TRUEBLUE, INC., 10-Q filed on 4/29/2015
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 27, 2015
Apr. 13, 2015
Document and Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Mar. 27, 2015 
 
Document Fiscal Year Focus
2015 
 
Document Fiscal Period Focus
Q1 
 
Trading Symbol
TBI 
 
Entity Registrant Name
TrueBlue, Inc. 
 
Entity Central Index Key
0000768899 
 
Current Fiscal Year End Date
--12-25 
 
Entity Well-Known Seasoned Issuer
Yes 
 
Entity Voluntary Filers
No 
 
Entity Current Reporting Status
Yes 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
41,941,221 
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Mar. 27, 2015
Dec. 26, 2014
Current assets:
 
 
Cash and cash equivalents
$ 17,779 
$ 19,666 
Marketable securities
1,500 
Accounts receivable, net of allowance for doubtful accounts of $6,629 and $7,603
290,746 
359,903 
Prepaid expenses, deposits and other current assets
15,803 
18,778 
Income tax receivable
10,438 
10,516 
Deferred income taxes
7,700 
5,444 
Total current assets
342,466 
415,807 
Property and equipment, net
58,591 
61,392 
Restricted cash and investments
172,039 
168,426 
Goodwill
241,855 
241,855 
Intangible assets, net
131,409 
136,560 
Other assets, net
41,111 
42,631 
Total assets
987,471 
1,066,671 
Current liabilities:
 
 
Accounts payable and other accrued expenses
53,769 
50,256 
Accrued wages and benefits
65,693 
69,692 
Current portion of workers' compensation claims reserve
61,784 
64,556 
Other current liabilities
2,582 
2,726 
Total current liabilities
183,828 
187,230 
Workers’ compensation claims reserve, less current portion
181,214 
178,283 
Long-term debt, less current portion
110,817 
199,383 
Deferred income taxes
21,726 
19,768 
Other long-term liabilities
14,444 
12,673 
Total liabilities
512,029 
597,337 
Commitments and contingencies
   
   
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; 41,939 and 41,530 shares issued and outstanding
Accumulated other comprehensive income/(loss)
(374)
871 
Retained earnings
475,815 
468,462 
Total shareholders’ equity
475,442 
469,334 
Total liabilities and shareholders’ equity
$ 987,471 
$ 1,066,671 
CONSOLIDATED BALANCE SHEETS (Parentheticals) (USD $)
In Thousands, except Share data, unless otherwise specified
Mar. 27, 2015
Dec. 26, 2014
Allowance for doubtful accounts
$ 6,629 
$ 7,603 
Preferred stock, par value (in dollars per share)
$ 0.131 
$ 0.131 
Preferred stock, shares authorized
20,000,000 
20,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value (in dollars per share)
$ 0 
$ 0 
Common stock, shares authorized
100,000,000 
100,000,000 
Common stock, shares issued
41,939,000 
41,530,000 
Common stock, shares outstanding
41,939,000 
41,530,000 
CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 27, 2015
Mar. 28, 2014
Revenue from services
$ 573,315 
$ 396,063 
Cost of services
443,479 
296,504 
Gross profit
129,836 
99,559 
Selling, general and administrative expenses
111,593 
91,982 
Depreciation and amortization
10,520 
5,161 
Income from operations
7,723 
2,416 
Interest expense
(1,166)
(263)
Interest and other income
632 
607 
Interest and other income (expense), net
(534)
344 
Income before tax expense
7,189 
2,760 
Income tax expense
1,473 
1,104 
Net income
5,716 
1,656 
Net income per common share:
 
 
Basic (in dollars per share)
$ 0.14 
$ 0.04 
Diluted (in dollars per share)
$ 0.14 
$ 0.04 
Weighted average shares outstanding:
 
 
Basic (in shares)
41,031 
40,572 
Diluted (in shares)
41,362 
40,891 
Other comprehensive income (loss):
 
 
Foreign currency translation adjustment, net of tax
(1,412)
(245)
Unrealized gain on investments, net of tax
167 
48 
Total other comprehensive loss, net of tax
(1,245)1
(197)
Comprehensive income
$ 4,471 
$ 1,459 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 27, 2015
Mar. 28, 2014
Cash flows from operating activities:
 
 
Net income
$ 5,716 
$ 1,656 
Adjustments to reconcile net income to net cash from operating activities:
 
 
Depreciation and amortization
10,520 
5,161 
Provision for doubtful accounts
1,745 
3,487 
Stock-based compensation
3,389 
2,876 
Deferred income taxes
(299)
(1,433)
Other operating activities
(316)
(435)
Changes in operating assets and liabilities:
 
 
Accounts receivable
67,411 
9,949 
Income taxes
943 
3,567 
Other assets
4,496 
(331)
Accounts payable and other accrued expenses
4,369 
(3,307)
Accrued wages and benefits
(3,999)
1,380 
Workers’ compensation claims reserve
159 
261 
Other liabilities
1,626 
664 
Net cash provided by operating activities
95,760 
23,495 
Cash flows from investing activities:
 
 
Capital expenditures
(3,458)
(2,091)
Purchases of marketable securities
(25,057)
Sales and maturities of marketable securities
1,500 
9,450 
Change in restricted cash and cash equivalents
(8,215)
(1,491)
Maturities of restricted investments
4,288 
4,215 
Net cash used in investing activities
(5,885)
(14,974)
Cash flows from financing activities:
 
 
Net proceeds from stock option exercises and employee stock purchase plans
411 
602 
Common stock repurchases for taxes upon vesting of restricted stock
(3,026)
(2,474)
Net change in revolving credit facility
(88,000)
Payments on debt and other liabilities
(566)
(567)
Other
865 
973 
Net cash used in financing activities
(90,316)
(1,466)
Effect of exchange rate changes on cash and cash equivalents
(1,446)
(240)
Net change in cash and cash equivalents
(1,887)
6,815 
CASH AND CASH EQUIVALENTS, beginning of period
19,666 
122,003 
CASH AND CASH EQUIVALENTS, end of period
$ 17,779 
$ 128,818 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial statement preparation

The accompanying unaudited consolidated financial statements (“financial statements”) of TrueBlue, Inc. (the "Company," "we," "us," "our," and "TrueBlue") are prepared in accordance with U.S. 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 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.
These financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 26, 2014. The results of operations for the thirteen weeks ended March 27, 2015 are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period.

Recently issued accounting pronouncements not yet adopted

In April 2015, the Financial Accounting Standards Board ("FASB") issued new accounting guidance intended to simplify the presentation of debt issuance costs. The guidance requires that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with the presentation for debt discounts. The recognition and measurement guidance for debt issuance costs is not affected. This guidance is effective for annual periods beginning after December 15, 2015 (Q1 2016 for TrueBlue), including interim periods within those annual periods and must be applied on a retrospective basis with early adoption permitted. This guidance is not expected to have a material impact on our consolidated financial statements.

In April 2015, the FASB issued new accounting guidance related to accounting for fees paid in a cloud computing arrangement. The new standard provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 (Q1 2016 for TrueBlue). Early adoption is permitted and may be applied retrospectively or prospectively to arrangements entered into, or materially modified, after the effective date. We are evaluating the impact, if any, that this standard will have on our consolidated financial statements.

