UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: October 1, 2017September 27, 2020
or
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-14543
____________________________________ 
tbi-20200927_g1.jpg
TrueBlue, Inc.
(Exact name of registrant as specified in its charter)
______________________________________ 
WashingtonWashington91-1287341
(State of incorporation)(I.R.S. Employer Identification No.employer identification no.)
1015 A Street, Tacoma, Washington98402
(Address of principal executive offices)(Zip Code)

1015 A Street, Tacoma, Washington 98402
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code:    (253) 383-9101
______________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stockstock, no par valueTBIThe New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d)15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.        Yes ý☒ No ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý☒ No ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”,filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerx☒Accelerated filer¨☐ Non-accelerated filer¨☐(Do not check if a smaller reporting company)
Smaller reporting company¨☐Emerging growth company¨☐


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐
Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No ý☒
As of October 16, 2017,12, 2020, there were 41,361,50735,472,768 shares of the registrant’s common stock outstanding.





TrueBlue, Inc.
Table of Contents
Page
PART I. FINANCIAL INFORMATION
Item 1.
3
3
4
5
6
Item 2.
1519
Item 3.
3038
Item 4.
3038
PART II. OTHER INFORMATION
Item 1.
3139
Item 1A.
3139
Item 2.
3547
Item 5.3.
3547
Item 6.4.
3647
Item 5.
47
Item 6.
3748
49













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PART I. FINANCIAL INFORMATION
Item 1.CONSOLIDATED FINANCIAL STATEMENTS
TRUEBLUE, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except par value data)October 1,
2017		January 1,
2017		(in thousands, except par value data)September 27,
2020		December 29,
2019
ASSETS ASSETS
Current assets: Current assets:
Cash and cash equivalents$35,055
$34,970
Cash and cash equivalents$28,233 $37,608 
Accounts receivable, net of allowance for doubtful accounts of $5,741 and $5,160380,473
352,606
Accounts receivable, net of allowance of $5,447 and $4,288Accounts receivable, net of allowance of $5,447 and $4,288279,812 342,303 
Prepaid expenses, deposits and other current assets18,923
21,373
Prepaid expenses, deposits and other current assets27,008 30,717 
Income tax receivable5,945
18,854
Income tax receivable15,696 11,105 
Total current assets440,396
427,803
Total current assets350,749 421,733 
Property and equipment, net63,079
63,998
Property and equipment, net66,994 66,150 
Restricted cash and investments244,173
231,193
Restricted cash and investments229,815 230,932 
Deferred income taxes, net1,037
6,770
Deferred income taxes, net28,766 3,228 
Goodwill226,771
224,223
Goodwill94,212 237,498 
Intangible assets, net109,963
125,671
Intangible assets, net30,704 73,673 
Operating lease right-of-use assets, netOperating lease right-of-use assets, net37,645 41,082 
Workers’ compensation claims receivable, netWorkers’ compensation claims receivable, net51,970 44,624 
Other assets, net46,931
50,787
Other assets, net17,343 17,235 
Total assets$1,132,350
$1,130,445
Total assets$908,198 $1,136,155 
LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities: Current liabilities:
Accounts payable and other accrued expenses$67,364
$66,758
Accounts payable and other accrued expenses$56,303 $68,406 
Accrued wages and benefits79,607
79,782
Accrued wages and benefits60,209 67,604 
Current portion of workers’ compensation claims reserve76,406
79,126
Current portion of workers’ compensation claims reserve65,860 73,020 
Contingent consideration—
21,600
Current portion of long-term debt23,422
2,267
Current operating lease liabilitiesCurrent operating lease liabilities13,670 14,358 
Other current liabilities1,408
1,602
Other current liabilities6,385 7,418 
Total current liabilities248,207
251,135
Total current liabilities202,427 230,806 
Workers’ compensation claims reserve, less current portion202,929
198,225
Workers’ compensation claims reserve, less current portion188,934 182,598 
Long-term debt, less current portion111,408
135,362
Long-term debt, less current portion1,500 37,100 
Long-term deferred compensation liabilitiesLong-term deferred compensation liabilities25,044 26,765 
Long-term operating lease liabilitiesLong-term operating lease liabilities25,950 28,849 
Deferred employer payroll taxesDeferred employer payroll taxes36,312 0 
Other long-term liabilities26,033
20,544
Other long-term liabilities3,849 4,064 
Total liabilities588,577
605,266
Total liabilities484,016 510,182 
 
Commitments and contingencies (Note 5)
Commitments and contingencies (Note 7)Commitments and contingencies (Note 7)
 
Shareholders’ equity: Shareholders’ equity:
Preferred stock, $0.131 par value, 20,000 shares authorized; No shares issued and outstanding—
—
Common stock, no par value, 100,000 shares authorized; 41,339 and 42,171 shares issued and outstanding1
1
Preferred stock, $0.131 par value, 20,000 shares authorized; NaN shares issued and outstandingPreferred stock, $0.131 par value, 20,000 shares authorized; NaN shares issued and outstanding0 0 
Common stock, no par value, 100,000 shares authorized; 35,450 and 38,593 shares issued and outstandingCommon stock, no par value, 100,000 shares authorized; 35,450 and 38,593 shares issued and outstanding1 1 
Accumulated other comprehensive loss(6,880)(11,433)Accumulated other comprehensive loss(17,379)(13,238)
Retained earnings550,652
536,611
Retained earnings441,560 639,210 
Total shareholders’ equity543,773
525,179
Total shareholders’ equity424,182 625,973 
Total liabilities and shareholders’ equity$1,132,350
$1,130,445
Total liabilities and shareholders’ equity$908,198 $1,136,155 
See accompanying notes to consolidated financial statements

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TRUEBLUE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(unaudited)
Thirteen weeks endedThirty-nine weeks ended
Thirteen weeks ended Thirty-nine weeks ended
(in thousands, except per share data)\October 1,
2017		September 23,
2016		 October 1,
2017		September 23,
2016
(in thousands, except per share data)(in thousands, except per share data)September 27,
2020		September 29,
2019		September 27,
2020		September 29,
2019
Revenue from services$660,780
$697,097
 $1,839,146
$2,015,689
Revenue from services$474,530 $636,793 $1,327,726 $1,777,739 
Cost of services488,761
518,702
 1,372,418
1,516,858
Cost of services364,066 469,058 1,007,878 1,306,626 
Gross profit172,019
178,395

466,728
498,831
Gross profit110,464 167,735 319,848 471,113 
Selling, general and administrative expense131,552
134,679
 378,150
401,090
Selling, general and administrative expense90,100 129,800 304,681 383,745 
Depreciation and amortization11,189
11,690
 34,650
34,673
Depreciation and amortization7,652 8,749 24,002 28,528 
Goodwill and intangible asset impairment charge—
4,275
 —
103,544
Goodwill and intangible asset impairment charge0 0 175,189 0 
Income (loss) from operations29,278
27,751

53,928
(40,476)Income (loss) from operations12,712 29,186 (184,024)58,840 
Interest expense(1,365)(1,721) (3,893)(5,430)Interest expense(628)(715)(3,104)(2,097)
Interest and other income1,146
854
 3,903
2,657
Interest and other income, netInterest and other income, net454 1,186 2,781 3,948 
Interest and other income (expense), net(219)(867)
10
(2,773)Interest and other income (expense), net(174)471 (323)1,851 
Income (loss) before tax expense29,059
26,884

53,938
(43,249)
Income (loss) before tax expense (benefit)Income (loss) before tax expense (benefit)12,538 29,657 (184,347)60,691 
Income tax expense (benefit)7,838
3,455
 14,909
(9,911)Income tax expense (benefit)3,743 2,981 (34,480)6,333 
Net income (loss)$21,221
$23,429

$39,029
$(33,338)Net income (loss)$8,795 $26,676 $(149,867)$54,358 
   
Net income (loss) per common share:   Net income (loss) per common share:
Basic$0.52
$0.56
 $0.94
$(0.80)Basic$0.25 $0.69 $(4.20)$1.39 
Diluted$0.51
$0.56
 $0.94
$(0.80)Diluted$0.25 $0.68 $(4.20)$1.38 
   
Weighted average shares outstanding:   Weighted average shares outstanding:
Basic41,046
41,762
 41,420
41,651
Basic34,597 38,741 35,643 39,090 
Diluted41,276
42,056
 41,671
41,651
Diluted34,904 39,213 35,643 39,479 
   
Other comprehensive income:   
Other comprehensive income (loss):Other comprehensive income (loss):
Foreign currency translation adjustment$1,143
$1,247
 $3,483
$3,341
Foreign currency translation adjustment$386 $(1,657)$(4,141)$(1,024)
Unrealized gain on investments, net of tax424
784
 1,070
946
Total other comprehensive income, net of tax1,567
2,031

4,553
4,287
Comprehensive income (loss)$22,788
$25,460

$43,582
$(29,051)Comprehensive income (loss)$9,181 $25,019 $(154,008)$53,334 
See accompanying notes to consolidated financial statements

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TRUEBLUE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Thirty-nine weeks endedThirty-nine weeks ended
(in thousands)October 1,
2017		September 23,
2016		(in thousands)September 27,
2020		September 29,
2019
Cash flows from operating activities: Cash flows from operating activities:
Net income (loss)$39,029
$(33,338)Net income (loss)$(149,867)$54,358 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization34,650
34,673
Depreciation and amortization24,002 28,528 
Goodwill and intangible asset impairment charge—
103,544
Goodwill and intangible asset impairment charge175,189 0 
Provision for doubtful accounts6,321
6,361
Provision for doubtful accounts6,582 5,997 
Stock-based compensation6,161
7,443
Stock-based compensation6,762 8,119 
Deferred income taxes4,890
(23,874)Deferred income taxes(25,955)1,058 
Non-cash lease expenseNon-cash lease expense11,115 11,087 
Other operating activities2,563
5,603
Other operating activities1,944 (1,701)
Changes in operating assets and liabilities, net of effects of acquisition of business: 
Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Accounts receivable(34,198)102,722
Accounts receivable55,408 (17,616)
Income tax receivable12,788
4,018
Income tax receivable(4,928)(3,982)
Other assets6,306
(3,563)Other assets(2,646)(9,449)
Accounts payable and other accrued expenses(784)(3,764)Accounts payable and other accrued expenses(12,723)(6,970)
Accrued wages and benefits(176)(3,254)Accrued wages and benefits(7,395)(141)
Workers’ compensation claims reserve1,985
11,938
Workers’ compensation claims reserve(824)(7,176)
Operating lease liabilitiesOperating lease liabilities(11,410)(11,297)
Deferred employer payroll taxesDeferred employer payroll taxes36,312 0 
Other liabilities1,086
4,740
Other liabilities(2,798)1,723 
Net cash provided by operating activities80,621
213,249
Net cash provided by operating activities98,768 52,538 
Cash flows from investing activities: Cash flows from investing activities:
Capital expenditures(16,303)(17,766)Capital expenditures(16,244)(18,297)
Acquisition of business—
(71,863)
Change in restricted cash and cash equivalents8,623
732
Purchases of restricted investments(36,015)(35,940)
Maturities of restricted investments15,042
12,273
Divestiture of businessDivestiture of business0 215 
Purchases of restricted available-for-sale investmentsPurchases of restricted available-for-sale investments(2,310)(5,299)
Sales of restricted available-for-sale investmentsSales of restricted available-for-sale investments3,212 3,881 
Purchases of restricted held-to-maturity investmentsPurchases of restricted held-to-maturity investments(32,495)(17,298)
Maturities of restricted held-to-maturity investmentsMaturities of restricted held-to-maturity investments24,358 25,095 
Net cash used in investing activities(28,653)(112,564)Net cash used in investing activities(23,479)(11,703)
Cash flows from financing activities: Cash flows from financing activities:
Purchases and retirement of common stock(29,371)—
Purchases and retirement of common stock(52,346)(31,316)
Net proceeds from stock option exercises and employee stock purchase plans1,179
1,183
Net proceeds from employee stock purchase plansNet proceeds from employee stock purchase plans734 1,023 
Common stock repurchases for taxes upon vesting of restricted stock(2,956)(2,692)Common stock repurchases for taxes upon vesting of restricted stock(2,331)(1,934)
Net change in Revolving Credit Facility(1,099)(104,586)
Payments on debt(1,700)(1,700)
Payment of contingent consideration at acquisition date fair value(18,300)—
Net change in revolving credit facilityNet change in revolving credit facility(35,600)(36,200)
Other—
20
Other(1,436)(203)
Net cash used in financing activities(52,247)(107,775)Net cash used in financing activities(90,979)(68,630)
Effect of exchange rate changes on cash and cash equivalents364
2,090
Net change in cash and cash equivalents85
(5,000)
Cash and cash equivalents, beginning of period34,970
29,781
Cash and cash equivalents, end of period$35,055
$24,781
Effect of exchange rate changes on cash, cash equivalents and restricted cashEffect of exchange rate changes on cash, cash equivalents and restricted cash(466)732 
Net change in cash, cash equivalents and restricted cashNet change in cash, cash equivalents and restricted cash(16,156)(27,063)
Cash, cash equivalents and restricted cash, beginning of periodCash, cash equivalents and restricted cash, beginning of period92,371 102,450 
Cash, cash equivalents and restricted cash, end of periodCash, cash equivalents and restricted cash, end of period$76,215 $75,387 
Supplemental disclosure of cash flow information: Supplemental disclosure of cash flow information:
Cash paid (received) during the period for: Cash paid (received) during the period for:
Interest$2,612
$3,071
Interest$2,672 $1,767 
Income taxes(2,972)8,801
Income taxes(3,414)9,230 
Operating lease liabilitiesOperating lease liabilities13,147 13,280 
Non-cash transactions: Non-cash transactions:
Property, plant, and equipment purchased but not yet paid2,863
2,244
Non-cash acquisition adjustments—
3,783
Property and equipment purchased but not yet paidProperty and equipment purchased but not yet paid1,614 945 
Right-of-use assets obtained in exchange for new operating lease liabilitiesRight-of-use assets obtained in exchange for new operating lease liabilities8,672 10,825 
See accompanying notes to consolidated financial statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(unaudited)
NOTE 1:
NOTE 1:    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial statement preparation
The accompanying unaudited consolidated financial statements (“financial statements”) of TrueBlue, Inc. (the “Company,“company,” “TrueBlue,” “we,” “us,” and “our”) are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and rules and regulations of the Securities and Exchange Commission.Commission for interim financial information. Accordingly, certain information and footnote disclosures usually found in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The financial statements reflect all adjustments which, in the opinion of management, are necessary to fairly state the financial statements for the interim periods presented. We follow the same accounting policies for preparing both quarterly and annual financial statements.

We also considered COVID-19 related impacts to our estimates, as appropriate, within our financial statements and there may be changes to those estimates in future periods. However, we believe that the accounting estimates used are appropriate after considering the increased uncertainties surrounding the severity and duration of COVID-19. These estimates and assumptions are subject to inherent uncertainties, which may result in actual future amounts differing from reported estimated amounts.

These financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2017.December 29, 2019. The results of operations for the thirteen and thirty-nine weeks ended October 1, 2017,September 27, 2020 are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period.

Goodwill and indefinite-lived intangible assets

We evaluate goodwill and indefinite-lived intangible assets for impairment on an annual basis as of the first day of our second fiscal quarter, and more frequently if an event occurs or circumstances change that would indicate impairment may exist. These events or circumstances could include a significant change in the business climate,operating performance indicators, competition, customer engagement, legal factors, or sale or disposition of a significant portion of a reporting unit. We monitor the existence of potential impairment indicators throughout the fiscal year.
Based on our annual goodwill impairment test performed as of the first day of our second fiscal quarter, all reporting units’ fair values were substantially in excess of their respective carrying values. We consider a reporting unit’s fair value to be substantially in excess of its carrying value at a 20% premium or greater. Accordingly, no impairment loss was recognized for the thirty-nine weeks ended October 1, 2017. Based on our test performed in the prior year, we recorded a goodwill impairment charge of $65.9 million for the thirty-nine weeks ended September 23, 2016.

We performed our annual indefinite-lived intangible asset impairment test as of the first day of our second fiscal quarter and determined that the estimated fair values exceeded the carrying amounts for both of our indefinite-lived trade names. Accordingly, no impairment loss was recognized for the thirty-nine weeks ended October 1, 2017. Based on our test performed in the prior year, we recorded an impairment charge of $4.5 million for the thirty-nine weeks ended September 23, 2016.

Acquired intangible assets and other long-lived assets

We generally record acquired intangible assets that have finite useful lives, such as customer relationships and trade names/trademarks, in connection with business combinations. We review intangible assets that have finite useful lives and other long-lived assets whenever an event or change in circumstances indicates that the carrying value of the asset may not be recoverable. Based on our review there was no impairment loss recognized for the thirty-nine weeks ended October 1, 2017. In the prior year, we recorded an impairment to our acquired trade names/trademarks intangible assets of $4.3 million during the thirteen weeks ended September 23, 2016, and also recorded an impairment to our customer relationships intangible assets of $28.9 million during the first half of fiscal 2016.

Stock repurchases

During the thirteen weeks ended October 1, 2017, we repurchased the remaining $13.9 million available under our $75.0 million share repurchase program. Under this program we repurchased and retired 4.8 million shares of our common stock at an average share price of $15.52, which excludes commissions. On September 15, 2017, our Board of Directors authorized a $100 million share repurchase program of our outstanding common stock. The share repurchase program does not obligate us to acquire any particular amount of common stock and does not have an expiration date. There have been no repurchases under this new program during the thirteen weeks ended October 1, 2017.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Recently adopted accounting standards

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

Recently issued accounting pronouncements not yet adopted

In May 2017, the FASB issued guidance to provide clarity and reduce diversity in practice when accounting for a change to the terms or conditions of share-based payment awards. The objective is to reduce the scope of transactions that would require modification accounting. Disclosure requirements remain unchanged. This amended guidance is effective for fiscal years and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue), with early adoption permitted. We plan to adopt this guidance on the effective date and do not expect the adoption to have a material impact on our financial statements.

In November 2016, the FASB issued guidance to amend the presentation of restricted cash and restricted cash equivalents on the statement of cash flows. The standard requires restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This amended guidance is effective for fiscal years and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue), with early adoption permitted. We plan to adopt this guidance on the effective date. Changes in restricted cash and cash equivalents recorded in cash flows from investing were $8.6 million and $0.7 million for the thirty-nine weeks ended October 1, 2017 and September 23, 2016, respectively.

In October 2016, FASB issued guidance on the accounting for income tax effects of intercompany sales or transfers of assets other than inventory. The guidance requires entities to recognize the income tax impact of an intra-entity sale or transfer of an asset other than inventory when the sale or transfer occurs, rather than when the asset has been sold to an outside party. This guidance is effective for fiscal years and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue), with early adoption permitted. The guidance will require a modified retrospective application with a cumulative catch-up adjustment to opening retained earnings. We plan to adopt this guidance on the effective date and do not expect the adoption to have a material impact on our financial statements.

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

Credit losses
In June 2016, the FASBFinancial Accounting Standards Board issued guidance on accounting for credit losses on financial instruments. This guidance sets forth a current expected credit loss model (“CECL”), which requires the measurement of allcredit 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 for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replacesforecasted information rather than the existing incurred loss model and is applicable to the measurementprevious methodology of delaying recognition of credit losses on financial assets measured at amortized cost and some off-balance sheet exposures, as well as trade account receivables.until it is probable a loss has been incurred. This guidance is effective for fiscal years beginning after December 15, 2019 (Q1 2020 for TrueBlue) with early adoption permitted no sooner than Q1 2019. A modified retrospective approach is required for all investments, except debt securities for which an other-than-temporary impairment had been recognized prior to the effective date, which will require a prospective transition approach. We plan to adopt this guidance on the effective date and are currently assessing the impact of the adoption of this guidance on our financial statements.

In February 2016, the FASB issued guidance on lease accounting. The new guidance will continue to classify leases as either finance or operating and will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet with classification affecting the pattern of expense recognition in the statement of income. This guidance is effective for annual and interim periods beginning after December 15, 2018 (Q1 2019 for TrueBlue), and early adoption is permitted. A modified

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


retrospective approach is required for all leases existing or entered into afterwas adopted at the beginning of the earliest comparative period infirst quarter of 2020. We were required to apply the consolidated financial statements. We plan to adopt the guidance on the effective date. We are currently evaluating the impact of this guidance on our financial statements and expect that, upon adoption, a majority of our operating lease commitments will be recognized on our Consolidated Balance Sheets as operating lease liabilities and right-of-use assets. We do not expect the adoption to have a material impact on the pattern of expense recognition in our Consolidated Statements of Operations and Comprehensive Income.

In January 2016, the FASB issued guidance on the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The guidance is effective for annual and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue). Early adoption of the amendments in the guidance is not permitted, with limited exceptions, and should be appliednew standard by means of a cumulative-effect adjustment to the balance sheetopening retained earnings as of the beginning of the fiscal yearfirst quarter of adoption. We plan to adopt the guidance on the effective date. We do not expect the2020. The total impact upon adoption to have a material impact on our consolidatedopening retained earnings was immaterial to both the individual financial statements.
In May 2014, the FASB issued guidance outlining a single comprehensive model for accounting for revenue arising from contracts with customers, which supersedes the current revenue recognition guidance. This guidance requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance requires enhanced disclosures, including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition. The guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgmentsassets affected as well as assets recognized from costs incurred to obtain or fulfill a contract. The guidance provides two methods of initial adoption: retrospective for all periods presented (full retrospective), or a cumulative adjustment in the year ofaggregate.
The following policies have been updated to reflect our adoption (modified retrospective). Since the issuance of the original standard, the FASB has issued several other subsequent updates including the following: 1) clarification of the implementation guidance on principal versus agent considerations; 2) further guidance on identifying performance obligations in a contract as well as clarifications on the licensing implementation guidance; and 3) additional guidance and practical expedients in response to identified implementation issues. The effective date is for annual and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue). We expect to adopt the guidance using the modified retrospective approach.

We established a cross-functional implementation team consisting of representatives from our business segments and various departments. We utilized a bottoms-up approach to analyze the impact of the standard on our various revenue streams by reviewing our current contracts with customers, accounting policies, and business practices to identify potential differences that would result from applying the requirements of the new standard.standard on accounting for credit losses on financial instruments.
Accounts receivable and allowance for credit losses
Accounts receivable are recorded at the invoiced amount. We establish an estimate for the allowance for credit losses resulting from the failure of our clients to make required payments by applying an aging schedule to pools of assets with similar risk characteristics. Based on an analysis of the risk characteristics of our clients and associated receivables, we have concluded our pools are as follows:
•PeopleReady and Centerline Drivers (“Centerline”) have a large, diverse set of clients, generally with frequent, low dollar invoices due to the daily nature of the work we perform. This results in high turnover in accounts receivable and lower rates of non-payment.
•PeopleManagement On-Site has a smaller number of clients, and follows a contractual billing schedule. The invoice amounts are higher than that of PeopleReady and Centerline, with longer payment terms.
•PeopleScout has a smaller number of clients, and generally sends invoices on a consolidated basis for a client. Invoice amounts are generally higher for PeopleScout than for PeopleManagement On-Site, with similar payment terms.
When specific clients are identified as no longer sharing the same risk profile as their current pool, they are removed from the pool and evaluated separately. The credit loss rates applied to each aging category by pool are based on current collection
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efforts, historical collection trends, write-off experience, client credit risk, current economic data and forecasted information. The allowance for credit loss is reviewed quarterly and represents our best estimate of the amount of expected credit losses. Each month, past due or delinquent balances are identified based upon a review of aged receivables performed by collections and operations. Past due balances are written off when it is probable the receivable will not be collected. Changes in the processallowance for credit losses are recorded in selling, general and administrative (“SG&A”) expense on the Consolidated Statements of making appropriate changesOperations and Comprehensive Income (Loss).
Due to the uncertain economic environment, it is difficult to estimate the impact caused by COVID–19 on our clients. However, the allowance for credit loss for accounts receivable as of September 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 credit losses for accounts receivable during the thirty-nine weeks ended September 27, 2020 was as follows:
(in thousands)
Beginning balance$4,288 
Cumulative-effect adjustment (1)524 
Current period provision6,582 
Write-offs(5,925)
Foreign currency translation(22)
Ending balance$5,447 
(1)As a result of our adoption of the accounting standard for credit losses, we recognized a cumulative-effect adjustment to our business processes, and controls to support recognition and disclosure under the new standard. We are substantially complete with our evaluationaccount receivable allowance of $0.5 million as of the potentialbeginning of the first quarter of 2020.
Restricted cash and investments
We establish an allowance for credit loss for our held-to-maturity debt securities using a discounted cash flow method including a probability of default rate based on the issuer’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 September 27, 2020.
Workers’ compensation claims reserves
We establish an allowance for credit loss for our insurance receivables using a probability of default and losses expected upon default method, with the probability of default rate based on the third-party insurance carrier’s credit rating. Changes in the allowance for credit losses are recorded in cost of services on the Consolidated Statements of Operations and Comprehensive Income (Loss). The cumulative-effect adjustment to our workers’ compensation insurance receivables as a result of adopting CECL as of the beginning of the first quarter of 2020 was immaterial, as was the allowance as of September 27, 2020.
Reclassifications
Certain previously reported amounts have been reclassified to conform to the current presentation. Specifically, the company has made certain reclassifications between cost of services and SG&A expense to more accurately reflect the costs of delivering our services. Such reclassifications did not have a significant impact that adoptingon the new standard willcompany’s gross profit or SG&A expense.
Certain immaterial prior year amounts have also been reclassified within cash flows from investing activities on our financial statements. Revenue from substantially allConsolidated Statements of our contracts with customers will continueCash Flows to be recognized over time as servicesconform to current year presentation.
Recently issued accounting pronouncements not yet adopted
There are rendered. We dono accounting pronouncements which have not anticipate the adoption of this guidance will have a material impact on our financial reporting other than expanded disclosures.

Other accounting standardsyet been adopted that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a materialsignificant impact on our financial statements upon adoption.

