TRUEBLUE, INC., 10-Q filed on 5/6/2011
Quarterly Report
Document and Entity Information Document
3 Months Ended
Apr. 01, 2011
Apr. 29, 2011
Document Information [Line Items]
 
 
Document Type
10-Q 
 
Amendment Flag
FALSE 
 
Document Period End Date
2011-04-01 
 
Document Fiscal Year Focus
2011 
 
Document Fiscal Period Focus
Q1 
 
Trading Symbol
TBI 
 
Entity Registrant Name
TrueBlue, Inc. 
 
Entity Central Index Key
0000768899 
 
Current Fiscal Year End Date
12/30 
 
Entity Filer Category
Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
44,309,894 
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
Apr. 01, 2011
Dec. 31, 2010
Current assets:
 
 
Cash and cash equivalents
$ 152,790 
$ 163,153 
Accounts receivable, net of allowance for doubtful accounts of $4.8 and $6.4 million
120,410 
108,692 
Prepaid expenses, deposits and other current assets
9,576 
9,981 
Income tax receivable
6,703 
4,898 
Deferred income taxes
5,893 
6,776 
Total current assets
295,372 
293,500 
Property and equipment, net
52,386 
53,958 
Restricted cash and investments
123,808 
120,067 
Deferred income taxes
2,592 
2,400 
Goodwill
36,960 
36,960 
Intangible assets, net
19,849 
20,526 
Other assets, net
19,002 
19,055 
Total assets
549,969 
546,466 
Current liabilities:
 
 
Accounts payable and other accrued expenses
16,229 
18,776 
Accrued wages and benefits
28,159 
24,464 
Current portion of workers' compensation reserve
41,280 
42,379 
Other current liabilities
201 
304 
Total current liabilities
85,869 
85,923 
Workers compensation claims reserve, less current portion
145,484 
144,927 
Other long-term liabilities
2,806 
2,909 
Total liabilities
234,159 
233,759 
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; 44,281 and 44,281 shares issued and outstanding
Accumulated other comprehensive income
3,164 
2,906 
Retained earnings
312,645 
309,800 
Total shareholders' equity
315,810 
312,707 
Total liabilities and shareholders' equity
$ 549,969 
$ 546,466 
CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) (USD $)
Apr. 01, 2011
Dec. 31, 2010
Accounts receivable, allowance for doubtful accounts
$ 4.8 
$ 6.4 
Preferred stock, par value
0.131 
0.131 
Preferred stock, shares authorized
20,000 
20,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value
$ 0 
$ 0 
Common stock, shares authorized
100,000 
100,000 
Common stock, shares issued
44,281 
44,086 
Common stock, shares outstanding
44,086 
43,833 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
3 Months Ended
Apr. 01, 2011
3 Months Ended
Mar. 26, 2010
Revenue from services
$ 274,300 
$ 239,851 
Cost of services
204,269 
178,726 
Gross profit
70,031 
61,125 
Selling, general and administrative expenses
65,159 
61,214 
Depreciation and amortization
3,922 
4,095 
Income (loss) from operations
950 
(4,184)
Interest expense
(273)
(305)
Interest and other income
581 
633 
Interest and other income, net
308 
328 
Income (loss) before tax expense (benefit)
1,258 
(3,856)
Income tax expense (benefit)
492 
(1,597)
Net income (loss)
766 
(2,259)
Net income (loss) per common share:
 
 
Basic
0.02 
(0.05)
Diluted
$ 0.02 
$ (0.05)
Weighted average shares outstanding:
 
 
Basic
43,460 
43,083 
Diluted
43,854 
43,083 
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)
3 Months Ended
Apr. 01, 2011
3 Months Ended
Mar. 26, 2010
Cash flows from operating activities:
 
 
Net income (loss)
$ 766 
$ (2,259)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
 
 
Depreciation and amortization
3,922 
4,095 
Provision for doubtful accounts
576 
2,066 
Stock-based compensation
2,575 
2,430 
Deferred income taxes
690 
1,118 
Other operating activities
(527)
23 
Changes in operating assets and liabilities:
 
