscal years ended December 26, 2021, December 27, 2020 and December 29, 2019, respectively.

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

We discount this reserve and corresponding receivable to its estimated net present value using the discount rates based on average returns of “risk-free” U.S.

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

At December 27, 2020 and December 29, 2019, the weighted average rate was 1.3 % and 2.4 %, respectively.

The rates used to discount excess claims incurred during the fiscal years ended December 26, 2021 and December 27, 2020 were 1.8 % and 1.3 %, respectively.

The claim payments are made and the corresponding reimbursements from our insurance carriers are received over an estimated weighted average period of approximately 17 years.

The discounted workers’ compensation reserve for excess claims was $ 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:

The discounted workers’ compensation reserve for excess claims were $ 62.7 million and $ 54.0 million, as of December 26, 2021 and December 27, 2020, respectively.

The discounted receivables from insurance companies, net of valuation allowance, were $ 61.4 million and $ 52.9 million as of December 26, 2021 and December 27, 2020, respectively.

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

(in thousands) 2021 2020 2019

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• impact of safety initiatives;

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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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 $ 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.

Workers’ compensation cost of $ 39.8 million, $ 49.4 million and $ 60.2 million was recorded in cost of services on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the fiscal years ended December 26, 2021, December 27, 2020 and December 29, 2019, respectively.

LONG-TERM DEBT

On March 16, 2020, we entered into a first amendment to our credit agreement with Bank of America, N.A., Wells Fargo Bank, N.A., PNC Bank, N.A., KeyBank, N.A.

and HSBC Bank USA, N.A.

dated as of July 13, 2018, 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.

We have a revolving credit agreement with Bank of America, N.A., Wells Fargo Bank, N.A., PNC Bank, N.A., KeyBank, N.A.

and HSBC Bank USA, N.A., which provides for a revolving line of credit of up to $ 300.0 million, and currently set to mature on March 16, 2025 (“Revolving Credit Facility”).

We have an option to increase the amount to $ 450.0 million, subject to lender approval.

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

At 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.

At December 26, 2021, $ 6.2 million was utilized by outstanding standby letters of credit, leaving $ 293.8 million unused and available under the Revolving Credit Facility.

At December 27, 2020, $ 6.1 million was utilized by outstanding standby letters of credit.

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

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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.

The applicable spread is determined by the consolidated leverage ratio, as defined under the Revolving Credit Facility.

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

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

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

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domestic subsidiaries.

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.

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

The following financial covenants, as defined in the second amendment to our credit agreement, were in effect starting the third quarter of 2021 and remained as of December 26, 2021:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

As of December 26, 2021, our consolidated leverage ratio was 0.05 .

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

As of December 26, 2021, our consolidated fixed charge coverage ratio was 67.88 .

As of December 26, 2021, and throughout fiscal 2021, we were in compliance with all effective covenants related to the Revolving Credit Facility.

COMMITMENTS AND CONTINGENCIES

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Short-term lease costs 8,392 7,781

Other lease costs (1)

Other lease costs, net (1)

Total lease costs

$ 28,780 $ 28,310

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

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

Other information related to our operating leases was as follows:

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(in thousands)

2022 $ 14,898

Total undiscounted future non-cancelable minimum lease payments (1)

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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.

We had $ 33.3 million of purchase obligations as of December 26, 2021, of which $ 20.2 million are expected to be paid in 2022, $ 11.4 million in 2023, $ 1.6 million in 2024, and the remaining $ 0.1 million in 2025.

Legal contingencies and developments

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

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

The resolution of those proceedings is not expected to have a material effect on our results of operations or financial condition.

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

We also believe that the aggregate range of reasonably possible losses for the Company's exposure in excess of the amount accrued is expected to be immaterial to the Company.

It remains possible that despite our current belief, material differences in actual outcomes or changes in management's evaluation or predictions could arise that could have a material effect on the Company's financial condition, results of operations or cash flows.

SHAREHOLDERS’ EQUITY

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Unvested restricted stock included in reportable shares outstanding was 0.5 million and 0.9 million shares as of December 26, 2021 and December 27, 2020, 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

On September 15, 2017, our Board authorized a $ 100.0 million addition to our share repurchase program for our outstanding common stock (“2017 authorization”).

On October 16, 2019, our Board authorized a $ 100.0 million addition to our share repurchase program for our outstanding common stock (“2019 authorization”).

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

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

Refer to Note 15:

Subsequent Event for further details regarding an additional authorization.

During fiscal 2020, we repurchased shares using the remaining $ 19.0 million available under the 2017 authorization.

Under this authorization, we repurchased and retired 4.7 million shares of our common stock at an average share price of $ 21.14 , which excludes commissions.

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

During fiscal 2021, we repurchased shares using $ 16.7 million under the 2019 authorization.