In May 2014, the FASB issued new accounting guidance that sets forth a five-step revenue recognition model, which supersedes current revenue recognition guidance, including industry-specific revenue recognition guidance. The underlying principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance. The ASU provides two methods of initial adoption: retrospective for all periods presented, or through a cumulative adjustment in the year of adoption. It is effective for annual periods beginning after December 15, 2016 (Q1 2017 for TrueBlue), including interim periods within those annual periods. Early adoption is not permitted. We have not yet determined which method of adoption will be applied and are currently evaluating the impact that this standard will have on our consolidated financial statements.
FAIR VALUE MEASUREMENT
FAIR VALUE MEASUREMENT
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 that prioritizes the inputs used to measure fair value:
Level 1 inputs are valued using quoted market prices in active markets for identical assets or liabilities. Our Level 1 assets primarily include cash and cash equivalents and mutual funds.
Level 2 inputs are valued based upon quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active. Our Level 2 assets are marketable securities, which may consist of certificates of deposit ("CDs"), and commercial paper, and restricted investments, which consist of municipal debt securities, corporate debt securities, asset-backed securities, and U.S. agency debentures. Our investments consist of highly rated investment grade debt securities, which are rated A1/P1 or higher for short-term securities and A- or higher for long-term securities, by nationally recognized statistical rating organizations. We obtain our inputs from quoted market prices and independent pricing vendors.
Level 3 inputs are generally unobservable and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability. We have no Level 3 assets or liabilities.
The carrying values of our accounts receivable, accounts payable and other accrued expenses, and accrued wages and benefits approximate fair value due to their short-term nature. We also hold certain restricted investments which collateralize workers' compensation programs and are classified as held-to-maturity and carried at amortized cost on our Consolidated Balance Sheets. We hold long-term debt with variable interest rates that approximate fair value. For additional information, see Note 8: Long-term Debt.
The following tables present the fair value and hierarchy for our financial assets (in thousands):
 
March 27, 2015
 
Carrying Value
 
Total Fair Value
 
Level 1
 
Level 2
 
Level 3
Cash and cash equivalents (1)
$
17,779

 
$
17,779

 
$
17,779

 
$

 
$

Restricted cash and cash equivalents (1)
75,427

 
75,427

 
75,427

 

 

Other restricted assets (3)
11,261

 
11,261

 
11,261

 

 

Restricted investments classified as held-to-maturity
85,351

 
86,945

 

 
86,945

 

 
December 26, 2014
 
Carrying Value
 
Total Fair Value
 
Level 1
 
Level 2
 
Level 3
Cash and cash equivalents (1)
$
19,666

 
$
19,666

 
$
19,666

 
$

 
$

Marketable securities classified as available-for-sale (2)
1,500

 
1,500

 

 
1,500

 

Restricted cash and cash equivalents (1)
68,359

 
68,359

 
68,359

 

 

Other restricted assets (3)
9,972

 
9,972

 
9,972

 

 

Restricted investments classified as held-to-maturity
90,095

 
91,066

 

 
91,066

 


(1)
Cash equivalents and restricted cash equivalents consist of money market funds, deposits, and investments with original maturities of three months or less.
(2)
At March 27, 2015 we held no marketable securities. At December 26, 2014, all our marketable securities, which consisted of CDs, had stated maturities of less than one year.
(3)
Other restricted assets primarily consist of deferred compensation plan accounts, which are comprised of mutual funds.
MARKETABLE SECURITIES
MARKETABLE SECURITIES
MARKETABLE SECURITIES
We held no marketable securities as of March 27, 2015.
As of December 26, 2014, the amortized cost and fair value of our marketable securities, which were all CDs with stated maturities of less than one year, were $1.5 million. Gross unrealized gains and losses were de minimis for the thirteen weeks ended March 28, 2014.
RESTRICTED CASH AND INVESTMENTS
RESTRICTED CASH AND INVESTMENTS
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' 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 municipal debt securities, corporate debt securities, 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.
The following is a summary our restricted cash and investments (in thousands):
 
March 27,
2015
 
December 26,
2014
Cash collateral held by insurance carriers
$
22,497

 
$
22,639

Cash and cash equivalents held in Trust
51,066

 
43,856

Investments held in Trust
85,351

 
90,095

Cash collateral backing letters of credit
1,864

 
1,864

Other (1)
11,261

 
9,972

Total restricted cash and investments
$
172,039

 
$
168,426


(1)
Primarily consists of deferred compensation plan accounts, which are comprised of mutual funds.
The following tables present fair value disclosures for our held-to-maturity investments, which are carried at amortized cost (in thousands):
 
March 27, 2015
 
Amortized Cost
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Fair Value
Municipal debt securities
$
49,353

 
$
1,002

 
$
(22
)
 
$
50,333

Corporate debt securities
26,646

 
469

 
(22
)
 
27,093

Asset-backed securities
9,352

 
167

 

 
9,519

 
$
85,351

 
$
1,638

 
$
(44
)
 
$
86,945

 
December 26, 2014
 
Amortized Cost
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Fair Value
Municipal debt securities
$
52,406

 
$
882

 
$
(92
)
 
$
53,196

Corporate debt securities
27,715

 
179

 
(144
)
 
27,750

Asset-backed securities
9,974

 
157

 
(11
)
 
10,120

 
$
90,095

 
$
1,218

 
$
(247
)
 
$
91,066


The amortized cost and fair value by contractual maturity of our held-to-maturity investments are as follows (in thousands):
 
March 27, 2015
 
Amortized Cost
 
Fair Value
Due in one year or less
$
8,649

 
$
8,691

Due after one year through five years
40,368

 
40,906

Due after five years through ten years
36,334

 
37,348

 
$
85,351

 
$
86,945


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.
PROPERTY AND EQUIPMENT, NET
PROPERTY AND EQUIPMENT, NET
PROPERTY AND EQUIPMENT, NET
Property and equipment are stated at cost and consist of the following (in thousands):
 
March 27,
2015
 
December 26,
2014
Buildings and land
$
30,769

 
$
30,381

Computers and software
117,000

 
115,419

Furniture and equipment
11,629

 
11,690

Construction in progress
5,001

 
5,415

 
164,399

 
162,905

Less accumulated depreciation
(105,808
)
 
(101,513
)
 
$
58,591

 
$
61,392


Capitalized software costs, net of accumulated depreciation, were $28.7 million and $30.2 million as of March 27, 2015 and December 26, 2014, respectively, excluding amounts in Construction in progress. Construction in progress consists primarily of purchased and internally-developed software.

Depreciation expense of property and equipment totaled $5.4 million and $3.7 million for the thirteen weeks ended March 27, 2015 and March 28, 2014, respectively.
GOODWILL AND INTANGIBLE ASSETS
Goodwill and Intangible Assets
GOODWILL AND INTANGIBLE ASSETS
Goodwill

The following table reflects goodwill at March 27, 2015 and December 26, 2014 (in thousands):
 
Legacy TrueBlue
 
Unallocated Goodwill (1)
 
Total Company
Balance at December 26, 2014
 
 
 
 
 
Goodwill before impairment
$
128,449

 
$
159,616

 
$
288,065

Accumulated impairment loss
(46,210
)
 

 
(46,210
)
Goodwill, net
82,239

 
159,616

 
241,855

 
 
 
 
 
 
Balance at March 27, 2015
 
 
 
 
 
Goodwill before impairment
128,449

 
159,616

 
288,065

Accumulated impairment loss
(46,210
)
 

 
(46,210
)
Goodwill, net
$
82,239

 
$
159,616

 
$
241,855


(1)
Management is still determining the allocation of our goodwill acquired to our new reportable segments, which will be finalized in Q2 2015. See Note 16: Segment Information, for additional details.