 
Accounts receivable
(12,294)
2,395 
Income taxes
(1,264)
(3,183)
Other assets
458 
587 
Accounts payable and other accrued expenses
(2,547)
(1,248)
Accrued wages and benefits
3,695 
(477)
Workers' compensation claims reserve
(542)
(2,314)
Other liabilities
(103)
225 
Net cash (used in) provided by operating activities
(4,595)
3,458 
Cash flows from investing activities:
 
 
Capital expenditures
(1,691)
(777)
Change in restricted cash
(635)
2,305 
Purchase of restricted investments
(3,106)
Other
10 
Net cash (used in) provided by investing activities
(5,432)
1,538 
Cash flows from financing activities:
 
 
Net proceeds from sale of stock through options and employee benefit plans
424 
294 
Common stock repurchases for taxes upon vesting of restricted stock
1,460 
1,153 
Payments on debt
(103)
(92)
Other
541 
77 
Net cash used in financing activities
(598)
(874)
Effect of exchange rates on cash
262 
16 
Net change in cash and cash equivalents
(10,363)
4,138 
CASH AND CASH EQUIVALENTS, beginning of period
163,153 
124,377 
CASH AND CASH EQUIVALENTS, end of period
152,790 
128,515 
Cash paid during period for:
 
 
Interest
174 
207 
Income taxes
$ 1,047 
$ 127 
ACCOUNTING PRINCIPLES AND PRACTICES
ACCOUNTING PRINCIPLES AND PRACTICES
NOTE 1:
ACCOUNTING PRINCIPLES AND PRACTICES
 
The accompanying unaudited condensed consolidated financial statements (“financial statements”) are prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) for interim financial information and rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures usually found in financial statements prepared in accordance with GAAP have been condensed or omitted. The unaudited financial statements reflect all adjustments which, in the opinion of management, are necessary to fairly state the financial position, results of operations and cash flows for the interim periods presented. We follow the same accounting policies for preparing both quarterly and annual financial information. These financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010.
 
Our 2011 fiscal year will include 52 weeks and our 2010 fiscal year included 53 weeks, with the 53rd week falling in our fourth fiscal quarter.
 
On March 11, 2011, we entered into an agreement with The Bank of New York Mellon as escrow agent and National Union Fire Insurance Company of Pittsburgh, PA on behalf of itself and its insurance company affiliates including but not limited to Chartis Casualty Company (Chartis). The agreement creates a trust (the "Trust") at The Bank of New York Mellon which holds the majority of our collateral obligations under existing workers' compensation insurance policies that were previously held directly by Chartis. Placing the collateral in the Trust allows us to manage the investment of the assets. In conjunction with the creation of the Trust, we expanded our accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2010 to include the following in preparation of our quarterly financial information:
 
Restricted cash and investments
Cash and investments pledged as collateral and restricted to use for workers' compensation insurance programs are included as restricted cash and investments in our Consolidated Balance Sheet. Our investments consist of highly rated investment grade debt securities which are rated A or higher by Nationally Recognized Statistical Rating Organizations. All of our investments are classified as held-to-maturity.
Fair value of financial instruments and investments
The carrying value of cash and cash equivalents and restricted cash approximates fair value because of the short-term maturity of those instruments. The fair value of our restricted investments is based upon the quoted market price on the last business day of the fiscal reporting period. Where an observable quoted market price for a security does not exist, we estimate fair value using a variety of valuation methodologies, which include observable inputs for comparable instruments and unobservable inputs. The specific methodologies include comparing the security with similar publicly traded securities and estimating discounted cash flows.
 
Subsequent events
 
We evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements through the day these financial statements were issued.
FAIR VALUE MEASUREMENT
FAIR VALUE MEASUREMENT
NOTE 2:
FAIR VALUE MEASUREMENT
 
Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We apply a fair value hierarchy which prioritizes the inputs used to measure fair value:
 
Level 1: Investments valued using quoted market prices in active markets for identical assets or liabilities
Level 2: Investments valued using other observable market-based inputs or unobservable inputs that are corroborated by
market data
Level 3: Investments with no observable inputs and therefore, are valued using significant management judgment
 
The carrying value of our cash and cash equivalents, restricted cash, and accounts receivable approximates fair value due to their short term nature. Cash equivalents consist of money market funds and investments with original maturities of three months or less and are classified within Level 1 of the fair value hierarchy. Our cash equivalents included money market funds totaling $86 million and $133 million for April 1, 2011 and December 31, 2010, respectively.
 