Subsequent events

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.

related disclosures.
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NOTE 2:FAIR VALUE MEASUREMENT
NOTE 2:    FAIR VALUE MEASUREMENT
Assets measured at fair value on a recurring basis
Our assets and liabilities measured at fair value on a recurring basis consisted of the following:
September 27, 2020
(in thousands)Total fair valueQuoted prices in active markets for identical assets (level 1)Significant other observable inputs (level 2)Significant unobservable inputs (level 3)
Cash and cash equivalents$28,233 $28,233 $0 $0 
Restricted cash and cash equivalents47,982 47,982 0 0 
Cash, cash equivalents and restricted cash (1)$76,215 $76,215 $0 $0 
Municipal debt securities$72,354 $0 $72,354 $0 
Corporate debt securities88,136 0 88,136 0 
Agency mortgage-backed securities713 0 713 0 
U.S. government and agency securities1,139 0 1,139 0 
Restricted investments classified as held-to-maturity$162,342 $0 $162,342 $0 
Deferred compensation investments (2)$12,950 $12,950 $0 $0 
 October 1, 2017
(in thousands)Total Fair ValueQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Financial assets:    
Cash and cash equivalents (1)$35,055
$35,055
$—
$—
Restricted cash and cash equivalents (1)59,788
59,788
—
—
Other restricted assets (2)21,115
21,115
—
—
Restricted investments classified as held-to-maturity165,053
—
165,053
—
December 29, 2019
(in thousands)Total fair valueQuoted prices in active markets for identical assets (level 1)Significant other observable inputs (level 2)Significant unobservable inputs (level 3)
Cash and cash equivalents$37,608 $37,608 $0 $0 
Restricted cash and cash equivalents54,763 54,763 0 0 
Cash, cash equivalents and restricted cash (1)$92,371 $92,371 $0 $0 
Municipal debt securities$74,236 $0 $74,236 $0 
Corporate debt securities76,068 0 76,068 0 
Agency mortgage-backed securities1,376 0 1,376 0 
U.S. government and agency securities1,051 0 1,051 0 
Restricted investments classified as held-to-maturity$152,731 $0 $152,731 $0 
Deferred compensation investments (2)$13,670 $13,670 $0 $0 
(1)Cash, cash equivalents and restricted cash consist of money market funds, deposits and investments with original maturities of three months or less.
 January 1, 2017
(in thousands)Total Fair ValueQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Financial assets:    
Cash and cash equivalents (1)$34,970
$34,970
$—
$—
Restricted cash and cash equivalents (1)67,751
67,751
—
—
Other restricted assets (2)16,925
16,925
—
—
Restricted investments classified as held-to-maturity145,953
—
145,953
—
     
Financial liabilities:    
Contingent consideration (3)21,600
—
—
21,600
(2)Deferred compensation investments consist of mutual funds and money market funds.

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

Assets measured at fair value on a nonrecurring basis
The following table presentsWe measure the change in the estimated fair value of our liability for contingent consideration measured using significant unobservable inputs (Level 3) for the thirty-nine weeks ended October 1, 2017:
(in thousands) 
Fair value measurement at beginning of period$21,600
Accretion on contingent consideration900
Payment of contingent consideration(22,500)
Fair value measurement at end of period$—
certain non-financial assets on a nonrecurring basis, including goodwill and certain intangible assets. During the secondfirst quarter of 2017,2020, we paid $22.5performed an interim impairment test as of the last day of our first fiscal quarter (March 29, 2020) due to market conditions. As a result of the test, goodwill and client relationship intangible assets with a total carrying value of $221.6 million relatingwere written down to the contingent consideration associated with our acquisition of SIMOS. The purchase pricetheir fair value, and an impairment charge of the contingent consideration of $18.3$175.2 million is reflected in cash flows used in financing activities and the remaining balance of $4.2 million iswas recognized in cash flows used in operating activities as a decrease in Other assets and liabilities.

The preliminary achievement of the defined performance milestone occurred in the fourth quarter of 2016; however, the final determination was subject to a verification period through the payout date in the second quarter of 2017. Amortization of the present value discount was recorded in Interest expense on theour Consolidated Statements of Operations and Comprehensive Income (Loss).
There were no material transfers between Level 1, Level 2, and Level 3 of the fair value hierarchy during for the thirty-nine weeks ended October 1, 2017 or September 23, 2016.

27, 2020. Refer to Note 4: Goodwill and Intangible Assets for additional details on the impairment charge and valuation methodologies.
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The impairment was comprised as follows:
March 29, 2020
(in thousands)Total fair valueQuoted prices in active markets for identical assets (level 1)Significant other observable inputs (level 2)Significant unobservable inputs (level 3)Total impairment loss
Goodwill$31,705 $0 $0 $31,705 $(140,489)
Client relationships14,700 0 0 14,700 (34,700)
Total$46,405 $0 $0 $46,405 $(175,189)
NOTE 3:RESTRICTED CASH AND INVESTMENTS

NOTE 3:    RESTRICTED CASH AND INVESTMENTS
The following is a summary of the carrying value of our restricted cash and investments:
(in thousands)September 27,
2020		December 29,
2019
Cash collateral held by insurance carriers$25,843 $24,612 
Cash and cash equivalents held in Trust18,543 23,681 
Investments held in Trust156,030 149,373 
Deferred compensation investments12,950 13,670 
Company owned life insurance policies12,853 13,126 
Other restricted cash and cash equivalents3,596 6,470 
Total restricted cash and investments$229,815 $230,932 
Held-to-maturity
Restricted cash and investments consist principally ofinclude collateral that has been provided or pledged to insurance carriers for workers’ compensation and state workers’ compensation programs. Our insurance carriers and certain state workers’ compensation programs require us to collateralize a portion of our workers’ compensation obligation. The collateral typically takes the form of cash and cash equivalents and highly rated investment grade securities, primarily in debt and asset-backed securities. The majority of our collateral obligations are held in a trust at the Bank of New York Mellon (“Trust”). Our investments have not resulted in any other-than-temporary impairments for the thirteen and thirty-nine weeks ended October 1, 2017.
The following is a summaryamortized cost and estimated fair value of our restricted cashheld-to-maturity investments held in Trust, aggregated by investment category as of September 27, 2020 and investments:December 29, 2019, were as follows:
September 27, 2020
(in thousands)Amortized costGross unrealized gainsGross unrealized lossesFair value
Municipal debt securities$68,716 $3,638 $0 $72,354 
Corporate debt securities85,629 2,605 (98)88,136 
Agency mortgage-backed securities686 27 0 713 
U.S. government and agency securities999 140 0 1,139 
Total held-to-maturity investments$156,030 $6,410 $(98)$162,342 
December 29, 2019
(in thousands)Amortized costGross unrealized gainsGross unrealized lossesFair value
Municipal debt securities$72,017 $2,219 $0 $74,236 
Corporate debt securities75,000 1,102 (34)76,068 
Agency mortgage-backed securities1,357 21 (2)1,376 
U.S. government and agency securities999 52 0 1,051 
Total held-to-maturity investments$149,373 $3,394 $(36)$152,731 
(in thousands)October 1,
2017		January 1,
2017
Cash collateral held by insurance carriers$29,122
$34,910
Cash and cash equivalents held in Trust30,666
32,841
Investments held in Trust163,270
146,517
Other (1)21,115
16,925
Total restricted cash and investments$244,173
$231,193

(1)Primarily consists of deferred compensation plan accounts, which are comprised of mutual funds classified as available-for-sale securities.
The following tables present fair value disclosures for our held-to-maturity investments, which are carried at amortized cost:
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 October 1, 2017
(in thousands)Amortized CostGross Unrealized GainGross Unrealized LossFair Value
Municipal debt securities$76,373
$1,561
$(233)$77,701
Corporate debt securities81,395
572
(166)81,801
Agency mortgage-backed securities4,502
36
(13)4,525
U.S. government and agency securities1,000
26
—
1,026
 $163,270
$2,195
$(412)$165,053
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 January 1, 2017
 (in thousands)Amortized CostGross Unrealized GainGross Unrealized LossFair Value
Municipal debt securities$71,618
$443
$(865)$71,196
Corporate debt securities68,934
212
(352)68,794
Agency mortgage-backed securities5,965
30
(32)5,963
 $146,517
$685
$(1,249)$145,953
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amortized cost and fair value by contractual maturity of our held-to-maturity investments are as follows:
October 1, 2017September 27, 2020
(in thousands)Amortized CostFair Value(in thousands)Amortized costFair value
Due in one year or less$16,796
$16,816
Due in one year or less$21,395 $21,605 
Due after one year through five years83,156
83,764
Due after one year through five years111,992 116,813 
Due after five years through ten years63,318
64,473
Due after five years through ten years22,643 23,924 
$163,270
$165,053
Total held-to-maturity investmentsTotal held-to-maturity investments$156,030 $162,342 
Actual maturities may differ from contractual maturities because the issuers of certain debt securities have the right to call or prepay their obligations without penalty. We have no significant concentrations of counterparties in our held-to-maturity investment portfolio.

Deferred compensation investments and company owned life insurance policies
We hold 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 September 27, 2020 and September 29, 2019, included in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income (Loss), were as follows:
Thirteen weeks endedThirty-nine weeks ended
(in thousands)September 27,
2020		September 29,
2019		September 27,
2020		September 29,
2019
Unrealized gains (losses)$1,452 $(115)$(258)$3,078 
NOTE 4:    GOODWILL AND INTANGIBLE ASSETS
Goodwill
The following table reflects changes in the carrying amount of goodwill during the period by reportable segments:
(in thousands)PeopleReadyPeopleManagementPeopleScoutTotal company
Balance atDecember 29, 2019
Goodwill before impairment$106,304 $81,092 $145,181 $332,577 
Accumulated impairment loss(46,210)(33,700)(15,169)(95,079)
Goodwill, net60,094 47,392 130,012 237,498 
Impairment loss0 (45,901)(94,588)(140,489)
Foreign currency translation0 0 (2,797)(2,797)
Balance atSeptember 27, 2020
Goodwill before impairment106,304 81,092 142,384 329,780 
Accumulated impairment loss(46,210)(79,601)(109,757)(235,568)
Goodwill, net$60,094 $1,491 $32,627 $94,212 
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Intangible assets
Finite-lived intangible assets
The following table presents our purchased finite-lived intangible assets:
 September 27, 2020December 29, 2019
(in thousands)Gross carrying amountAccumulated
amortization		Net
carrying
amount		Gross carrying amountAccumulated
amortization		Net
carrying
amount
Finite-lived intangible assets (1):
Client relationships (2)$96,978 $(73,725)$23,253 $149,299 $(83,317)$65,982 
Trade names/trademarks1,978 (527)1,451 2,052 (441)1,611 
Technologies0 0 0 600 (520)80 
Total finite-lived intangible assets$98,956 $(74,252)$24,704 $151,951 $(84,278)$67,673 
(1)Excludes assets that are fully amortized.
(2)Balance at September 27, 2020 is net of impairment loss of $34.7 million recorded in the thirty-nine weeks endedSeptember 27, 2020.
Amortization expense of our finite-lived intangible assets was $2.0 million and $3.9 million for the thirteen weeks ended September 27, 2020 and September 29, 2019, respectively, and $8.1 million and $13.9 million for the thirty-nine weeks ended September 27, 2020 and September 29, 2019, respectively.
Indefinite-lived intangible assets
We also held indefinite-lived trade names/trademarks of $6.0 million as of September 27, 2020 and December 29, 2019.
Impairments
Goodwill
We evaluate goodwill for impairment on an annual basis as of the first day of our fiscal second quarter, and whenever events or circumstances make it more likely than not that an impairment may have occurred. These events or circumstances could include a significant change in the business climate, operating performance indicators, competition, client engagement, legal factors, or sale or disposition of a significant portion of a reporting unit. We monitor the existence of potential impairment indicators throughout the fiscal year.
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.
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 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
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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 loss of $140.5 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the thirty-nine weeks ended September 27, 2020. The goodwill carrying value of $45.9 million for our PeopleManagement On-Site reporting unit was fully impaired. The goodwill impairment charge for PeopleScout RPO and PeopleScout MSP was $92.2 million and $2.4 million, respectively.
Annual impairment test
Given the proximity of our interim impairment measurement date (last day of our fiscal first quarter - March 29, 2020) to our annual goodwill impairment measurement date (first day of our fiscal second quarter - March 30, 2020), we performed a qualitative assessment to determine whether it was more likely than not that the fair value of any of our reporting units is 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 September 27, 2020. The remaining goodwill balances for PeopleScout RPO and PeopleScout MSP were $22.9 million and $9.7 million, respectively, as of September 27, 2020. Should actual results decline further or longer than we have currently estimated, the remaining goodwill balances may be further impaired. We will continue to closely monitor the operational performance of these reporting units.
Finite-lived intangible assets
We generally record acquired intangible assets that have finite useful lives, such as client relationships, in connection with business combinations. We review intangible assets that have finite useful lives and other long-lived assets whenever an event or change in circumstances indicates that the carrying value of the asset may not be recoverable. Factors considered important that could result in an impairment review include, but are not limited to, significant underperformance relative to historical or planned operating results or significant changes in business strategies. We estimate the recoverability of these assets by comparing the carrying amount of the asset to the future undiscounted cash flows that we expect the asset to generate. An impairment loss is recognized when the estimated undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value based on discounted cash flow analysis or other valuation techniques.
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 for certain of our acquired client relationships intangible assets. As a result of this impairment test, we recorded a non-cash impairment loss 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 thirty-nine weeks ended September 27, 2020. The impairment charge for PeopleScout RPO and PeopleManagement On-Site client relationship intangible assets was $25.0 million and $9.7 million, respectively. Considerable management judgment was necessary to determine key assumptions, including projected revenue of acquired clients and an appropriate discount rate of 12.0%. Additionally, we did not identify any events or conditions that make it more likely than not that an impairment may have occurred during the period from March 30, 2020 to September 27, 2020. The remaining client relationship intangible asset balances related to assets impaired for PeopleScout RPO and PeopleManagement On-Site were $5.5 million and $7.6 million, respectively, as of September 27, 2020.
Indefinite-lived intangible assets
We have indefinite-lived intangible assets related to our Staff Management and PeopleScout trade names. We test our trade names annually for impairment, and when indicators of potential impairment exist. We utilize the relief from royalty method to determine the fair value of each of our trade names. If the carrying value exceeds the fair value, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value. Management uses considerable judgment to determine key assumptions, including projected revenue, royalty rates and appropriate discount rates.
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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 for 2020 and determined that the estimated fair values exceeded the carrying amounts for our indefinite-lived trade names. Accordingly, no impairment loss was recognized.
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 is 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 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 September 27, 2020.
NOTE 4:5:    WORKERS’ COMPENSATION INSURANCE AND RESERVES

We provide workers’ compensation insurance for our temporarycontingent and permanent employees. The majority of our current workers’ compensation insurance policies cover claims for a particular event above a $2.0 million deductible limit, on a “per occurrence” basis. This results in our being substantially self-insured.
Our workers’ compensation reserve for claims below the deductible limit is discounted to its estimated net present value using discount rates based on average returns of “risk-free” U.S. Treasury instruments available during the year in which the liability was incurred. The weighted average discount rate was 1.6%1.8% and 2.0% at October 1, 2017September 27, 2020 and January 1, 2017.December 29, 2019, respectively. Payments made against self-insured claims are made over a weighted average period of approximately 4.55 years at October 1, 2017.as of September 27, 2020.
The following table below presents a reconciliation of the undiscounted workers’ compensation reserve to the discounted workers’ compensation reserve for the periods presented (in thousands):presented:
(in thousands)October 1,
2017		January 1,
2017		(in thousands)September 27,
2020		December 29,
2019
Undiscounted workers’ compensation reserve$295,969
$292,169
Undiscounted workers’ compensation reserve$272,467 $274,934 
Less discount on workers’ compensation reserve16,634
14,818
Less discount on workers’ compensation reserve17,673 19,316 
Workers' compensation reserve, net of discount279,335
277,351
Workers’ compensation reserve, net of discountWorkers’ compensation reserve, net of discount254,794 255,618 
Less current portion76,406
79,126
Less current portion65,860 73,020 
Long-term portion$202,929
$198,225
Long-term portion$188,934 $182,598 
Payments made against self-insured claims were $48.2$40.6 million and $55.6$47.3 million for the thirty-nine weeks ended October 1, 2017September 27, 2020 and September 23, 2016,29, 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 September 27, 2020 and December 29, 2019, the weighted average rate was 1.5% and 2.4%, respectively. The claim payments are made and the corresponding reimbursements from our insurance carriers are received over an estimated weighted average period of approximately 1516 years. The discounted workers’ compensation reserve for excess claims was $50.7$53.1 million and $52.9$45.3 million, and the corresponding gross receivable for the insurance on excess claims was $52.1 million and $45.3 million as of October 1, 2017September 27, 2020 and January 1, 2017,December 29, 2019, respectively. The discounted receivables from insurance companies, net of valuation allowance, were $45.7 million and $48.9 million as of October 1, 2017 and January 1, 2017, respectively, and are included in Other assets, net on the accompanying Consolidated Balance Sheets.
Workers’ compensation expensecost consists primarily of $22.1changes in self-insurance reserves net of changes in discount, monopolistic jurisdictions’ premiums, insurance premiums and other miscellaneous expenses. Workers’ compensation cost of $14.4 million and $23.4$18.0 million was recorded in Costcost of services on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the thirteen weeks ended October 1, 2017September 27, 2020 and September 23, 2016, respectively. Workers’ compensation expense of $64.229, 2019, respectively, and $38.0 million and $72.1$46.2 million was recorded in Cost of services foror the thirty-nine weeks ended October 1, 2017September 27, 2020 and September 23, 2016,29, 2019, respectively.
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NOTE 6:    LONG-TERM DEBT
On March 16, 2020, we entered into a first amendment to our credit agreement with Bank of America, N.A., Wells Fargo Bank, N.A., PNC Bank, N.A., KeyBank, N.A. and HSBC Bank USA, N.A. dated as of July 13, 2018, 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.
The amended credit agreement provides for a revolving line of credit of up to $300.0 million with an option, subject to lender approval, to increase the amount to $450.0 million. Included in the Revolving Credit Facility is a $30.0 million sub-limit for “Swingline” loans and a $125.0 million sub-limit for letters of credit. At September 27, 2020, $1.5 million was drawn on the Revolving Credit Facility as a Swingline loan and $6.1 million was utilized by outstanding standby letters of credit, leaving $292.4 million unused under the Revolving Credit Facility, which is constrained by our most restrictive covenant at this time making $138.5 million available for additional borrowings. At December 29, 2019, $37.1 million was drawn on the Revolving Credit Facility, which included a $17.1 million Swingline loan.
Under the terms of the Revolving Credit Facility, we pay a variable rate of interest on funds borrowed under the revolving line of credit in excess of the Swingline loans, based on the London Interbank Offered Rate (“LIBOR”) plus an applicable spread between 1.25% and 3.50%. Alternatively, at our option, we may pay interest based on a base rate plus an applicable spread between 0.25% and 1.50%. The base rate is the greater of the prime rate (as announced by Bank of America), or the federal funds rate plus 0.50%. The applicable spread on LIBOR is 3.50% through the end of fiscal 2020, and will be determined by the consolidated leverage ratio thereafter, as defined in the amended credit agreement.
Under the terms of the Revolving Credit Facility, we are required to pay a variable rate of interest on funds borrowed under the Swingline loan based on the base rate plus applicable spread between 0.25% and 1.50%, as described above. At September 27, 2020, the applicable spread on the base rate was 1.50% and the base rate was 3.25%, resulting in an interest rate of 4.75%.
A commitment fee between 0.25% and 0.50% is applied against the Revolving Credit Facility’s unused borrowing capacity, with the specific rate determined by the consolidated leverage ratio, as defined in the amended credit agreement. Letters of credit are priced at a margin between 1.00% and 3.25%, plus a fronting fee of 0.50%.
Obligations under the Revolving Credit Facility are guaranteed by TrueBlue and material U.S. domestic subsidiaries, and are secured by substantially all of the assets of TrueBlue and material U.S. domestic subsidiaries. The amended 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, are 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 million. As of September 27, 2020, our asset coverage ratio was greater than 1.00 at 22.1.
•Liquidity greater than $150 million, defined as the sum of unrestricted cash and availability under the aggregate revolving commitments. As of September 27, 2020, our liquidity was greater than the $150 million at $320.6 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 million for the trailing three quarters ending Q1 2021 and greater than $15 million for the trailing four quarters ending Q2 2021.
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 September 27, 2020, we were in compliance with all effective covenants related to the Revolving Credit Facility.
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NOTE 5:
NOTE 7:    COMMITMENTS AND CONTINGENCIES

Workers’ compensation commitments

We have provided our insurance carriers and certain states with commitments in the form and amounts listed below:
(in thousands)September 27,
2020		December 29,
2019
Cash collateral held by workers’ compensation insurance carriers$22,076 $22,256 
Cash and cash equivalents held in Trust18,543 23,681 
Investments held in Trust156,030 149,373 
Letters of credit (1)6,109 6,202 
Surety bonds (2)20,616 20,731 
Total collateral commitments$223,374 $222,243 
(in thousands)October 1,
2017		January 1,
2017
Cash collateral held by workers’ compensation insurance carriers$28,343
$28,066
Cash and cash equivalents held in Trust30,666
32,841
Investments held in Trust163,270
146,517
Letters of credit (1)7,748
7,982
Surety bonds (2)19,524
20,440
Total collateral commitments$249,551
$235,846
(1)We have agreements with certain financial institutions to issue letters of credit as collateral.

(1)We have agreements with certain financial institutions to issue letters of credit as collateral.
(2)(2)Our surety bonds are issued by independent insurance companies on our behalf and bear annual fees based on a percentage of the bond, which are determined by each independent surety carrier. These fees do not exceed 2.0% of the bond amount, subject to a minimum charge.

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the bond, which are determined by each independent surety carrier. These fees do not exceed 2.0% of the bond amount, subject to a minimum charge. The terms of these bonds are subject to review and renewal every one to four years and most bonds can be canceled by the sureties with as little as 60 days’ notice.

Legal contingencies and developments
We are involved in various proceedings arising in the normal course of conducting business. We believe the liabilities included in our financial statements reflect the probable loss that can be reasonably estimated. The amounts recorded are immaterial and resolution of those proceedings isare not expected to have a material effect on our results of operations, financial condition or financial condition.cash flows.
NOTE 6:INCOME TAXES

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NOTE 8:    SHAREHOLDERS’ EQUITY
Changes in the balance of each component of shareholders’ equity during the reporting periods were as follows:
Thirteen weeks endedThirty-nine weeks ended
(in thousands)September 27,
2020		September 29,
2019		September 27,
2020		September 29,
2019
Common stock shares
Beginning balance36,052 40,058 38,593 40,054 
Purchases and retirement of common stock(627)(1,115)(3,557)(1,505)
Net issuance under equity plans, including tax benefits48 (11)387 355 
Stock-based compensation(23)0 27 28 
Ending balance35,450 38,932 35,450 38,932 
Common stock amount
Beginning balance$1 $1 $1 $1 
Current period activity— — — — 
Ending balance1 1 1 1 
Retained earnings
Beginning balance430,525 629,022 639,210 606,087 
Net income (loss)8,795 26,676 (149,867)54,358 
Purchases and retirement of common stock (1)0 (22,239)(52,346)(31,316)
Net issuance under equity plans, including tax benefits(177)19 (1,597)(911)
Stock-based compensation2,417 2,859 6,762 8,119 
Change in accounting standard cumulative-effect adjustment (2)0 0 (602)0 
Ending balance441,560 636,337 441,560 636,337 
Accumulated other comprehensive loss
Beginning balance, net of tax(17,765)(14,016)(13,238)(14,649)
Foreign currency translation adjustment386 (1,657)(4,141)(1,024)
Ending balance, net of tax(17,379)(15,673)(17,379)(15,673)
Total shareholders’ equity ending balance$424,182 $620,665 $424,182 $620,665 
(1)Under applicable Washington State law, shares purchased are not displayed separately as treasury stock on our Consolidated Balance Sheets and are treated as authorized but unissued shares. It is our accounting policy to first record these purchases as a reduction to our common stock account. Once the common stock account has been reduced to a nominal balance, remaining purchases are recorded as a reduction to our retained earnings. Furthermore, activity in our common stock account related to stock-based compensation is also recorded to retained earnings until such time as the reduction to retained earnings due to stock repurchases has been recovered.
(2)As a result of our adoption of the accounting standard for credit losses, we recognized a cumulative-effect adjustment to retained earnings of $0.6 million in the first quarter of 2020.
Share repurchase plan

On October 16, 2019, our Board of Directors authorized a $100.0 million share repurchase program of our outstanding common stock. The share repurchase program does not obligate us to acquire any particular amount of common stock and does not have an expiration date. We may choose to purchase shares in the open market, from individual holders, through an accelerated share repurchase program or otherwise. As of September 27, 2020, $66.7 million remains available for repurchase of common stock under the existing authorization. The second amendment to our credit agreement prohibits us from repurchasing shares until July 1, 2021.
As part of the existing share repurchase plan, on February 28, 2020 we entered into an accelerated share repurchase (“ASR”) agreement with a third-party financial institution to repurchase $40.0 million of our common stock. Under the ASR agreement, we paid $40.0 million to the financial institution and received an initial delivery of 2,150,538 shares 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 United States.
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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.
NOTE 9:    INCOME TAXES
Our income tax provision or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment. Our quarterly tax provision and our quarterly estimate of our annual effective tax rate are subject to variation due to several factors, including variability in accurately predicting our pre-tax and taxable income and loss by jurisdiction, tax credits, government audit developments, changes in law,laws, regulations and administrative practices, and relative changes ofin expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income. For example, the impact of discrete items, tax credits, and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower. Except as required under U.S.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in the United States. The CARES Act is an emergency economic aid package to help mitigate the impact of COVID-19. Among other things, the CARES Act provides certain changes to tax law, we do not provide for U.S. taxes on undistributed earnings of our foreign subsidiaries since we consider those earningslaws, including the ability to be permanently invested outside of the U.S.

carry back losses to obtain refunds related to prior year tax returns.
Our effective tax rate for the thirty-nine weeks ended October 1, 2017September 27, 2020 was 27.6%18.7%. The difference between the statutory federal income tax rate of 35.0%21% and our effective income tax rate results primarily from a non-deductible goodwill and intangible asset impairment charge and the impact of the CARES Act and the federal Work Opportunity Tax Credit. This tax creditCredit (“WOTC”). WOTC is designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates. Other differences between the statutory federal income tax rate of 35.0% and our effective tax rate result from state and foreign income taxes, certain non-deductible expenses, tax exempt interest, and tax effects of share basedstock-based compensation.
NOTE 7:
NOTE 10:    NET INCOME (LOSS) PER SHARE

Diluted common shares were calculated as follows:
Thirteen weeks endedThirty-nine weeks ended
(in thousands, except per share data)September 27,
2020		September 29,
2019		September 27,
2020		September 29,
2019
Net income (loss)$8,795 $26,676 $(149,867)$54,358 
Weighted average number of common shares used in basic net income (loss) per common share34,597 38,741 35,643 39,090 
Dilutive effect of non-vested restricted stock307 472 0 389 
Weighted average number of common shares used in diluted net income (loss) per common share34,904 39,213 35,643 39,479 
Net income (loss) per common share:
Basic$0.25 $0.69 $(4.20)$1.39 
Diluted$0.25 $0.68 $(4.20)$1.38 
Anti-dilutive shares595 220 1,006 245 
 Thirteen weeks ended Thirty-nine weeks ended
(in thousands, except per share amounts)October 1,
2017		September 23,
2016		 October 1,
2017		September 23,
2016
Net income (loss)$21,221
$23,429
 $39,029
$(33,338)
      
Weighted average number of common shares used in basic net income (loss) per common share41,046
41,762
 41,420
41,651
Dilutive effect of non-vested restricted stock230
294
 251
—
Weighted average number of common shares used in diluted net income (loss) per common share41,276
42,056

41,671
41,651
Net income (loss) per common share:     
Basic$0.52
$0.56
 $0.94
$(0.80)
Diluted$0.51
$0.56
 $0.94
$(0.80)
      
Anti-dilutive shares354
302
 388
521

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NOTE 8:ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in the balance of each component of accumulated other comprehensive loss during the reporting periods were as follows:
 Thirteen weeks ended
 October 1, 2017September 23, 2016
(in thousands)Balance at beginning of periodCurrent period other comprehensive incomeBalance at end of period Balance at beginning of periodCurrent period other comprehensive incomeBalance at end of period
Foreign currency translation adjustment$(9,344)$1,143
$(8,201) $(11,420)$1,247
$(10,173)
Unrealized gain (loss) on investments (1)897
424
1,321
 (337)784
447
Total other comprehensive income (loss), net of tax$(8,447)$1,567
$(6,880) $(11,757)$2,031
$(9,726)
 Thirty-nine weeks ended
 October 1, 2017September 23, 2016
(in thousands)Balance at beginning of periodCurrent period other comprehensive incomeBalance at end of period Balance at beginning of periodCurrent period other comprehensive incomeBalance at end of period
Foreign currency translation adjustment$(11,684)$3,483
$(8,201) $(13,514)$3,341
$(10,173)
Unrealized gain (loss) on investments (1)251
1,070
1,321
 (499)946
447
Total other comprehensive income (loss), net of tax$(11,433)$4,553
$(6,880) $(14,013)$4,287
$(9,726)

(1)Consists of deferred compensation plan accounts, which are comprised of mutual funds classified as available-for-sale securities. The tax impact on unrealized gain (loss) on available-for-sale securities was de minimis for the thirteen and thirty-nine weeks ended October 1, 2017 and September 23, 2016, respectively.