Intangible assets
The following table presents our purchased finite-lived intangible assets (in thousands):
 
March 27, 2015
 
December 26, 2014
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Finite-lived intangible assets (1):
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
$
123,940

 
$
(26,316
)
 
$
97,624

 
$
123,940

 
$
(22,195
)
 
$
101,745

Trade name/trademarks
4,422

 
(3,090
)
 
1,332

 
4,422

 
(2,878
)
 
1,544

Non-compete agreements
1,800

 
(907
)
 
893

 
1,800

 
(817
)
 
983

Technologies
18,300

 
(2,940
)
 
15,360

 
18,300

 
(2,212
)
 
16,088

Total finite-lived intangible assets
$
148,462

 
$
(33,253
)
 
$
115,209

 
$
148,462

 
$
(28,102
)
 
$
120,360


(1)
Excludes assets that are fully amortized.

Amortization of our finite-lived intangible assets was $5.2 million and $1.5 million for the thirteen weeks ended March 27, 2015 and March 28, 2014, respectively.
The following table provides the estimated future amortization of finite-lived intangible assets as of March 27, 2015 (in thousands):
Remainder of 2015
$
13,836

2016
18,186

2017
16,157

2018
14,638

2019
11,942

Thereafter
40,450

Total future amortization
$
115,209


We also held indefinite-lived trade name/trademarks of $16.2 million as of March 27, 2015 and December 26, 2014.

We did not perform an interim impairment test of our goodwill and indefinite-lived intangible assets as we noted no significant indicators of impairment as of March 27, 2015.
WORKERS' COMPENSATION INSURANCE AND RESERVES
WORKERS' COMPENSATION INSURANCE AND RESERVES
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.
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 Labor Ready service line in the state of 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. Our workers’ compensation reserve is established using estimates of the future cost of claims and related expenses that have been reported but not settled, as well as those that have been incurred but not reported.
Our workers’ compensation reserve for claims below the deductible limit is discounted to its estimated net present value using discount rates based on average returns of “risk-free” U.S. Treasury instruments available during the year in which the liability was incurred. The weighted average discount rate was 1.6% and 1.7% at March 27, 2015 and December 26, 2014, respectively. Payments made against self-insured claims are made over a weighted average period of approximately 4.5 years at March 27, 2015.
The table below presents a reconciliation of the undiscounted workers’ compensation claims reserve to the discounted workers' compensation reserve for the periods presented as follows (in thousands):
 
March 27,
2015
 
December 26,
2014
Undiscounted workers’ compensation reserve
$
257,177

 
$
256,220

Less discount on workers' compensation reserve
14,179

 
13,381

Workers' compensation reserve, net of discount
242,998

 
242,839

Less current portion
61,784

 
64,556

Long-term portion
$
181,214

 
$
178,283


Payments made against self-insured claims were $16.8 million and $13.7 million for the thirteen weeks ended March 27, 2015 and March 28, 2014, respectively.
Our workers’ compensation reserve includes estimated expenses related to claims above our self-insured limits (“excess claims”), and we record a corresponding receivable for the insurance coverage on excess claims based on the contractual policy agreements we have with insurance carriers. We discount this reserve and corresponding receivable to its estimated net present value using the discount rates based on average returns of “risk-free” U.S. Treasury instruments available during the year in which the liability was incurred. The claim payments are made and the corresponding reimbursements from our insurance carriers are received over an estimated weighted average period of approximately 14.7 years. The discounted workers’ compensation reserve for excess claims was $41.3 million and $42.6 million as of March 27, 2015 and December 26, 2014, respectively. The discounted receivables from insurance companies, net of valuation allowance, were $37.4 million and $38.7 million as of March 27, 2015 and December 26, 2014, respectively, and are included in Other assets, net on the accompanying Consolidated Balance Sheets.
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;
impact of safety initiatives; and
positive or adverse development of claims.
Workers’ compensation expense consists primarily of changes in self-insurance reserves net of changes in discount, monopolistic jurisdictions’ premiums, insurance premiums, and other miscellaneous expenses. Workers’ compensation expense of $21.5 million and $15.9 million was recorded in Cost of services for the thirteen weeks ended March 27, 2015 and March 28, 2014, respectively.
LONG-TERM DEBT (Notes)
Long-term Debt
LONG-TERM DEBT

The components of our borrowings were as follows (in thousands):
 
 
March 27, 2015
 
December 26, 2014
Revolving Credit Facility
 
$
83,995

 
$
171,994

Term Loan
 
29,089

 
29,656

Total debt
 
113,084

 
201,650

Less current portion
 
2,267

 
2,267

Long-term debt
 
$
110,817

 
$
199,383



Second amended and restated credit agreement

Effective June 30, 2014, we entered into a Second Amended and Restated Revolving Credit Agreement for a secured revolving credit facility of $300.0 million with Bank of America, N.A., Wells Fargo Bank, National Association, HSBC and PNC Capital Markets LLC ("Revolving Credit Facility") in connection with our acquisition of Seaton. The Revolving Credit Facility, which matures June 30, 2019, amended and restated our previous credit facility, and replaced the Seaton credit facility.

The maximum amount we can borrow under the Revolving Credit Facility is subject to certain borrowing limits. Specifically, we are limited to the sum of 90% of our eligible billed accounts receivable, plus 85% of our eligible unbilled accounts receivable limited to 15% of all our eligible receivables, plus the value of our Tacoma headquarters office building. The real estate lending limit is $17.4 million, and is reduced quarterly by $0.4 million. As of March 27, 2015, the Tacoma headquarters office building liquidation value totaled $16.6 million. 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 other reserves, if deemed applicable. Each borrowing has a stated maturity of 90 days or less. At March 27, 2015, $240.9 million was available under the Revolving Credit Facility, $84.0 million was utilized as a draw on the facility, and $5.0 million was utilized by outstanding standby letters of credit, leaving $151.9 million available for additional borrowings. The letters of credit collateralize a portion of our workers' compensation obligation.

The Revolving Credit Facility requires that we maintain an excess liquidity of $37.5 million. Excess liquidity is an amount equal to the unused borrowing capacity under the Revolving Credit Facility plus certain unrestricted cash, cash equivalents, and marketable securities. We are required to satisfy a fixed charge coverage ratio in the event we do not meet that requirement. The additional amount available to borrow at March 27, 2015 was $151.9 million and the amount of cash, cash equivalents and certain marketable securities under control agreements was $15.1 million for a total of $167.0 million, which is well in excess of the liquidity requirement. We are currently in compliance with all covenants related to the Revolving Credit Facility.

Under the terms of the Revolving Credit Facility, we pay a variable rate of interest on funds borrowed that is based on London Interbank Offered Rate (LIBOR) plus an applicable spread between 1.25% and 2.00%. Alternatively, at our option, we may pay interest based upon a base rate plus an applicable spread between 0.25% and 1.00%. The applicable spread is determined by certain liquidity to debt ratios. The base rate is the greater of the prime rate (as announced by Bank of America), the federal funds rate plus 0.50%, or the one-month LIBOR rate plus 1.00%. Until April 1, 2015, the applicable spread on LIBOR was 1.75% and the applicable spread on the base rate was 0.75%. As of March 27, 2015, the interest rate was 2.00%.

A fee of 0.375% is applied against the Revolving Credit Facility's unused borrowing capacity when utilization is less than 25%, or 0.25% when utilization is greater than or equal to 25%. Letters of credit are priced at the margin in effect for LIBOR loans, plus a fronting fee of 0.125%.