RESTRICTED CASH AND INVESTMENTS
RESTRICTED CASH AND INVESTMENTS
NOTE 3:
RESTRICTED CASH AND INVESTMENTS
 
Restricted cash and investments consist primarily of collateral that has been provided or pledged to insurance carriers 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, highly rated investment grade debt securities, and cash-backed instruments.
 
Prior to March 11, 2011, Chartis held the majority of the restricted cash collateralizing our self-insured workers' compensation policies. As of March 11, 2011, we entered into an agreement between Chartis and the Bank of New York Mellon creating a trust at the Bank of New York Mellon which holds the majority of our collateral obligations. Effective March 11, 2011, we transferred $89.1 million from Chartis to the Trust. Of the amount transferred, $3.1 million was invested. The amortized cost of our investment securities held to maturity consisted of $2.6 million of state government and agency securities and $0.5 million of corporate bonds, which approximates fair value of these investments as of April 1, 2011. The maturity dates of these investment securities range from November 2012 to July 2018.
 
The following is a summary of restricted cash and investments (in millions):
 
 
April 1,
2011
 
December 31,
2010
Cash collateral held by insurance carriers
$
25.6
 
 
$
108.7
 
Cash held in trust
86.0
 
 
 
Investments held in trust
3.1
 
 
 
Cash-backed letters of credit
4.1
 
 
4.1
 
Cash-backed surety bonds
3.0
 
 
3.0
 
Other
2.0
 
 
4.3
 
Total Restricted cash and investments
$
123.8
 
 
$
120.1
 
 
 
The following is a summary of held to maturity investments (in millions):
 
 
April 1, 2011
 
Amortized Cost
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Fair Value
State government and agency securities
$
2.6
 
 
 
 
 
 
$
2.6
 
Corporate bonds
0.5
 
 
 
 
 
 
0.5
 
 
$
3.1
 
 
 
 
 
 
$
3.1
 
 
PROPERTY AND EQUIPMENT, NET
PROPERTY AND EQUIPMENT, NET
NOTE 4:
PROPERTY AND EQUIPMENT, NET
 
Property and equipment are stated at cost and consist of the following (in millions):
 
 
April 1,
2011
 
December 31,
2010
Buildings and land
$
23.4
 
 
$
23.5
 
Computers and software
71.9
 
 
71.2
 
Cash dispensing machines
5.4
 
 
11.4
 
Furniture and equipment
8.5
 
 
8.6
 
Construction in progress
2.9
 
 
2.7
 
 
112.1
 
 
117.4
 
Less accumulated depreciation and amortization
(59.7
)
 
(63.4
)
 
$
52.4
 
 
$
54.0
 
 
Capitalized software costs, net of accumulated amortization, were $31.9 million and $32.8 million as of April 1, 2011 and December 31, 2010 respectively, excluding amounts in Construction in progress. Construction in progress consists primarily of internally developed software.
 
Depreciation and amortization of Property and equipment totaled $3.2 million and $3.4 million for the thirteen weeks ended April 1, 2011 and March 26, 2010, respectively.
 
INTANGIBLE ASSETS
INTANGIBLE ASSETS
NOTE 5:
INTANGIBLE ASSETS
 
The following table presents our purchased intangible assets other than Goodwill (in millions):
 
 
April 1, 2011
 
December 31, 2010
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Amortizable intangible assets (1):
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
$
18.0
 
 
$
(6.7
)
 
$
11.3
 
 
$
18.0
 
 
$
(6.2
)
 
$
11.8
 
Trade name/trademarks
3.0
 
 
(1.0
)
 
2.0
 
 
3.0
 
 
(0.9
)
 
2.1
 
Non-compete agreements
2.1
 
 
(1.4
)
 
0.7
 
 
2.1
 
 
(1.3
)
 
0.8
 
 
$
23.1
 
 
$
(9.1
)
 
$
14.0
 
 
$
23.1
 
 
$
(8.4
)
 
$
14.7
 
Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
Trade name/trademarks
$
5.8
 
 
 $ --
 
 
$
5.8
 
 
$
5.8
 
 
 $ --
 
 
$
5.8
 
____________________
(1)Excludes intangible assets that are fully amortized or written off due to impairment.
 
Total amortization expense was $0.7 million for each of the thirteen weeks ended April 1, 2011 and March 26, 2010.
 