There were no material reclassifications out of accumulated other comprehensive loss during the thirteen weeks ended October 1, 2017 or September 23, 2016, nor during the thirty-nine weeks ended October 1, 2017 or September 23, 2016.
NOTE 9:NOTE 11:    SEGMENT INFORMATION

Commencing in the fourth quarter of 2016, we changed our internal reporting structure to better align our operations with customer needs and how our chief operating decision maker, our Chief Executive Officer, currently evaluates financial results to determine resource allocation and assess performance. As a result of this change, our former Staffing Services reportable segment has been separated into two reportable segments, PeopleReady and PeopleManagement, and our former Managed Services reportable segment has been renamed PeopleScout. In addition, we changed our methodology for allocating certain corporate costs to our segments, which decreased our corporate unallocated expenses. The prior year amounts have been recast to reflect this change for consistency purposes.
Our service lines, which are our operating segments and our reportable segments are described below:
Our PeopleReady reportable segment provides blue-collar, contingent staffing through the PeopleReady service line.operating segment. PeopleReady provides on-demand and skilled labor in thea broad range of industries that include construction, manufacturing and logistics, warehousing and distribution, retail, manufacturing, warehousing, logistics,waste and recycling, energy, construction, hospitality, general labor and other industries.others.
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Our PeopleManagement reportable segment provides contingent labor and outsourced industrial workforce solutions, primarily on-premise contingent staffing and on-premise management of those contingent staffing serviceson-site at the client’s facility, through the following operating segments, which we have aggregated into one reportable segment in accordance with U.S. GAAP:
Staff Management | SMX•On-Site: Exclusive recruitment and on-premise management of a facility’s contingent industrial workforce;
SIMOS Insourcing Solutions: On-premiseOn-site management and recruitment for the contingent industrial workforce of warehouse/manufacturing, warehouse, and distribution operations;
facilities; and

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•Centerline Drivers: Recruitment and management of temporarycontingent and dedicated commercial drivers to the transportation and distribution industries; and
industries.
PlaneTechs: Recruitment and on-premise management of skilled mechanics and technicians to the aviation and transportation industries.
Our PeopleScout reportable segment provides high-volume, permanent employee recruitment process outsourcing, employer branding services and management of outsourced labor service providers through the following operating segments, which we have aggregated into one reportable segment in accordance with U.S. GAAP:
•PeopleScout RPO: Outsourced recruitment of permanent employees on behalf of clients;clients and
employer branding services; and
•PeopleScout MSP: Management of multiple third partythird-party staffing vendors on behalf of clients.
We have two primary measures of segment performance: revenue from services and segment earnings before interest, taxes, depreciation and amortization (“Segment EBITDA”). Segment EBITDA includes net sales to third parties, related cost of sales, selling, general and administrative expenses, and goodwill and intangible impairment charges directly attributable to the reportable segment together with certain allocated corporate general and administrative expenses. Segment EBITDA excludes unallocated corporate general and administrative expenses.

The following table presents our revenue disaggregated by major source and segment and a reconciliation of segment revenue from services to total company revenue:
Thirteen weeks endedThirty-nine weeks ended
(in thousands)September 27,
2020		September 29,
2019		September 27,
2020		September 29,
2019
Revenue from services (1):
Contingent staffing
PeopleReady$293,546 $413,132 $801,991 $1,109,261 
PeopleManagement147,241 159,315 407,516 470,889 
Human resource outsourcing
PeopleScout33,743 64,346 118,219 197,589 
Total company$474,530 $636,793 $1,327,726 $1,777,739 
 Thirteen weeks ended Thirty-nine weeks ended
(in thousands)October 1,
2017		September 23,
2016		 October 1,
2017		September 23,
2016
Revenue from services:     
PeopleReady$414,995
$435,783
 $1,118,331
$1,198,067
PeopleManagement196,835
216,834
 581,408
682,605
PeopleScout48,950
44,480
 139,407
135,017
Total Company$660,780
$697,097

$1,839,146
$2,015,689

(1)Inter-segment revenue is minimal.
The following table presents a reconciliation of Segment EBITDAsegment profit to income (loss) before tax expense:expense (benefit):
 Thirteen weeks ended Thirty-nine weeks ended
(in thousands)October 1,
2017		September 23,
2016		 October 1,
2017		September 23,
2016
Segment EBITDA (1):     
PeopleReady$28,572
$34,100
 $57,448
$75,198
PeopleManagement6,940
3,520
 18,759
(70,218)
PeopleScout10,277
8,358
 29,071
12,527
 45,789
45,978
 105,278
17,507
Corporate unallocated(5,322)(6,537) (16,700)(23,310)
Depreciation and amortization(11,189)(11,690) (34,650)(34,673)
Income (loss) from operations29,278
27,751
 53,928
(40,476)
Interest and other income (expense), net(219)(867) 10
(2,773)
Income (loss) before tax expense$29,059
$26,884
 $53,938
$(43,249)

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

Thirteen weeks endedThirty-nine weeks ended
(in thousands)September 27,
2020		September 29,
2019		September 27,
2020		September 29,
2019
Segment profit:
PeopleReady$18,714 $30,878 $27,002 $64,143 
PeopleManagement4,574 3,381 6,063 9,815 
PeopleScout349 10,774 75 32,424 
Total segment profit23,637 45,033 33,140 106,382 
Corporate unallocated(5,968)(5,769)(16,106)(16,680)
Work Opportunity Tax Credit processing fees(174)(240)(309)(720)
Acquisition/integration costs0 (362)0 (1,612)
Goodwill and intangible asset impairment charge0 0 (175,189)0 
Other benefits (costs)2,869 (727)(1,558)(2)
Depreciation and amortization(7,652)(8,749)(24,002)(28,528)
Income (loss) from operations12,712 29,186 (184,024)58,840 
Interest and other income (expense), net(174)471 (323)1,851 
Income (loss) before tax expense (benefit)$12,538 $29,657 $(184,347)$60,691 
Asset information by reportable segment is not presented since we do not manage our segments on a balance sheet basis.

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NOTE 12:    SUBSEQUENT EVENT
On October 1, 2020, we took possession of office space we are under contract to lease. The location requires construction and retrofitting before it will be available to serve as our Chicago Headquarters. The lease has a term of 15 years, commencing on April 1, 2021. As a result, we recorded a $29.5 million right-of-use asset and corresponding lease liability as of the date of possession.
Item 2.MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMMENT ON FORWARD LOOKING STATEMENTS
Certain statements in this Form 10-Q, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, the impact of and our ongoing response to COVID-19, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements involve risks and uncertainties, and future events and circumstances could differ significantly from those anticipated in the forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “goal,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially from those expressed or implied in our forward-looking statements, including the risks and uncertainties described in “Risk Factors”“Management’s Discussion and Analysis” (Part II,I, Item 1A2 of this Form 10-Q), “Quantitative“Quantitative and Qualitative Disclosures about Market Risk” (Part I, Item 3 of this Form 10-Q), and “Management’s Discussion and Analysis”“Risk Factors” (Part I,II, Item 21A of this Form 10-Q). We undertake no duty to update or revise publicly any of the forward-looking statements after the date of this report or to conform such statements to actual results or to changes in our expectations, whether because of new information, future events, or otherwise.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide the reader of our accompanying unaudited consolidated financial statements (“financial statements”) with a narrative from the perspective of management on our financial condition, results of operations, liquidity and certain other factors that may affect future results. MD&A is provided as a supplement to, and should be read in conjunction with, our Annual Report on Form 10-K for the fiscal year ended January 1, 2017. MD&A is provided as a supplement to,December 29, 2019, and should be read in conjunction with, our financial statements and the accompanying notes to our financial statements.
OVERVIEW

TrueBlue, Inc. (the “Company,“company,” “TrueBlue,” “we,” “us,”“us” and “our”) is a leading provider of specialized workforce solutions that help our customers createclients achieve business growth and improve efficiency,productivity. In 2019, we connected approximately 724,000 people with work and increase reliability. Our workforce solutions meet customers’ needs for a reliable, efficient workforce in a wide variety of industries.

served approximately 139,000 clients. We report our business as three distinctreportable segments: PeopleReady, PeopleManagement and PeopleScout. See Note 9: 11: Segment Information, to our Consolidated Financial Statementsconsolidated financial statements found in Item 1 of this Quarterly Report on Form 10-Q, for additional details ofon our service linesoperating segments and reportable segments.

segmentscroppeda05.jpg

Our PeopleReadyis segment offers on-demand, industrial staffing; our branch-based blue-collarPeopleManagement segment offers contingent, on-site industrial staffing service. PeopleReady providesand commercial driver services; and our PeopleScout segment offers recruitment process outsourcing (“RPO”) and managed service provider (“MSP”) solutions to a wide rangevariety of staffing solutionsindustries.
The global economy and our business have been dramatically affected by the COVID-19 pandemic. We continue to monitor its impact on all aspects of our business. Throughout the pandemic, our business has remained open and we have continued to provide key services to essential businesses. However, the preventative measures and individual precautions taken to help curb the spread of COVID-19, and the resulting negative impact on the economy, continue to have a severe adverse impact on client demand for contingent, on-demand, generalour services and skilled laborour business results.
Our first priority, with regard to a broad range of industries that include retail, manufacturing, warehousing, logistics, energy, construction, hospitality, and others. PeopleReady helped approximately 122,000 businesses in 2016COVID-19, continues to be more productive by providing easy accessthe safety, health and hygiene of our associates, employees, clients, suppliers and others with whom we partner in our business activities to dependable contingent labor. Additionally, we connected over 414,000 people with workcontinue our operations in 2016. Atthis unprecedented environment. We implemented comprehensive measures across our businesses to keep our workers and clients healthy and safe, including adherence to guidance from the end of the third quarter of fiscal 2017, we had a network of 628 branches across all 50 states, Puerto Rico,Centers for Disease Control and Canada.


Prevention, World Health Organization, Occupational Safety and Health Administration and other key authorities.
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PeopleManagement predominantly encompasses our on-site placement and management services and provides a wide range of workforce management solutions for blue-collar, contingent, on-premise staffing and management of a facility’s workforce. We use distinct brands to market our PeopleManagement contingent workforce solutions and operate as Staff Management | SMX (“Staff Management”), SIMOS Insourcing Solutions (“SIMOS”), PlaneTechs, and Centerline Drivers. Staff Management specializes in exclusive recruitment and on-premise management of a facility’s contingent industrial workforce. SIMOS specializes in exclusive recruitment and on-premise management of warehouse/distribution operations to meet the growing demand for e-commerce and scalable supply chain solutions. PlaneTechs specializes in recruitment and on-premise management of temporary skilled mechanics and techniciansIn response to the aviationrapidly changing market conditions as a result of COVID-19, commencing in March 2020, we have taken actions to reduce our operating expenses while preserving the key strengths of our business to ensure we are prepared when business conditions improve. Additionally, in June 2020, we amended our credit agreement to further enhance our liquidity position and transportation industries. Centerline Drivers specializes in dedicatedwe have implemented initiatives to improve cash flow. Our cost management strategies are on track and temporary truck driverscontinue to preserve our operating results and liquidity. At this time, we have ample liquidity to satisfy our cash needs. However, the transportation and distribution industries. PeopleManagement helped approximately 900 businesses in 2016 to be more productive by providing easy access to dependable blue-collar contingent workforce solutions. Additionally, we connected over 133,000 people with work in 2016. At the endlong-term impacts of the thirdpandemic are difficult to predict. Accordingly, we will continue to evaluate the nature and extent of the impact of COVID-19 on our business, consolidated results of operations, financial condition, and liquidity.

We continue to monitor this rapidly evolving situation and guidance from domestic and international authorities, including federal, state and local public health authorities, and may take additional actions based on their recommendations. There may be developments outside our control requiring us to adjust our operating plan. As such, given the dynamic nature of this situation, it is difficult to estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future. For additional discussion on the uncertainties and business risks associated with COVID-19, refer to “Risk Factors” in Part II, Item 1A of this Form 10-Q.
Third quarter of fiscal 2017, we had 233 on-premise locations at customers’ facilities.

PeopleScout provides outsourced recruitment for permanent employees for all major industries and jobs. Our dedicated recruitment process outsourcing service delivery teams work as an integrated partner with our clients in providing end-to-end talent acquisition services from sourcing candidates to on-boarding employees. In 2016, PeopleScout placed over 268,000 individuals into permanent jobs with 200 clients. Our PeopleScout segment also includes a management service provider business, which provides clients with improved quality and spend management of their contingent labor vendors.

Third Quarter of Fiscal 2017 Highlights

2020 highlights
Revenue from services

Total company revenue declined 25.5% to $661$474.5 million for the thirteen weeks ended October 1, 2017, a 5.2% decrease compared to the same period in the prior year due primarily to lower volumes for staffing services within our PeopleReady business and with our former largest customer, Amazon, in our PeopleManagement business. Excluding this customer, total company revenue declined 2.4% from the same period in the prior year.

We saw improvement in our year-over-year monthly revenue trends for the thirteen weeks ended October 1, 2017. We exited the third quarter of fiscal 2017 with a year-over-year decline of 2.5% for the fiscal month of September 2017, as compared to exiting the second quarter of fiscal 2017 with a year-over-year decline of 8.7% for the fiscal month of June 2017. The improving monthly results were due to better underlying trends across all of our segments.

PeopleReady revenue from services

PeopleReady staffing services declined to $415 million for the thirteen weeks ended October 1, 2017, a 4.8% decrease27, 2020, compared to the same period in the prior year. The decline was primarily due to weaknessa significant drop in residential constructionclient demand associated with government and manufacturing. However, this decline was partially offsetsocietal actions taken to address COVID-19. In particular, the preventive measures and individual precautions taken to help curb the spread of COVID-19 had severe adverse impacts on our operations and business results. Many of our clients have been severely impacted by an increaseCOVID-19 and have reduced their need for our staffing services, which has resulted in revenue of approximately 1% related to the recent hurricanes and improvements in our service-based, hospitality, and retail businesses.

We saw improvement to our year-over-year monthly revenue trends for the thirteen weeks ended October 1, 2017. We exitedlower revenue. During the third quarter, of fiscal 2017 with a year-over-year decline of 1.0% for the fiscal month of September 2017, aswe saw improving trends when compared to exiting the second quarter of fiscal 20172020 with a year-over-year declinerevenue declines of 8.9% for25.5% compared to 39.0% in the fiscal month of June 2017. The improving year-over-year monthly results were due to better underlying trendssecond quarter. This steady improvement in the third quarter was broad-based across allmost of the industries and geographies we serve, except manufacturing.serve.

Wage growthPeopleReady, our largest segment, experienced a revenue decline of 28.9%. PeopleManagement, our lowest margin segment, experienced a revenue decline of 7.6%. PeopleManagement supplies an outsourced workforce that involves multiyear, multi-million dollar on-site or driver relationships. These types of client engagements are often more resilient in an economic downturn. PeopleScout, our highest margin segment, experienced a revenue decline of 47.6%. PeopleScout has accelerated due to various minimum wage increases and a need for higher wages to attract talent in tight labor markets. We have increased bill rates for the higher wages, payroll burdens, and our traditional mark-up. While we believe our pricing strategy is the right long-term decision, these actions impact our revenue trendslarge number of clients in the near term.

PeopleReady performance continuestravel and leisure sectors which continue to be significantly impacted by temporary disruptions from operational changes related to our consolidation of Labor Ready, CLP Resources, and Spartan Staffing into one specialized workforce solutions service in order to create a more seamless experience for our customers to access all of our blue-color contingent on-demand general and skilled labor service offerings. We are actively working to complete the transition.

PeopleManagement revenue from services

PeopleManagementrevenue declined to $197 million for the thirteen weeks ended October 1, 2017, a 9.2% decrease compared to the same period in the prior year. Revenue from our former largest customer declined by $20 million or 64.3% to $11 million

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for the thirteen weeks ended October 1, 2017, compared to the prior year period. Excluding this customer, PeopleManagement delivered growth of 0.3% for the thirteen weeks ended October 1, 2017. This customer substantially insourced the recruitment and management of contingent labor for their warehouse fulfillment centers and distribution sites in the United States, commencing in the second quarter of fiscal 2016. Excluding this customer, revenue trends improved with modest increases in demand from existing and new customers supporting e-commerce.

PeopleScout revenue from services
PeopleScoutrevenue grew to $49 million for the thirteen weeks ended October 1, 2017, a 10.0% increase compared to the same period in the prior year. The increase was primarily driven by new client wins and expanding our scope of services with existing clients.

COVID-19.
Gross profit

margin
Total company gross profit as a percentage of revenue for the thirteen weeks ended October 1, 2017 was 26.0%September 27, 2020, decreased by 300 basis points to 23.3%, compared to 25.6%26.3% for the same period in the prior year. Our staffing businesses contributed 230 basis points of the decline due to 180 basis points from pressure on our bill and pay rates and the remainder primarily due to client mix. The bill and pay rate pressure was caused by higher pay rates to entice associates to take work assignments given COVID-19 health concerns and additional federal unemployment benefits. As with prior recessions, our ability to pass through higher costs plus our standard markup in our bill rates was hampered due to a variety of economic factors negatively impacting our client’s businesses. Our PeopleScout business contributed approximately 70 basis points to the decline primarily due to client mix and reduced volumes.
Selling, general and administrative expense (“SG&A”)
Total company SG&A expense decreased by $40.0 million to $90.1 million, or 19.0% of revenue for the thirteen weeks ended September 27, 2020, compared to $129.8 million, or 20.4% of revenue for the same period in the prior year. The increase wasdecrease in SG&A expense is primarily due to favorable mix with less revenue from our former largest customer, which carries a lower gross margin than the blended average, and additional efficiency gainscomprehensive actions we put in the sourcing and recruiting activities of PeopleScout as growth has accelerated.

Selling, general and administrative

Total company selling, general and administrative ("place beginning in March 2020 to dramatically reduce costs in response to rapidly changing market conditions due to COVID-19. The actions we took reduced SG&A")&A expense decreased by $3 million to $132 million 30.6% for the thirteen weeks ended October 1, 2017,September 27, 2020, compared to the same period in the prior year. The prior yearWe have taken steps to reduce SG&A expense included approximately $3 million in costs incurred to exitwhile preserving the delivery businesskey strengths of our former largest customer and certain other realignment costs as well as incremental integration costs of $1 millionbusiness to fully integrate the RPOensure we are prepared when business of Aon Hewitt into the PeopleScout service line. Excluding these costs,conditions improve. The decrease in SG&A expense increasedbenefited from $4.1 million of employee retention credits made available under the Canada Emergency Wage Subsidy for Canadian employees and the Australian JobKeeper subsidy for Australian employees during the thirteen weeks ended October 1, 2017, compared to the same period in the prior year. The increase is due primarily to the hurricane related damage and costs to mobilize resources for increased demand for staffing services. Total company SG&A expense as a percentage of revenue increased to 19.9% for the thirteen weeks ended October 1, 2017, from 19.3% in the same period in the prior year, largely due to the decline in revenue outpacing the decline in expense. With the decline in revenues, we put in place cost control programs commencing in the prior year, which continued in the current year, and have reduced costs in line with our plans.September 27, 2020. We will continue to monitor and manage our SG&A costs.expense in line with our cost reduction plans.

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Income from operations

Total company income from operations was $29$12.7 million or 4.4% as a percent of revenue, for the thirteen weeks ended October 1, 2017,September 27, 2020, compared to $28$29.2 million or 4.0% infor the same period in the prior year. The prior year included a goodwill and intangible impairment charge of $4 million. Excluding the prior year impairment charge,decrease in income from operations as a percent of revenue was 4.6% or a decline of 0.2%. This decline was primarily due to the declinesignificant drop in revenue outpacing improved gross profitclient demand associated with government and societal actions taken to address COVID-19. The significant drop in demand, increased price sensitivity, increased contingent worker wages and preventive measures taken to help curb the decline inspread of COVID-19 had severe adverse impacts on our operations and business results. The declines were partially offset by the decisive and comprehensive cuts to SG&A expenses.

expense in line with management’s plans to preserve the key strengths of our business.
Net income

Net income was $21$8.8 million, or $0.51$0.25 per diluted share for the thirteen weeks ended October 1, 2017,September 27, 2020, compared to $23$26.7 million, or $0.56$0.68 per diluted share infor the same period in the prior year. The decline was impacted by increasedNet income includes income tax expense of $3.7 million resulting from an effective tax rate for the thirteen weeks ended October 1, 2017 asof 29.9%, compared to 10.1% for the same period in the prior year. Our effective tax rate for the thirteen weeks ended October 1, 2017 was 27.0% compared to 12.9% in the same periodlower in the prior year. A significant driveryear as a result of fluctuations in our effective income tax rate isa greater benefit from the Workerfederal Work Opportunity Tax Credit ("WOTC"(“WOTC”) program.. WOTC is designed to encourage employers to hire workers from certain disadvantaged targeted categoriesgroups with higher than average unemployment rates. WOTC program benefits were higher than anticipated in the prior year due to additional credits from 2013 through 2015 wages.
Additional highlights

We believeare focused on capital management as a top priority. In response to the rapidly changing market conditions as a result of COVID-19, we are taking the right stepshave taken swift action to reduce operating costs and other cash outflows to preserve capital to fund working capital needs. Additionally, on March 16, 2020, we amended our operating margin and produce long-term growth for shareholders. We also believecredit agreement which extended the maturity of the revolving credit facility established thereunder (“Revolving Credit Facility”) to March 16, 2025. On June 24, 2020, we further amended our revolving credit agreement, which modified terms of our financial covenants as well as certain other provisions. Under the amended credit agreement, we have the option, subject to lender approval, to increase the Revolving Credit Facility to $450.0 million. As of September 27, 2020, we are in a strong financial position to fund working capital needs for growth opportunities. As of October 1, 2017, we hadwith cash and cash equivalents of $35$28.2 million, total debt outstanding of $1.5 million and $118$138.5 million available under the Second Amended and Restatedmost restrictive covenant of our Revolving Credit Agreement for a secured revolving credit facility ("Revolving Credit Facility")Facility at this time for total liquidity of $153$167.0 million.