Obligations under the Revolving Credit Facility are guaranteed by TrueBlue and material U.S. domestic subsidiaries, and are secured by a pledge of substantially all of the assets of TrueBlue and material U.S. domestic subsidiaries. The Revolving Credit Facility has variable rate interest and approximates fair value as of March 27, 2015 and December 26, 2014.
Term loan agreement
On February 4, 2013, we entered into an unsecured Term Loan Agreement (“Term Loan”) with Synovus Bank in the principal amount of $34.0 million. The Term Loan has a five-year maturity with fixed monthly principal payments, which total $2.3 million annually based on a loan amortization term of 15 years. Interest accrues at the one-month LIBOR index rate plus an applicable spread of 1.50%, which is paid in addition to the principal payments. At our discretion, we may elect to extend the term of the Term Loan by five consecutive one-year extensions. At March 27, 2015, the interest rate for the Term Loan was 1.67%.
At March 27, 2015 and December 26, 2014, the remaining balance of the Term Loan was $29.1 million and $29.7 million, respectively, of which $2.3 million is current and is included in Other current liabilities on our Consolidated Balance Sheets. The Term Loan has variable rate interest and approximates fair value as of March 27, 2015 and December 26, 2014.
Our obligations under the Term Loan may be accelerated upon the occurrence of an event of default under the Term Loan, which includes customary events of default, as well as cross-defaults related to indebtedness under our Revolving Credit Facility and other Term Loan specific defaults. The Term Loan contains customary negative covenants applicable to the Company and our subsidiaries such as indebtedness, certain dispositions of property, the imposition of restrictions on payments under the Term Loan, and other Term Loan specific covenants. We are currently in compliance with all covenants related to the Term Loan.
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
Workers’ compensation commitments
Our insurance carriers and certain state workers’ compensation programs require us to collateralize a portion of our workers’ compensation obligation, for which they become responsible should we become insolvent. The collateral typically takes the form of cash and cash equivalents, highly rated investment grade debt securities, letters of credit, and/or surety bonds. On a regular basis these entities assess the amount of collateral they will require from us relative to our workers' compensation obligation. The majority of our collateral obligations are held in the Trust.
We have provided our insurance carriers and certain states with commitments in the form and amounts listed below (in thousands):
 
March 27,
2015
 
December 26,
2014
Cash collateral held by insurance carriers
$
22,497

 
$
22,639

Cash and cash equivalents held in Trust
51,066

 
43,856

Investments held in Trust
85,351

 
90,095

Letters of credit (1)
6,787

 
6,513

Surety bonds (2)
16,861

 
16,861

Total collateral commitments
$
182,562

 
$
179,964



(1)
We have agreements with certain financial institutions to issue letters of credit as collateral. We had $1.9 million of restricted cash collateralizing our letters of credit at March 27, 2015 and December 26, 2014.
(2)
Our surety bonds are issued by independent insurance companies on our behalf and bear annual fees based on a percentage of the bond, which are determined by each independent surety carrier. These fees do not exceed 2.0% of the bond amount, subject to a minimum charge. The terms of these bonds are subject to review and renewal every one to four years and most bonds can be canceled by the sureties with as little as 60 days' notice.
Legal contingencies and developments
We are involved in various proceedings arising in the normal course of conducting business. We believe the liabilities included in our financial statements reflect the probable loss that can be reasonably estimated. The resolution of those proceedings is not expected to have a material effect on our results of operations or financial condition.
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION
We record stock-based compensation expense for restricted and unrestricted stock awards, performance share units, stock options, and shares purchased under an employee stock purchase plan.
Our 2005 Long-Term Equity Incentive Plan, as amended and restated effective May 2013 ("Incentive Plan"), provides for the issuance or delivery of up to 7.95 million shares of our common stock over the full term of the Incentive Plan.

Restricted and unrestricted stock awards and performance share units
Under the Incentive Plan, restricted stock awards are granted to executive officers and key employees and vest annually over three or four years. Unrestricted stock awards granted to our Board of Directors vest immediately. Restricted and unrestricted stock-based compensation expense is calculated based on the grant-date market value. We recognize compensation expense on a straight-line basis over the vesting period, net of estimated forfeitures.
Performance share units have been granted to executive officers and certain key employees. Vesting of the performance share units is contingent upon the achievement of revenue and/or profitability growth goals at the end of each three-year performance period. Each performance share unit is equivalent to one share of common stock. Compensation expense is calculated based on the grant-date market value of our stock and is recognized ratably over the performance period for the performance share units which are expected to vest. Our estimate of the performance units expected to vest is reviewed and adjusted as appropriate each quarter.
Restricted and unrestricted stock awards and performance share units activity for the thirteen weeks ended March 27, 2015, was as follows (shares in thousands):
 
Shares
 
Weighted- average grant-date price
Non-vested at beginning of period
1,547

 
$
20.03

Granted
455

 
$
21.77

Vested
(495
)
 
$
17.02

Forfeited
(241
)
 
$
14.02

Non-vested at the end of the period
1,266

 
$
22.29


As of March 27, 2015, total unrecognized stock-based compensation expense related to non-vested restricted stock was approximately $12.9 million, which is estimated to be recognized over a weighted average period of 1.89 years. As of March 27, 2015, total unrecognized stock-based compensation expense related to performance share units was approximately $5.2 million which is estimated to be recognized over a weighted average period of 2.07 years.
Stock options
Our Incentive Plan provides for both nonqualified stock options and incentive stock options (collectively, “stock options”) for directors, officers, and certain employees. We issue new shares of common stock upon exercise of stock options. All of our stock options are vested and expire if not exercised within seven to ten years from the date of grant. Stock option activity was de minimis for the thirteen weeks ended March 27, 2015.
Employee stock purchase plan

Our Employee Stock Purchase Plan (“ESPP”) reserves for purchase 1.0 million shares of common stock. The plan allows eligible employees to contribute up to 10% of their earnings toward the monthly purchase of the Company's common stock. The employee's purchase price is the lesser of 85% of the fair market value of shares on either the first day or the last day of each month. We consider our ESPP to be a component of our stock-based compensation and accordingly we recognize compensation expense over the requisite service period for stock purchases made under the plan. The requisite service period begins on the enrollment date and ends on the purchase date, the duration of which is one month.

During the thirteen weeks ended March 27, 2015 and March 28, 2014, participants purchased approximately 20,000 and 17,000 shares from the plan, for cash proceeds of $0.4 million and $0.3 million, respectively.
Stock-based compensation expense
Total stock-based compensation expense, which is included in Selling, general and administrative expenses on our Consolidated Statements of Operations and Comprehensive Income, was $3.4 million and $2.9 million for the thirteen weeks ended March 27, 2015 and March 28, 2014, respectively.
DEFINED CONTRIBUTION PLANS
DEFINED CONTRIBUTION PLANS
DEFINED CONTRIBUTION PLANS

We offer both qualified and non-qualified defined contribution plans to eligible employees. Participating employees may elect to defer and contribute a portion of their eligible compensation. The plans offer discretionary matching contributions. The liability for the non-qualified plans was $11.3 million and $10.1 million as of March 27, 2015 and December 26, 2014, respectively. The current and non-current portion of the deferred compensation liability is included in Other current liabilities and Other long-term liabilities, respectively, on the Consolidated Balance Sheets, and is largely offset by restricted investments recorded in Restricted cash and investments on the Consolidated Balance Sheets.
INCOME TAXES
INCOME TAXES
INCOME TAXES

Our 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, is 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, audit developments, changes in law, 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. For example, the impact of discrete items, tax credits, and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.

Our effective tax rate on earnings for the thirteen weeks ended March 27, 2015 was 20.5% compared to 40.0% for the same period in 2014. During the thirteen weeks ended March 27, 2015, we recognized $1.3 million of discrete tax benefits from prior year federal and state hiring credits. These hiring credits include the federal Work Opportunity Tax Credit ("WOTC") and the California Enterprise Zone Tax Credit.

