Washington | 91-1287341 | |
(State of incorporation) | (I.R.S. Employer Identification No.) | |
1015 A Street, Tacoma, Washington | 98402 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Name of each exchange on which registered | |
Common Stock no par value | The New York Stock Exchange |
Large accelerated filer | x | Accelerated filer | ¨ | Non-accelerated filer | ¨ | |
Smaller reporting company | ¨ | Emerging growth company | ¨ |
Page | ||
PART I. FINANCIAL INFORMATION | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II. OTHER INFORMATION | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
Item 1. | CONSOLIDATED FINANCIAL STATEMENTS |
(in thousands, except par value data) | September 30, 2018 | December 31, 2017 | ||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 34,736 | $ | 28,780 | ||
Accounts receivable, net of allowance for doubtful accounts of $8,056 and $4,344 | 384,867 | 374,273 | ||||
Prepaid expenses, deposits and other current assets | 23,757 | 20,605 | ||||
Income tax receivable | 9,763 | 4,621 | ||||
Total current assets | 453,123 | 428,279 | ||||
Property and equipment, net | 55,803 | 60,163 | ||||
Restricted cash and investments | 240,634 | 239,231 | ||||
Deferred income taxes, net | — | 3,783 | ||||
Goodwill | 238,648 | 226,694 | ||||
Intangible assets, net | 96,862 | 104,615 | ||||
Workers’ compensation claims receivable, net | 45,644 | 45,048 | ||||
Other assets, net | 10,899 | 1,218 | ||||
Total assets | $ | 1,141,613 | $ | 1,109,031 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable and other accrued expenses | $ | 68,260 | $ | 55,091 | ||
Accrued wages and benefits | 83,260 | 76,894 | ||||
Current portion of workers’ compensation claims reserve | 70,950 | 77,218 | ||||
Other current liabilities | 1,211 | 3,216 | ||||
Total current liabilities | 223,681 | 212,419 | ||||
Workers’ compensation claims reserve, less current portion | 194,968 | 197,105 | ||||
Long-term debt, less current portion | 107,900 | 116,489 | ||||
Deferred income taxes, net | 300 | — | ||||
Long-term deferred compensation liabilities | 23,570 | 21,866 | ||||
Other long-term liabilities | 6,039 | 6,305 | ||||
Total liabilities | 556,458 | 554,184 | ||||
Commitments and contingencies (Note 9) | ||||||
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; 40,472 and 41,098 shares issued and outstanding | 1 | 1 | ||||
Accumulated other comprehensive loss | (12,229 | ) | (6,804 | ) | ||
Retained earnings | 597,383 | 561,650 | ||||
Total shareholders’ equity | 585,155 | 554,847 | ||||
Total liabilities and shareholders’ equity | $ | 1,141,613 | $ | 1,109,031 |
Thirteen weeks ended | Thirty-nine weeks ended | ||||||||||||
(in thousands, except per share data) | September 30, 2018 | October 1, 2017 | September 30, 2018 | October 1, 2017 | |||||||||
Revenue from services | $ | 680,371 | $ | 660,780 | $ | 1,849,060 | $ | 1,839,146 | |||||
Cost of services | 496,053 | 488,761 | 1,355,890 | 1,372,418 | |||||||||
Gross profit | 184,318 | 172,019 | 493,170 | 466,728 | |||||||||
Selling, general and administrative expense | 145,382 | 131,552 | 405,352 | 378,150 | |||||||||
Depreciation and amortization | 10,586 | 11,189 | 30,777 | 34,650 | |||||||||
Income from operations | 28,350 | 29,278 | 57,041 | 53,928 | |||||||||
Interest expense | (1,357 | ) | (1,365 | ) | (3,602 | ) | (3,893 | ) | |||||
Interest and other income | 1,017 | 1,146 | 4,498 | 3,903 | |||||||||
Interest and other income (expense), net | (340 | ) | (219 | ) | 896 | 10 | |||||||
Income before tax expense | 28,010 | 29,059 | 57,937 | 53,938 | |||||||||
Income tax expense | 3,630 | 7,838 | 7,070 | 14,909 | |||||||||
Net income | $ | 24,380 | $ | 21,221 | $ | 50,867 | $ | 39,029 | |||||
Net income per common share: | |||||||||||||
Basic | $ | 0.61 | $ | 0.52 | $ | 1.27 | $ | 0.94 | |||||
Diluted | $ | 0.61 | $ | 0.51 | $ | 1.26 | $ | 0.94 | |||||
Weighted average shares outstanding: | |||||||||||||
Basic | 39,743 | 41,046 | 40,138 | 41,420 | |||||||||
Diluted | 40,073 | 41,276 | 40,417 | 41,671 | |||||||||
Other comprehensive income (loss): | |||||||||||||
Foreign currency translation adjustment | $ | (595 | ) | $ | 1,143 | $ | (3,900 | ) | $ | 3,483 | |||
Unrealized gain on investments, net of tax | — | 424 | — | 1,070 | |||||||||
Total other comprehensive income (loss), net of tax | (595 | ) | 1,567 | (3,900 | ) | 4,553 | |||||||
Comprehensive income | $ | 23,785 | $ | 22,788 | $ | 46,967 | $ | 43,582 |
Thirty-nine weeks ended | ||||||
(in thousands) | September 30, 2018 | October 1, 2017 | ||||
Cash flows from operating activities: | ||||||
Net income | $ | 50,867 | $ | 39,029 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization | 30,777 | 34,650 | ||||
Provision for doubtful accounts | 10,140 | 6,321 | ||||
Stock-based compensation | 9,552 | 6,161 | ||||
Deferred income taxes | 2,638 | 4,890 | ||||
Other operating activities | 526 | 2,724 | ||||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | (17,960 | ) | (34,198 | ) | ||
Income tax receivable | (5,389 | ) | 12,788 | |||
Other assets | (12,110 | ) | 6,306 | |||