DuringRESULTS OF OPERATIONS
Total company results

The global economy and our business have been dramatically affected by the thirteen weeks ended October 1, 2017,COVID-19 pandemic. We continue to monitor its impact on all aspects of our business. Throughout the pandemic, our business has remained open and we repurchasedhave continued to provide key services to essential businesses. However, the remaining $14 million available underpreventative measures and individual precautions taken to help curb the spread of COVID-19 and the resulting negative impact on the economy, continue to have a severe adverse impact on client demand for our prior share repurchase program. The total shares repurchased underservices and our prior repurchase program was 4.8 million shares atbusiness results.

Our first priority, with regard to COVID-19, has been to ensure the safety, health and hygiene of our associates, employees, clients, suppliers and others with whom we partner in our business activities to continue our operations in this unprecedented environment. We implemented comprehensive measures across our businesses to keep our workers and clients healthy and safe, including adherence to guidance from the Centers for Disease Control and Prevention, World Health Organization, Occupational Safety and Health Administration and other key authorities. We formed a specialized task force tracking the most up-to-date developments and safety standards, and created an average price

internal information hub with safety protocols, dashboards, FAQs, and daily reporting by location on the COVID-19 impact. In addition to posting TrueBlue’s action plan on our external websites, we are actively sharing information on how companies and workers can protect themselves via ongoing emails, social outreach, webinars and other digital communications. We are fully leveraging our JobStackTM app to help companies and workers connect safely through a digital environment, and are rolling out a new virtual onboarding capability to minimize in-person branch visits. We are also leveraging our AffinixTM technology to enable companies to connect with permanent talent through virtual hiring and sourcing. Working closely with clients to enforce safety standards, we are supporting efforts in providing masks for associates, hand sanitizer, workplace disinfecting, social distancing, and infrared temperature checks. We instruct our workers to stay home if they are not feeling well or have been exposed to COVID-19. Immediate notification and self-quarantine protocols are in place if a staff member, associate or client’s employee is exposed to COVID-19, and our Field Safety Specialists closely evaluate any assignments related to clean-up of potentially infectious job sites. To ensure business continuity and support for clients who need workers for essential services, we established a Centralized Branch Support Center and are ready to implement Regional Command Centers as needed to serve as backup for our 600+ branches. Our branches follow strict sanitation and social distancing guidelines. In addition, across the TrueBlue organization, we suspended all
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international travel and restricted nonessential domestic travel for our employees and are providing remote work capabilities for our Tacoma and Chicago support centers as well as other locations.
per share
In response to the rapidly changing market conditions as a result of $15.52, which excludes commissions. On September 15, 2017,COVID-19, we have taken steps to reduce SG&A expense and other cash outflows. We continue to monitor this evolving situation and guidance from domestic and international authorities, including federal, state and local public health authorities, and may take additional actions based on their recommendations. There may be developments outside our Board of Directors authorized a $100 million share repurchase program of our outstanding common stock. The share repurchase program does not obligatecontrol requiring us to acquire any particular amountadjust our operating plan. As such, given the dynamic nature of common stockthis situation, it is difficult to estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future. However, we do expect that it will continue to have a material adverse impact on our future revenue, overall profitability and does not have an expiration date. There have been no repurchases underliquidity. For additional discussion on the uncertainties and business risks associated with COVID-19, refer to “Risk Factors” in Part II, Item 1A of this new program during the thirteen weeks ended October 1, 2017.
RESULTS OF OPERATIONS

Total company resultsQuarterly Report on Form 10-Q.
The following table presents selected financial data:
Thirteen weeks endedThirty-nine weeks ended
(in thousands, except percentages and per share data)Sep 27,
2020		% of revenueSep 29,
2019		% of revenueSep 27,
2020		% of revenueSep 29,
2019		% of revenue
Revenue from services$474,530 $636,793 $1,327,726 $1,777,739 
Total revenue growth (decline) %(25.5)%(6.4)%(25.3)%(3.9)%
Gross profit$110,464 23.3 %$167,735 26.3 %$319,848 24.1 %$471,113 26.5 %
Selling, general and administrative expense90,100 19.0 %129,800 20.4 %304,681 22.9 %383,745 21.6 %
Depreciation and amortization7,652 1.6 %8,749 1.4 %24,002 1.8 %28,528 1.6 %
Goodwill and intangible asset impairment charge— — 175,189 — 
Income (loss) from operations12,712 2.7 %29,186 4.6 %(184,024)(13.9)%58,840 3.3 %
Interest and other income (expense), net(174)471 (323)1,851 
Income (loss) before tax expense (benefit)12,538 29,657 (184,347)60,691 
Income tax expense (benefit)3,743 2,981 (34,480)6,333 
Net income (loss)$8,795 1.9 %$26,676 4.2 %$(149,867)(11.3)%$54,358 3.1 %
Net income (loss) per diluted share$0.25 $0.68 $(4.20)$1.38 
We report our business as three reportable segments described below and in Note 11: Segment Information, to our consolidated financial statements found in Item 1 of this Quarterly Report on Form 10-Q.
•PeopleReadyprovides access to reliable workers in the United States, Canada and Puerto Rico through a wide range of staffing solutions for on-demand contingent general and skilled labor. PeopleReady connects people to work in a broad range of industries that include construction, manufacturing and logistics, warehousing and distribution, waste and recycling, energy, retail, hospitality, and others. As of December 29, 2019, we had a network of 614 branches across all 50 states, Canada and Puerto Rico. Complementing our branch network is our mobile application, JobStack, which connects workers with jobs, creates a virtual exchange between our workers and clients, and allows our branch resources to expand their recruiting and sales efforts and service delivery. JobStack is helping to competitively differentiate our services, expand our reach into new demographics, and improve both service delivery and work order fill rates as we lead our business into a digital future.
•PeopleManagement predominantly provides a wide range of on-site contingent staffing and workforce management solutions to larger multi-site manufacturing, distribution and fulfillment clients. In comparison with PeopleReady, services are larger in scale, longer in duration, and dedicated service teams are located at the client’s facility. Effective December 30, 2019 (first day of our 2020 fiscal year), we combined our two on-site contingent industrial workforce operating segments, Staff Management | SMX and SIMOS Insourcing Solutions (“SIMOS”) into one operating segment titled “On-Site,” which continues to be reported under PeopleManagement. On-Site includes our branded service offerings for hourly (Staff Management | SMX) and productivity-based (SIMOS) industrial staffing solutions serving the same industries and similar clients. PeopleManagement also includes Centerline Drivers (“Centerline”), which specializes in dedicated and contingent commercial truck drivers to the transportation and distribution industries. Despite the recession, year-to-date new client wins exceeded new client wins in the comparable prior-year period primarily due to increased investment in sales. We will continue making investments in sales resources to expand into under-penetrated geographic markets as well as programs to support client and associate care and retention.
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 Thirteen weeks ended Thirty-nine weeks ended
(in thousands, except percentages and per share amounts)October 1,
2017		% of revenueSeptember 23,
2016		% of revenue October 1,
2017		% of revenueSeptember 23,
2016		% of revenue
Revenue from services$660,780
 $697,097
  $1,839,146
 $2,015,689
 
Total revenue growth (decline) %(5.2)% 1.9%  (8.8)% 6.9% 
          
Gross profit$172,019
26.0%$178,395
25.6% $466,728
25.4%$498,831
24.7 %
Selling, general and administrative expense131,552
19.9%134,679
19.3% 378,150
20.6%401,090
19.9 %
Depreciation and amortization11,189
1.7%11,690
1.7% 34,650
1.9%34,673
1.7 %
Goodwill and intangible asset impairment charge—
 4,275
0.6% —
 103,544
5.1 %
Income (loss) from operations29,278
4.4%27,751
4.0% 53,928
2.9%(40,476)(2.0)%
Interest and other income (expense), net(219) (867)  10
 (2,773) 
Income (loss) before tax expense29,059
 26,884
  53,938


(43,249) 
Income tax expense (benefit)7,838
 3,455
  14,909
 (9,911) 
Net income (loss)$21,221
3.2%$23,429
3.4% $39,029
2.1%$(33,338)(1.7)%
Net income (loss) per diluted share$0.51
 $0.56
  $0.94
 $(0.80) 
•PeopleScout provides recruitment process outsourcing of end-to-end talent acquisition services from candidate sourcing and engagement through the onboarding of employees as well as employer branding services. Our solution is highly scalable and flexible, which allows for the outsourcing of all or a subset of skill categories across a series of recruitment, hiring and onboarding steps. Our solution delivers improved talent quality and candidate experience, faster hiring, increased scalability, lower cost of recruitment, greater flexibility, and increased compliance. Our clients outsource the recruitment process to PeopleScout in all major industries and jobs. We leverage our proprietary technology platform (Affinix) for sourcing, screening and delivering a permanent workforce, along with dedicated service delivery teams to work as an integrated partner with our clients. Affinix uses artificial intelligence and machine learning to search the web and source candidates, which means we can create the first slate of candidates for a job posting within minutes rather than days.

Our PeopleScout reportable segment also includes a managed service provider business, which provides clients with improved quality and cost management of their contingent labor vendors.
Revenue from services

Revenue from services by reportable segment was as follows:
Thirteen weeks endedThirty-nine weeks ended
(in thousands, except percentages)Sep 27,
2020		Growth (decline) %Segment % of totalSep 29,
2019		Segment % of totalSep 27,
2020		Growth (decline) %Segment % of totalSep 29,
2019		Segment % of total
Revenue from services:
PeopleReady$293,546 (28.9)%61.9 %$413,132 64.9 %$801,991 (27.7)%60.4 %$1,109,261 62.4 %
PeopleManagement147,241 (7.6)31.0 159,315 25.0 407,516 (13.5)30.7 470,889 26.5 
PeopleScout33,743 (47.6)7.1 64,346 10.1 118,219 (40.2)8.9 197,589 11.1 
          Total company$474,530 (25.5)%100.0 %$636,793 100.0 %$1,327,726 (25.3)%100.0 %$1,777,739 100.0 %
 Thirteen weeks ended Thirty-nine weeks ended
(in thousands, except percentages)October 1,
2017		Decline %Segment % of TotalSeptember 23,
2016		Segment % of Total October 1,
2017		Decline %Segment % of TotalSeptember 23,
2016		Segment % of Total
Revenue from services:           
PeopleReady$414,995
(4.8)%62.8%$435,783
62.5% $1,118,331
(6.7)%60.8%$1,198,067
59.4%
PeopleManagement196,835
(9.2)%29.8%216,834
31.1% 581,408
(14.8)%31.6%682,605
33.9%
PeopleScout48,950
10.0 %7.4%44,480
6.4% 139,407
3.3 %7.6%135,017
6.7%
          Total Company$660,780
(5.2)%100.0%$697,097
100.0% $1,839,146
(8.8)%100.0%$2,015,689
100.0%

The workforce solutions business is dependent on the overall strength of the labor market. Clients tend to use contingent workers to supplement their existing workforce and generally hire permanent workers when long-term demand is expected to increase. As a consequence, our revenue from services tends to increase quickly when the economy begins to grow. Conversely, our revenue decreases quickly when the economy begins to weaken and thus contingent staff positions are eliminated, permanent hiring is frozen and turnover replacement diminishes.
Total company revenue declined 25.5% to $661$474.5 million and 25.3% to $1,327.7 million for the thirteen and thirty-nine weeks ended September 27, 2020, compared to the same periods in the prior years, respectively. The decline was due to a significant drop in client demand associated with government and societal actions taken to address COVID-19. In particular, the outbreak and preventive measures taken to help curb the spread of COVID-19 had severe adverse impacts on our operations and business results. Many of our clients have been severely impacted by COVID-19 and have reduced their need for our staffing services, which has resulted in lower revenue. During the third quarter, we saw improving trends when compared to the second quarter of 2020 with year-over-year revenue declines of 25.5% compared to 39.0% in the second quarter. This improvement in the third quarter was broad-based across most of the industries and geographies we serve.
PeopleReady
PeopleReady revenue declined to $293.5 million for the thirteen weeks ended October 1, 2017,September 27, 2020, a 5.2%28.9% decrease compared to the same period in the prior year. Total company revenueyear, and declined to $1.8 billion$802.0 million for the thirty-nine weeks ended October 1, 2017, an 8.8% decrease compared to the same period in the prior year. The decrease is primarily due to lower volumes for staffing services within our PeopleReady business and with our former largest customer, Amazon. Excluding this customer, total company revenue declined 2.4% for the thirteen weeks ended October 1, 2017 and 3.6% for the thirty-nine weeks ended October 1, 2017.

We saw improvement in our year-over-year monthly revenue trends for the thirteen weeks ended October 1, 2017. We exited the third quarter of fiscal 2017 withSeptember 27, 2020, a year-over-year decline of 2.5% for the fiscal month of September 2017, as compared to exiting the second quarter of fiscal 2017 with a year-over-year decline of 8.7% for the fiscal month of June 2017. The improving monthly results were due to better underlying trends across all of our segments.

PeopleReady
PeopleReadyrevenue declined to $415 million for the thirteen weeks ended October 1, 2017, a 4.8% decrease compared to the same period in the prior year. Revenue declined to $1.1 billion for the thirty-nine weeks ended October 1, 2017, a 6.7%27.7% decrease compared to the same period in the prior year. The decline was primarily due to weaknessa significant drop in residentialclient demand associated with government and societal actions taken to address the impact of COVID-19. In particular, the outbreak and preventive measures taken to help curb the spread of COVID-19 had severe adverse impacts on our operations and business results. Many of the clients we serve have been severely impacted by COVID-19 and have reduced their need for our staffing services, which has resulted in lower revenue. PeopleReady has experienced a moderate improvement in revenue trends in the third quarter of 2020, compared to the second quarter of 2020 with year-over-year revenue declines in the third quarter of 28.9% compared to 43.4% in the second quarter. The improvement was broad-based across most geographies and industries, driven primarily by the construction, manufacturing, services and manufacturing.transportation industries.

We believe the year-over-year decline was moderated by the use of our industry-leading JobStack mobile application that digitally connects workers with jobs. During the third quarter of 2020, PeopleReady dispatched approximately 726,000 shifts via JobStack and achieved a digital fill rate of 51%. JobStack has approximately 26,100 client users as of the third quarter of
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However, this decline was partially offset by2020, or an increase in revenue of approximately 1% related37% compared to the recent hurricanes and improvements in our service-based, hospitality, and retail businesses.
We saw improvement to our year-over-year monthly revenue trends for the thirteen weeks ended October 1, 2017. We exited the third quarter of fiscal 2017 with a year-over-year decline of 1.0% for the fiscal month of September 2017, as compared to exiting the second quarter of fiscal 2017 with a year-over-year decline of 8.9% for the fiscal month of June 2017. The improving year-over-year monthly results were due to better underlying trends across all of the industries we serve, except manufacturing.

Wage growth has accelerated due to various minimum wage increases and a need for higher wages to attract talent in tight labor markets. We have increased bill rates for the higher wages, payroll burdens, and our traditional mark-up. While we believe our pricing strategy is the right long-term decision, these actions impact our revenue trendssame period in the near term.

PeopleReady performance continues to be impacted by temporary disruptions from operational changes related to our consolidationprior year. JobStack is helping us safely connect people with work during this time of Labor Ready, CLP Resources, and Spartan Staffing into one specialized workforce solutions service in order to create a more seamless experience for our customers to access all of our blue-color contingent on-demand general and skilled labor service offerings. We are actively working to complete the transition.

crisis.
PeopleManagement

PeopleManagementrevenue declined to $197$147.2 million for the thirteen weeks ended October 1, 2017,September 27, 2020, a 9.2%7.6% decrease compared to the same period in the prior year, and declined to $407.5 million for the thirty-nine weeks ended September 27, 2020, a 13.5% decrease compared to the same period in the prior year. Revenue fromMany of the clients we serve have been impacted by COVID-19 and have reduced their need for our former largest customerstaffing services, which has resulted in lower revenue. PeopleManagement has experienced improving revenue trends during the third quarter of 2020, compared to the second quarter of 2020, primarily driven by the fact that PeopleManagement supplies an outsourced workforce that involves multiyear, multi-million dollar on-site or driver relationships. These types of client engagements are often more resilient in an economic downturn. Year-over-year, revenue declined by $20 million or 64.3%7.6% in the third quarter of 2020 compared to $1122.7% in the second quarter of 2020.
PeopleScout
PeopleScoutrevenue declined to $33.7 million for the thirteen weeks ended October 1, 2017,September 27, 2020, a 47.6% decrease compared to the same period in the prior year, period. Excluding this customer, PeopleManagement delivered growth of 0.3% for the thirteen weeks ended October 1, 2017. This customer substantially insourced the recruitment and management of contingent labor for their warehouse fulfillment centers and distribution sites in the United States, commencing in the second quarter of fiscal 2016. Excluding this customer, revenue trends improved with modest increases in demand from existing and new customers supporting e-commerce.

Revenue declined to $581$118.2 million for the thirty-nine weeks ended October 1, 2017,September 27, 2020, a 14.8%40.2% decrease compared to the same period in the prior year. RevenueThe revenue decline was primarily due to less demand from our former largest customer declinedexisting clients resulting from the economic disruption caused by $108 million, or 78.6%the impact of COVID-19. PeopleScout clients in the travel and leisure industries were especially impacted. These clients, which represented approximately 25% and 30% of the client mix for the thirteen and thirty-nine weeks ended October 1, 2017,September 29, 2019, respectively, were disproportionately impacted which resulted in a 74% and 63% decrease in revenue, respectively, compared to the same periods in the prior year period. Excluding this customer, PeopleManagement delivered growthyear. The revenue decline also includes the impact of 1.3% forreduced project-based recruiting volumes at a large industrial client, which declined throughout 2019 due to the thirty-nine weeks ended October 1, 2017.client’s adverse business conditions resulting in no order volume after the third quarter of 2019.

Gross profit
PeopleScoutGross profit was as follows:
PeopleScout
Thirteen weeks endedThirty-nine weeks ended
(in thousands, except percentages)Sep 27, 2020Sep 29, 2019Sep 27, 2020Sep 29, 2019
Gross profit$110,464 $167,735 $319,848 $471,113 
Percentage of revenue23.3 %26.3 %24.1 %26.5 %
Gross profit as a percentage of revenue grewdeclined to $49 million23.3%, or 300 basis points for the thirteen weeks ended October 1, 2017, a 10.0% increaseSeptember 27, 2020, compared to 26.3% for the same period in the prior year. Our staffing businesses contributed 230 basis points to the decline due to 180 basis points from pressure on our bill and pay rates and the remainder primarily due to client mix. The bill and pay rate pressure was caused by higher pay rates to entice associates to take work assignments given COVID-19 health concerns and additional federal unemployment benefits. As with prior recessions, our ability to pass through higher costs plus our standard markup in our bill rates was hampered due to a variety of economic factors negatively impacting our clients’ businesses. Our PeopleScout business contributed approximately 70 basis points to the decline primarily due to client mix and reduced volumes.
Gross profit as a percentage of revenue grewdeclined to $139 million24.1%, or 240 basis points for the thirty-nine weeks ended October 1, 2017, a 3.3% increaseSeptember 27, 2020, compared to 26.5% for the same period in the prior year.
•Our PeopleScout business contributed approximately 130 basis points to the decline partially due to 30 basis points of severance and the remaining decline from the continued impact of lower volume due to the rapid revenue decline caused by the disruption of COVID-19, which outpaced the reductions to our service delivery team and client mix.
•Our staffing businesses contributed 110 basis points to the decline primarily due to 130 basis points resulting from bill and pay rate pressure caused by higher pay rates to entice associates to take work assignments given COVID-19 health concerns and additional federal unemployment benefits. As with prior recessions, our ability to pass through higher costs plus our standard markup in our bill rates was hampered due to a variety of economic factors negatively impacting our clients’ businesses. The increase was primarily drivendecline from our staffing business also includes a decline of 30 basis points due to additional insurance coverage associated with former workers’ compensation carriers in liquidation in the prior year. These declines were partially offset by new client winsa benefit of 50 basis points from a reduction in estimated costs to comply with the Patient Protection and expandingAffordable Care Act and the Health Care and Education Reconciliation Act of 2010, which were accrued in prior fiscal years. We do not expect the benefit from lower affordable health care costs to reoccur.

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We continue to actively manage workers’ compensation cost through the safety of our scopecontingent workers with our safety programs, and actively control costs with our network of services with existing clients.

Gross profit
Gross profit was as follows:
 Thirteen weeks ended Thirty-nine weeks ended
(in thousands, except percentages)October 1, 2017September 23, 2016 October 1, 2017September 23, 2016
Gross profit$172,019
$178,395
 $466,728
$498,831
Percentage of revenue26.0%25.6% 25.4%24.7%

Total company gross profit as a percentageservice providers. We had favorable adjustments to our workers’ compensation liabilities of $5.4 million or 1.1% of revenue for the thirteen weeks ended October 1, 2017 was 26.0%,September 27, 2020, compared to 25.6% in$7.9 million, or 1.2% of revenue for the same period in the prior year. Continued favorable adjustments to our workers’ compensation liabilities are dependent on our ability to continue to lower accident rates and claim costs. For additional discussion regarding our workers’ compensation liability, see the “Workers’ compensation insurance, collateral and claims reserves” section within Liquidity and Capital Resources.
Selling, general and administrative expense
SG&A expense was as follows:
Thirteen weeks endedThirty-nine weeks ended
(in thousands, except percentages)Sep 27, 2020Sep 29, 2019Sep 27, 2020Sep 29, 2019
Selling, general and administrative expense$90,100 $129,800 $304,681 $383,745 
Percentage of revenue19.0 %20.4 %22.9 %21.6 %
Total company SG&A expense decreased by $39.7 million, or 30.6% and $79.1 million, or 20.6% for the thirteen and thirty-nine weeks ended September 27, 2020, compared to the same periods in the prior year, respectively. The increasedecrease in SG&A expense was primarily due to favorable mix with less revenue fromcomprehensive actions we put in place in March 2020 to dramatically reduce costs in response to rapidly changing market conditions due to COVID-19. We believe we have taken steps to reduce SG&A expense while preserving the key strengths of our former largest customer, which carries a lower gross margin thanbusiness to ensure we are prepared for the blended average,time when business conditions improve. The decrease in SG&A expense included $4.1 million and additional efficiency gains$7.2 million in employee retention credits made available under the sourcingCanada Emergency Wage Subsidy for Canadian employees and recruiting activities of PeopleScout as growth has accelerated.
Total company gross profit as a percentage of revenuethe Australian JobKeeper subsidy for Australian employees during the thirteen and thirty-nine weeks ended September 27, 2020, respectively. These reductions were partially offset by $8.9 million in workforce reduction costs recorded in the thirty-nine weeks ended October 1, 2017 was 25.4%,September 27, 2020, compared to 24.7% in$0.5 million for the same period in the prior year. The increase of 0.7% was primarily due to favorable mix with less revenue from our former largest customer, which carries a lower gross margin than the blended average, and additional efficiency gains in the sourcing and recruiting activities of PeopleScout as growth has accelerated.


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Selling, general and administrative expense
Selling, general and administrative ("SG&A") expense was as follows:
 Thirteen weeks ended Thirty-nine weeks ended
(in thousands, except percentages)October 1, 2017September 23, 2016 October 1, 2017September 23, 2016
Selling, general and administrative expense$131,552
$134,679
 $378,150
$401,090
Percentage of revenue19.9%19.3% 20.6%19.9%

Total company selling, general and administrative ("SG&A") expense decreased by $3 million to $132 million for the thirteen weeks ended October 1, 2017, compared to the same period in the prior year. The prior year SG&A expense included approximately $3 million in costs incurred to exit the delivery business of our former largest customer and certain other realignment costs as well as incremental integration costs of $1 million to fully integrate the RPO business of Aon Hewitt into the PeopleScout service line. Excluding these costs, SG&A increased for the thirteen weeks ended October 1, 2017, compared to the same period in the prior year. The increase is due primarily to hurricane related damage and costs to mobilize resources for increased demand for staffing services. Total company SG&A expense as a percentage of revenue increased to 19.9% for the thirteen weeks ended October 1, 2017, from 19.3% in the same period in the prior year, largely due to the decline in revenue outpacing the decline in expense. With the decline in revenues, we put in place cost control programs commencing in the prior year, which continued in the current year, and have reduced costs in line with our plans. We will continue to monitor and manage our SG&A costs.

Total company SG&A expense decreased by $23 million to $378 million for the thirty-nine weeks ended October 1, 2017, compared to the same period in the prior year due to continued progress in managing costs. Total company SG&A expense as a percentage of revenue increased to 20.6% for the thirty-nine weeks ended October 1, 2017, from 19.9% in the same period in the prior year. The rate at which revenue declines outpaced the decline in operating expenses has slowedline with the success of our cost reduction programs.