Our effective tax rate on earnings for the thirteen weeks ended March 28, 2014, was 40.0% compared to 83.4% on losses, for the same period in 2013. The principal difference between the statutory federal income tax rate of 35.0% and our effective income tax rate of 40.0%, results from state income taxes, certain non-deductible expenses, and the WOTC earned in 2014 for prior year hires.
As of March 27, 2015 and December 26, 2014, we had gross unrecognized tax benefits of $2.1 million and $2.0 million recorded in accordance with current accounting guidance on uncertain tax positions.
NET INCOME PER SHARE
NET INCOME PER SHARE
NET INCOME PER SHARE
Diluted common shares were calculated as follows (in thousands, except per share amounts):
 
Thirteen weeks ended
 
March 27, 2015
 
March 28, 2014
Net income
$
5,716

 
$
1,656

 
 
 
 
Weighted average number of common shares used in basic net income per common share
41,031

 
40,572

Dilutive effect of outstanding stock options and non-vested restricted stock
331

 
319

Weighted average number of common shares used in diluted net income per common share
41,362

 
40,891

Net income per common share:
 
 
 
Basic
$
0.14

 
$
0.04

Diluted
$
0.14

 
$
0.04

 
 
 
 
Anti-dilutive shares
266

 


Basic net income per share is calculated by dividing net income 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, non-vested restricted stock, performance share units, and shares issued under the employee stock purchase plan, except where their inclusion would be anti-dilutive.
Anti-dilutive shares include unvested restricted stock, performance share units, and in-the-money options for which the sum of the assumed proceeds, including unrecognized compensation expense, exceeds the average stock price during the periods presented. Anti-dilutive shares associated with our stock options relate to those stock options with an exercise price higher than the average market value of our stock during the periods presented.
ACCUMULATED OTHER COMPREHENSIVE INCOME
ACCUMULATED OTHER COMPREHENSIVE INCOME
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) is reflected as a net increase (decrease) to shareholders’ equity. Changes in the balance of each component of accumulated other comprehensive income (loss) during the years presented were as follows (in thousands):
 
Foreign currency translation adjustment
 
Unrealized gain on marketable securities (1)
 
Total other comprehensive income, net of tax
Balance at beginning of period
$
848

 
$
23

 
$
871

Current-period other comprehensive income (loss) (2)
(1,412
)
 
167

 
(1,245
)
Balance at end of period
$
(564
)
 
$
190

 
$
(374
)

(1)
Consists of deferred compensation plan accounts, which includes mutual funds.
(2)
The tax impact on foreign currency translation adjustment and unrealized gain on marketable securities was de minimis for the period ending March 27, 2015.

There were no material reclassifications out of accumulated other comprehensive income (loss) during the fiscal period presented.
SUPPLEMENTAL CASH FLOW INFORMATION
SUPPLEMENTAL CASH FLOW INFORMATION
SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosure of cash flow information (in thousands):
 
Thirteen weeks ended
 
March 27, 2015
 
March 28, 2014
Cash paid during the period for:
 
 
 
Interest
$
1,137

 
$
254

Income taxes
$
565

 
$
913

As of March 27, 2015 and March 28, 2014 we had acquired $0.2 million and $0.9 million, respectively, of property, plant and equipment on account that was not yet paid. These are considered non-cash investing items.
SEGMENT INFORMATION
SEGMENT INFORMATION
SEGMENT INFORMATION

Our operating segments are based on the organizational structure for which financial results are regularly evaluated by the chief operating decision maker, our Chief Executive Officer, to determine resource allocation and assess performance. Our service lines are our operating segments. Our reportable segments are described below:

Our Staffing Services segment provides temporary staffing through the following service lines:
Labor Ready: On-demand general labor;
Spartan Staffing: Skilled manufacturing and logistics labor;
CLP Resources: Skilled trades for commercial, industrial, and energy construction as well as building and plant maintenance;
PlaneTechs: Skilled mechanics and technicians to the aviation and transportation industries;
Centerline Drivers: Temporary and dedicated drivers to the transportation and distribution industries; and
Staff Management On-premise Staffing: Exclusive recruitment and on-premise management of a facility's contingent industrial workforce.

Our Managed Services segment provides high-volume permanent employee recruitment process outsourcing and management of outsourced labor service providers through the following service lines:
PeopleScout and hrX: Outsourced recruitment of permanent employees on behalf of clients; and
Staff Management: Management of multiple third party staffing vendors on behalf of clients.

We have two measures of segment performance; revenue from services and income from operations. Income from operations for each segment includes net sales to third parties, related cost of sales, and operating expenses directly attributable to the segment. Costs excluded from segment income from operations include various corporate general and administrative expenses, depreciation and amortization expense, interest income (expense), other income (expense), and income taxes. Asset information by reportable segment is not presented, since we do not manage the performance of our segments on a balance sheet basis. There are no material internal revenue transactions between our reporting segments.

Revenue from services and income from operations associated with our segments were as follows (in thousands):
 
Thirteen weeks ended
 
March 27, 2015
 
March 28, 2014
Revenue from services
 
 
 
Staffing Services
$
549,712

 
$
396,063

Managed Services
23,603

 

Total Company
$
573,315

 
$
396,063

 
 
 
 
Income from operations
 
 
 
Staffing Services
$
24,229

 
$
15,545

Managed Services
3,478

 

Depreciation and amortization
(10,520
)
 
(5,161
)
Corporate unallocated
(9,464
)
 
(7,968
)
Total Company
7,723

 
2,416

Interest and other income (expense), net
(534
)
 
344

Income before tax expense
$
7,189

 
$
2,760

SUBSEQUENT EVENTS
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS

We evaluated events and transactions occurring after the balance sheet date through the date the financial statements were issued, and noted no other events that were subject to recognition or disclosure.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
Financial statement preparation

The accompanying unaudited consolidated financial statements (“financial statements”) of TrueBlue, Inc. (the "Company," "we," "us," "our," and "TrueBlue") are prepared in accordance with U.S. 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 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.
These financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 26, 2014. The results of operations for the thirteen weeks ended March 27, 2015 are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period.
Recently issued accounting pronouncements not yet adopted

In April 2015, the Financial Accounting Standards Board ("FASB") issued new accounting guidance intended to simplify the presentation of debt issuance costs. The guidance requires that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with the presentation for debt discounts. The recognition and measurement guidance for debt issuance costs is not affected. This guidance is effective for annual periods beginning after December 15, 2015 (Q1 2016 for TrueBlue), including interim periods within those annual periods and must be applied on a retrospective basis with early adoption permitted. This guidance is not expected to have a material impact on our consolidated financial statements.

In April 2015, the FASB issued new accounting guidance related to accounting for fees paid in a cloud computing arrangement. The new standard provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 (Q1 2016 for TrueBlue). Early adoption is permitted and may be applied retrospectively or prospectively to arrangements entered into, or materially modified, after the effective date. We are evaluating the impact, if any, that this standard will have on our consolidated financial statements.