Amortization expense of intangible assets for the next five years and thereafter is as follows (in millions):
 
Remainder of 2011
$
2.0
 
2012
2.7
 
2013
2.3
 
2014
2.3
 
2015
2.3
 
Thereafter
2.4
 
 
$
14.0
 
WORKERS' COMPENSATION INSURANCE AND RESERVES
WORKERS' COMPENSATION INSURANCE AND RESERVES
NOTE 6:
WORKERS’ COMPENSATION INSURANCE AND RESERVES
 
We provide workers’ compensation insurance for our temporary 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 insurance policies are renewed annually. We renewed our coverage with Chartis effective July 1, 2010 for the period July 2010 to July 2011. For all prior periods, we had coverage with Chartis and other insurance providers. Furthermore, we have full liability for all further payments on claims that originated between January 2001 and June 2003, without recourse to any third-party insurer as the result of a novation agreement we entered into with Kemper Insurance Company in December 2004.
 
Our workers’ compensation reserve is established using estimates of the future cost of claims and related expenses that have been reported but not settled, as well as those that have been incurred but not reported. Management evaluates the adequacy of the workers’ compensation reserves in conjunction with an independent quarterly actuarial assessment. Changes in the self-insurance reserve estimates are reflected in the income statement in the period when the changes in estimates are made.
 
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. At April 1, 2011, the weighted average rate was 3.2%. The claim payments are made over an estimated weighted average period of approximately 5.5 years.
 
Our workers’ compensation reserves include estimated expenses related to claims above our deductible 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 April 1, 2011, the weighted average rate was 5.0%. The claim payments are made and the corresponding reimbursements from our insurance carriers are received over an estimated weighted average period of approximately 19.2 years. The discounted workers’ compensation reserve for excess claims and the corresponding receivable for the insurance on excess claims were $26.1 million and $25.8 million as of April 1, 2011 and December 31, 2010, respectively. The receivable for the insurance on excess claims is included in Other assets, net in the accompanying Consolidated Balance Sheets.
 
Two of the workers’ compensation insurance companies (“Troubled Insurance Companies”) with which we formerly did business are in liquidation and have failed to pay a number of excess claims. These excess claims have been presented to the state guaranty funds of the states in which the claims originated. Certain of these excess claims have been rejected by the state guaranty funds due to statutory eligibility limitations. We have recorded a valuation allowance of $7.9 million against all of the Troubled Insurance Companies insurance receivables as of April 1, 2011 and substantially all of the Troubled Insurance Companies insurance receivables as of December 31, 2010.
 
Our total discounted workers’ compensation claims reserves were $186.8 million and $187.3 million as of April 1, 2011 and December 31, 2010, respectively. Workers’ compensation expense totaling $10.2 million and $7.9 million was recorded for the thirteen weeks ended April 1, 2011 and March 26, 2010, respectively.
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
NOTE 7:
COMMITMENTS AND CONTINGENCIES
 
Revolving credit facility
 
We have a credit agreement with Wells Fargo Capital Finance and Bank of America, N.A. for a secured revolving credit facility of up to a maximum amount of $80 million (the “Revolving Credit Facility”). The Revolving Credit Facility expires in June 2012. As of April 1, 2011, the maximum $80 million was available under the Revolving Credit Facility and $11.0 million of letters of credit have been issued against the facility, leaving an unused portion of $69.0 million.
 
The Revolving Credit Facility requires that we maintain liquidity in excess of $30 million. The liquidity level is defined as the amount we are entitled to borrow under the Revolving Credit Facility plus the amount of cash and cash equivalents held in accounts subject to a control agreement benefiting the lenders. We are required to satisfy a fixed charge coverage ratio in the event that liquidity falls below $30 million. The amount we were entitled to borrow at April 1, 2011 was $69.0 million and the amount of cash and cash equivalents under control agreements was $155.2 million for a total of $224.2 million of liquidity, which was in excess of our $30 million liquidity requirement. We are currently in compliance with all covenants related to the Revolving Credit Facility.
 
Obligations under the Revolving Credit Facility are secured by substantially all of our domestic personal property and our headquarters located in Tacoma, Washington.
 