Goodwill and Intangible Asset Impairment Charge
Goodwill and intangible asset impairment charge was as follows:
 Thirteen weeks ended Thirty-nine weeks ended
(in thousands, except percentages)October 1, 2017September 23, 2016 October 1, 2017September 23, 2016
Goodwill and intangible asset impairment charge$—
$4,275
 $—
$103,544
Percentage of revenue 0.6%  5.1%

The goodwill and intangible asset impairment charge in the prior year was primarily driven by a change in the scope of services with our former largest customer and other changes in our outlook reflecting changes to economic and industry conditions.

plans.
Depreciation and amortization
Depreciation and amortization was as follows:
Thirteen weeks endedThirty-nine weeks ended
(in thousands, except percentages)Sep 27, 2020Sep 29, 2019Sep 27, 2020Sep 29, 2019
Depreciation and amortization$7,652 $8,749 $24,002 $28,528 
Percentage of revenue1.6 %1.4 %1.8 %1.6 %
 Thirteen weeks ended Thirty-nine weeks ended
(in thousands, except percentages)October 1, 2017September 23, 2016 October 1, 2017September 23, 2016
Depreciation and amortization$11,189
$11,690
 $34,650
$34,673
Percentage of revenue1.7%1.7% 1.9%1.7%
Increased depreciationDepreciation and amortization decreased primarily due to investments designedthe impairment to further improve our efficiencyacquired client relationships intangible assets of $34.7 million in the first quarter of 2020 and effectivenessseveral intangible assets that were fully amortized in recruiting and retaining our contingent workers, and attracting and retaining customers was partially offset bythe second half of 2019, which resulted in a decline in amortization expense for the thirteen and thirty-nine weeks ended October 1, 2017, respectively, due to theSeptember 27, 2020.
Goodwill and intangible asset impairment in the prior year.charge

Goodwill and intangible asset impairment charge were as follows:
Thirteen weeks endedThirty-nine weeks ended
(in thousands, except percentages)Sep 27, 2020Sep 29, 2019Sep 27, 2020Sep 29, 2019
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Goodwill and intangible asset impairment charge$— $— $175,189 $— 
A summary of the goodwill and intangible asset impairment charge by reportable segment is as follows:
(in thousands)PeopleManagementPeopleScoutTotal company
Goodwill$45,901 $94,588 $140,489 
Client relationships9,700 25,000 34,700 
Total$55,601 $119,588 $175,189 
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
MANAGEMENT'S
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capitalization reflected the expected continued weakness in pricing and demand for our services in an uncertain economic climate that was further impacted in March 2020 by COVID-19, which created a sudden global economic shock. Most industries we serve were impacted by a significant decrease in demand for their products and services and, as a result, we experienced a significant drop in client demand associated with government and societal actions taken to address COVID-19. We experienced significant decreases to our revenues and corresponding operating results due to weakness in pricing and demand for our services during the severe economic downturn. While demand is expected to recover in the future, the rate of recovery will vary by geography and industry depending on the economic impact caused by COVID-19 and the rate at which infections decline to a contained level.
As a result of our interim impairment test in the first quarter of 2020, we concluded that the carrying amounts of goodwill for PeopleScout RPO, PeopleScout MSP and PeopleManagement On-Site reporting units exceeded their implied fair values and we recorded a non-cash impairment loss of $140.5 million. The total goodwill carrying value of $45.9 million for PeopleManagement On-Site reporting unit was fully impaired. The goodwill impairment charge for PeopleScout RPO and PeopleScout MSP was $92.2 million and $2.4 million, respectively. The remaining goodwill balances for PeopleScout RPO and PeopleScout MSP were $22.9 million and $9.7 million, respectively, as of September 27, 2020.
With the decrease in demand for our services due to the economic impact caused by COVID-19, we lowered our future expectations, which was the primary trigger of an impairment to our acquired client relationships intangible assets for our PeopleScout RPO and PeopleManagement On-Site reporting units of $34.7 million in the first quarter of 2020. The impairment charge for PeopleScout RPO and PeopleManagement On-Site reporting units 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 were $5.5 million and $7.6 million, respectively, as of September 27, 2020.
Income taxes
The income tax expense and the effective income tax rate were as follows:
Thirteen weeks ended Thirty-nine weeks endedThirteen weeks endedThirty-nine weeks ended
(in thousands, except percentages)October 1, 2017September 23, 2016 October 1, 2017September 23, 2016(in thousands, except percentages)Sep 27, 2020Sep 29, 2019Sep 27, 2020Sep 29, 2019
Income tax expense (benefit)$7,838
$3,455
 $14,909
$(9,911)Income tax expense (benefit)$3,743 $2,981 $(34,480)$6,333 
Effective income tax rate27.0%12.9% 27.6%22.9%Effective income tax rate29.9 %10.1 %18.7 %10.4 %
Our tax provision and our effective tax rate are subject to variation due to several factors, including variability in accurately predicting our pre-tax and taxable income and loss and the mix of jurisdictions to which they relate,by jurisdiction, tax credits, government audit developments, changes in law,laws, regulations and administrative practices, and relative changes of expenses or losses for which tax benefits are not recognized.
Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income.income and loss. For example, the impact of discrete items, tax credits and non-deductible expenses on our effective tax rate is greater when our pre-tax income or loss is lower. Except as required under U.S.
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The items accounting for the difference between income taxes computed at the statutory federal income tax law, we do not provide for U.S. federalrate and income taxes reported on undistributed earningsthe Consolidated Statements of our foreign subsidiaries because we consider those earnings to be permanently invested outside of the United States.Operations and Comprehensive Income (Loss) are as follows:

Thirteen weeks endedThirty-nine weeks ended
(in thousands, except percentages)Sep 27, 2020%Sep 29, 2019%Sep 27, 2020%Sep 29, 2019%
Income (loss) before tax expense (benefit)$12,538 $29,657 $(184,347)$60,691 
Federal income tax expense (benefit) at statutory rate$2,633 21.0%$6,230 21.0%$(38,713)21.0%$12,747 21.0%
Increase (decrease) resulting from:
State income taxes, net of federal benefit631 5.01,428 4.8(9,321)5.12,922 4.8
Goodwill and intangible asset impairment impact— —— —21,849 (11.9)— —
CARES Act impact657 5.2— —(5,041)2.7— —
Hiring credits, net(866)(6.9)(4,792)(16.2)(4,848)2.6(10,298)(17.0)
Other non-deductible/non-taxable items688 5.6115 0.51,594 (0.8)962 1.6
Income tax expense (benefit)$3,743 29.9%$2,981 10.1%$(34,480)18.7%$6,333 10.4%
A significant driver ofSignificant fluctuations in our effective rate are primarily due to the non-deductible goodwill and intangible asset impairment charge, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and the WOTC hiring credits. Other differences between the statutory federal income tax rate result from state and foreign income taxes and certain other non-deductible and non-taxable items.
The non-cash impairment loss of $175.2 million, recorded in the first quarter of 2020, includes $84.7 million (tax effected $21.8 million) related to reporting units from stock acquisitions and accordingly are not deductible for tax purposes. The remaining impairment loss of $90.5 million (tax effected $23.3 million) related to reporting units from asset acquisitions and accordingly are deductible for tax purposes.

On March 27, 2020, the CARES Act was enacted in the United States. The CARES Act is an emergency economic aid package to help mitigate the Work Opportunity Tax Credit (“WOTC”)impact of COVID-19. Among other things, the CARES Act provides certain changes to tax laws, including the ability to carry back current year losses to obtain refunds related to prior year tax returns with a higher federal tax rate of 35%. The net operating loss carry back benefit will vary depending on estimated results for the current fiscal year.
WOTC is designed to encourage hiring ofemployers to hire workers from certain disadvantaged targeted categories, andgroups with higher than average unemployment rates. WOTC is generally calculated as a percentage of wages over a twelve monthtwelve-month period up to worker maximummaximums by targeted category.groups. Based on historical results and business trends, we estimate the amount of WOTC we expect to earn related to wages of the current year. However, the estimate is subject to variation because 1) a small percentage of our workers qualify for one or more of the many targeted categories;groups; 2) the targeted categoriesgroups are subject to different incentive credit rates and limitations; 3) credits fluctuate depending on economic conditions and qualified worker retention periods; and 4) state and federal offices can delay their credit certification processing and have inconsistent certification rates. We recognize additional prior year hiring credits if credits in excess of original estimates have been certified by government offices. WOTC was restored through December 31, 2019, as a resultis due to expire at the end of the Protecting Americans from Tax Hikes Act of 2015, signed into law on December 18, 2015.2020.

Our effective tax rate for the thirty-nine weeks ended October 1, 2017 and September 23, 2016 was 27.6% and 22.9%, respectively. We recognized discrete tax benefits from prior year(s) hiring credits of $0.9 million for the thirty-nine weeks ended October 1, 2017, compared to $5.6 million for the same period in the prior year.

Changes to our effective tax rate as a result of hiring credits, impairment, and share based compensation were as follows:
 Thirteen weeks ended Thirty-nine weeks ended
 October 1, 2017September 23, 2016 October 1, 2017September 23, 2016
Effective income tax rate without adjustments below38.6 %39.0 % 39.2 %41.3 %
Hiring credits estimate from current year wages 
(10.2)(14.0) (10.2)(14.0)
Additional hiring credits from prior year wages(1.4)(12.1) (1.7)(9.9)
Tax effect of share based compensation—
—
 0.3
—
Goodwill and intangible asset impairment impact—
—
 —
5.5
Effective income tax rate27.0 %12.9 %
27.6 %22.9 %
Segment performance
We realigned our reporting structure in the fourth quarter of fiscal 2016 to streamline our operationsevaluate performance based on segment revenue and make it easier for our customers to leverage our total workforce solution by using both our contingent work and permanent placement services. We now report our business as three distinct segments. Our former Staffing Services reportable segment was separated into two reportable segments, PeopleReady and PeopleManagement, and our former Managed Services reportable segment was renamed PeopleScout. In addition, we changed our methodology for allocating certain corporate costs to our segments, which decreased our corporate unallocated expenses. The prior year amounts have been recast to reflect this change for consistency.

A primary measure of segment performance, evaluated by our chief operating decision maker, to determine resource allocation and assess performance is segment earnings before interest, taxes, depreciation and amortization (“profit. Segment EBITDA”). Segment EBITDAprofit includes net sales to third parties,revenue, related cost of sales, selling, generalservices, and administrativeongoing operating expenses anddirectly attributable to the reportable segment. Segment profit excludes goodwill and intangible impairment charges, directly attributable to the reportable segment together with certain allocated corporate generaldepreciation and administrative expenses. Segment EBITDA excludesamortization expense, unallocated corporate general and administrative expenses.expense, interest, other income and expense, income taxes, and other adjustments not considered to be ongoing. See Note 9: 11: Segment

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Information, to our Consolidated Financial Statementsconsolidated financial statements found in Item 1 of this Quarterly Report on Form 10-Q, for additional details ofon our service lines and reportable segments, as well as a reconciliation of Segment EBITDAsegment profit to income (loss) before tax expense.

expense (benefit).
Segment EBITDAprofit should not be considered a measure of financial performance in isolation or as an alternative to net income (loss) in the Consolidated Statements of Operations and Comprehensive Income (Loss) in accordance with accounting principles generally accepted in the United States of America, and may not be comparable to similarly titled measures of other companies.

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PeopleReadysegment performance was as follows:
Thirteen weeks endedThirty-nine weeks ended
Thirteen weeks ended Thirty-nine weeks ended
(in thousands, except for percentages)October 1, 2017September 23, 2016 October 1, 2017September 23, 2016
(in thousands, except percentages)(in thousands, except percentages)Sep 27, 2020Sep 29, 2019Sep 27, 2020Sep 29, 2019
Revenue from services$414,995
$435,783
 $1,118,331
$1,198,067
Revenue from services$293,546 $413,132 $801,991 $1,109,261 
Segment EBITDA28,572
34,100
 57,448
75,198
Segment profitSegment profit18,714 30,878 27,002 64,143 
Percentage of revenue6.9%7.8% 5.1%6.3%Percentage of revenue6.4 %7.5 %3.4 %5.8 %
PeopleReady Segment EBITDA decreasedsegment profit declined $12.2 million and $37.1 million for the thirteen and thirty-nine weeks ended September 27, 2020, compared to $29the same periods in the prior year, respectively. PeopleReady experienced a segment profit decline primarily due to the significant drop in client demand associated with government and societal actions taken to address COVID-19. The significant drop in demand, as well as increased price sensitivity, increased contingent worker wages and preventive measures taken to help curb the spread of COVID-19 had severe adverse impacts on our operations and business results. The declines were partially offset by the decisive and comprehensive cuts to SG&A expense in line with management’s plans to preserve the key strengths of our business.
We believe these declines were also partially offset by the strategic use of our industry-leading JobStack mobile application that digitally connects workers with jobs. JobStack is helping us safely connect people with work during this time of crisis.
PeopleManagementsegment performance was as follows:
Thirteen weeks endedThirty-nine weeks ended
(in thousands, except percentages)Sep 27, 2020Sep 29, 2019Sep 27, 2020Sep 29, 2019
Revenue from services$147,241 $159,315 $407,516 $470,889 
Segment profit4,574 3,381 6,063 9,815 
Percentage of revenue3.1 %2.1 %1.5 %2.1 %
PeopleManagement segment profit grew $1.2 million or 6.9% of revenue for the thirteen weeks ended October 1, 2017,September 27, 2020, compared to $34 million, or 7.8% of revenue in the same period in the prior year. PeopleReady Segment EBITDA decreased to $57 million, or 5.1% of revenue for the thirty-nine weeks ended October 1, 2017, compared to $75 million, or 6.3% of revenue in the same period in the prior year. The revenue decline outpaced the cost control programsgrowth was primarily due to the de-leveraging effect associated with the fixed costs in a branch network. Through disciplined pricing, we have passed through our normal mark-up on the increased costs for minimum wages, payroll taxes and benefits together with higher contingent worker wages in a tightening labor market. With the decline incost reductions outpacing revenue we put in place cost control programs commencing in the prior year, which continue in the current year, and have reduced SG&A costs in line with our plans. We will continue to monitor and manage our SG&A costs.

PeopleManagementsegment performance was as follows:
 Thirteen weeks ended Thirty-nine weeks ended
(in thousands, except for percentages)October 1, 2017September 23, 2016 October 1, 2017September 23, 2016
Revenue from services$196,835
$216,834
 $581,408
$682,605
Segment EBITDA6,940
3,520
 18,759
(70,218)
Percentage of revenue3.5%1.6% 3.2%(10.3)%

PeopleManagement Segment EBITDA increased to $7 million, or 3.5% of revenue for the thirteen weeks ended October 1, 2017, compared to $4 million, or 1.6% of revenue in the same period in the prior yeardeclines primarily due to a more favorable mix of less revenuedemand from our former largest customer, which carried a lower gross margin than our blended average, and the results of a cost reduction program. Revenueexisting clients resulting from our former largest customer declinedeconomic disruption caused by $20 million, or 64.3% to $11 million for the thirteen weeks ended October 1, 2017, from the same period in the prior year.

COVID-19.
PeopleManagement Segment EBITDA increased to $19segment profit declined $3.8 million or 3.2% of revenue for the thirty-nine weeks ended October 1, 2017,September 27, 2020, compared to a loss of $70 million, or 10.3% of revenue in the same period in the prior year. The decline was primarily due to a significant drop in demand from our clients associated with government and societal actions taken to address COVID-19. The drop in demand, as well as increased price sensitivity, higher pay rates necessary to attract employees given the availability of federal unemployment benefits, and preventive measures taken to help curb the spread of COVID-19 had severe adverse impacts on our segment profit and our segment profit as a percent of revenue. The decline in revenue was partially offset by the decisive and comprehensive cuts to SG&A expense in line with management’s plans to preserve the key strengths of our business.
PeopleScoutsegment performance was as follows:
Thirteen weeks endedThirty-nine weeks ended
(in thousands, except percentages)Sep 27, 2020Sep 29, 2019Sep 27, 2020Sep 29, 2019
Revenue from services$33,743 $64,346 $118,219 $197,589 
Segment profit349 10,774 75 32,424 
Percentage of revenue1.0 %16.7 %0.1 %16.4 %
PeopleScout segment profit declined $10.4 million and $32.3 million for the thirteen and thirty-nine weeks ended September 27, 2020, compared to the same periods in the prior year, respectively. The decline in segment profit was primarily due to a decline in demand. The decline in demand was primarily due to less demand from existing clients resulting from the economic disruption caused by COVID-19. PeopleScout clients in the travel and leisure industries were especially impacted. These clients, which represented approximately 25% and 30% of the client mix for the thirteen and thirty-nine weeks ended September 29, 2019, respectively, were adversely impacted which resulted in a 74% and 63% decrease in revenue, respectively, compared to the same periods in the prior year. Due to the decline in revenue, we took actions to reduce the cost of our service delivery which lagged the rapid revenue decline caused by the disruption of COVID-19 and negatively impacted our segment profit and our segment profit as a percent of revenue. The decline in revenue was partially offset by our cost reduction programs, which have reduced our SG&A expense in line with our plans.
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FUTURE OUTLOOK

The global economy and our business have been dramatically affected by COVID-19. To date, COVID-19 has surfaced all around the world and resulted in country-level quarantines, global travel restrictions and broad-based economic slowdowns. There are no reliable estimates of how long the pandemic will last or how many people will be affected by it. For that reason, it is difficult to predict the short- and long-term impacts of the pandemic on our business at this time. Due to the uncertainty surrounding COVID-19 and its impact on the business environment, we have limited visibility into our financial condition, results of operations or cash flows in the future. However, we are providing the following future outlook for the fourth quarter.

Operating outlook
•We anticipate gross margin to decline between 250 to 190 basis points in the fourth quarter of 2020 and 270 to 210 basis points for fiscal 2020, compared to the same periods in the prior year. This improvement from a decline of 300 basis points in the third quarter of 2020, compared to the same period in the prior year, is primarily due to improving volume and client mix. The improvement is expected to be driven by the anniversary in the third quarter of the loss of $70a highly profitable PeopleScout industrial client, which declined throughout 2019 with no order volume in the fourth quarter of 2019, and less recruiting staff in our PeopleScout business given current revenue volume.
•We have taken steps to reduce our operating cost structure and other cash outflows to preserve capital to fund working capital needs. These actions will have the effect of reducing our operating expenses by $23 million to $27 million in the fourth quarter of 2020 and $102 million to $106 million for fiscal 2020, compared to the same periods in the prior year, while preserving the key strengths of our business to ensure we are prepared when business conditions improve. As the demand environment begins to improve, we will begin to slowly and thoughtfully bring back some spending that will be critical for the long-term health and sustainability of our business.
Liquidity outlook
•Capital expenditures for the fourth quarter of 2020 will be approximately $11 million. This includes $4 million of build out costs planned for our Chicago headquarters that will be reimbursed by our landlord. We remain committed to technological innovation to transform our business for a digital future. We continue to make investments in online and mobile applications to improve access to workers and candidates, as well as improve the speed and ease of connecting our clients and workers for our staffing businesses, and candidates for our recruitment process outsourcing business. We expect these investments will increase the competitive differentiation of our services over the long-term, improve the efficiency of our service delivery, and reduce PeopleReady’s dependence on local branches to find contingent workers and connect them with work. Examples include our JobStack mobile application in our PeopleReady business and our Affinix talent acquisition technology in our PeopleScout business.
•We expect our Revolving Credit Facility and strong financial position to provide ample liquidity. At September 27, 2020, $1.5 million was drawn on the Revolving Credit Facility leaving $292.4 million unused under the Revolving Credit Facility, which is constrained by our most restrictive covenant at this time making $138.5 million available for additional borrowings. We have an option to increase the total line of credit amount to $450.0 million, subject to bank approval. As of September 27, 2020, we had cash and cash equivalents of $28.2 million and total debt of $1.5 million due to strong capital management practices.
•We had a significant reduction in our accounts receivable balance of $55.4 million for the thirty-nine weeks ended September 23, 2016 included29, 2019 due to lower revenue caused from a decline in demand for our services from COVID-19. This has been a substantial source of cash in 2020, but will become a cash use as revenue recovers in future periods and we fund increasing accounts receivable.
•Under the CARES Act, we are allowed to delay payments for the employer portion of social security taxes (6.2% of taxable wages) incurred during March 27, 2020 to December 31, 2020, for both our temporary associates and permanent employees. Half of the deferred amount is due by December 31, 2021, and the remaining amount by December 31, 2022. As of September 27, 2020, we deferred $36.3 million of our employer portion of social security taxes. We expect to defer $18 million to $20 million of employer payroll taxes in the fourth quarter of 2020.

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LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY
Thirty-nine weeks ended
(in thousands)Sep 27, 2020Sep 29, 2019
Net income (loss)$(149,867)$54,358 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization24,002 28,528 
Goodwill and intangible asset impairment charge175,189 — 
Provision for doubtful accounts6,582 5,997 
Non-cash lease expense, net of changes in operating lease liabilities(295)(210)
Stock-based compensation6,762 8,119 
Deferred income taxes(25,955)1,058 
Other operating activities1,944 (1,701)
Changes in operating assets and liabilities:
Accounts receivable55,408 (17,616)
Accounts payable and other accrued expenses(12,723)(6,970)
Accrued wages and benefits(7,395)(141)
Income tax receivable(4,928)(3,982)
Other assets(2,646)(9,449)
Workers’ compensation claims reserve(824)(7,176)
Deferred employer payroll taxes36,312 — 
Other liabilities(2,798)1,723 
Net cash provided by operating activities$98,768 $52,538 
Cash flows from operating activities
Net cash provided by operating activities increased to $98.8 million for the thirty-nine weeks ended September 27, 2020, compared to $52.5 million for the same period in the prior year.
Changes to adjustments to reconcile net loss to net cash provided by operating activities for the thirty-nine weeks ended September 27, 2020 were primarily due to:
•Depreciation and amortization decreased primarily due to the impairment to our acquired client relationships intangible assets for our PeopleScout RPO and PeopleManagement On-Site reporting units of $34.7 million in the first quarter of 2020, and several intangible assets that were fully amortized in the second half of 2019.
•Net loss for the thirty-nine weeks ended September 27, 2020 includes a non-cash goodwill and intangible asset impairment charge of $84$175.2 million ($151.9 million after tax). The charge was a result of the adverse impact on expected future cash flows related to the current state of the economy and the impact of COVID-19. The charge does not impact the company’s current cash, liquidity, or banking covenants.
•The provision for doubtful accounts increased primarily drivendue to specific reserves for clients significantly impacted by a change in the scope of services with our former largest customer. Excluding the goodwill and intangible asset impairment charge, Segment EBITDACOVID-19 pandemic. Bad debt expense as a percentagepercent of revenue improved by 1.2%increased to 0.5% for the thirty-nine weeks ended September 23, 2016.27, 2020, from 0.3% for the same period in the prior year.
•Deferred tax assets increased primarily due to $23.3 million of discrete tax benefit resulting from goodwill and intangible asset impairments. Impairment losses related to goodwill and intangible assets acquired in an asset acquisition are deductible for tax purposes.
•Other operating activities increased primarily due to $0.3 million in unrealized losses on deferred compensation assets due to overall declines in global equity investments for the thirty-nine weeks ended September 27, 2020, as compared to a $3.1 million gain for the same period in the prior year as equity markets strengthened.
Changes to operating assets and liabilities for the thirty-nine weeks ended September 27, 2020 were primarily due to:
•Cash provided by accounts receivable of $55.4 million was due to lower revenue from a decline in demand for our services and a seasonal revenue decline from the fourth quarter of 2019, resulting in a significant decrease in accounts
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receivable. This improvementdecrease was partially offset by an increase in Segment EBITDA asour days sales outstanding by 1.0 day during the thirty-nine weeks ended September 27, 2020, caused by a percentmix of revenueclients with longer payment terms and payment delays from certain clients that have been negatively impacted by COVID-19.
•Cash used for accounts payable and accrued expenses of $12.7 million was primarily due to cost control programs, decline in customer rebates, seasonal patterns and timing of payments. The cost control programs were implemented in response to the economic impact of COVID-19. Customer rebate accruals have declined significantly due to clients not meeting rebate volume thresholds as a moreresult of the impact COVID-19 has had on their businesses. The decline was also due to seasonal patterns, as our business experiences seasonal fluctuations for contingent staffing services.
•Cash used for accrued wages and benefits of $7.4 million was primarily due to our actions to reduce our operating cost structure by initiating salary and selected benefit cuts in April 2020 in response to the economic impact of COVID-19.
•Generally, our workers’ compensation claims reserve for estimated claims decreases as contingent labor services decline, as is the case in the current and prior year. Our worker safety programs have had a positive impact and have created favorable mixadjustments to our workers’ compensation liabilities recorded in each period. Continued favorable adjustments to our workers’ compensation liabilities are dependent on our ability to continue to lower accident rates and claim costs.
•Deferred employer payroll taxes represent employer payroll tax payments that were deferred as of less revenue from our former largest customer which carried a lower gross margin than our blended average,September 27, 2020, as allowed under the CARES Act. The CARES Act allows employers to defer the payment of the employer share of Social Security tax that would otherwise be due on or after March 27, 2020, and before January 1, 2021. Half of the deferred amount is due by December 31, 2021, and the results of a cost reduction program. Revenueremaining amount by December 31, 2022.
Cash flows from our former largest customer declined by $108 million, or 78.6% to $29investing activities
Thirty-nine weeks ended
(in thousands)Sep 27, 2020Sep 29, 2019
Capital expenditures$(16,244)$(18,297)
Purchases and sales of restricted investments(7,235)6,379 
Net cash used in investing activities$(23,479)$(11,703)
Net cash used in investing activities was $23.5 million for the thirty-nine weeks ended October 1, 2017, fromSeptember 27, 2020, compared to $11.7 million for the same period in the prior year.

PeopleScoutsegment performance was as follows:
 Thirteen weeks ended Thirty-nine weeks ended
(in thousands, except for percentages)October 1, 2017September 23, 2016 October 1, 2017September 23, 2016
Revenue from services$48,950
$44,480
 $139,407
$135,017
Segment EBITDA10,277
8,358
 29,071
12,527
Percentage of revenue21.0%18.8% 20.9%9.3%


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PeopleScout Segment EBITDA increased to $10 million, or 21.0% of revenue for the thirteen weeks ended October 1, 2017, compared to $8 million, or 18.8% of revenue for the same period in the prior year. The improved performance is due primarily to new client wins and expanding the scope of services with existing clients together with efficiency gains in the sourcing and recruiting activities.