As of December 26, 2021, $ 50.0 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The details of shares repurchased as part of our existing share repurchase authorizations are as follows:

Fiscal year Number of shares repurchased Average price per share Amount

(in thousands)

Open market purchases 620,280 $ 26.90 $ 16,678

Open market purchases 779,068 $ 15.85 $ 12,346

ASR (1) 2,777,486 $ 14.40 $ 40,000

Total 2020 3,556,554 $ 14.72 $ 52,346

(1) On February 28, 2020, we entered into an accelerated share repurchase (“ASR”) agreement with a third-party financial institution to repurchase our common stock.

On July 2, 2020, we settled our ASR agreement, resulting in the receipt of a total of 2,777,486 shares over the term of the ASR agreement with a volume weighted average price of $ 14.40 .

Preferred stock

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STOCK-BASED COMPENSATION

We record stock-based compensation expense for restricted and unrestricted stock awards, performance share units, and shares purchased under an employee stock purchase plan.

Our 2016 Omnibus Incentive Plan, effective May 11, 2016 (“Incentive Plan”), provides for the issuance or delivery of up to 1.5 million shares of our common stock over the full term of the Incentive Plan.

Restricted and unrestricted stock awards and performance share units

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

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.

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.

We record stock-based compensation expense for restricted stock awards, restricted stock units, performance share units (collectively, “stock-based awards”), and shares purchased under an employee stock purchase plan (“ESPP”).

Our 2016 Omnibus Incentive Plan (“Incentive Plan”), effective May 11, 2016, applies to directors, officers, employees and consultants of the Company and permits the granting of nonqualified and incentive stock options, restricted stock awards, performance share units, restricted stock units and stock appreciation rights.

Upon adoption, the Incentive Plan provided for the issuance or delivery of up to 1.5 million shares of our common stock.

Effective May 9, 2018, an additional 1.8 million shares were authorized under the Incentive Plan.

Stock-based awards

Under the Incentive Plan, stock-based awards are granted to the Board, executive officers and key employees.

Stock-based awards granted to executive officers and key employees generally vest annually over three or four years .

Beginning in fiscal 2020, stock-based awards granted to members of our Board vest over an eight month period.

Prior to fiscal 2020, stock-based awards granted to members of our Board vested immediately.

Receipt of the vested shares may be deferred until after a director leaves the Board.

Compensation expense related to these grants is calculated based on the grant-date fair value.

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

Beginning in fiscal 2020, performance share units are only granted to certain executive officers.

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

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

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

Compensation expense is calculated based on the grant-date market value of our stock and is recognized ratably over the performance period for the performance share units which are expected to vest.

Compensation expense for these grants is calculated based on the grant-date market value of our stock and is recognized ratably over the performance period only for the performance share units expected to vest.

Our estimate of the performance units expected to vest is reviewed and adjusted as appropriate each quarter.

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

S tock-based award activity for the fiscal year ended December 26, 2021, was as follows:

(shares in thousands) Shares Weighted-average grant-date fair value

Non-vested at beginning of period 1,523 $ 22.77

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Non-vested at the end of the period 1,713 $ 21.71

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 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the weighted-average grant-date fair value per share for stock-based awards granted during fiscal 2021, 2020 and 2019:

2021 2020 2019

Weighted-average grant-date fair value $ 20.21

As of December 26, 2021, total unrecognized stock-based compensation expense was approximately $ 17.5 million, which is estimated to be recognized over a weighted average remaining period of 1.7 years.

The total fair value of stock-based awards that vested during fiscal 2021, 2020 and 2019 was $ 20.6 million, $ 7.0 million and $ 8.7 million, respectively.

Employee Stock Purchase Plan

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

The employee’s purchase price is 85.0 % of the lesser of the fair market value of shares on either the first day or the last day of each month.

We consider our ESPP to be a component of our stock-based compensation and accordingly we recognize compensation expense over the requisite service period for stock purchases made under the plan.

The employee’s purchase price is 85 % of the lesser of the company’s common stock price on either the first day or the last day of each calendar month.

We consider our ESPP to be a component of stock-based compensation and accordingly we recognize compensation expense over the requisite service period for stock purchases made under the plan.

The requisite service period begins on the enrollment date and ends on the purchase date, the duration of which is one month .

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

(shares in thousands) Shares Average price per share

Issued during fiscal 2020 68 $ 13.46

Issued during fiscal 2019 73 $ 18.31

Issued during fiscal 2018 68 $ 22.17

The following table summarizes transactions under our ESPP during fiscal 2021, 2020 and 2019:

(shares in thousands) 2021 2020 2019

Shares issued 44 68 73

Average price per share $ 19.77 $ 13.46 $ 18.31

Stock-based compensation expense

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.

Total stock-based compensation expense for fiscal 2021, 2020 and 2019, which is included in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income (Loss), was $ 13.9 million, $ 9.1 million and $ 9.8 million, respectively.

The related tax benefit was $ 2.9 million, $ 1.9 million and $ 2.1 million for fiscal 2021, 2020 and 2019, respectively.