Accounts payable and other accrued expenses | 1,624 | (784 | ) | |||
Accrued wages and benefits | 4,724 | (176 | ) | |||
Workers’ compensation claims reserve | (8,405 | ) | 1,985 | |||
Other liabilities | 1,642 | 1,086 | ||||
Net cash provided by operating activities | 68,626 | 80,782 | ||||
Cash flows from investing activities: | ||||||
Capital expenditures | (10,313 | ) | (16,303 | ) | ||
Acquisition of business | (22,742 | ) | — | |||
Divestiture of business | 10,414 | — | ||||
Purchases of restricted investments | (11,747 | ) | (36,015 | ) | ||
Maturities of restricted investments | 17,021 | 15,042 | ||||
Net cash used in investing activities | (17,367 | ) | (37,276 | ) | ||
Cash flows from financing activities: | ||||||
Purchases and retirement of common stock | (24,818 | ) | (29,371 | ) | ||
Net proceeds from employee stock purchase plans and stock options exercised | 1,146 | 1,179 | ||||
Common stock repurchases for taxes upon vesting of restricted stock | (2,539 | ) | (2,956 | ) | ||
Net change in revolving credit facility | 12,000 | (1,099 | ) | |||
Payments on debt | (22,855 | ) | (1,700 | ) | ||
Payment of contingent consideration at acquisition date fair value | — | (18,300 | ) | |||
Net cash used in financing activities | (37,066 | ) | (52,247 | ) | ||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (583 | ) | 364 | |||
Net change in cash, cash equivalents and restricted cash | 13,610 | (8,377 | ) | |||
Cash, cash equivalents and restricted cash, beginning of period | 73,831 | 103,222 | ||||
Cash, cash equivalents and restricted cash, end of period | $ | 87,441 | $ | 94,845 | ||
Supplemental disclosure of cash flow information: | ||||||
Cash paid (received) during the period for: | ||||||
Interest | $ | 3,395 | $ | 2,612 | ||
Income taxes | 9,832 | (2,972 | ) | |||
Non-cash transactions: | ||||||
Property, plant, and equipment purchased but not yet paid | 1,229 | 2,863 | ||||
Divestiture non-cash consideration | 971 | — |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
• | We maintain the direct contractual relationship with the client and are responsible for fulfilling the service promised to the client. |
• | We demonstrate control over the services provided to our clients by being the employer of record for the individuals performing the service. |
• | We establish our worker’s billing rate. |
Thirteen weeks ended | September 30, 2018 | |||||||||||
(in thousands) | PeopleReady | PeopleManagement | PeopleScout | Consolidated | ||||||||
Revenue from services: | ||||||||||||
Contingent staffing | $ | 428,665 | $ | 181,199 | $ | — | $ | 609,864 | ||||
Human resource outsourcing | — | — | 70,507 | 70,507 | ||||||||
Total company | $ | 428,665 | $ | 181,199 | $ | 70,507 | $ | 680,371 |
Thirty-nine weeks ended | September 30, 2018 | |||||||||||
(in thousands) | PeopleReady | PeopleManagement | PeopleScout | Consolidated | ||||||||
Revenue from services: | ||||||||||||
Contingent staffing | $ | 1,122,960 | $ | 543,930 | $ | — | $ | 1,666,890 | ||||
Human resource outsourcing | — | — | 182,170 | 182,170 | ||||||||
Total company | $ | 1,122,960 | $ | 543,930 | $ | 182,170 | $ | 1,849,060 |
(in thousands) | Purchase price allocation | ||
Cash purchase price, net of cash acquired | $ | 22,742 | |
Purchase price allocated as follows: | |||
Accounts receivable | 9,770 | ||
Prepaid expenses, deposits and other current assets | 337 | ||
Property and equipment | 435 | ||
Customer relationships | 6,286 | ||
Trade names/trademarks | 1,738 | ||
Total assets acquired | 18,566 | ||
Accounts payable and other accrued expenses | 9,139 | ||
Accrued wages and benefits | 1,642 | ||
Income tax payable | 205 | ||
Deferred income tax liability | 1,444 | ||
Total liabilities assumed | 12,430 | ||
Net identifiable assets acquired | 6,136 | ||
Goodwill (1) | 16,606 | ||
Total consideration allocated | $ | 22,742 |
(in thousands, except for estimated useful lives, in years) | Estimated fair value | Estimated useful life in years | ||
Customer relationships | $ | 6,286 | 3-7 | |
Trade names/trademarks | 1,738 | 14 | ||
Total acquired identifiable intangible assets | $ | 8,024 |
September 30, 2018 | ||||||||||||
(in thousands) | Total fair value | Quoted prices in active markets for identical assets (level 1) | Significant other observable inputs (level 2) | Significant unobservable inputs (level 3) | ||||||||
Financial assets: | ||||||||||||
Cash and cash equivalents | $ | 34,736 | $ | 34,736 | $ | — | $ | — | ||||
Restricted cash and cash equivalents | 52,705 | 52,705 | — | — | ||||||||
Cash, cash equivalents and restricted cash (1) | $ | 87,441 | $ | 87,441 | $ | — | $ | — | ||||
Deferred compensation mutual funds classified as available-for-sale | $ | 25,410 | $ | 25,410 | $ | — | $ | — | ||||
Municipal debt securities | $ | 76,234 | $ | — | $ | 76,234 | $ | — | ||||
Corporate debt securities | 80,194 | — | 80,194 | — | ||||||||
Agency mortgage-backed securities | 2,846 | — | 2,846 | — | ||||||||
U.S. government and agency securities | 964 | — | 964 | — | ||||||||
Restricted investments classified as held-to-maturity | $ | 160,238 | $ | — | $ | 160,238 | $ | — |