PeopleScout Segment EBITDA grew to $29 million, or 20.9% of revenue for the thirty-nine weeks ended October 1, 2017, compared to $13 million, or 9.3% of revenue for the same period in the prior year. The increases wereCapital expenditures are primarily due to the goodwill and intangible asset impairment charge of $15 millionour increased investment in the prior period. Excluding the goodwill and intangible asset impairment charge, Segment EBITDA as a percentage of revenue was 20.5% for the thirty-nine weeks ended September 23, 2016. The improved performance is due primarilysoftware technology. We remain committed to new client wins and expanding the scope of services with existing clients together with efficiency gains in the sourcing and recruiting activities.
FUTURE OUTLOOK
We have limited visibility into future demand for our services. However, we believe there is value in providing highlights of our expectations for future financial performance. The following highlights represent our expectations regarding operating trends for the remainder of fiscal 2017. These expectations are subjecttechnological innovation to revision astransform our business changes with the overall economy.
Revenue has declined during the first three quarters of 2017 primarily due to the decrease in revenue from our former largest customer and weakness in the residential construction, manufacturing, and various other service industries in many of the geographies we serve. Within our staffing businesses, wage growth has accelerated due to various minimum wage increases andfor a need for higher wages to attract talent in tight labor markets. We have increased bill rates to compensate for the higher wages, payroll burdens, and our traditional mark-up. While we believe our pricing strategy is the right long-term decision, these actions impact our revenue trends in the near term. Additionally, we implemented cost reduction programs in the prior year which we continued in the current year to address revenue declines and preserve operating margin without sacrificing strategic initiatives to drivedigital future growth. We will continue to monitor and manage our SG&A costs.
We have re-aligned our business around three distinct segments: PeopleReady, PeopleManagement, and PeopleScout. By simplifying our specialized service offerings and clarifying our branding structure, we have laid the foundation for expanding our cross-selling efforts. PeopleReady performance continues to be impacted by temporary disruptions from operational changes related to our consolidation of Labor Ready, CLP Resources, and Spartan Staffing into one specialized workforce solutions service in order to create a more seamless experience for our customers to access all of our blue-color contingent on-demand general and skilled labor service offerings. We are actively working to complete the transition. We are also sharpening our focus on strategic accounts, developing comprehensive account plans, and building institutional capacity to ingrain cross-selling as part of the TrueBlue culture. These efforts are well underway and we believe will drive favorable results.
Our productivity based solutions within our PeopleManagement segment specialize in exclusive recruitment and on-premise management of warehouse/distribution operations to meet the growing demand for e-commerce and scalable supply chain solutions. This business model is based on a productivity-based pricing model where the customer outsources a complete work cell to us and through a combination of process redesign and best practices, we increase the efficiency of a customer’s contingent workforce and align the cost of the workforce with the level of demand within a customer’s business. We believe this adds an appealing solution to certain parts of our existing on-premise business as well as opportunities in the broader marketplace. We believe that productivity based solutions will continue to deliver growth with its compelling value proposition.
PeopleScout is a recognized industry leader of RPO services, which are in the early stages of their adoption cycles. We expect continued organic growth with a differentiated service that leverages innovative technology for high-volume, scalable sourcing and dedicated client service teams for connecting the best talent to work opportunity, reducing the cost of hiring, and delivering a better outcome for the client. Additionally, we are focused on growth through the disciplined pursuit of international acquisitions to improve win rates on multi-continent deals.
We are committed to technology innovation that makes it easier for our customersclients to do business with us and easier to connect people withto work. We continue making investments in our online tools and our mobile application ("JobStack")applications to improve access to workers and candidates, as well as improve the speed and ease of connecting our customersclients and workers. We began the rollout of the JobStack worker application ("app") earlier this year. The worker functionality is now live in approximately 450 branches, or about 70% ofworkers for our overall PeopleReady branch network. We began piloting the onboarding of clients to the JobStack client app at the end of Q2 2017staffing businesses, and are receiving positive feedback.candidates for our recruitment process outsourcing business. We expect JobStackthese investments will increase the competitive differentiation of our services expandover the long-term, improve the efficiency of our reach into new demographics, improve both service delivery, and work-order fill rates, and ultimately reduce ourPeopleReady’s dependence on local branches to find temporarycontingent workers and connect them with work.

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LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY

Cash flows from operating activities
Our cash flows from operating activities were as follows:
 Thirty-nine weeks ended
(in thousands)October 1, 2017September 23, 2016
Net income (loss)$39,029
$(33,338)
Adjustments to reconcile net income (loss) to net cash from operating activities:  
Depreciation and amortization34,650
34,673
Goodwill and intangible asset impairment charge—
103,544
Provision for doubtful accounts6,321
6,361
Stock-based compensation6,161
7,443
Deferred income taxes4,890
(23,874)
Other operating activities2,563
5,603
Changes in operating assets and liabilities, net of effects of acquisition of business:  
Accounts receivable(34,198)102,722
Income tax receivable12,788
4,018
Accounts payable and other accrued expenses(784)(3,764)
Accrued wages and benefits(176)(3,254)
Workers' compensation claims reserve1,985
11,938
Other assets and liabilities7,392
1,177
Net cash provided by operating activities$80,621
$213,249
Net cash provided by operating activities was $81 million for the thirty-nine weeks ended October 1, 2017, compared to $213 million for the same period Examples include our JobStack mobile application in the prior year.  
The goodwill and intangible asset impairment charge of $104 million in the prior year was primarily driven by a change in the scope of services with our former largest customer and the impact of other changes in outlook reflecting changes to economic and industry conditions which lowered future expectations. In addition, it includes a $4.3 million trade name impairment charge in connection with the consolidation of our retail branch network under a common brand name.
The change to deferred income taxes is due primarily to the goodwill and intangible asset impairment charge in the comparable period in the prior year.
Accounts receivable followed normal season patterns through the third quarter of 2017 by increasing from the beginning of the year. Our business experiences seasonal fluctuations. Demand for our PeopleReady services is higher during the secondbusiness and third quarters of the year with demand peakingour Affinix talent acquisition technology in the third quarter. In addition, days sales outstanding increased due to revenue mix and slowed collections. Accounts receivable for the comparable prior year period declined primarily due to a decline in revenue and associated receivables from our former largest customer. The record fourth quarter of fiscal 2015 and seasonal de-leveraging that followed was in large part due to this customer who substantially insourced their recruitment and management of contingent labor for their warehouse fulfillment centers and distribution sites in the United States commencing in the second quarter of fiscal 2016. Revenues from our former largest customer declined by $140 million between the fourth quarter of fiscal 2015 and the third quarter of fiscal 2016. Revenues from our former largest customer declined by $22 million between the fourth quarter of fiscal 2016 and the third quarter of fiscal 2017.PeopleScout business.
The decline in accounts payable and other accrued expenses is primarily due to cost control programs together with normal seasonal patterns and timing of payments.
The decline in accrued wages and benefits is primarily due to the lower volume of activity from revenue declines, which require reductions in the flex workforce to align with client volume changes.
Generally, our workers’ compensation claims reserve for estimated claims increases as contingent labor services increase and decreases as contingent labor services decline.

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During the second quarter of 2017, we paid $23 million relating to the contingent consideration associated with our acquisition of SIMOS. The payment included $18 million related to the final purchase price fair value, which is reflected in cash flows used in financing activities. The remaining balance of $4 million is recognized in cash flows used in operating activities as a decrease in Other assets and liabilities.

Cash flows from investing activities
Our cash flows from investing activities were as follows:
 Thirty-nine weeks ended
(in thousands)October 1, 2017September 23, 2016
Capital expenditures$(16,303)$(17,766)
Acquisition of business, net of cash acquired—
(71,863)
Change in restricted cash and investments(12,350)(22,935)
Net cash used in investing activities$(28,653)$(112,564)
Net cash used in investing activities was $29 million for the thirty-nine weeks ended October 1, 2017, compared to $113 million for the same period in the prior year.
Cash used in investing activities of $72 million for the thirty-nine weeks ended September 23, 2016, was for the acquisition of the RPO business of Aon Hewitt, effective January 4, 2016.
Restricted cash and investments consists primarilyconsist of collateral that has been provided or pledged to insurance carriers and state workers’ compensation programs. The change in cash used in investing activities was primarily dueprograms, as well as collateral to a decrease insupport the deferred compensation plan. Lower collateral requirements paid tofrom our workers’ compensation insurance providers due to a decline in contingent labor services, as well as the timingwere more than offset by an acceleration of collateral payments.

funding for the thirty-nine weeks ended September 27, 2020.
Cash flows from financing activities

Our cash flows from financing activities were as follows:
Thirty-nine weeks ended
(in thousands)Sep 27, 2020Sep 29, 2019
Purchases and retirement of common stock$(52,346)$(31,316)
Net proceeds from employee stock purchase plans734 1,023 
Common stock repurchases for taxes upon vesting of restricted stock(2,331)(1,934)
Net change in revolving credit facility(35,600)(36,200)
Other(1,436)(203)
Net cash used in financing activities$(90,979)$(68,630)
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 Thirty-nine weeks ended
(in thousands)October 1, 2017September 23, 2016
Purchases and retirement of common stock$(29,371)$—
Net proceeds from stock option exercises and employee stock purchase plans1,179
1,183
Common stock repurchases for taxes upon vesting of restricted stock(2,956)(2,692)
Net change in Revolving Credit Facility(1,099)(104,586)
Payments on debt and other liabilities(1,700)(1,700)
Payment of contingent consideration at acquisition date fair value(18,300)—
Other—
20
Net cash used in financing activities$(52,247)$(107,775)
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Net cash used in financing activities was $52$91.0 million for the thirty-nine weeks ended October 1, 2017,September 27, 2020, compared to $108$68.6 million for the same period in the prior yearyear.

Purchases and retirement of common stock totaled $29 million under our prior share repurchase program duringDuring the thirty-nine weeks ended October 1, 2017. On September 15, 2017,27, 2020, we repurchased $40.0 million of our Board of Directors authorized a new $100 millioncommon stock under an accelerated share repurchase program and $12.4 million of our outstandingcommon stock in the open market, including commissions, for a total of $52.4 million of common stock. The shareThese transactions were initiated prior to the medical community’s acknowledgment of the expected severity of the impact COVID-19 would have on the United States. As of September 27, 2020, $66.7 million remains available for repurchase program does not obligate us to acquire any particular amount of common stock and does not have an expiration date. There have been no repurchases under existing authorizations. The second amendment to our credit agreement prohibits us from repurchasing shares until July 1, 2021. See Note 8: Shareholders’ Equity, to our consolidated financial statements found in Item 1 of this new program through the period ending October 1, 2017.Quarterly Report on Form 10-Q, for additional details on our share repurchase program.

Payment of $23 million related to contingent consideration during the thirty-nine weeks ended October 1, 2017 was made in connection with the acquisition of SIMOS. The total contingent consideration payment included $18 million related to the final purchase price fair value, which is reflected in cash flows used in financing activities. The remaining balance of $4 million is recognized in cash flows used in operating activities as a decrease in Other assets and liabilities.


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The net change in the Revolving Credit Facility in the prior year is due to repayments.

Future outlook

Our cash-generating capability provides us with financial flexibility in meeting our operating and investing needs. Our current financial position is highlighted as follows:

Our Revolving Credit Facility of up to a maximum of $300 million expires on June 30, 2019. The Revolving Credit Facility is an asset backed facility, which is secured by a pledge of substantially all of the assets of TrueBlue, Inc. and material U.S. domestic subsidiaries. The additional amount available to borrow at October 1, 2017 was $118 million. We believe the Revolving Credit Facility provides adequate borrowing availability.

We had cash and cash equivalents of $35 million at October 1, 2017.

The majority of our workers’ compensation payments are made from restricted cash rather than cash from operations. At October 1, 2017, we had restricted cash and investments totaling $244 million.

We believe that cash provided from operations and our capital resources will be adequate to meet our cash requirements for the foreseeable future.
CAPITAL RESOURCES

Revolving credit facility

Effective June 30, 2014,On March 16, 2020, we entered into a Second Amended and Restated Revolving Credit Agreement for a secured revolvingfirst amendment to our credit facility of $300 millionagreement with Bank of America, N.A., Wells Fargo Bank, National Association,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 PNC Capital Markets LLC ("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"). TheFacility. Subject to lender approval, we have the ability to increase our Revolving Credit Facility which matures June 30, 2019, amended and restated our previous credit facility. The maximum amount we can borrowup to $450.0 million.

Obligations under the Revolving Credit Facility is subjectare guaranteed by TrueBlue and material U.S. domestic subsidiaries, and are secured by substantially all of the assets of TrueBlue and material U.S. domestic subsidiaries. The amended 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, 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 certain borrowing limits. Specifically, we are limited tothe difference of total debt outstanding and unrestricted cash in excess of $50 million. As of September 27, 2020, our asset coverage ratio was 22.1.
•Liquidity greater than $150 million, defined as the sum of 90%unrestricted cash and availability under the aggregate revolving commitments. As of September 27, 2020, our eligible billed accounts receivable, plus 85%liquidity was $320.6 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 million for the trailing three quarters ending Q1 2021 and greater than $15 million for the trailing four quarters ending Q2 2021. As of September 27, 2020, EBITDA for the trailing three and four quarters was $24.8 million and $46.1 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 eligible unbilled accounts receivable limitedfunded 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.
See Note 6: Long-Term Debt, to 15%our consolidated financial statements found in Item 1 of allthis Quarterly Report on Form 10-Q, for additional details on our eligible receivables, plus the value of our Tacoma headquarters office building.The borrowing limit is further reduced by the sum of a reserve in an amount equal to the payroll and payroll taxes for our temporary employees for one payroll cycle and certain other reserves, if deemed applicable. The additional amount available to borrow at October 1, 2017 was $118 million. We are currently in compliance with all covenants related to the Revolving Credit Facility.

Restricted cash and investments

Restricted cash and investments consist principally of collateral that has been provided or pledged to insurance carriers for workers’ compensation and state workers’ compensation programs. Our insurance carriers and certain state workers’
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compensation programs require us to collateralize a portion of our workers’ compensation obligation. We have agreements with certain financial institutions that allow us to restrict cash and cash equivalents and investments for the purpose of providing collateral instruments to our insurance carriers to satisfy workers’ compensation claims. At October 1, 2017,September 27, 2020, we had restricted cash and investments totaling $244$229.8 million. The majority of our collateral obligations are held in a trust at the Bank of New York Mellon ("Trust"(“Trust”). See Note 3: Restricted Cash and Investments, to our Consolidated Financial Statementsconsolidated financial statements found in Item 1 of this Quarterly Report on Form 10-Q, for details ofon our restricted cash and investments.
We established investment policy directives for the Trust with the first priority to preserve capital, second to ensure sufficient liquidity to pay workers’ compensation claims, third to diversify the investment portfolio, and fourth to maximize after-tax returns. Trust investments must meet minimum acceptable quality standards. The primary investments include U.S. Treasury securities, U.S. agency debentures, U.S. agency mortgages, corporate securities and municipal securities. For those investments rated by nationally recognized statistical rating organizations the minimum ratings at time of purchase are:
S&PMoody'sMoody’sFitch
Short-term ratingA-1/SP-1P-1/MIG-1F-1
Long-term ratingAA2A

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Workers’ compensation insurance, collateral and claims reserves

Workers’ compensation insurance

We provide workers’ compensation insurance for our temporarycontingent and permanent employees. The majority of our current workers’ compensation insurance policies cover claims for a particular event above a $2$2.0 million deductible limit, on a “per occurrence” basis and, accordingly, we are substantially self-insured.
For workers’ compensation claims originating in Washington, North Dakota, Ohio, Wyoming, Canada and Puerto Rico (our “monopolistic jurisdictions”), we pay workers’ compensation insurance premiums and obtain full coverage under government-administered programs (with the exception of our PeopleReady service lines in Ohio where we have a self-insured policy). Accordingly, because we are not the primary obligor, our financial statements do not reflect the liability for workers’ compensation claims in these monopolistic jurisdictions.

Workers’ compensation collateral

Our insurance carriers and certain state workers’ compensation programs require us to collateralize a portion of our workers’ compensation obligation, for which they become responsible should we become insolvent. The collateral typically takes the form of cash and cash-backed instruments, highly rated investment grade securities, letters of credit, and/orand surety bonds. On a regular basis, these entities assess the amount of collateral they will require from us relative to our workers’ compensation obligation. Such amounts can increase or decrease independent of our assessments and reserves. We generally anticipate that our collateral commitments will continue to grow as we grow our business. We pay our premiums and deposit our collateral in installments. The majority of the restricted cash and investments collateralizing our self-insured workers’ compensation policies are held in the Trust.
Our total collateral commitments were made up of the following components for the fiscal period end dates presented:
(in thousands)Sep 27, 2020Dec 29, 2019
Cash collateral held by workers’ compensation insurance carriers$22,076 $22,256 
Cash and cash equivalents held in Trust18,543 23,681 
Investments held in Trust156,030 149,373 
Letters of credit (1)6,109 6,202 
Surety bonds (2)20,616 20,731 
Total collateral commitments$223,374 $222,243 
(in thousands)October 1, 2017January 1, 2017
Cash collateral held by workers’ compensation insurance carriers$28,343
$28,066
Cash and cash equivalents held in Trust30,666
32,841
Investments held in Trust163,270
146,517
Letters of credit (1)7,748
7,982
Surety bonds (2)19,524
20,440
Total collateral commitments$249,551
$235,846
(1)We have agreements with certain financial institutions to issue letters of credit as collateral.
(2)Our surety bonds are issued by independent insurance companies on our behalf and bear annual fees based on a percentage of the bond, which is determined by each independent surety carrier. These fees do not exceed 2.0% of the bond amount, subject to a minimum charge. The terms of these bonds are subject to review and renewal every one to four years and most bonds can be canceled by the sureties with as little as 60 days’ notice.
(1)We have agreements with certain financial institutions to issue letters of credit as collateral.
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(2)MANAGEMENT’S DISCUSSION AND ANALYSISOur surety bonds are issued by independent insurance companies on our behalf and bear annual fees based on a percentage of the bond, which is determined by each independent surety carrier. These fees do not exceed 2.0% of the bond amount, subject to a minimum charge. The terms of these bonds are subject to review and renewal every one to four years and most bonds can be canceled by the sureties with as little as 60 days’ notice.



Workers’ compensation reserve

The following table provides a reconciliation of our collateral commitments to our workers’ compensation reserve as of the fiscal period end dates presented:
(in thousands)Sep 27, 2020Dec 29, 2019
Total workers’ compensation reserve$254,794 $255,618 
Add back discount on workers’ compensation reserve (1)17,673 19,316 
Less excess claims reserve (2)(53,053)(45,253)
Reimbursable payments to insurance provider (3)3,581 8,121 
Other (4)379 (15,559)
Total collateral commitments$223,374 $222,243 
(in thousands)October 1, 2017January 1, 2017
Total workers’ compensation reserve$279,335
$277,351
Add back discount on workers’ compensation reserve (1)16,634
14,818
Less excess claims reserve (2)(50,655)(52,930)
Reimbursable payments to insurance provider (3)14,736
10,193
Less portion of workers’ compensation not requiring collateral (4)(10,499)(13,586)
Total collateral commitments$249,551
$235,846
(1)Our workers’ compensation reserves are discounted to their estimated net present value while our collateral commitments are based on the gross, undiscounted reserve.
(2)Excess claims reserve includes the estimated obligation for claims above our deductible limits. These are the responsibility of the insurance carriers against which there are no collateral requirements.

(1)Our workers’ compensation reserves are discounted to their estimated net present value while our collateral commitments are based on the gross, undiscounted reserve.
(2)Excess claims reserve includes the estimated obligation for claims above our deductible limits. These are the responsibility of the insurance carriers against which there are no collateral requirements.
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Table of Contents(3)This amount is included in restricted cash and represents a timing difference between claim payments made by our insurance carrier and the reimbursement from cash held in the Trust. When claims are paid by our carrier, the amount is removed from the workers’ compensation reserve but not removed from collateral until reimbursed to the carrier.

(4)Represents the difference between the self-insured reserves and collateral commitments.
MANAGEMENT'S DISCUSSION AND ANALYSIS



(3)This amount is included in restricted cash and represents a timing difference between claim payments made by our insurance carrier and the reimbursement from cash held in the Trust. When claims are paid by our carrier, the amount is removed from the workers’ compensation reserve but not removed from collateral until reimbursed to the carrier.
(4)Represents deductible and self-insured reserves where collateral is not required.
Our workers’ compensation reserve is established using estimates of the future cost of claims and related expenses, which are discounted to their estimated net present value. We discount our workers’ compensation liability as we believe the estimated future cash outflows are readily determinable.
Our workers’ compensation reserve for deductible and self-insured claims is established using estimates of the future cost of claims and related expenses that have been reported but not settled, as well as those that have been incurred but not reported. Reserves are estimated for claims incurred in the current year, as well as claims incurred during prior years.
Management evaluates the adequacy of the workers’ compensation reserves in conjunction with an independent quarterly actuarial assessment. Factors considered in establishing and adjusting these reserves include, among other things:
•changes in medical and time loss (“indemnity”) costs;
•changes in mix between medical only and indemnity claims;
•regulatory and legislative developments impacting benefits and settlement requirements;
•type and location of work performed;
•the impact of safety initiatives; and
•positive or adverse development of claims.
Our workers’ compensation claims reserves are discounted to their estimated net present value using discount rates based on returns of “risk-free” U.S. Treasury instruments with maturities comparable to the weighted average lives of our workers’ compensation claims. At October 1, 2017,September 27, 2020, the weighted average discount rate was 1.6%1.8%. The claim payments are made over an estimated weighted average period of approximately 4.55 years.
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 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 October 1, 2017,September 27, 2020, the weighted average rate was 2.4%1.5%. The claim payments are made and the corresponding reimbursements from our insurance carriers are received over an estimated weighted average period of approximately 1516 years. The discounted workers’ compensation reserve for excess claims was $53.1 million and $45.3 million, and the corresponding gross receivable for the insurance on excess claims were $51was $52.1 million and $53$45.3 million as of October 1, 2017September 27, 2020 and January 1, 2017,December 29, 2019, respectively.

Certain workers’ compensation insurance companies with which we formerly did business are in liquidation and have failed to pay a number of excess claims to date. We have recorded a valuation allowance against substantially all of the insurance receivables from the insurance companies in liquidation.

We continue to actively manage workers’ compensation expensecost through the safety of our temporarycontingent workers with our safety programs, and actively control costs with our network of service providers. These actions have had a positive impact creating favorable adjustments to workers’ compensation liabilities recorded in the current and prior periods. Continued favorable adjustments to our workers’ compensation liabilities are dependent on our ability to continue to aggressively lower accident rates and costs of our claims. We expect diminishing favorable adjustments to our workers’ compensation liabilities as the opportunity for significant reduction to frequency and severity of accident rates diminishes.
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Future outlook
We are focused on capital preservation as a top priority. In response to the rapidly changing market conditions due to COVID-19, we have reduced operating costs and other cash outflows to preserve capital to fund working capital needs. Our Revolving Credit Facility 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. On March 16, 2020, we extended the maturity of the Revolving Credit Facility to March 16, 2025. Although we were in compliance with our covenants, we felt it was prudent to negotiate more favorable covenants given the level of economic uncertainty. On June 24, 2020, we further amended our revolving credit agreement, which included modifications to our financial covenants. As of September 27, 2020, we are in a strong financial position with cash and cash equivalents of $28.2 million, total debt outstanding of $1.5 million and $138.5 million available under the most restrictive covenant of our Revolving Credit Facility at this time for total liquidity of $166.7 million. As our revenue growth continues, our outstanding debt will increase to fund the related growth in accounts receivables.
Our insurance carriers and certain state workers’ compensation programs require us to collateralize a portion of our workers’ compensation obligation, for which they become responsible should we become insolvent. The collateral typically takes the form of cash and cash-backed instruments, highly rated investment grade securities, letters of credit, and surety bonds. We continue to have risk that these collateral requirements may be increased by our insurers due to our loss history and market dynamics, including from the impact of COVID-19.
Under the CARES Act, we are allowed to delay payments for the employer portion of social security taxes (6.2% of taxable wages) incurred during March 27, 2020 to December 31, 2020, for both our temporary associates and permanent employees. As of September 27, 2020, we deferred $36.3 million of our employer portion of social security taxes. We expect to defer $18 million to $20 million of employer payroll taxes in the fourth quarter of 2020.
In February 2020, as part of the existing share repurchase plan, we entered into an accelerated share repurchase agreement with a third-party financial institution to repurchase $40.0 million of our common stock, and we also repurchased $12.4 million, including commissions, in the open market. These transactions were initiated prior to the medical community’s acknowledgment of the expected severity of the impact COVID-19 would have on the United States. We did not initiate any repurchases of our common stock during the thirteen weeks ended September 27, 2020. As of September 27, 2020, $66.7 million remains available for repurchase of common stock under existing authorizations. We have historically returned capital to shareholders through stock repurchases. We anticipate repurchasing additional shares when economic conditions improve. However, the second amendment to our credit agreement prohibits us from repurchasing shares until July 1, 2021.
We believe that cash provided from operations and our capital resources will be adequate to meet our cash requirements for the next 12 months. If the business interruptions caused by COVID-19 last longer than we expect, we may need to seek other sources of liquidity by accessing the capital markets to raise additional debt or equity.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
There have been no material changes during the period covered by this Quarterly Report on Form 10-Q, outside of the ordinary course of business, to the contractual obligations specified in the table of contractual obligations includedfound in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included inof our Annual Report on Form 10-K for the fiscal year ended January 1, 2017.December 29, 2019.


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SUMMARY OF CRITICAL ACCOUNTING ESTIMATES
Our critical accounting estimates are consistent with those discussed in Part II, “Item 7. Management’sItem 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations; Summary of Critical Accounting Estimates” in our Annual Report on Form 10-K for the fiscal year ended JanuaryDecember 29, 2019, other than the adoption of the current expected credit loss model for accounts receivable as discussed in Note 1: Summary of Significant Accounting Policies, to our consolidated financial statements found in Item 1 2017. Theof this Quarterly Report on Form 10-Q, as well as the following has been updatedupdates as of September 27, 2020.
Considerations related to reflectCOVID-19
We have considered COVID-19 related impacts to our estimates, as appropriate, within our financial statements and there may be changes to those estimates in future periods. However, we believe that the resultsaccounting estimates used are appropriate after considering the increased uncertainties surrounding the severity and duration of our annual goodwillCOVID-19. Such estimates and indefinite-lived intangible asset impairment analysis.assumptions are subject to inherent uncertainties, which may result in actual future amounts differing from reported estimated amounts.

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Goodwill and indefinite-lived intangible assets

We evaluate goodwill and indefinite-lived intangible assets for impairment on an annual basis as of the first day of our fiscal second fiscal 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, legal factors, operating performance indicators, competition, customerclient 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.