In May 2014, the FASB issued new accounting guidance that sets forth a five-step revenue recognition model, which supersedes current revenue recognition guidance, including industry-specific revenue recognition guidance. The underlying principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance. The ASU provides two methods of initial adoption: retrospective for all periods presented, or through a cumulative adjustment in the year of adoption. It is effective for annual periods beginning after December 15, 2016 (Q1 2017 for TrueBlue), including interim periods within those annual periods. Early adoption is not permitted. We have not yet determined which method of adoption will be applied and are currently evaluating the impact that this standard will have on our consolidated financial statements.
FAIR VALUE MEASUREMENT Fair Value Measurement (Policies)
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 that prioritizes the inputs used to measure fair value:
Level 1 inputs are valued using quoted market prices in active markets for identical assets or liabilities. Our Level 1 assets primarily include cash and cash equivalents and mutual funds.
Level 2 inputs are valued based upon quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active. Our Level 2 assets are marketable securities, which may consist of certificates of deposit ("CDs"), and commercial paper, and restricted investments, which consist of municipal debt securities, corporate debt securities, asset-backed securities, and U.S. agency debentures. Our investments consist of highly rated investment grade debt securities, which are rated A1/P1 or higher for short-term securities and A- or higher for long-term securities, by nationally recognized statistical rating organizations. We obtain our inputs from quoted market prices and independent pricing vendors.
Level 3 inputs are generally unobservable and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability. We have no Level 3 assets or liabilities.
The carrying values of our accounts receivable, accounts payable and other accrued expenses, and accrued wages and benefits approximate fair value due to their short-term nature. We also hold certain restricted investments which collateralize workers' compensation programs and are classified as held-to-maturity and carried at amortized cost on our Consolidated Balance Sheets. We hold long-term debt with variable interest rates that approximate fair value. For additional information, see Note 8: Long-term Debt.
FAIR VALUE MEASUREMENT (Tables)
Schedule of fair value hierarchy for cash equivalents and restricted investments
The following tables present the fair value and hierarchy for our financial assets (in thousands):
 
March 27, 2015
 
Carrying Value
 
Total Fair Value
 
Level 1
 
Level 2
 
Level 3
Cash and cash equivalents (1)
$
17,779

 
$
17,779

 
$
17,779

 
$

 
$

Restricted cash and cash equivalents (1)
75,427

 
75,427

 
75,427

 

 

Other restricted assets (3)
11,261

 
11,261

 
11,261

 

 

Restricted investments classified as held-to-maturity
85,351

 
86,945

 

 
86,945

 

 
December 26, 2014
 
Carrying Value
 
Total Fair Value
 
Level 1
 
Level 2
 
Level 3
Cash and cash equivalents (1)
$
19,666

 
$
19,666

 
$
19,666

 
$

 
$

Marketable securities classified as available-for-sale (2)
1,500

 
1,500

 

 
1,500

 

Restricted cash and cash equivalents (1)
68,359

 
68,359

 
68,359

 

 

Other restricted assets (3)
9,972

 
9,972

 
9,972

 

 

Restricted investments classified as held-to-maturity
90,095

 
91,066

 

 
91,066

 


(1)
Cash equivalents and restricted cash equivalents consist of money market funds, deposits, and investments with original maturities of three months or less.
(2)
At March 27, 2015 we held no marketable securities. At December 26, 2014, all our marketable securities, which consisted of CDs, had stated maturities of less than one year.
(3)
Other restricted assets primarily consist of deferred compensation plan accounts, which are comprised of mutual funds.
RESTRICTED CASH AND INVESTMENTS (Tables)
The following is a summary our restricted cash and investments (in thousands):
 
March 27,
2015
 
December 26,
2014
Cash collateral held by insurance carriers
$
22,497

 
$
22,639

Cash and cash equivalents held in Trust
51,066

 
43,856

Investments held in Trust
85,351

 
90,095

Cash collateral backing letters of credit
1,864

 
1,864

Other (1)
11,261

 
9,972

Total restricted cash and investments
$
172,039

 
$
168,426


(1)
Primarily consists of deferred compensation plan accounts, which are comprised of mutual funds.
The following tables present fair value disclosures for our held-to-maturity investments, which are carried at amortized cost (in thousands):
 
March 27, 2015
 
Amortized Cost
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Fair Value
Municipal debt securities
$
49,353

 
$
1,002

 
$
(22
)
 
$
50,333

Corporate debt securities
26,646

 
469

 
(22
)
 
27,093

Asset-backed securities
9,352

 
167

 

 
9,519

 
$
85,351

 
$
1,638

 
$
(44
)
 
$
86,945

 
December 26, 2014
 
Amortized Cost
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Fair Value
Municipal debt securities
$
52,406

 
$
882

 
$
(92
)
 
$
53,196

Corporate debt securities
27,715

 
179

 
(144
)
 
27,750

Asset-backed securities
9,974

 
157

 
(11
)
 
10,120

 
$
90,095

 
$
1,218

 
$
(247
)
 
$
91,066

The amortized cost and fair value by contractual maturity of our held-to-maturity investments are as follows (in thousands):
 
March 27, 2015
 
Amortized Cost
 
Fair Value
Due in one year or less
$
8,649

 
$
8,691

Due after one year through five years
40,368

 
40,906

Due after five years through ten years
36,334

 
37,348

 
$
85,351

 
$
86,945

PROPERTY AND EQUIPMENT, NET (Tables)
Schedule of property and equipment
Property and equipment are stated at cost and consist of the following (in thousands):
 
March 27,
2015
 
December 26,
2014
Buildings and land
$
30,769

 
$
30,381

Computers and software
117,000

 
115,419

Furniture and equipment
11,629

 
11,690

Construction in progress
5,001

 
5,415

 
164,399

 
162,905

Less accumulated depreciation
(105,808
)
 
(101,513
)
 
$
58,591

 
$
61,392

GOODWILL AND INTANGIBLE ASSETS (Tables)
The following table reflects goodwill at March 27, 2015 and December 26, 2014 (in thousands):
 
Legacy TrueBlue
 
Unallocated Goodwill (1)
 
Total Company
Balance at December 26, 2014
 
 
 
 
 
Goodwill before impairment
$
128,449

 
$
159,616

 
$
288,065

Accumulated impairment loss
(46,210
)
 

 
(46,210
)
Goodwill, net
82,239

 
159,616

 
241,855

 
 
 
 
 
 
Balance at March 27, 2015
 
 
 
 
 
Goodwill before impairment
128,449

 
159,616

 
288,065

Accumulated impairment loss
(46,210
)
 

 
(46,210
)
Goodwill, net
$
82,239

 
$
159,616

 
$
241,855


(1)
Management is still determining the allocation of our goodwill acquired to our new reportable segments, which will be finalized in Q2 2015. See Note 16: Segment Information, for additional details.

The following table presents our purchased finite-lived intangible assets (in thousands):
 
March 27, 2015
 
December 26, 2014
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Finite-lived intangible assets (1):
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
$
123,940

 
$
(26,316
)
 
$
97,624

 
$
123,940

 
$
(22,195
)
 
$
101,745

Trade name/trademarks
4,422

 
(3,090
)
 
1,332

 
4,422

 
(2,878
)
 
1,544

Non-compete agreements
1,800

 
(907
)
 
893

 
1,800

 
(817
)
 
983

Technologies
18,300

 
(2,940
)
 
15,360

 
18,300

 
(2,212
)
 
16,088

Total finite-lived intangible assets
$
148,462

 
$
(33,253
)
 
$
115,209

 
$
148,462

 
$
(28,102
)
 
$
120,360


(1)
Excludes assets that are fully amortized.