December 31, 2017 | ||||||||||||
(in thousands) | Total fair value | Quoted prices in active markets for identical assets (level 1) | Significant other observable inputs (level 2) | Significant unobservable inputs (level 3) | ||||||||
Financial assets: | ||||||||||||
Cash and cash equivalents | $ | 28,780 | $ | 28,780 | $ | — | $ | — | ||||
Restricted cash and cash equivalents | 45,051 | 45,051 | — | — | ||||||||
Cash, cash equivalents and restricted cash (1) | $ | 73,831 | $ | 73,831 | $ | — | $ | — | ||||
Deferred compensation mutual funds classified as available-for-sale | $ | 22,428 | $ | 22,428 | $ | — | $ | — | ||||
Municipal debt securities | $ | 83,366 | $ | — | $ | 83,366 | $ | — | ||||
Corporate debt securities | 83,791 | — | 83,791 | — | ||||||||
Agency mortgage-backed securities | 4,062 | — | 4,062 | — | ||||||||
U.S. government and agency securities | 1,019 | — | 1,019 | — | ||||||||
Restricted investments classified as held-to-maturity | $ | 172,238 | $ | — | $ | 172,238 | $ | — |
(1) | Cash, cash equivalents and restricted cash consist of money market funds, deposits and investments with original maturities of three months or less. |
(in thousands) | September 30, 2018 | December 31, 2017 | ||||
Cash collateral held by insurance carriers | $ | 24,054 | $ | 22,926 | ||
Cash and cash equivalents held in Trust | 28,494 | 16,113 | ||||
Investments held in Trust | 162,519 | 171,752 | ||||
Deferred compensation mutual funds | 25,410 | 22,428 | ||||
Other restricted cash and cash equivalents | 157 | 6,012 | ||||
Total restricted cash and investments | $ | 240,634 | $ | 239,231 |
September 30, 2018 | ||||||||||||
(in thousands) | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | ||||||||
Municipal debt securities | $ | 77,211 | $ | 124 | $ | (1,101 | ) | $ | 76,234 | |||
Corporate debt securities | 81,414 | 1 | (1,221 | ) | 80,194 | |||||||
Agency mortgage-backed securities | 2,895 | 3 | (52 | ) | 2,846 | |||||||
U.S. government and agency securities | 999 | — | (35 | ) | 964 | |||||||
Total held-to-maturity investments | $ | 162,519 | $ | 128 | $ | (2,409 | ) | $ | 160,238 |
December 31, 2017 | ||||||||||||
(in thousands) | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | ||||||||
Municipal debt securities | $ | 82,770 | $ | 974 | $ | (378 | ) | $ | 83,366 | |||
Corporate debt securities | 83,916 | 309 | (434 | ) | 83,791 | |||||||
Agency mortgage-backed securities | 4,066 | 22 | (26 | ) | 4,062 | |||||||
U.S. government and agency securities | 1,000 | 19 | — | 1,019 | ||||||||
Total held-to-maturity investments | $ | 171,752 | $ | 1,324 | $ | (838 | ) | $ | 172,238 |
September 30, 2018 | ||||||||||||||||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||
(in thousands) | Estimated fair value | Unrealized losses | Estimated fair value | Unrealized losses | Estimated fair value | Unrealized losses | ||||||||||||||
Municipal debt securities | $ | 49,727 | $ | (515 | ) | $ | 11,531 | $ | (586 | ) | $ | 61,258 | $ | (1,101 | ) | |||||
Corporate debt securities | 52,187 | (689 | ) | 26,020 | (532 | ) | 78,207 | (1,221 | ) | |||||||||||
Agency mortgage-backed securities | 1,323 | (20 | ) | 873 | (32 | ) | 2,196 | (52 | ) | |||||||||||
U.S. government and agency securities | 964 | (35 | ) | — | — | 964 | (35 | ) | ||||||||||||
Total held-to-maturity investments | $ | 104,201 | $ | (1,259 | ) | $ | 38,424 | $ | (1,150 | ) | $ | 142,625 | $ | (2,409 | ) |
December 31, 2017 | ||||||||||||||||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||
(in thousands) | Estimated fair value | Unrealized losses | Estimated fair value | Unrealized losses | Estimated fair value | Unrealized losses | ||||||||||||||
Municipal debt securities | $ | 23,078 | $ | (124 | ) | $ | 9,631 | $ | (254 | ) | $ | 32,709 | $ | (378 | ) | |||||
Corporate debt securities | 48,952 | (311 | ) | 10,081 | (123 | ) | 59,033 | (434 | ) | |||||||||||
Agency mortgage-backed securities | 1,362 | (10 | ) | 888 | (16 | ) | 2,250 | (26 | ) | |||||||||||
Total held-to-maturity investments | $ | 73,392 | $ | (445 | ) | $ | 20,600 | $ | (393 | ) | $ | 93,992 | $ | (838 | ) |
September 30, 2018 | ||||||
(in thousands) | Amortized cost | Fair value | ||||
Due in one year or less | $ | 28,294 | $ | 28,133 | ||
Due after one year through five years | 87,267 | 86,225 | ||||
Due after five years through ten years | 46,958 | 45,880 | ||||
Total held-to-maturity investments | $ | 162,519 | $ | 160,238 |
(in thousands) | PeopleReady | PeopleManagement | PeopleScout | Total company | ||||||||
Balance at December 31, 2017 | ||||||||||||
Goodwill before impairment | $ | 106,304 | $ | 100,146 | $ | 132,323 | $ | 338,773 | ||||
Accumulated impairment loss | (46,210 | ) | (50,700 | ) | (15,169 | ) | (112,079 | ) | ||||
Goodwill, net | 60,094 | 49,446 | 117,154 | 226,694 | ||||||||
Divested goodwill before impairment (1) | — | (19,054 | ) | — | (19,054 | ) | ||||||
Divested accumulated impairment loss (1) | — | 17,000 | — | 17,000 | ||||||||
Acquired goodwill (2) | — | — | 16,606 | 16,606 | ||||||||