Goodwill

We test for goodwill impairment at the reporting unit level. We consider our service linesoperating segments to be our reporting units for goodwill impairment testing. Our service lines areAs of September 27, 2020, our operating segments were PeopleReady, PlaneTechs,PeopleManagement Centerline, Drivers, Staff Management, SIMOS,PeopleManagement On-Site, PeopleScout RPO, and PeopleScout MSP.
Interim impairment test
During the first quarter of 2020, we experienced a significant decline in our stock price. 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 this 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. Accordingly, we performed an interim impairment test involvesof our goodwill.
The interim impairment test involved comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit. If the fair value exceeds the carrying value, we conclude that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value of the goodwill.

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 operationaloperating and macroeconomic changes on each reporting unit. The fair value of each reporting unit iswas estimated using a weighted averagecombination of a discounted cash flow methodology and the income and market valuation approaches. The income approach applies a fair value methodology based on discounted cash flows.using publicly traded company multiples in similar businesses. This analysis requiresrequired significant estimates and judgments, including estimation of future cash flows, which iswas dependent on internalinternally developed forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows willwould occur, and determination of our weighted average cost of capital, which iswas risk-adjusted to reflect the specific risk profile of the reporting unit being tested. OurThe weighted average cost of capital forused in our most recent annualinterim impairment test ranged from 11.5% to 12.0%. Our control premium was approximately 12%, which management has determined to be reasonable.
We also apply a market approach, which identifies similar publicly traded companiescarefully considered the economic impact of COVID-19, together with the estimated decreases to our revenues and develops a correlation, referred to as a multiple, to apply to thecorresponding operating results ofas we continued to experience weakness in pricing and demand for our services during the reporting units. The primary market multipleseconomic downturn. Our estimates were based on our experience with prior recessions, as well as our experience with plans and actions to which we compare are revenueadjust and earnings before interest, taxes, depreciation, and amortization. The income and market approaches were equally weighted in our most recent annual impairment test. These combined fair values are reconciledadapt to our aggregate market value of our shares of common stock outstanding on the date of valuation, resulting in a reasonable control premium.recessions. We base fair value estimates on assumptions we believe to be reasonable but that are unpredictabledifficult to predict. Given the uncertain nature of the economic impact of COVID-19, and inherently uncertain. Actual futurethe recovery pattern of the broader economy and its impact on our business, actual results maycould differ significantly from thoseour estimates. We consider
As a result of our Q1 2020 interim impairment test, we concluded that the carrying amounts of goodwill for our PeopleScout RPO, PeopleScout MSP and PeopleManagement On-Site reporting unit’sunits exceeded their implied fair values and we recorded a non-cash impairment loss of $140.5 million, which was included in goodwill and intangible asset impairment charge on the Consolidated Statements of Operations and Comprehensive Income (Loss). The goodwill carrying value to be substantiallyof $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. Based on our interim goodwill impairment test, the fair values of our PeopleReady and PeopleManagement Centerline reporting units were in excess of itstheir carrying value atby approximately 60% and 195%, respectively.
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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 20% premium or greater.
Based onqualitative assessment to determine whether it was more likely than not that the fair value of any of our test performedreporting units is 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 quarterquarter. Therefore, a quantitative assessment was not performed as of fiscal 2017, all reporting units’ fair valuesMarch 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 September 27, 2020. The remaining goodwill balances for PeopleScout RPO and PeopleScout MSP were substantially$22.9 million and $9.7 million, respectively, as of September 27, 2020. The loss of a key client, a significant further decline to the economy, or a delayed recovery in excesskey industries we serve, including travel and leisure, could give rise to an additional impairment. Should any one of their respective carrying values. Accordingly, nothese events occur, we will need to record an impairment loss was recognized. Based on our test performed in the prior year, we recorded ato goodwill impairment charge of $66 million for the thirty-nine weeks ended September 23, 2016.

amount by which the carrying value exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill. We will continue to closely monitor the operational performance of these reporting units as it relates to goodwill impairment.
Indefinite-lived intangible assets

We have indefinite-lived intangible assets related to our Staff Management and PeopleScout trade names. We test our trade names annually for impairment, and when indicators of potential impairment exist. We utilize the relief from royalty method to determine the fair value of each of our trade names. If the carrying value exceeds the fair value, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value. Management uses considerable judgment to determine key assumptions, including projected revenue, royalty rates and appropriate discount rates.

Interim impairment test
We performed our annual indefinite-lived intangible assetan interim impairment test as of the firstlast day of our secondfirst fiscal quarter of fiscal 2017for 2020 and determined that the estimated fair values exceeded the carrying amounts for both of our indefinite-lived trade names. Accordingly, no impairment loss was recognized. Based on
Annual impairment test
Given the proximity of our testinterim 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 ina qualitative assessment to determine whether it was more likely than not that the prior year,fair value of any of our indefinite-lived trade names is 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 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 recordeddid not identify any events or conditions that make it more likely than not that an impairment charge of $5 million formay have occurred during the thirty-nine weeks endedperiod from March 30, 2020 to September 23, 2016.27, 2020.


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AcquiredFinite-lived intangible assets and other long-lived assets

We generally record acquired intangible assets that have finite useful lives, such as customer relationships, in connection with business combinations. We review intangible assets that have finite useful lives and other long-lived assets whenever an event or change in circumstances indicates that the carrying value of the asset may not be recoverable. Factors considered important that could result in an impairment review include, but are not limited to, significant underperformance relative to historical or planned operating results, or significant changes in business strategies. We estimate the recoverability of these assets by comparing the carrying amount of the asset to the future undiscounted cash flows that we expect the asset to generate.
An impairment loss is recognized when the estimated undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value based on discounted cash flow analysis or other valuation techniques. Based on
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Interim impairment test
With the estimated decrease in demand for our review inservices due to the prior year,economic impact of COVID-19, we lowered our future expectations, which was the primary trigger of an impairment test as of the last day of our fiscal first quarter for certain of our acquired client relationships intangible assets. As a result of this impairment test, we recorded ana non-cash impairment toloss for our acquired trade names/trademarksPeopleScout RPO and PeopleManagement On-Site client relationship intangible assets of $4$34.7 million, duringwhich was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the thirteenthirty-nine weeks ended September 23, 2016,27, 2020. The impairment charge for PeopleScout RPO and also recordedPeopleManagement On-Site client relationship intangible assets was $25.0 million and $9.7 million, respectively. Considerable management judgment was necessary to determine key assumptions, including estimated 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 to our customer relationships intangible assets of $29 millionmay have occurred during the first halfperiod from March 30, 2020 to September 27, 2020. The remaining client relationship intangible asset balances related to assets impaired for PeopleScout RPO and PeopleManagement On-Site were $5.5 million and $7.6 million, respectively, as of 2016.September 27, 2020. Should actual results decline further or longer than we have currently estimated, the remaining intangible asset balances may become further impaired. We will continue to closely monitor the revenue generated from acquired clients as it relates to client relationship asset impairment.
NEW ACCOUNTING STANDARDS
See Note 1: Summary of Significant Accounting Policies, to our Consolidated Financial Statements includedconsolidated financial statements found in Item 1 of this Quarterly Report on Form 10-Q.
Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our quantitative and qualitative disclosures about market risk are discussed in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended January 1, 2017.December 29, 2019.
Item 4.CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

During the fiscal third quarter of fiscal 2017,2020, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures at a reasonable assurance level, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level, as of October 1, 2017.

September 27, 2020.
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our most recently completed fiscal quarter that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

The certifications required by Section 302Rule 13a-14 of the Sarbanes-OxleyExchange Act of 2002 are filed as exhibits 31.1 and 31.2, respectively, to this Quarterly Report on Form 10-Q.

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PART II. OTHER INFORMATION
Item 1.LEGAL PROCEEDINGS
See Note 5: 7: Commitments and Contingencies, to our Consolidated Financial Statementsconsolidated financial statements found in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Item 1A.RISK FACTORS
Investing in our securities involves risk. The following risk factors and all other information set forth in this Quarterly Report on Form 10-Q should be considered in evaluating our future prospects. If any of the events described below occur, our business, financial condition, results of operations, liquidity, or access to the capital markets could be materially and adversely affected.
RISKS RELATED TO OUR COMPANY’S OPERATIONS
COVID-19, governmental reactions to COVID-19, and the resulting adverse economic conditions have negatively impacted our business and will have a continued material adverse impact on our business, financial condition, liquidity, and results of operations.
COVID-19’s negative impacts on the global economy and related governmental responses have been wide ranging and multi-faceted. These impacts have caused historically steep and rapid declines in economic activity in the markets where we operate, disruptions in global supply chains, travel restrictions, sharp downturns in business activity, price volatility in equities markets, and concern that credit markets and companies will not remain liquid.
COVID-19 has caused significant negative impacts on our operations and stock price. Our workforce solutions are significantly affected by fluctuationsrevenues declined substantially beginning in generalthe second half of March 2020 because of COVID-19 and will remain suppressed while the current economic conditions.
conditions continue. The operations of our clients have been severely disrupted, and could further decline, thereby increasing the likelihood that our clients continue to delay new contracts or cancel current contracts, reduce orders for our services in the future, have difficulty paying for services provided, or cease operations altogether. The rapid increase in unemployment has made it easier for clients to find new staff, reducing the demand for workforce solutions is highly dependent upon the state of the economy and upon the workforce needs of our customers, which creates uncertainty and volatility. As economic activity slows, companies tendservices. In response to these adverse conditions we have taken steps to reduce their useour expenses and cash outflows. These reductions in expenses, including layoffs, could fail to achieve the intended savings or alternatively reduce our ability to take advantage of temporary workers and reduce their recruitmentopportunities in the future if economic conditions improve. Further deterioration in economic conditions, as a result of new employees. Significant declinesCOVID-19 or otherwise, will lead to a prolonged decline in demand of any region or industry in which we have a major presence may severely reduce the demand for our services and thereby significantly decreasenegatively impact our revenuesbusiness.
The extent to which COVID-19 adversely impacts our business depends on future developments of the pandemic and profits. Deterioration inrelated governmental responses, which are both uncertain and unpredictable. While this matter has, and we expect it to continue to, negatively impact our results of operations, cash flows, profit margins, and financial position, the current level of uncertainty over the economic conditions orand operational impacts of COVID-19 means the related financial or credit markets could also have an adverse impact on our customers’ ability to pay for services we have already provided.
It is difficult for us to forecast futureestimate at this time. In addition, we cannot guarantee that actions we take to reduce costs or otherwise change our operations will address the issues we face with clients, employees or our results of operations.
Advances in technology may disrupt the labor and recruiting markets and we must constantly improve our technology to meet the expectations of clients, candidates and employees.
The increased use of internet-based and mobile technology is attracting additional technology-oriented companies and resources to our industry. Our candidates and clients increasingly demand technological innovation to improve the access to and delivery of our services. Our clients increasingly rely on automation, artificial intelligence, machine learning and other new technologies to reduce their dependence on labor needs, which may reduce demand for our services dueand impact our operations. We face extensive pressure for lower prices and new service offerings and must continue to the inherent uncertaintyinvest in forecasting the direction and strength of economic cyclesimplement new technology and the project nature of our staffing assignments. The uncertainty can be exacerbated by volatile economic conditions, which may cause clientsindustry developments in order to reduce or defer projects for which they utilize our services. The negative impactremain relevant to our business can occur beforeclients and candidates. As a decline in economic activity is seen in the broader economy. When it is difficult for us to accurately forecast future demand, we may not be able to determine the optimal levelresult of personnel and investment necessary to profitably take advantage of growth opportunities.
We may be unable to attract sufficient qualified candidates to meet the needs of our customers.
We compete to meet our customers’ needs for workforce solutions and, therefore,this increasing dependence upon technology, we must continually attract qualified candidates to fill positions. Attracting qualified candidates dependstimely and effectively identify, develop, or license technology from third parties, and integrate such enhanced or expanded technologies into the solutions that we provide. In addition, our business relies on factors such as desirabilitya variety of the assignment, location,technologies, including those that support recruiting, hiring, paying, order management, billing, collecting, contingent worker data analytics and the associated wages and other benefits. We have in the past experienced shortages of qualified candidates and we may experience such shortages in the future. Further, if there is a shortage, the cost to employ or recruit these individuals could increase.client data analytics. If we are unable to pass those costs through to our customers, it could materiallydo not sufficiently invest in and adversely affect our business. Organized labor periodically engages in efforts to represent various groups of our temporary workers. If we are subject to unreasonable collective bargaining agreementsimplement new technology, or work disruptions,evolve our business could be adversely affected.
Our workforce solutions are subject to extensive government regulationat sufficient speed and the imposition of additional regulations that could materially harmscale, our future earnings.
Our workforce solutions are subject to extensive regulation. The cost to comply, and any inability to comply with government regulation, could have a material adverse effect on our business and financial results. Increased government regulation of the workplace or of the employer-employee relationship, or judicial or administrative proceedings related to such regulation, could materially harm our business.
Our temporary staffing services employ temporary workers. The wage rates we pay to temporary workers are based on many factors including government mandated minimum wage requirements, payroll taxes, and benefits. If we are not able to increase the fees charged to customers to absorb any increased costs related to government mandated minimum wages, payroll-related taxes, or benefits, our results of operations may decline materially. Acquiring technological expertise and financial condition could be adversely affected.
We offerdeveloping new technologies for our temporary workers in the United States government mandated health insurance in compliance with the Patient Protectionbusiness may require us to incur significant expenses and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”). Because the final requirements, regulations, and interpretations of the ACA may change, the ultimate financial effect of the ACA is not yet known, and changes in these requirements and interpretations could increase or change our costs. In addition, because of the uncertainty surrounding a potential repeal or replacement of the ACA, we cannot predict with any certainty the likely impact of the ACA’s repeal or the adoption of any other health care reform legislation on our financial condition or operating results. Whether or not there is a change in health care legislation in the U.S., there is likely to be significant disruption to the health care

For some
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market in the future,solutions, we depend on key vendors and the costs ofpartners to provide technology and support. If these third parties fail to perform their obligations or cease to work with us, our health care expenditures may increase. If we are unable to comply with changes to the ACA, or any future health care legislation in the U.S., or sufficiently raise the rates we charge our customers to cover any additional costs, such increases in costsbusiness operations could materially harm our business.
We may incur employment related claims and costs that could materially harm our business.
We are in the business of employing people in the workplaces of other businesses. We incur a risk of liability for claims for personal injury, wage and hour violations, immigration, discrimination, harassment, and other liabilities arising from the actions of our customers and/or temporary workers. Some or all of these claims may give rise to negative publicity, litigation, settlements, or investigations. We may incur costs, charges or other material adverse impacts on our financial statements for the period in which the effect of an unfavorable final outcome becomes probable and can be reasonably estimated.
We maintain insurance with respect to some potential claims and costs with deductibles. We cannot be certain that our insurance will be available, or if available, will be in sufficient amount or scope to cover all claims that may be asserted against us. Should the ultimate judgments or settlements exceed our insurance coverage, they could have a material effect on our business. We cannot be certain we will be able to obtain appropriate types or levels of insurance in the future, that adequate replacement policies will be available on acceptable terms, or at all, or that the companies from which we have obtained insurance will be able to pay claims we make under such policies.negatively affected.
We are dependent on obtaining workers’ compensation and other insurance coverage at commercially reasonable terms. Unexpected changes in claim trends on our workers’ compensation may negatively impact our financial condition.
Our temporary staffing services employ workers for which we provide workers’ compensation insurance. Our workers’ compensation insurance policies are renewed annually. The majority of our insurance policies are with AIG. Our insurance carriers require us to collateralize a significant portion of our workers’ compensation obligation. The majority of our collateral is held in trust by a third-partythird party for the payment of these claims. The loss or decline in value of theour collateral could require us to seek additional sources of capital to pay our workers’ compensation claims. We cannot be certain we will be able to obtain appropriate types or levels of insurance in the future or that adequate replacement policies will be available on acceptable terms. As our business grows or if our financial results deteriorate, the amount of collateral required will likely increase and the timing of providing collateral could be accelerated. Resources to meet these requirements may not be available. We cannot be certain we will be able to obtain appropriate types or levels of insurance in the future or that adequate replacement policies will be available on acceptable terms. The loss of our workers’ compensation insurance coverage would prevent us from operating as a staffing services business in the majority of our markets. Further, we cannot be certain that our current and former insurance carriers will be able to pay claims we make under such policies.
We self-insure, or otherwise bear financial responsibility for, a significant portion of expected losses under our workers’ compensation program. UnexpectedWe have experienced unexpected changes in claim trends, including the severity and frequency of claims, changes in state laws regarding benefit levels and allowable claims, actuarial estimates, orand medical cost inflation, and may experience such changes in the future which could result in costs that are significantly different than initially reported.anticipated or reported and could cause us to record different reserves in our financial statements. There can be no assuranceis a risk that we will not be able to increase the fees charged to our customersclients in a timely manner and in a sufficient amount to cover increased costs as a result of any changes in claims-related liabilities.
We actively manage the safety of our temporarycontingent workers withthrough our safety programs and actively control costs with our network of workers’ compensation related service providers. These activities have had a positive impact creating favorable adjustments to workers’ compensation liabilities recorded in prior periods. The benefit of these adjustments has been decliningis likely to decline and there can be no assurance that we will be able to continue to reduce accident rates and control costs to produce these results in the future.
We operate in a highly competitive industrySome clients require extensive insurance coverage and may be unable to retain customers or market share.
Our industry is highly competitive and rapidly innovating, with low barriers to entry. Our competition includes large, well-financed competitors, small local competitors, internet-based companies, and mobile-enabled solutions providing a variety of flexible workforce solutions. We expect the increased use of internet-based and mobile technology will attract additional technology-oriented companies and resources to the staffing industry. Our customers may demand technological changes in the development or implementation of our services. We face extensive pricing pressure and must continue to invest in new technology and industry developments while we innovate changes in the way we do business in order to remain relevant to our customers. Therefore, thererequest insurance endorsements that are not available under standard policies. There can be no assurance that we will be able to retain customersnegotiate acceptable compromises with clients or market sharenegotiate appropriate changes in our insurance contracts. An inability to meet client insurance requirements may adversely affect our ability to take on new clients or continue providing services to existing clients.
We may experience employment related claims, commercial indemnification claims and other legal proceedings that could materially harm our business.
We are in the business of employing people in the workplaces of our clients. We incur a risk of liability for claims relating to personal injury, wage and hour violations, immigration, discrimination, harassment and other liabilities arising from the actions of our clients and/or contingent workers. Some or all of these claims may give rise to negative publicity, investigations, litigation or settlements. We may incur costs or other material adverse impacts on our financial statements for the period in which the effect of an unfavorable final outcome becomes probable and can be reasonably estimated.
We may have liability to our clients for the action or inaction of our employees, that may cause harm to our clients or third parties. In some cases, we must indemnify our clients for certain acts of our contingent workers or arising from our contingent workers presence on the client’s job site and certain clients have negotiated broad indemnification provisions. We may also incur fines, penalties, and losses that are not covered by insurance or negative publicity with respect to these matters.
We maintain insurance with respect to some potential claims and costs with deductibles. We cannot be certain we will be able to obtain appropriate types or levels of insurance in the future nor can thereor that adequate replacement policies will be any assurance thatavailable on acceptable terms. Should the final judgments or settlements exceed our insurance coverage, they could have a material effect on our business. Our ability to obtain insurance, its coverage levels, deductibles and premiums, are all dependent on market factors, our loss history, and insurance providers’ assessments of our overall risk profile. Further, we cannot be certain our current and former insurance carriers will in light of competitive pressures, be able to remain profitable or maintain our current profit margins.pay claims we make under such policies.
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Our level of debt and restrictions in our credit agreement could negatively affect our operations and limit our liquidity and our ability to react to changes in the economy.
ExtensionsOur revolving credit agreement (the “Revolving Credit Facility”) contains restrictive covenants that require us to maintain certain financial conditions, which we may fail to meet if there is a material decrease in our profitability, including as a result of credit underCOVID-19. Our failure to comply with these restrictive covenants could result in an event of default, which, if not cured or waived, would require us to repay these borrowings before their due date. We may not have sufficient funds on hand to repay these loans, and if we are forced to refinance these borrowings on less favorable terms, or are unable to refinance at all, our Second Amendedresults of operations and Restated Revolving Credit Agreement as amended ("Revolving Credit Facility") are permitted based on a borrowing base, which is an agreed percentage of eligible accounts receivablefinancial condition could be materially adversely affected by increased costs and an agreed percentage of the appraised value of our Tacoma headquarters building, less required reserves and other adjustments.rates. If the amount

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or quality of our accounts receivable deteriorates, then our ability to borrow under the Revolving Credit Facility will be directly affected. Our lenders can impose additional conditions which may reduce the amounts available to us under the Revolving Credit Facility.liquidity.
Our principal sources of liquidity are funds generated from operating activities, available cash and cash equivalents, and borrowings under our Revolving Credit Facility. We must have sufficient sources of liquidity to meet our working capital requirements, fund our workers’ compensation collateral requirements, service our outstanding indebtedness, and finance investment opportunities. Without sufficient liquidity, we could be forced to curtail our operations or we may not be able to pursue promising business opportunities.
Our Revolving Credit Facility and Term Loan Agreement contain restrictive covenants that require us to maintain certain financial conditions. Our failure to comply with these restrictive covenants could result in an event of default, which, if not cured or waived, could result inAs our being required to repay these borrowings before their due date. We may not have sufficient funds on hand to repay these loans, and if we are forced to refinance these borrowings on less favorable terms, or are unable to refinance at all, our results of operations and financial condition could be materially adversely affected by increased costs and rates.
Our debt levels increase, it could have significant consequences for the operation of our business including:including requiring us to dedicate a significant portion of our cash flow from operations to servicing our debt rather than using it for our operations; limiting our ability to obtain additional debt financing for future working capital, capital expenditures, or other corporate purposes; limiting our ability to take advantage of significant business opportunities, such as acquisition opportunities;acquisitions; limiting our ability to react to changes in market or industry conditions; and putting us at a disadvantage compared to competitors with less debt.
The loss of, continued reduction in or substantial decline in revenue from a major customerlarger clients or certain industries could have a material adverse effect on our revenues, profitability and liquidity.
We experience revenue concentration with large customers.clients and in certain industries. Generally, our contracts do not contain guarantees of minimum duration, revenue levels, or profitability and our customersprofitability. Our clients may terminate their contracts or materially reduce their requested levels of service at any time. Although we have no clients that represents over 10% of our consolidated revenue, there are clients that exceed 10% of revenues within some of our operating segments. The lossdeterioration of the financial condition of a large client or reduced demand for our services from, major customersa particular industry could have a material adverse effect on our business, financial condition, and results of operations. COVID-19 has caused certain clients to temporarily close large job sites or reduce demand for our services, and future outbreaks of the pandemic could cause large closures and long-term reduction in demand. In addition, customera significant change to the business, staffing or recruiting model of these clients, for example a decision to insource our services, has had and could again have a material adverse effect on our business, financial condition, and results of operations. The loss of, or reduced demand for our services from larger clients and industries, such as construction or travel and leisure, has had, and in the future could have, a material adverse effect on our business, financial condition, and results of operations. Client concentration exposes us to concentrated credit risk, as a significant portion of our accounts receivable may be from a small number of customers.clients. As the impact of COVID-19 increases for our clients, their ability to pay for our services may decline. If we are unable to collect our receivables, or are required to take additional reserves, our results and cash flows will be adversely affected.
Our business and operations have undergone, and will continue to undergo, significant change as we seek to improve our operational and support effectiveness, which if not managed could have an adverse outcome on our business and results of operations.
We have significantly changed our operations and internal processes in recent periods, and we will continue making similar changes, in order to improve our operational effectiveness. These efforts strain our systems, management, informationadministrative, operations, and financial infrastructure. For example, we combined some of our operating segments earlier in the year. We believe these efforts are important to our long-term success. Managing and cascading these changes throughout the company will continue to require the further attention of our management team and refinement to our operational, financial and management controls, reporting systems and procedures. These activities will require ongoing expenditures and allocation of valuable management and employee resources. If we fail to manage these changes effectively, our costs and expenses may not perform as anticipatedincrease more than we expect and our system,business, financial condition, and results of operations and facilities are vulnerablemay be harmed.
New business initiatives may have an adverse effect on our business.