Workers’ compensation commitments
 
Our insurance carriers and certain state workers' compensation programs require us to collateralize a portion of our workers' compensation obligation, for which they would become responsible if we became insolvent. The collateral typically takes the form of cash and cash equivalents, highly rated investment grade debt securities, letters of credit, and/or surety bonds. On a regular basis these entities assess the amount of collateral they will require from us relative to our workers' compensation obligation. Prior to March 11, 2011, Chartis held the majority of the restricted cash collateralizing our self-insured workers' compensation policies. As of March 11, 2011, we entered into an agreement between Chartis and the Bank of New York Mellon creating a trust at the Bank of New York Mellon which holds the majority of our collateral obligations.
 
Our surety bonds are issued by independent insurance companies on our behalf. 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.
 
At April 1, 2011 and December 31, 2010 we had provided our insurance carriers and certain states with commitments in the form and amounts listed below (in millions):
 
 
April 1,
2011
 
December 31,
2010
Cash collateral held by insurance carriers
$
25.6
 
 
$
108.7
 
Cash held in trust (1)
86.0
 
 
 
Investments held in trust (1)
3.1
 
 
 
Letters of credit (2)
15.0
 
 
15.1
 
Surety bonds (3)
16.9
 
 
16.8
 
Total collateral commitments
$
146.6
 
 
$
140.6
 
____________________
(1)
Effective March 11, 2011, we transferred $89.1 million from Chartis to the Trust. Of the amount transferred, we invested $2.6 million in state government and agency securities and $0.5 million in corporate bonds.
(2)
We had $4.1 million of restricted cash collateralizing our letters of credit at both April 1, 2011 and December 31, 2010.
(3)
We had $3.0 million of restricted cash collateralizing our surety bonds at both April 1, 2011 and December 31, 2010.
 
Legal contingencies and developments
 
We are involved in various proceedings arising in the normal course of conducting business. We believe the amounts provided in our financial statements are adequate in consideration of the probable and estimable liabilities. The resolution of those proceedings is not expected to have a material effect on our results of operations or financial condition.
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION
NOTE 8:
STOCK-BASED COMPENSATION
 
Stock-based compensation includes expense charges for all stock-based awards to employees and directors. Such awards include restricted stock awards, performance share units, stock options, and shares purchased under an employee stock purchase plan (“ESPP”).
 
Total stock-based compensation expense was (in millions):
 
 
Thirteen weeks ended
 
April 1,
2011
 
March 26,
2010
Restricted stock and performance share units expense
$
2.4
 
 
$
1.9
 
Stock option expense
0.1
 
 
0.4
 
ESPP expense
0.1
 
 
0.1
 
Total stock-based compensation
$
2.6
 
 
$
2.4
 
 
Restricted stock and performance share units
 
Stock-based awards are issued under our 2005 Long-Term Equity Incentive Plan. Restricted stock is granted to officers and key employees and vests over periods ranging from three to four years. Stock granted to our directors vested immediately. Restricted stock-based compensation expense is calculated based on the grant-date market value. We recognize stock-based compensation expense on a straight-line basis over the vesting period for the awards that are expected to vest.
 
Performance share units have been granted to executives since 2010. Vesting of the performance share units is contingent upon the achievement of revenue and profitability goals at the end of each three-year performance period. Each performance share unit is equivalent to a share of common stock. Compensation expense is calculated based on the grant-date market value of our stock and is recognized ratably over the performance period for the performance share units which are expected to vest. Our estimate of the performance units expected to vest is reviewed and adjusted as appropriate each quarter.
 
Restricted stock and performance share units activity was (shares in thousands):
 
 
Thirteen weeks ended
 
April 1, 2011
 
Shares
 
Price (1)
Non-vested at beginning of period
882
 
 
$
13.14
 
Granted
396
 
 
$
17.19
 
Vested
(298
)
 
$
13.42
 
Forfeited
(4
)
 
$
12.74
 
Non-vested at the end of the period
976
 
 
$
14.63
 
_____________________
(1)
Weighted average market price on grant-date.
 
As of April 1, 2011, total unrecognized stock-based compensation expense related to non-vested restricted stock was approximately $8.7 million, of which $7.8 million is currently estimated to be recognized over a weighted average period of 1.7 years through 2015. As of April 1, 2011, total unrecognized stock-based compensation expense related to performance share units was approximately $3.2 million, of which $2.5 million is currently estimated to be recognized over a weighted average period of 2.5 years through 2014.
 