Foreign currency translation | — | — | (2,598 | ) | (2,598 | ) | ||||||
Balance at September 30, 2018 | ||||||||||||
Goodwill before impairment | 106,304 | 81,092 | 146,331 | 333,727 | ||||||||
Accumulated impairment loss | (46,210 | ) | (33,700 | ) | (15,169 | ) | (95,079 | ) | ||||
Goodwill, net | $ | 60,094 | $ | 47,392 | $ | 131,162 | $ | 238,648 |
(1) | Effective March 12, 2018, the company entered into an asset purchase agreement for the sale of its PlaneTechs business to Launch Technical Workforce Solutions. As a result of this divestiture, we eliminated the remaining goodwill balance of the PlaneTechs business, which was a part of our PeopleManagement reportable segment. For additional information, see Note 3: Acquisition and divestiture. |
(2) | Effective June 12, 2018, the company acquired TMP Holdings LTD, through PeopleScout. Accordingly, the goodwill associated with the acquisition has been assigned to our PeopleScout reportable segment based on our preliminary purchase price allocation. For additional information, see Note 3: Acquisition and divestiture. |
September 30, 2018 | December 31, 2017 | ||||||||||||||||||
(in thousands) | Gross carrying amount | Accumulated amortization | Net carrying amount | Gross carrying amount | Accumulated amortization | Net carrying amount | |||||||||||||
Finite-lived intangible assets (1): | |||||||||||||||||||
Customer relationships | $ | 153,945 | $ | (66,537 | ) | $ | 87,408 | $ | 148,114 | $ | (53,801 | ) | $ | 94,313 | |||||
Trade names/trademarks | 2,865 | (995 | ) | 1,870 | 4,149 | (3,736 | ) | 413 | |||||||||||
Non-compete agreements | — | — | — | 1,400 | (1,377 | ) | 23 | ||||||||||||
Technologies | 9,800 | (8,216 | ) | 1,584 | 17,500 | (13,588 | ) | 3,912 | |||||||||||
Total finite-lived intangible assets | $ | 166,610 | $ | (75,748 | ) | $ | 90,862 | $ | 171,163 | $ | (72,502 | ) | $ | 98,661 |
(1) | Excludes assets that are fully amortized. |
(in thousands) | September 30, 2018 | December 31, 2017 | ||||
Undiscounted workers’ compensation reserve | $ | 286,156 | $ | 293,600 | ||
Less discount on workers’ compensation reserve | 20,238 | 19,277 | ||||
Workers’ compensation reserve, net of discount | 265,918 | 274,323 | ||||
Less current portion | 70,950 | 77,218 | ||||
Long-term portion | $ | 194,968 | $ | 197,105 |
(in thousands) | September 30, 2018 | December 31, 2017 | ||||
Revolving Credit Facility | $ | 107,900 | $ | 95,900 | ||
Term Loan | — | 22,856 | ||||
Total debt | 107,900 | 118,756 | ||||
Less current portion | — | 2,267 | ||||
Long-term debt, less current portion | $ | 107,900 | $ | 116,489 |
(in thousands) | September 30, 2018 | December 31, 2017 | ||||
Cash collateral held by workers’ compensation insurance carriers | $ | 22,122 | $ | 22,148 | ||
Cash and cash equivalents held in Trust | 28,494 | 16,113 | ||||
Investments held in Trust | 162,519 | 171,752 | ||||
Letters of credit (1) | 6,707 | 7,748 | ||||
Surety bonds (2) | 21,961 | 19,829 | ||||
Total collateral commitments | $ | 241,803 | $ | 237,590 |
(1) | We have agreements with certain financial institutions to issue letters of credit as collateral. |
(2) | Our surety bonds are issued by independent insurance companies on our behalf and bear annual fees based on a percentage of the bond, which 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. |
Thirteen weeks ended | Thirty-nine weeks ended | ||||||||||||
(in thousands) | September 30, 2018 | October 1, 2017 | September 30, 2018 | October 1, 2017 | |||||||||
Common Stock Shares | |||||||||||||
Beginning balance | 40,595 | 41,982 | 41,098 | 42,171 | |||||||||
Purchases and retirement of common stock | (203 | ) | (682 | ) | (961 | ) | (1,268 | ) | |||||
Issuances under equity plans, including tax benefits | 87 | 34 | 316 | 397 | |||||||||
Stock-based compensation | (7 | ) | 5 | 19 | 39 | ||||||||
Ending balance | 40,472 | 41,339 | 40,472 | 41,339 | |||||||||
Common Stock Amount | |||||||||||||
Beginning balance | $ | 1 | $ | 1 | $ | 1 | $ | 1 | |||||
Current period activity | — | — | — | — | |||||||||
Ending balance | 1 | 1 | 1 | 1 | |||||||||
Retained Earnings | |||||||||||||
Beginning balance | 574,934 | 542,020 | 561,650 | 536,611 | |||||||||
Net income | 24,380 | 21,221 | 50,867 | 39,029 | |||||||||
Purchases and retirement of common stock | (5,752 | ) | (13,841 | ) | (24,818 | ) | (29,371 | ) | |||||
Issuances under equity plans, including tax benefits | 249 | 237 | (1,396 | ) | (1,778 | ) | |||||||
Stock-based compensation | 3,572 | 1,015 | 9,555 | 6,161 | |||||||||
Change in accounting standard cumulative-effect adjustment (1) | — | — | 1,525 | — | |||||||||
Ending balance | 597,383 | 550,652 | 597,383 | 550,652 | |||||||||
Accumulated Other Comprehensive Loss | |||||||||||||
Beginning balance | (11,634 | ) | (8,447 | ) | (6,804 | ) | (11,433 | ) | |||||
Other comprehensive income (loss), net of tax | (595 | ) | 1,567 | (3,900 | ) | 4,553 | |||||||
Change in accounting standard cumulative-effect adjustment (1) | — | — | (1,525 | ) | — | ||||||||
Ending balance | (12,229 | ) | (6,880 | ) | (12,229 | ) | (6,880 | ) | |||||