The following table provides the estimated future amortization of finite-lived intangible assets as of March 27, 2015 (in thousands):
Remainder of 2015
$
13,836

2016
18,186

2017
16,157

2018
14,638

2019
11,942

Thereafter
40,450

Total future amortization
$
115,209

WORKERS' COMPENSATION INSURANCE AND RESERVES (Tables)
Reconciliation of workers' compensation claims reserve
The table below presents a reconciliation of the undiscounted workers’ compensation claims reserve to the discounted workers' compensation reserve for the periods presented as follows (in thousands):
 
March 27,
2015
 
December 26,
2014
Undiscounted workers’ compensation reserve
$
257,177

 
$
256,220

Less discount on workers' compensation reserve
14,179

 
13,381

Workers' compensation reserve, net of discount
242,998

 
242,839

Less current portion
61,784

 
64,556

Long-term portion
$
181,214

 
$
178,283

LONG-TERM DEBT (Tables)
Schedule of Long-term Debt Instruments
The components of our borrowings were as follows (in thousands):
 
 
March 27, 2015
 
December 26, 2014
Revolving Credit Facility
 
$
83,995

 
$
171,994

Term Loan
 
29,089

 
29,656

Total debt
 
113,084

 
201,650

Less current portion
 
2,267

 
2,267

Long-term debt
 
$
110,817

 
$
199,383

COMMITMENTS AND CONTINGENCIES (Tables)
Schedule of workers’ compensation collateral commitments
We have provided our insurance carriers and certain states with commitments in the form and amounts listed below (in thousands):
 
March 27,
2015
 
December 26,
2014
Cash collateral held by insurance carriers
$
22,497

 
$
22,639

Cash and cash equivalents held in Trust
51,066

 
43,856

Investments held in Trust
85,351

 
90,095

Letters of credit (1)
6,787

 
6,513

Surety bonds (2)
16,861

 
16,861

Total collateral commitments
$
182,562

 
$
179,964



(1)
We have agreements with certain financial institutions to issue letters of credit as collateral. We had $1.9 million of restricted cash collateralizing our letters of credit at March 27, 2015 and December 26, 2014.
(2)
Our surety bonds are issued by independent insurance companies on our behalf and bear annual fees based on a percentage of the bond, which are determined by each independent surety carrier. These fees do not exceed 2.0% of the bond amount, subject to a minimum charge. The terms of these bonds are subject to review and renewal every one to four years and most bonds can be canceled by the sureties with as little as 60 days' notice.
STOCK-BASED COMPENSATION (Tables)
Schedule of restricted and unrestricted stock and performance share units activity
Restricted and unrestricted stock awards and performance share units activity for the thirteen weeks ended March 27, 2015, was as follows (shares in thousands):
 
Shares
 
Weighted- average grant-date price
Non-vested at beginning of period
1,547

 
$
20.03

Granted
455

 
$
21.77

Vested
(495
)
 
$
17.02

Forfeited
(241
)
 
$
14.02

Non-vested at the end of the period
1,266

 
$
22.29

NET INCOME PER SHARE (Tables)
Schedule of adjusted net income and diluted common shares
Diluted common shares were calculated as follows (in thousands, except per share amounts):
 
Thirteen weeks ended
 
March 27, 2015
 
March 28, 2014
Net income
$
5,716

 
$
1,656

 
 
 
 
Weighted average number of common shares used in basic net income per common share
41,031

 
40,572

Dilutive effect of outstanding stock options and non-vested restricted stock
331

 
319

Weighted average number of common shares used in diluted net income per common share
41,362

 
40,891

Net income per common share:
 
 
 
Basic
$
0.14

 
$
0.04

Diluted
$
0.14

 
$
0.04

 
 
 
 
Anti-dilutive shares
266

 

ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables)
Schedule of Comprehensive Income (Loss)
Changes in the balance of each component of accumulated other comprehensive income (loss) during the years presented were as follows (in thousands):
 
Foreign currency translation adjustment
 
Unrealized gain on marketable securities (1)
 
Total other comprehensive income, net of tax
Balance at beginning of period
$
848

 
$
23

 
$
871

Current-period other comprehensive income (loss) (2)
(1,412
)
 
167

 
(1,245
)
Balance at end of period
$
(564
)
 
$
190

 
$
(374
)

(1)
Consists of deferred compensation plan accounts, which includes mutual funds.
(2)
The tax impact on foreign currency translation adjustment and unrealized gain on marketable securities was de minimis for the period ending March 27, 2015.
SUPPLEMENTAL CASH FLOW INFORMATION (Tables)
Schedule of supplemental cash flow information
Supplemental disclosure of cash flow information (in thousands):
 
Thirteen weeks ended
 
March 27, 2015
 
March 28, 2014
Cash paid during the period for:
 
 
 
Interest
$
1,137

 
$
254

Income taxes
$
565

 
$
913

SEGMENT INFORMATION (Tables)
Schedule of Segment Information
Revenue from services and income from operations associated with our segments were as follows (in thousands):
 
Thirteen weeks ended
 
March 27, 2015
 
March 28, 2014
Revenue from services
 
 
 
Staffing Services
$
549,712

 
$
396,063

Managed Services
23,603

 

Total Company
$
573,315

 
$
396,063

 
 
 
 
Income from operations
 
 
 
Staffing Services
$
24,229

 
$
15,545

Managed Services
3,478

 

Depreciation and amortization
(10,520
)
 
(5,161
)
Corporate unallocated
(9,464
)
 
(7,968
)
Total Company
7,723

 
2,416

Interest and other income (expense), net
(534
)
 
344

Income before tax expense
$
7,189

 
$
2,760

FAIR VALUE MEASUREMENT (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 27, 2015
Dec. 26, 2014
Fair Value Measurement [Line Items]
 
 
Restricted investments classified as held-to-maturity
$ 86,945 
$ 91,066 
Certificate of deposits
 
 
Fair Value Measurement [Line Items]
 
 
Marketable securities classified as available-for-sale
 
1,500 
Carrying Value
 
 
Fair Value Measurement [Line Items]
 
 
Cash and cash equivalents
17,779 1
19,666 1
Carrying Value |
Restricted Assets
 
 
Fair Value Measurement [Line Items]
 
 
Restricted cash and cash equivalents
75,427 1
68,359 1
Other restricted assets
11,261 2
9,972 2
Restricted investments classified as held-to-maturity
85,351 
90,095 
Total Fair Value
 
 
Fair Value Measurement [Line Items]
 
 
Cash and cash equivalents
17,779 1
19,666 1
Total Fair Value |
Certificate of deposits
 
 
Fair Value Measurement [Line Items]
 
 
Marketable securities classified as available-for-sale
 
1,500 3
Total Fair Value |
Restricted Assets
 
 
Fair Value Measurement [Line Items]
 
 
Restricted cash and cash equivalents
75,427 1
68,359 1
Other restricted assets
11,261 2
9,972 2
Restricted investments classified as held-to-maturity
86,945 
91,066 
Level 1
 
 
Fair Value Measurement [Line Items]
 
 
Cash and cash equivalents
17,779 1
19,666 1
Marketable securities classified as available-for-sale
 
3
Level 1 |
Restricted Assets
 
 
Fair Value Measurement [Line Items]
 
 
Restricted cash and cash equivalents
75,427 1
68,359 1
Other restricted assets
11,261 2
9,972 2
Restricted investments classified as held-to-maturity
Level 2
 
 
Fair Value Measurement [Line Items]
 
 
Cash and cash equivalents
1
1
Level 2 |
Restricted Assets
 
 
Fair Value Measurement [Line Items]
 
 
Restricted cash and cash equivalents
1
1
Other restricted assets
2
2
Restricted investments classified as held-to-maturity
86,945 
91,066 
Level 3
 
 
Fair Value Measurement [Line Items]
 
 
Cash and cash equivalents
1
1
Marketable securities classified as available-for-sale
 
   3
Level 3 |
Restricted Assets
 
 
Fair Value Measurement [Line Items]
 