Stock options
 
Our 2005 Long-Term Equity Incentive Plan provides for both nonqualified stock options and incentive stock options (collectively, “stock options”) for directors, officers, and certain employees.
 
Stock option activity follows (shares in thousands):
 
 
Thirteen weeks ended
 
April 1, 2011
 
Shares
 
Price (1)
Outstanding, December 31, 2010
1,119
 
 
$
15.62
 
Granted
 
 
$
 
Exercised
(8
)
 
$
13.20
 
Expired/Forfeited
 
 
$
 
Outstanding, April 1, 2011
1,111
 
 
$
15.64
 
 
 
 
 
Exercisable, April 1, 2011
813
 
 
$
18.03
 
Options expected to vest, April 1, 2011
295
 
 
$
9.14
 
____________________
(1)
Weighted average exercise price.
 
There were no stock options granted during the period ending April 1, 2011. A summary of the weighted average assumptions and results for stock options granted during the period ending March 26, 2010 is as follows:
 
 
Thirteen weeks ended
 
April 1,
2011
 
March 26,
2010
Expected life (in years)
 
 
3.36
 
Expected volatility
%
 
59.6
%
Risk-free interest rate
%
 
1.3
%
Expected dividend yield
%
 
%
Weighted average fair value of options granted during the period
$
 
 
$
6.24
 
 
As of April 1, 2011, total unrecognized stock-based compensation expense related to non-vested stock options was approximately $0.3 million, which is currently estimated to be recognized over a weighted average period of 0.9 years through 2013.
 
Employee stock purchase plan
 
Our 2010 Employee Stock Purchase Plan (“2010 ESPP”) became effective on July 1, 2010, replacing our 1996 Employee Stock Purchase Plan, which expired on June 30, 2010. We have reserved for purchase under the 2010 ESPP 1.0 million shares of common stock. During the thirteen weeks ended April 1, 2011 and March 26, 2010, participants purchased 20,000 and 23,000 shares from the plans for cash proceeds of $0.3 million for each period.
INCOME TAXES
INCOME TAXES
NOTE 9:
INCOME TAXES
 
The effective tax rate was 39.1% for the thirteen weeks ended April 1, 2011. The principal difference between the statutory federal income tax rate of 35% and our effective income tax rate results from state and foreign income taxes, federal tax credits, and certain non-deductible expenses. As of April 1, 2011 and December 31, 2010, we had unrecognized tax benefits of $1.6 million.
NET INCOME (LOSS) PER SHARE
NET INCOME (LOSS) PER SHARE
NOTE 10:
NET INCOME (LOSS) PER SHARE
 
Adjusted net income (loss) and diluted common shares were calculated as follows (in millions except per share amounts):
 
 
Thirteen weeks ended
 
April 1,
2011
 
March 26,
2010
Net income (loss)
$
0.8
 
 
$
(2.3
)
 
 
 
 
Weighted average number of common shares used in basic net income (loss) per common share
43.5
 
 
43.1
 
Dilutive effect of outstanding stock options and non-vested restricted stock
0.4
 
 
 
Weighted average number of common shares used in diluted net income (loss) per common share
43.9
 
 
43.1
 
Net income (loss) per common share:
 
 
 
Basic
$
0.02
 
 
$
(0.05
)
Diluted
$
0.02
 
 
$
(0.05
)
 
 
 
 
Antidilutive stock options and other
0.7
 
 
1.0
 
 
Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income per share is calculated by dividing net income by the weighted average number of common shares and potential common shares outstanding during the period. Potential common shares include the dilutive effects of outstanding options and non-vested restricted stock except where their inclusion would be antidilutive.
 
Antidilutive shares associated with our stock options relate to those stock options with an exercise price higher than the average market value of our stock during the periods presented. Antidilutive shares also include in-the-money options and non-vested restricted stock for which the sum of the assumed proceeds, including unrecognized compensation expense, exceeds the average stock price during the periods presented.
 
Due to the net loss from continuing operations for the thirteen weeks ended March 26, 2010, the assumed exercise of stock options and non-vested restricted stock had an antidilutive effect and therefore 0.4 million shares were excluded from the computation of diluted loss per share.