Total shareholder’s equity ending balance | $ | 585,155 | $ | 543,773 | $ | 585,155 | $ | 543,773 |
(1) | As a result of our adoption of the new accounting standard for equity investments, $1.5 million in unrealized gains, net of tax on available-for-sale equity securities were reclassified from accumulated other comprehensive loss to retained earnings as of the beginning of fiscal 2018. There were no material reclassifications out of accumulated other comprehensive loss during the thirteen and thirty-nine weeks ended October 1, 2017. For additional information, see Note 1: Summary of significant accounting policies. |
Thirteen weeks ended | |||||||||||||||||||
September 30, 2018 | October 1, 2017 | ||||||||||||||||||
(in thousands) | Foreign currency translation adjustment | Unrealized gain (loss) on investments, net of tax (1) | Total other comprehensive (loss), net of tax | Foreign currency translation adjustment | Unrealized gain on investments, net of tax (1) | Total other comprehensive income (loss), net of tax | |||||||||||||
Balance at beginning of period | $ | (11,634 | ) | $ | — | $ | (11,634 | ) | $ | (9,344 | ) | $ | 897 | $ | (8,447 | ) | |||
Current period other comprehensive income (loss) | (595 | ) | — | (595 | ) | 1,143 | 424 | 1,567 | |||||||||||
Balance at end of period | $ | (12,229 | ) | $ | — | $ | (12,229 | ) | $ | (8,201 | ) | $ | 1,321 | $ | (6,880 | ) |
Thirty-nine weeks ended | |||||||||||||||||||
September 30, 2018 | October 1, 2017 | ||||||||||||||||||
(in thousands) | Foreign currency translation adjustment | Unrealized gain on investments, net of tax (1) | Total other comprehensive (loss), net of tax | Foreign currency translation adjustment | Unrealized gain on investments, net of tax (1) | Total other comprehensive income (loss), net of tax | |||||||||||||
Balance at beginning of period | $ | (8,329 | ) | $ | 1,525 | $ | (6,804 | ) | $ | (11,684 | ) | $ | 251 | $ | (11,433 | ) | |||
Current period other comprehensive income (loss) | (3,900 | ) | — | (3,900 | ) | 3,483 | 1,070 | 4,553 | |||||||||||
Change in accounting standard cumulative-effect adjustment | — | (1,525 | ) | (1,525 | ) | — | — | — | |||||||||||
Balance at end of period | $ | (12,229 | ) | $ | — | $ | (12,229 | ) | $ | (8,201 | ) | $ | 1,321 | $ | (6,880 | ) |
(1) | Consisted of deferred compensation plan accounts, comprised of mutual funds classified as available-for-sale securities, prior to our adoption of the new accounting standard for equity investments in the fiscal first quarter of 2018. The tax impact on the unrealized gain on available-for-sale securities was de minimis for the thirteen and thirty-nine weeks ended October 1, 2017. |
NOTE 11: | INCOME TAXES |
NOTE 12: | NET INCOME PER SHARE |
Thirteen weeks ended | Thirty-nine weeks ended | ||||||||||||
(in thousands, except per share data) | September 30, 2018 | October 1, 2017 | September 30, 2018 | October 1, 2017 | |||||||||
Net income | $ | 24,380 | $ | 21,221 | $ | 50,867 | $ | 39,029 | |||||
Weighted average number of common shares used in basic net income per common share | 39,743 | 41,046 | 40,138 | 41,420 | |||||||||
Dilutive effect of non-vested restricted stock | 330 | 230 | 279 | 251 | |||||||||
Weighted average number of common shares used in diluted net income per common share | 40,073 | 41,276 | 40,417 | 41,671 | |||||||||
Net income per common share: | |||||||||||||
Basic | $ | 0.61 | $ | 0.52 | $ | 1.27 | $ | 0.94 | |||||
Diluted | $ | 0.61 | $ | 0.51 | $ | 1.26 | $ | 0.94 | |||||
Anti-dilutive shares | 414 | 354 | 500 | 388 |
• | Staff Management | SMX: Exclusive recruitment and on-premise management of a facility’s contingent industrial workforce; |
• | SIMOS Insourcing Solutions: On-premise management and recruitment of warehouse/distribution operations; and |
• | Centerline Drivers: Recruitment and management of temporary and dedicated drivers to the transportation and distribution industries. |
• | PeopleScout: Outsourced recruitment of permanent employees on behalf of clients; and |
• | PeopleScout MSP: Management of multiple third party staffing vendors on behalf of clients. |
Thirteen weeks ended | Thirty-nine weeks ended | ||||||||||||
(in thousands) | September 30, 2018 | October 1, 2017 | September 30, 2018 | October 1, 2017 | |||||||||
Revenue from services: | |||||||||||||
PeopleReady | $ | 428,665 | $ | 414,995 | $ | 1,122,960 | $ | 1,118,331 | |||||
PeopleManagement | 181,199 | 196,835 | 543,930 | 581,408 | |||||||||
PeopleScout | 70,507 | 48,950 | 182,170 | 139,407 | |||||||||
Total company | $ | 680,371 | $ | 660,780 | $ | 1,849,060 | $ | 1,839,146 |
Thirteen weeks ended | Thirty-nine weeks ended | ||||||||||||
(in thousands) | September 30, 2018 | October 1, 2017 | September 30, 2018 | October 1, 2017 | |||||||||
Segment profit: | |||||||||||||
PeopleReady | $ | 31,230 | $ | 28,752 | $ | 63,953 | $ | 57,916 | |||||
PeopleManagement | 6,169 | 6,940 | 16,530 | 18,759 | |||||||||
PeopleScout | 12,478 | 10,277 | 35,703 | 29,071 | |||||||||
49,877 | 45,969 | 116,186 | 105,746 | ||||||||||