 
Restricted cash and cash equivalents
1
1
Other restricted assets
2
2
Restricted investments classified as held-to-maturity
$ 0 
$ 0 
MARKETABLE SECURITIES - Available-for-sale Securities (Details) (Certificate of deposits, USD $)
Dec. 26, 2014
Schedule of Available-for-sale Securities [Line Items]
 
Fair Value
$ 1,500,000 
Due in one year [Member]
 
Schedule of Available-for-sale Securities [Line Items]
 
Amortized Cost
$ 1,500,000 
RESTRICTED CASH AND INVESTMENTS (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 27, 2015
Dec. 26, 2014
Restricted Cash and Investments [Line Items]
 
 
Cash collateral held by insurance carriers
$ 22,497 
$ 22,639 
Cash and cash equivalents held in Trust
51,066 
43,856 
Investments held in Trust
85,351 
90,095 
Cash collateral backing letters of credit
1,864 
1,864 
Other
11,261 1
9,972 1
Restricted cash and investments
172,039 
168,426 
Held-to-maturity Securities, Reconciliation to Fair Value [Abstract]
 
 
Amortized Cost
85,351 
90,095 
Gross Unrealized Gain
1,638 
1,218 
Gross Unrealized Loss
(44)
(247)
Fair Value
86,945 
91,066 
Held-to-maturity Securities, Investment Maturities, Amortized Cost [Abstract]
 
 
Amortized Cost
85,351 
90,095 
Held-to-maturity Securities, Investment Maturities, Fair Value [Abstract]
 
 
Fair Value
86,945 
91,066 
Municipal debt securities
 
 
Restricted Cash and Investments [Line Items]
 
 
Investments held in Trust
49,353 
52,406 
Held-to-maturity Securities, Reconciliation to Fair Value [Abstract]
 
 
Amortized Cost
49,353 
52,406 
Gross Unrealized Gain
1,002 
882 
Gross Unrealized Loss
(22)
(92)
Fair Value
50,333 
53,196 
Held-to-maturity Securities, Investment Maturities, Amortized Cost [Abstract]
 
 
Amortized Cost
49,353 
52,406 
Held-to-maturity Securities, Investment Maturities, Fair Value [Abstract]
 
 
Fair Value
50,333 
53,196 
Corporate debt securities
 
 
Restricted Cash and Investments [Line Items]
 
 
Investments held in Trust
26,646 
27,715 
Held-to-maturity Securities, Reconciliation to Fair Value [Abstract]
 
 
Amortized Cost
26,646 
27,715 
Gross Unrealized Gain
469 
179 
Gross Unrealized Loss
(22)
(144)
Fair Value
27,093 
27,750 
Held-to-maturity Securities, Investment Maturities, Amortized Cost [Abstract]
 
 
Amortized Cost
26,646 
27,715 
Held-to-maturity Securities, Investment Maturities, Fair Value [Abstract]
 
 
Fair Value
27,093 
27,750 
Asset-backed securities
 
 
Restricted Cash and Investments [Line Items]
 
 
Investments held in Trust
9,352 
9,974 
Held-to-maturity Securities, Reconciliation to Fair Value [Abstract]
 
 
Amortized Cost
9,352 
9,974 
Gross Unrealized Gain
167 
157 
Gross Unrealized Loss
(11)
Fair Value
9,519 
10,120 
Held-to-maturity Securities, Investment Maturities, Amortized Cost [Abstract]
 
 
Amortized Cost
9,352 
9,974 
Held-to-maturity Securities, Investment Maturities, Fair Value [Abstract]
 
 
Fair Value
9,519 
10,120 
Restricted Cash and Investments
 
 
Restricted Cash and Investments [Line Items]
 
 
Investments held in Trust
85,351 
 
Held-to-maturity Securities, Reconciliation to Fair Value [Abstract]
 
 
Amortized Cost
85,351 
 
Fair Value
86,945 
 
Held-to-maturity Securities, Investment Maturities, Amortized Cost [Abstract]
 
 
Due in one year or less
8,649 
 
Due after one year through five years
40,368 
 
Due after five years through ten years
36,334 
 
Amortized Cost
85,351 
 
Held-to-maturity Securities, Investment Maturities, Fair Value [Abstract]
 
 
Due in one year or less
8,691 
 
Due after one year through five years
40,906 
 
Due after five years through ten years
37,348 
 
Fair Value
$ 86,945 
 
PROPERTY AND EQUIPMENT, NET (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 27, 2015
Dec. 26, 2014
Property and Equipment, Net, by Type [Abstract]
 
 
Property and equipment, gross
$ 164,399 
$ 162,905 
Less accumulated depreciation and amortization
(105,808)
(101,513)
Property and equipment, net
58,591 
61,392 
Buildings and land
 
 
Property and Equipment, Net, by Type [Abstract]
 
 
Property and equipment, gross
30,769 
30,381 
Computers and software
 
 
Property and Equipment, Net, by Type [Abstract]
 
 
Property and equipment, gross
117,000 
115,419 
Furniture and equipment
 
 
Property and Equipment, Net, by Type [Abstract]
 
 
Property and equipment, gross
11,629 
11,690 
Construction in progress
 
 
Property and Equipment, Net, by Type [Abstract]
 
 
Property and equipment, gross
$ 5,001 
$ 5,415 
PROPERTY AND EQUIPMENT, NET (NARRATIVE) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 27, 2015
Mar. 28, 2014
Dec. 26, 2014
Property, Plant and Equipment [Line Items]
 
 
 
Capitalized computer software, net
$ 28.7 
 
$ 30.2 
Depreciation expense
$ 5.4 
$ 3.7 
 
- Changes in Carrying Amount of Goodwill (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 27, 2015
Dec. 26, 2014
Goodwill [Line Items]
 
 
Goodwill before impairment
$ 288,065 
$ 288,065 
Accumulated impairment loss
(46,210)
(46,210)
Goodwill, net
241,855 
241,855 
Legacy TrueBlue
 
 
Goodwill [Line Items]
 
 
Goodwill before impairment
128,449 
128,449 
Accumulated impairment loss
(46,210)
(46,210)
Goodwill, net
82,239 
82,239 
Unallocated Goodwill
 
 
Goodwill [Line Items]
 
 
Goodwill before impairment
159,616 1
159,616 1
Accumulated impairment loss
1
1
Goodwill, net
$ 159,616 1
$ 159,616 1
GOODWILL AND INTANGIBLE ASSETS - Intangible Assets Other Than Goodwill (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 27, 2015
Dec. 26, 2014
Amortizable intangible assets (1):
 
 
Gross Carrying Amount
$ 148,462 1
$ 148,462 1
Accumulated Amortization
(33,253)1
(28,102)1
Net Carrying Amount
115,209 1
120,360 1
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
 
 
Remainder of 2015
13,836 
 
2016
18,186 
 
2017
16,157 
 
2018
14,638 
 
2019
11,942 
 
Thereafter
40,450 
 
Net Carrying Amount
115,209 1
120,360 1
Customer relationships
 
 
Amortizable intangible assets (1):
 
 
Gross Carrying Amount
123,940 1
123,940 1
Accumulated Amortization
(26,316)1
(22,195)1
Net Carrying Amount
97,624 1
101,745 1
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
 
 
Net Carrying Amount
97,624 1
101,745 1
Trade name/trademarks
 
 
Amortizable intangible assets (1):
 
 
Gross Carrying Amount
4,422 1
4,422 1
Accumulated Amortization
(3,090)1
(2,878)1
Net Carrying Amount
1,332 1
1,544 1