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The expense for our qualified and non-qualified deferred compensation plans, including our discretionary matching contributions, totaled $ 6.5 million, $ 3.7 million and $ 5.5 million for fiscal 2021, 2020 and 2019, respectively, and is recorded in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income (Loss).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The provision for income taxes is comprised of the following:

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Provision for income taxes $ 12,216 $ ( 31,421 ) $ 6,971

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) 2021 % 2020 % 2019 %

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State income taxes, net of federal benefit 3,548 4.8 ( 6,631 ) 3.8 3,666 5.3

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 — — — —

Hiring tax credits, net ( 7,582 ) ( 10.3 ) ( 7,719 ) 4.5 ( 13,627 ) ( 19.4 )

CARES Act ( 468 ) ( 0.6 ) ( 2,939 ) 1.7 — —

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

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Our effective tax rate for fiscal 2021 was 16.5 %.

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:

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

Other differences result from state and foreign income tax, certain non-taxable income and non-deductible expenses, CARES Act and tax effects of stock-based compensation.

The non-deductible goodwill and intangible asset impairment charge relates to an impairment charge of the carrying amounts of goodwill and other intangible assets of $ 175.2 million, recorded in the first quarter of 2020.

Of the total impairment loss, $ 84.7 million (tax-effect $ 21.8 million) related to reporting units from stock acquisitions and accordingly were not deductible for tax purposes.

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

and international components of income (loss) before tax expense (benefit) was as follows:

(in thousands) 2021 2020 2019

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Deferred tax assets:

Allowance for doubtful accounts $ 991 $ 973

Allowance for credit losses $ 1,750 $ 991

Workers’ compensation 1,653 —

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State NOLs 2,002 ( 957 ) 1,045 Various

Foreign NOLs 730 ( 730 ) — Various

California Enterprise Zone credits 1,411 ( 1,411 ) — 2026

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If recognized, $ 1.5 million would impact our effective tax rate.

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Balance Sheets.

We do not believe the amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the fiscal year ended December 26, 2021.

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

In general, the tax years 2018 through 2020 remain open to examination by the major taxing jurisdictions where we conduct business.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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Increases for tax positions related to the current year 188 218 318

Decreases for tax positions related to prior years ( 52 ) — —

Reductions due to lapsed statute of limitations ( 185 ) ( 366 ) ( 430 )

Ending balance $ 1,881 $ 1,930 $ 2,078

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

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

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

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Weighted average number of common shares used in basic net income (loss) per common share 34,798 35,365 38,778

Dilutive effect of non-vested restricted stock — 401 290

Dilutive effect of non-vested stock-based awards 636 — 401

Weighted average number of common shares used in diluted net income (loss) per common share 35,434 35,365 39,179

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Anti-dilutive shares 36 894 225

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.

As we reported a loss for the fiscal 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

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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.

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

• Centerline Drivers :

• PeopleManagement On-Site :

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

• PeopleManagement Centerline :

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.

For additional information, see Note 2 :

Acquisition and Divestiture.

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.

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Management of multiple third-party staffing vendors on behalf of clients.

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

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

F or additional information, see Note 2 :

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:

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Total company $ 2,173,622 $ 1,846,360 $ 2,368,779

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

The following table presents a reconciliation of segment profit to income (loss) before tax expense (benefit):

(in thousands) 2021 2020 2019

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PeopleScout 36,163 4,525 37,831

59,442 132,530 155,008

Total segment profit 131,757 59,442 132,530

Corporate unallocated ( 27,937 ) ( 20,714 ) ( 21,870 )

Work Opportunity Tax Credit processing fees ( 495 ) ( 960 ) ( 985 )

Third-party processing fees for hiring tax credits ( 734 ) ( 495 ) ( 960 )

Amortization of software as a service assets ( 2,709 ) ( 2,307 ) ( 1,624 )

Acquisition/integration costs — — ( 1,562 )

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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.

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Total revenue from services $ 2,173,622 100.0 % $ 1,846,360 100.0 % $ 2,368,779 100.0 %

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

No single client represented more than 10.0% of total company revenue for fiscal 2021, 2020 or 2019.

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• No single client represented 10.0% or more of our PeopleReady reportable segment revenue for fiscal 2021, 2020, or 2019.

• 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 2021.

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

• One client represented 10.9 %, 10.1 % and 12.5 % of our PeopleScout reportable segment revenue for fiscal 2021, 2020 and 2019, respectively.

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.

Property and equipment located in international operations was approximately 5.6 % and 6.5 % of total property and equipment, net as of December 26, 2021 and December 27, 2020, respectively.

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.

On January 31, 2022, our Board of Directors authorized a $ 100 million addition to our share repurchase program for our outstanding common stock.

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

We evaluated events and transactions occurring after the balance sheet date through the date the financial statements were issued, and identified no other events that were subject to recognition or disclosure.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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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