Corporate unallocated | (6,469 | ) | (5,322 | ) | (20,001 | ) | (16,700 | ) | |||||
Work Opportunity Tax Credit processing fees | (241 | ) | (180 | ) | (700 | ) | (468 | ) | |||||
Acquisition/integration costs | (1,226 | ) | — | (1,683 | ) | — | |||||||
Other costs | (3,005 | ) | — | (5,984 | ) | — | |||||||
Depreciation and amortization | (10,586 | ) | (11,189 | ) | (30,777 | ) | (34,650 | ) | |||||
Income from operations | 28,350 | 29,278 | 57,041 | 53,928 | |||||||||
Interest and other income (expense), net | (340 | ) | (219 | ) | 896 | 10 | |||||||
Income before tax expense | $ | 28,010 | $ | 29,059 | $ | 57,937 | $ | 53,938 |
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION |
• | Staff Management | SMX: Exclusive recruitment and on-premise management of a facility’s contingent industrial workforce; |
• | SIMOS Insourcing Solutions: On-premise management and recruitment of warehouse/distribution operations; and |
• | Centerline Drivers: Recruitment and management of temporary and dedicated drivers to the transportation and distribution industries. |
• | PeopleScout: Outsourced recruitment of permanent employees on behalf of clients; and |
• | PeopleScout MSP: Management of multiple third party staffing vendors on behalf of clients. |
Thirteen weeks ended | Thirty-nine weeks ended | ||||||||||||||||||||
(in thousands, except percentages and per share data) | September 30, 2018 | % of revenue | October 1, 2017 | % of revenue | September 30, 2018 | % of revenue | October 1, 2017 | % of revenue | |||||||||||||
Revenue from services | $ | 680,371 | $ | 660,780 | $ | 1,849,060 | $ | 1,839,146 | |||||||||||||
Total revenue growth (decline) % | 3.0 | % | (5.2 | )% | 0.5 | % | (8.8 | )% | |||||||||||||
Gross profit | $ | 184,318 | 27.1 | % | $ | 172,019 | 26.0 | % | $ | 493,170 | 26.7 | % | $ | 466,728 | 25.4 | % | |||||
Selling, general and administrative expense | 145,382 | 21.4 | % | 131,552 | 19.9 | % | 405,352 | 21.9 | % | 378,150 | 20.6 | % | |||||||||
Depreciation and amortization | 10,586 | 1.6 | % | 11,189 | 1.7 | % | 30,777 | 1.7 | % | 34,650 | 1.9 | % | |||||||||
Income from operations | 28,350 | 4.2 | % | 29,278 | 4.4 | % | 57,041 | 3.1 | % | 53,928 | 2.9 | % | |||||||||
Interest and other income (expense), net | (340 | ) | (219 | ) | 896 | 10 | |||||||||||||||
Income before tax expense | 28,010 | 29,059 | 57,937 | 53,938 | |||||||||||||||||
Income tax expense | 3,630 | 7,838 | 7,070 | 14,909 | |||||||||||||||||
Net income | $ | 24,380 | 3.6 | % | $ | 21,221 | 3.2 | % | $ | 50,867 | 2.8 | % | $ | 39,029 | 2.1 | % | |||||
Net income per diluted share | $ | 0.61 | $ | 0.51 | $ | 1.26 | $ | 0.94 |
Thirteen weeks ended | Thirty-nine weeks ended | ||||||||||||||||||||||||
(in thousands, except percentages) | September 30, 2018 | Growth (decline) % | Segment % of total | October 1, 2017 | Segment % of total | September 30, 2018 | Growth (decline) % | Segment % of total | October 1, 2017 | Segment % of total | |||||||||||||||
Revenue from services: | |||||||||||||||||||||||||
PeopleReady | $ | 428,665 | 3.3 | % | 63.0 | % | $ | 414,995 | 62.8 | % | $ | 1,122,960 | 0.4 | % | 60.7 | % | $ | 1,118,331 | 60.8 | % | |||||
PeopleManagement | 181,199 | (7.9 | )% | 26.6 | % | 196,835 | 29.8 | % | 543,930 | (6.4 | )% | 29.4 | % | 581,408 | 31.6 | % | |||||||||
PeopleScout | 70,507 | 44.0 | % | 10.4 | % | 48,950 | 7.4 | % | 182,170 | 30.7 | % | 9.9 | % | 139,407 | 7.6 | % | |||||||||
Total company | $ | 680,371 | 3.0 | % | 100.0 | % | $ | 660,780 | 100.0 | % | $ | 1,849,060 | 0.5 | % | 100.0 | % | $ | 1,839,146 | 100.0 | % |
Thirteen weeks ended | Thirty-nine weeks ended | ||||||||||||
(in thousands, except percentages) | September 30, 2018 | October 1, 2017 | September 30, 2018 | October 1, 2017 | |||||||||
Gross profit | $ | 184,318 | $ | 172,019 | $ | 493,170 | $ | 466,728 | |||||
Percentage of revenue | 27.1 | % | 26.0 | % | 26.7 | % | 25.4 | % |
Thirteen weeks ended | Thirty-nine weeks ended | ||||||||||||
(in thousands, except percentages) | September 30, 2018 | October 1, 2017 | September 30, 2018 | October 1, 2017 | |||||||||
Selling, general and administrative expense | $ | 145,382 | $ | 131,552 | $ | 405,352 | $ | 378,150 | |||||
Percentage of revenue | 21.4 | % | 19.9 | % | 21.9 | % | 20.6 | % |
Thirteen weeks ended | Thirty-nine weeks ended | ||||||||||||
(in thousands, except percentages) | September 30, 2018 | October 1, 2017 | September 30, 2018 | October 1, 2017 | |||||||||
Depreciation and amortization | $ | 10,586 | $ | 11,189 | $ | 30,777 | $ | 34,650 | |||||
Percentage of revenue | 1.6 | % | 1.7 | % | 1.7 | % | 1.9 | % |
Thirteen weeks ended | Thirty-nine weeks ended | ||||||||||||
(in thousands, except percentages) | September 30, 2018 | October 1, 2017 | September 30, 2018 | October 1, 2017 | |||||||||
Income tax expense | $ | 3,630 | $ | 7,838 | $ | 7,070 | $ | 14,909 | |||||
Effective income tax rate | 13.0 | % | 27.0 | % | 12.2 | % | 27.6 | % |
Thirteen weeks ended | Thirty-nine weeks ended | ||||||||
September 30, 2018 | October 1, 2017 | September 30, 2018 | October 1, 2017 | ||||||