We expect to damage and interruption.
The efficient operationcontinue adjusting the composition of our business is dependent onlines and entering into new business initiatives as part of our business strategy. New business initiatives, strategic business partners or changes in the composition of our business mix can be distracting to our management information systems. We rely heavily on proprietary and third-party management information systems, mobile device technology and related services, and other technology which may not yield the intended results. Our systems may experience problems with functionality and associated delays. The failure ofdisruptive to our systems to perform as anticipated could disrupt our business and could result in decreased revenue and increased overhead costs,operations, causing our business and results of operations to suffer
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materially. We occasionally modify, retire,New business initiatives, including initiatives outside of our workforce solutions business, in new markets, or new geographies, could involve significant unanticipated challenges and change our systems, and these transitions can be disruptive, causingrisks including not advancing our business and results of operations to suffer materially. Our primary computer systems, headquarters, support facilities, and operations are vulnerable to damagestrategy, not realizing our anticipated return on investment, experiencing difficulty in implementing initiatives, or interruptiondiverting management’s attention from power outages, computer and telecommunications failures, computer viruses, employee errors, security breaches, natural disasters, and catastrophic events. Failure of our systems or facilities may require significant additional capital and management resources to resolve, causingother businesses. These events could cause material harm to our business, operating results or financial condition.
Failure to protect our intellectual property could harm our business, and we face the risk that our services or products may infringe upon the intellectual property rights of others.
We have invested in developing specialized technology and intellectual property, proprietary systems, processes and methodologies that we believe provide us a competitive advantage in serving clients. We cannot guarantee that trade secrets, trademark, and copyright law protections are adequate to deter misappropriation of our intellectual property, which is an important part of our business. We may be unable to detect the unauthorized use of our intellectual property and take the necessary steps to enforce our rights. We cannot be sure that our services and products, or the products of others that we offer to our clients, do not infringe on the intellectual property rights of third parties, and we may have infringement claims asserted against us or our clients. These claims may harm our reputation, result in financial liability and prevent us from offering some services or products to clients.
We are at risk of damage to our brands and reputation, which is important to our success.
Our ability to attract and retain clients, contingent workers, candidates, and employees is affected by external perceptions of our brands and reputation. Negative perceptions or publicity could damage our reputation with current or perspective clients and employees. Negative perceptions or publicity regarding our vendors, clients, or business partners may adversely affect our brand and reputation. We may not be successful in detecting, preventing, or negating all changes in or impacts on our reputation. If any factor, including poor performance or negative publicity, whether or not true, hurts our reputation, we may experience negative repercussions which could harm our business.
A data breach, or improper disclosureThe expansion of orsocial media platforms creates new risks and challenges that could cause damage to our brand and reputation.
The use of social media platforms, including social media websites and other forms of internet-based communications, has rapidly increased allowing individuals access to a broad audience of consumers and other interested parties. For example, unfavorable comments about a work site could make recruiting or hiring at that site more challenging. The inappropriate or unauthorized use of such platforms by our confidential and/clients or proprietary informationemployees could violate privacy laws, cause damage to our brand, or lead to litigation which could harm our employees’business.
We cannot guarantee that we will repurchase our common stock pursuant to our share repurchase program or customers’ informationthat our share repurchase program will enhance long-term shareholder value.
Our Board of Directors has authorized a share repurchase program. Under the program, we are authorized to repurchase shares of common stock for a set aggregate purchase price, or we may choose to purchase shares in the open market, from individual holders, through an accelerated share repurchase program or otherwise. Although the Board of Directors has authorized a share repurchase program, the share repurchase program does not obligate the company to repurchase any specific dollar amount or to acquire any specific number of shares. The timing and amount of the repurchases, if any, will depend upon several factors, including market and business conditions, the trading price of the company’s common stock and the nature of other investment opportunities. The repurchase program may be limited, suspended or discontinued at any time without prior notice. In addition, repurchases of our common stock pursuant to our share repurchase program could affect our stock price and increase its volatility. The existence of a share repurchase program could cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock. Additionally, our share repurchase program could diminish our cash reserves, which may impact our ability to finance future growth and to pursue possible future strategic opportunities and acquisitions. There can be no assurance that these share repurchases will enhance shareholder value because the market price of our common stock may decline below the level at which we repurchased shares of stock. Although our share repurchase program is intended to enhance long-term shareholder value, there is no assurance that it will do so and short-term stock price fluctuations could reduce the program’s effectiveness. Following an amendment to our Revolving Credit Facility, our share repurchase program has been paused until the third quarter of 2021.


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RISKS RELATED TO OUR INDUSTRY
Our workforce solutions are subject to extensive government regulation and the imposition of additional regulations, which could materially harm our future earnings.
Our workforce solutions are subject to extensive government regulation. The cost to comply, and any inability to comply with government regulation, could have a material adverse effect on our business and financial results. Increases or changes in government regulation of the workplace or of the employer-employee relationship, or judicial or administrative proceedings related to such regulation, could materially harm our business.
Our temporary staffing services employ contingent workers. The wage rates we pay to contingent workers are based on many factors including government-mandated minimum wage requirements, payroll-related taxes and benefits. If we are not able to increase the fees charged to clients to absorb any increased costs related to these factors, our results of operations and financial condition could be adversely affected.
We offer our contingent workers in the United States government-mandated health insurance in compliance with the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”). Because of the uncertainty surrounding a potential repeal or replacement of the ACA, we cannot predict with any certainty the likely impact of the ACA’s repeal or the adoption of any other health care reform legislation on our financial condition or operating results. If we are unable to comply with changes to the ACA, or any future health care legislation in the United States, or sufficiently raise the rates we charge our clients to cover any additional costs, such noncompliance or increases in costs could materially harm our business.
We operate in a highly competitive industry and may be unable to retain clients, market share, or profit margins.
Our industry is highly competitive and rapidly innovating, with low barriers to entry. We compete in global, national, regional and local markets with full-service and specialized temporary staffing companies as well as business involvesprocess outsourcing companies that also offer our services. Our competitors offer a variety of flexible workforce solutions. Therefore, there is no assurance that we will be able to retain clients or market share in the use, storage,future, nor can there be any assurance that we will, in light of competitive pressures, be able to remain profitable or maintain our current profit margins.
We may be unable to attract sufficient qualified contingent workers and transmissioncandidates to meet the needs of our clients.
We compete to meet our clients’ needs for workforce solutions, therefore, we must continually attract qualified contingent workers and candidates to fill positions. Attracting qualified workers and candidates depends on factors such as desirability of the assignment, location, the associated wages and other benefits. Prior to COVID-19, unemployment in the United States was low, making it challenging to find sufficient eligible workers and candidates to meet our clients’ orders. The economic slowdown resulting from COVID–19 has increased unemployment substantially, but we cannot predict its continued effect on employment rates. Government responses to COVID-19 included generous unemployment benefits which negatively impacted our ability to recruit qualified workers and candidates. Continued similar unemployment benefits will further impact our ability to recruit in the future. We have experienced shortages of qualified workers and candidates and may experience such shortages in the future. Further, if there is a shortage, the cost to employ or recruit these individuals could increase and our ability to generate revenue would be harmed if we could not fill positions. If we are unable to pass those costs through to our clients, it could materially and adversely affect our business. Organized labor periodically engages in efforts to represent various groups of our contingent workers. If we are subject to unreasonable collective bargaining agreements or work disruptions, our business could be adversely affected.
Cybersecurity vulnerabilities and incidents could lead to the improper disclosure of information about applicants,our clients, candidates temporary workers, employees, and customers. employees.
Our temporary workersbusiness requires the use, processing, and employees may have access or exposure tostorage of confidential information about applicants, candidates, temporarycontingent workers, other employees and customers.clients. We use information technology and other computer resources to carry out operational and support activities and maintain our third-party vendors have established policiesbusiness records. We rely on information technology systems to process, transmit, and proceduresstore electronic information and to help protectcommunicate among our locations around the securityworld and privacywith our clients, partners, and employees. The breadth and complexity of this infrastructure increases the potential risk of security breaches which could lead to potential unauthorized disclosure of confidential information. The secure use, storage,
Our systems and transmissionnetworks are vulnerable to computer viruses, malware, hackers and other security issues, including physical and electronic break-ins, disruptions from unauthorized access and tampering, social engineering attacks, impersonation of this information is critical to our business operations.authorized users, and coordinated denial-of-services attacks. We have experienced cyber-attacks, computer viruses, social engineering schemes,cybersecurity incidents and other meansattacks which have not had a material impact on our business or results of unauthorized access to our systems.operations, however, there is no assurance that such impacts will
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not be material in the future. The security controls over sensitive or confidential information and other practices we and our third-party vendors follow may not prevent the improper access to, disclosure of, or loss of such information. Continued investments in cybersecurity will increase our costs and a failure to prevent access to our systems could lead to penalties, litigation, and damage to our reputation. Perceptions that we do not adequately protect the privacy of information could harm our relationship with clients and employees.
Data security, data privacy and data protection laws and other technology regulations increase our costs.
Laws and regulations related to privacy and data protection are evolving and generally becoming more stringent. We may fail to implement practices and procedures that comply with increasing international and domestic privacy regulations, such as the General Data Protection Regulations or the California Consumer Privacy Act. Several additional U.S. states have issued cybersecurity regulations that outline a variety of required security measures for protection of data. These regulations are designed to protect client, candidate, contingent worker, and employee data and require that we meet stringent requirements regarding the handling of personal data, including the use, protection and transfer of personal data. As these laws continue to change, we may be required to make changes to our services, solutions or products to meet the new legal requirements. Changes in these laws may increase our costs to comply as well as our potential costs through higher potential penalties for non-compliance. Failure to protect the integrity and security of such confidential and/or proprietary information could expose us to regulatory fines, litigation, contractual liability, damage to our reputation and increased compliance costs.
Improper disclosure of, or access to our clients’ information could materially harm our business.
Our contingent workers and employees may have access to or exposure to confidential information about applicants, candidates, contingent workers, other employees and clients. The security controls over sensitive or confidential information and other practices we, our clients and our third-party vendors follow may not prevent the improper access to, disclosure of, or loss of such information. Failure to protect the integrity and security of such confidential and/or proprietary information could expose us to regulatory fines, litigation, contractual liability, damage to our reputation and increased compliance costs.

GENERAL RISK FACTORS
Demand for our workforce solutions is significantly affected by fluctuations in general economic conditions.
The demand for our workforce solutions is highly dependent upon the state of the economy and the workforce needs of our clients, which creates uncertainty and volatility. National and global economic activity is slowed by many factors, including rising interest rates, political and legislative changes, epidemics, other significant health concerns, and global trade uncertainties. As economic activity slows, companies tend to reduce their use of contingent workers and recruitment of new employees. For example, we have recently experienced significantly reduced demand from our clients due to COVID-19. Significant declines in demand from any region or industry in which we have a major presence, or the financial health of our clients, significantly decreases our revenues and profits. Deterioration in economic conditions or the financial or credit markets could also have an adverse impact on our clients’ financial health or their ability to pay for services we have already provided.
It is difficult for us to forecast future demand for our services due to the inherent uncertainty in forecasting the direction and strength of economic cycles and the project nature of our staffing assignments. The uncertainty can be exacerbated by volatile economic conditions, which has caused and may continue to cause clients to reduce or defer projects for which they utilize our services. The negative impact to our business can occur before, during or after a decline in economic activity is seen in the broader economy. When it is difficult for us to accurately forecast future demand, we may not be able to determine the optimal level of personnel and investment necessary to profitably manage our business in light of opportunities and risks we face.
Outsourcing certain aspects of our business could result in disruption and increased costs.
We have outsourced certain aspects of our business to third-party vendors. These relationships subject us to significant risks including disruptions in our business and increased costs. For example, we license software from third parties, much of which is central to our systems and our business. The licenses are generally terminable if we breach our obligations under the license agreements. If any of these relationships were terminated, or if any of these parties were to cease doing business or supporting the applications we currently utilize, our business could be disrupted and we may be forced to spend significant time and money to replace the licensed software. In addition, we have engaged third parties to host and manage certain aspects of our data center, information and technology infrastructure, mobile applications, and electronic pay solutions, to provide certain back office support activities, and to support business process outsourcing for our clients. We are subject to the risks associated with the vendors’ inability to provide these services in a manner that meets our needs. If the cost of these services is more than expected, if the vendors suddenly cease providing their services, or if we or the vendors fail to adequately protect our data and
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information is lost, or if our ability to deliver our services is interrupted, then our business and results of operations may be negatively impacted.
We may not achieve the intended effects of our business strategy which could negatively impact our results.
Our business strategy focuses on driving growth in our PeopleReady, PeopleManagement and PeopleScout business lines by investing in innovative technology, acquisitions and initiatives which drive organic growth. Our investments and acquisitions may not achieve our desired returns and the results of our initiatives may not be as expected or may be impacted by matters outside of our control. If we are unsuccessful in executing any of these strategies, we may not achieve our goal of revenue and profitability growth, which could negatively impact financial results.
Acquisitions and new business initiatives may have an adverse effect on our business.
We expect tomay continue making acquisitions adjusting the composition of our business lines, and entering into new business initiatives asa part of our business strategy. This strategy may be impeded, however, and we may not achieve our long-term growth goals if we cannot identify suitable acquisition candidates or new business initiatives, or if acquisition candidates are not available under acceptable terms. We may have difficulty integrating acquired companies into our operating, financial planning, and financial reporting systems and may not effectively manage acquired companies to achieve expected growth.
Future acquisitions could result in incurring additional debt and contingent liabilities, an increase in interest expense, amortization expense, and charges related to integration costs. New business initiatives and changesAdditional indebtedness could also include covenants or other restrictions that would impede our ability to manage our operations. We may also issue equity securities to pay for an acquisition, which could result in dilution to our shareholders. Any acquisitions we announce could be viewed negatively by investors, which may adversely affect the price of our common stock. Acquisitions can also result in the compositionaddition of goodwill and intangible assets to our financial statements and we may be required to record a significant charge in our financial statements during the period in which we determine an impairment of our acquired goodwill and intangible assets has occurred, which would negatively impact our financial results. The potential loss of key executives, employees, clients, suppliers, vendors, and other business mix can be distracting to our management and disruptive to our operations, causing our business and resultspartners of operations to suffer materially. Acquisitions and new business initiatives, including initiatives outsidebusinesses we acquire may adversely impact the value of our workforce solutions business, could involve significant unanticipated challenges and risks including not advancing our business strategy, not realizing our anticipated return on our investment, experiencing difficulty in implementing initiatives or integrating acquiredthe assets, operations, or directing management’s attention from our other businesses.business we acquire. These events could cause material harm to our business, operating results or financial condition.
Our results of operations could materially deteriorate if we fail to attract, develop and retain qualified employees.
Our performance is dependent on attracting and retaining qualified employees who are able to meet the needs of our customers.clients. We believe our competitive advantage is providing unique solutions for each individual customer,client, which requires us to have trained and engaged employees. Our success depends upon our ability to attract, develop and retain a sufficient number of qualified employees, including management, sales, recruiting, service, technology and administrative personnel. The turnover rate in the employment services industry is high, and qualified individuals of the requisite caliber and number needed to fill these positions may be in short supply.difficult to attract and hire. Our inability to recruit, train and motivate a sufficient number of qualified individuals may delay or affect the speed and quality of our strategy execution and planned growth. Delayed expansion, significant increases in employee turnover rates, or significant increases in labor costs could have a material adverse effect on our business, financial condition and results of operations. While we are generally able to keep our branches and offices open, as a key support service for essential business, we must keep our staff healthy for our branches and offices to remain open. Failure to keep our staff healthy and our branches and offices open would harm our results of operations.
Failure of our information technology systems could adversely affect our operating results.
The efficient operation of our business and applications and services we provide is dependent on reliable technology. We rely on our information technology systems to monitor and control our operations, adjust to changing market conditions, implement strategic initiatives, and provide services to clients. We rely heavily on proprietary and third-party information technology systems, mobile device technology data centers, cloud-based environments and other technology. We take various precautions and have enhanced controls around these systems, but information technology systems are susceptible to damage, disruptions, shutdowns, power outages, hardware failures, computer viruses, malicious attacks, telecommunication failures, user errors, catastrophic events or failures during the process of upgrading or replacing software, vendors, or databases. The failure of technology and our applications and services, and our information systems to perform as anticipated could disrupt our business and result in decreased revenue and increased overhead costs, causing our business and results of operations to suffer materially.
Our facilities, operations and information technology systems are vulnerable to damage and interruption.
Our primary computer systems, headquarters, support facilities and operations are vulnerable to damage or interruption from power outages, computer and telecommunications failures, computer viruses, employee errors, security breaches, natural disasters, civil unrest, and catastrophic events. Failure of our systems or damage to our facilities may cause significant
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interruption to our business, and require significant additional capital and management resources to resolve, causing material harm to our business.
We face risks in operating internationally.
A portion of our business operations and support functions are located outside of the United States. These international operations are subject to a number of risks, including the effects of COVID-19 and governmental action, such as travel restrictions and “stay-at-home” orders, political and economic conditions in those foreign countries, foreign currency fluctuations, the burden of complying with various foreign laws and technical standards, unpredictable changes in foreign regulations, U.S. legal requirements governing U.S. companies operating in foreign countries, legal and cultural differences in the conduct of business, potential adverse tax consequences and difficulty in staffing and managing international operations. We recently acquired operations in the United Kingdom, which could be negatively impacted as clients in the United Kingdom encounter uncertainties related to the United Kingdom’s exit from the European Union. We could also be exposed to fines and penalties under U.S. or foreign laws, such as the Foreign Corrupt Practices Act, which prohibits improper payments to governmental officials and others for the purpose of obtaining or retaining business. Although we have implemented policies and procedures designed to ensure compliance with these laws, we cannot be sure that our employees, contractors or agents will not violate such policies. Any such violations could materially damage our reputation, brands, business and operating results. Further, changes in U.S. laws and policies governing foreign investment and use of foreign operations or workers, and any negative sentiments towards the United States resulting from such changes, could adversely affect our operations.
We may have additional tax liabilities that exceed our estimates.
We are subject to federal taxes, and a multitude of state and local taxes in the United States, and taxes in foreign jurisdictions. We face continued uncertainty surrounding the 2017 Tax Cuts and Jobs Act and any potential reform of the U.S. tax codereduction or a reductionchange in tax credits which we utilize, and we cannot predict with any certaintysuch as the likely impact of such a reform on our financial condition or operating results.Work Opportunity Tax Credit. In the ordinary course of our business, there are transactions and calculations where the ultimate tax determination is uncertain. We are regularly subject to audit by tax authorities. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical tax provisions and accruals. The results of an audit or litigation with tax authorities could materially harm our business. Changes in interpretation of existing laws and regulations by a taxing authority could result in penalties and increased costs in the future. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing intercompany arrangements or may change their laws, which could increase our worldwide effective tax rate and harm our financial position and results of operations.
Failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting.
If our management is unable to certify the effectiveness of our internal controls, including those ofover our third partythird-party vendors, or if our independent registered public accounting firm cannot render an opinion on the effectiveness of our internal controlcontrols over financial reporting, or if material weaknesses in our internal controls are identified, we could be subject to regulatory scrutiny and a loss of public confidence. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to accurately report our financial performance on a timely basis, which could cause our stock price to fall.decline.
Outsourcing certain aspectsThe price of our business couldcommon stock may fluctuate significantly, which may result in disruptionlosses for investors.
The market price for our common stock may be subject to significant volatility. Our stock price can fluctuate as a result of a variety of factors, many of which are beyond our control. These factors include, but are not limited to, changes in general economic conditions, including those caused by COVID-19; social unrest; announcement of new services or acquisitions by us or our competitors; changes in financial estimates or other statements by securities analysts; changes in industry trends or conditions; regulatory developments and increased costs.
Weany major change in our board or management. In addition, the stock market in general has experienced extreme price and volume fluctuations that have outsourced certain aspectsoften been unrelated to the operating performance of listed companies. These broad market and industry factors may impact the price of our business to third-party vendors that subject us to risks including disruptions in our business and increased costs. For example, we have engaged third parties to host and manage certain aspectscommon stock, regardless of our data center, information and technology infrastructure, mobile texting, and electronic pay solutions, to provide certain back office support activities, and to support business process outsourcing for our customers. Accordingly, we are subject to the risks associated with the vendors’ ability to provide these services that meet our needs. If the cost of these services is more than expected, if we or the vendors are unable to adequately protect our data and information is lost, or if our ability to deliver our services is interrupted, then our business and results of operations may be negatively impacted.
If our acquired intangible assets become impaired we may be required to record a significant charge to earnings.
We regularly review acquired intangible assets for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. We test goodwill and indefinite-lived intangible assets for impairment at least annually. Factors that may be considered a change in circumstances, indicating that the carrying value of the intangible assets may not be recoverable,

operating performance.
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include: macroeconomic conditions, such as deterioration in general economic conditions; industry and market considerations, such as deterioration in the environment in which we operate; cost factors, such as increases in labor or other costs that have a negative effect on earnings and cash flows; our financial performance, such as negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods; other relevant entity-specific events, such as changes in management, key personnel, strategy, or customers; and sustained decreases in share price. We may be required to record a significant charge in our financial statements during the period in which we determine an impairment of our acquired intangible assets has occurred, therefore negatively impacting our financial results.
Foreign currency fluctuations may have a material adverse effect on our operating results.
We report our results of operations in United States dollars. The majority of our revenues are generated in the United States. Our international operations are denominated in currencies other than the United States dollar, and unfavorable fluctuations in foreign currency exchange rates could have an adverse effect on our reported financial results. Increases or decreases in the value of the United States dollar against other major currencies could affect our revenues, operating profit, and the value of balance sheet items denominated in foreign currencies. Our exposure to foreign currencies could have an adverse effect on our business, financial condition, cash flow, and/or results of operations. Furthermore, the volatility of currencies may impact year-over-year comparability.
Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The table below includes repurchases of our common stock pursuant to publicly announced plans or programs and those not made pursuant to publicly announced plans or programs during the thirteen weeks ended September 27, 2020.
PeriodTotal number
of shares
purchased (1)		Weighted
average price
paid per
share (2)		Total number of shares
purchased as part of
publicly announced plans
or programs (3)		Maximum number of shares (or
approximate dollar value) that
may yet be purchased under
plans or programs at period
end (4)
06/29/2019 through 07/26/20204,963 $14.57 626,948 $66.7 million
07/27/2020 through 08/23/20204,355 $15.43 — $66.7 million
08/24/2020 through 09/27/202014,355 $16.36 — $66.7 million
Total23,673 $15.81 626,948 
(1)During the thirteen weeks endedSeptember 27, 2020, we purchased 23,673 shares in order to satisfy employee tax withholding obligations upon the vesting of restricted stock. These shares were not acquired pursuant to our publicly announced share repurchase program.
(2)Weighted average price paid per share does not include any adjustments for commissions.
(3)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
(4)On October 16, 2019, our Board of Directors authorized a $100.0 million share repurchase program of our outstanding common stock. The share repurchase program does not obligate us to acquire any particular amount of common stock and does not have expiration dates. As of September 27, 2020, $66.7 million remains available for repurchase under the existing authorization. The second amendment to our credit agreement prohibits us from repurchasing shares until July 1, 2017.2021.
Accelerated share repurchase plan

On February 28, 2020, we entered into an accelerated share repurchase (“ASR”) agreement with a third-party financial institution to repurchase $40.0 million of our common stock. Under the ASR agreement, we paid $40.0 million to the financial institution and received an initial delivery of 2,150,538 shares during 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. 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.
Period
Total number
of shares
purchased (1)
Weighted
average price
paid per
share (2)
Total number of shares
purchased as part of
publicly announced plans
or programs (3)
Maximum number of shares (or
approximate dollar value) that
may yet be purchased under
plans or programs at period
end (4)
07/03/2017 through 07/30/201779

$27.90
—
$13.9 million
07/31/2017 through 09/03/20171,598

$22.20
444,440
$5.0 million
09/04/2017 through 10/01/20172,179

$20.55
237,413
$100.0 million
Total3,856

$21.38
681,853
 

(1)Item 3.During the thirty-nine weeks ended October 1, 2017, we purchased 3,856 shares in order to satisfy employee tax withholding obligations upon the vesting of restricted stock awards and performance share units. These shares were not acquired pursuant to any publicly announced purchase plan or program.DEFAULTS UPON SENIOR SECURITIES
Not applicable.
(2)Item 4.Weighted average price paid per share does not include any adjustments for commissions.MINE SAFETY DISCLOSURES
(3)The weighted average price per share for the shares repurchased under our prior share repurchase program during the period was $20.30.
(4)In September 2017, we repurchased the remaining $13.9 million available under our $75.0 million share repurchase program. On September 15, 2017, our Board of Directors authorized a $100 million share repurchase program of our outstanding common stock. The share repurchase program does not obligate us to acquire any particular amount of common stock and does not have an expiration date. There have been no repurchases under this new program during the thirteen weeks ended October 1, 2017.
Not applicable.
Item 5.OTHER INFORMATION

Amendments to Articles of Incorporation or Bylaws

On October 30, 2017, the Board of Directors (the “Board”) of TrueBlue, Inc. (the “Company”) adopted Amended and Restated Bylaws (the “Bylaws”) of the Company. The Bylaws were effective immediately and amend the Company’s preexisting bylaws to, among other things:
clarify the Board’s right to postpone, reschedule or cancel previously scheduled annual meetings of shareholders;
provide for additional disclosure and other requirements for advance notices of director nominations and shareholder proposals;
specify the powers of the chairman of a shareholder meeting over the conduct of such meeting;

specify the requirements for written and electronic notice under the Bylaws.

The foregoing description of the Bylaws is not complete and is qualified in its entirety by reference to the complete text of the Bylaws, a copy of which is filed as Exhibit 3.4 to this Quarterly Report on Form 10-Q and incorporated by reference herein.

None.
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Item 66.INDEX TO EXHIBITS
Exhibit
Number
Incorporated by reference		Exhibit DescriptionFiled Herewith
3.4
Exhibit number		Exhibit descriptionFiled herewithFormFile no.Date of first filing
3.1X8-K001-1454305/12/2016
3.210-Q001-1454310/30/2017
10.1*X
10.2*10-K001-1454302/24/2020
10.3*10-Q001-1454305/04/2007
10.4*10-K001-1454302/24/2020
31.1X
31.2
X
32.1
X
101.INS101XBRL Instance Document.The following financial statements from the Company’s 10-Q, formatted as Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) Consolidated Statements of Cash Flows, and (iv) Notes to consolidated financial statements.X
101.SCH104Cover page interactive data file - The cover page from this Quarterly Report on Form 10-Q is formatted as Inline XBRL Taxonomy Extension Schema.
X
101.CALXBRL Taxonomy Extension Calculation Linkbase.
101.DEFXBRL Taxonomy Extension Definition Linkbase.
101.LABXBRL Taxonomy Extension Label Linkbase.
101.PREXBRL Taxonomy Extension Presentation Linkbase.


* Indicates a management contract or compensatory plan or arrangement
Page - 3648
Table of Contents



SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TrueBlue, Inc.
TrueBlue, Inc./s/ A. Patrick Beharelle10/26/2020
SignatureDate        
By:/s/ Steven C. Cooper10/30/2017
SignatureDate        
By:Steven C. Cooper,A. Patrick Beharelle, Director, President and Chief Executive Officer
/s/ Derrek L. Gafford10/30/201726/2020
SignatureDate        
By:
Derrek L. Gafford, Chief Financial Officer and

Executive Vice President
/s/ Norman H. Frey10/30/201726/2020
SignatureDate        
By:Norman H. Frey, Chief Accounting Officer and

Senior Vice President

Page - 3749