Effective income tax rate without adjustments below | 27.5 | % | 38.6 | % | 27.8 | % | 39.2 | % | |
Hiring credits estimate from current year wages | (14.0 | ) | (10.2 | ) | (14.0 | ) | (10.2 | ) | |
Additional hiring credits from prior year wages | (1.0 | ) | (1.4 | ) | (1.5 | ) | (1.7 | ) | |
Other discrete items | 0.5 | — | (0.1 | ) | 0.3 | ||||
Effective income tax rate | 13.0 | % | 27.0 | % | 12.2 | % | 27.6 | % |
Thirteen weeks ended | Thirty-nine weeks ended | ||||||||||||
(in thousands, except for percentages) | September 30, 2018 | October 1, 2017 | September 30, 2018 | October 1, 2017 | |||||||||
Revenue from services | $ | 428,665 | $ | 414,995 | $ | 1,122,960 | $ | 1,118,331 | |||||
Segment profit | 31,230 | 28,752 | 63,953 | 57,916 | |||||||||
Percentage of revenue | 7.3 | % | 6.9 | % | 5.7 | % | 5.2 | % |
Thirteen weeks ended | Thirty-nine weeks ended | ||||||||||||
(in thousands, except for percentages) | September 30, 2018 | October 1, 2017 | September 30, 2018 | October 1, 2017 | |||||||||
Revenue from services | $ | 181,199 | $ | 196,835 | $ | 543,930 | $ | 581,408 | |||||
Segment profit | 6,169 | 6,940 | 16,530 | 18,759 | |||||||||
Percentage of revenue | 3.4 | % | 3.5 | % | 3.0 | % | 3.2 | % |
Thirteen weeks ended | Thirty-nine weeks ended | ||||||||||||
(in thousands, except for percentages) | September 30, 2018 | October 1, 2017 | September 30, 2018 | October 1, 2017 | |||||||||
Revenue from services | $ | 70,507 | $ | 48,950 | $ | 182,170 | $ | 139,407 | |||||
Segment profit | 12,478 | 10,277 | 35,703 | 29,071 | |||||||||
Percentage of revenue | 17.7 | % | 21.0 | % | 19.6 | % | 20.9 | % |
• | We expect revenue for the fourth quarter of 2018 to decline approximately 2% to 4%, as compared to the same period in the prior year, due to certain prior year events which are absent from our outlook for the fourth quarter of 2018. Prior year results included energy and hurricane Irma clean up projects, as well as Amazon's Canadian business. In September 2018, we lost the Amazon Canadian business, which had its highest volume in the fourth quarter of the prior year. |
• | Our top priority remains to produce solid organic revenue and gross profit growth while leveraging our cost structure to increase income from operations as a percentage of revenue. Through disciplined pricing and management of increasing minimum wages, taxes and benefits, we expect to pass through the higher cost of our temporary workers. Likewise, cost management programs to lower the cost of services and control operating expenses are key priorities in the short-term and to position the business for strong operating leverage and profitable long-term growth in the future. |
• | We are committed to technological innovation that makes it easier for our clients to do business with us and easier to connect people to work. We continue making investments in online and mobile applications to improve access, speed and ease of connecting our clients and workers for our staffing businesses and candidates for our recruitment process outsourcing business. We expect these investments will increase the competitive differentiation of our services, improve the efficiency of our service delivery, and reduce our PeopleReady dependence on local branches to find temporary workers and connect them with work. Examples include our new Jobstack mobile platform in the PeopleReady business and our new Affinix talent acquisition technology in the PeopleScout business. |
• | PeopleScout is a recognized industry leader of RPO services, which is in the early stages of that industry’s adoption cycle. Due to the industry growth rate for RPO services, our market leading position, and our advances in technology, we expect the revenue growth of this business to continue to exceed the growth of our other segments. We expect our acquisition of TMP to increase our ability to win multi-continent engagements by adding a physical presence in Europe, referenceable clients and employer branding capabilities. |
Thirty-nine weeks ended | ||||||
(in thousands) | September 30, 2018 | October 1, 2017 | ||||
Net income | $ | 50,867 | $ | 39,029 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization | 30,777 | 34,650 | ||||
Provision for doubtful accounts | 10,140 | 6,321 | ||||
Stock-based compensation | 9,552 | 6,161 | ||||
Deferred income taxes | 2,638 | 4,890 | ||||
Other operating activities | 526 | 2,724 | ||||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | (17,960 | ) | (34,198 | ) | ||
Income tax receivable | (5,389 | ) | 12,788 | |||
Accounts payable and other accrued expenses | 1,624 | (784 | ) | |||
Accrued wages and benefits | 4,724 | (176 | ) | |||
Workers’ compensation claims reserve | (8,405 | ) | 1,985 | |||
Other assets and liabilities | (10,468 | ) | 7,392 | |||
Net cash provided by operating activities | $ | 68,626 | $ | 80,782 |
• | Depreciation and amortization decreased primarily due to a proprietary software application becoming fully depreciated during the fiscal fourth quarter of 2017. |
• | The increase in accounts receivable in the current year is primarily due to revenue growth. Our contingent staffing businesses experience seasonal fluctuations. Demand for our PeopleReady services is higher during the second and third quarters of the year with demand peaking in the third quarter. Demand for our PeopleManagement services is higher during the fourth quarter of the year. Demand for PeopleScout services continues to grow with a combination of new client wins and expansion of the scope of services with existing clients. The increase in accounts receivable in the prior year was primarily due to an increase in the days sales outstanding due to customer mix and slowed collections. |
• | The increase in income tax receivable in the current year is primarily due to the benefit of higher than expected WOTC. The decrease in income tax receivable in the prior year is due primarily to receipt of a refund of $9 million for returns amended for higher than anticipated benefits from WOTC. |
• | The increase in accrued wages and benefits is primarily due to the higher volume of activity from revenue growth, which require increases in the flex workforce to align with client volume changes. |
• | Generally, our workers’ compensation claims reserve for estimated claims increases as contingent labor services increases, as is the case in the current year and decreases as contingent labor services declines, as was the case in the prior year. However, our worker safety programs have had a positive impact and have created favorable adjustments to our workers’ compensation liabilities recorded in each period. Continued favorable adjustments to our workers’ compensation liabilities are dependent on our ability to continue to lower accident rates and claim costs. |
• | The change in other assets and liabilities is primarily due to an increase in other assets related to current year investments in cloud-based systems of $9 million. |
Thirty-nine weeks ended | ||||||
(in thousands) | September 30, 2018 | October 1, 2017 | ||||
Capital expenditures | $ | (10,313 | ) | $ | (16,303 | ) |
Acquisition of business, net of cash acquired | (22,742 | ) | — | |||
Divestiture of business | 10,414 | — | ||||
Change in restricted investments | 5,274 | (20,973 | ) | |||
Net cash used in investing activities | $ | (17,367 | ) | $ | (37,276 | ) |
• | Effective June 12, 2018, the company acquired all of the outstanding equity interests of TMP, through PeopleScout for a cash purchase price of $23 million, net of cash acquired of $7 million. See Note 3: Acquisition and divestiture, to our Consolidated Financial Statements found in Item 1 of this Quarterly Report on Form 10-Q, for additional details on the purchase of TMP. |
• | Effective March 12, 2018, the company entered into an asset purchase agreement to sell substantially all the assets and certain liabilities of its PlaneTechs business for a purchase price of $11 million, of which $10 million has been paid in cash as of September 30, 2018. See Note 3: Acquisition and divestiture, to our Consolidated Financial Statements found in Item 1 of this Quarterly Report on Form 10-Q, for additional details on the divestiture of our PlaneTechs business. |
• | Restricted investments consist primarily of collateral that has been provided or pledged to insurance carriers and state workers’ compensation programs. The decrease in the incremental cash used in investing activities was primarily due to lower collateral requirements from our workers’ compensation insurance providers, as well as the timing of collateral payments. |
Thirty-nine weeks ended | ||||||
(in thousands) | September 30, 2018 | October 1, 2017 | ||||
Purchases and retirement of common stock | $ | (24,818 | ) | $ | (29,371 | ) |
Net proceeds from stock option exercises and employee stock purchase plans | 1,146 | 1,179 | ||||
Common stock repurchases for taxes upon vesting of restricted stock | (2,539 | ) | (2,956 | ) | ||
Net change in revolving credit facility | 12,000 | (1,099 | ) | |||
Payments on debt and other liabilities | (22,855 | ) | (1,700 | ) | ||
Payment of contingent consideration at acquisition date fair value | — | (18,300 | ) | |||
Net cash used in financing activities | $ | (37,066 | ) | $ | (52,247 | ) |
• | We repurchased $25 million of common stock during the thirty-nine weeks ended September 30, 2018. As of September 30, 2018, $68 million remains available for repurchase of common stock under the current authorization. |
• | We borrowed against our Revolving Credit Facility to fund the acquisition of TMP effective June 12, 2018 and liquidation of the Synovus Bank loan. See Note 3: Acquisition and divestiture, to our Consolidated Financial Statements found in Item 1 of this Quarterly Report on Form 10-Q, for additional details on the purchase of TMP. |
• | On June 25, 2018, we pre-paid in full our outstanding obligations of approximately $22 million with Synovus Bank, terminating all commitments under this term loan (the “Term Loan”) dated February 4, 2013 (as subsequently amended). We did not incur any early termination penalties in connection with the termination of the Term Loan. |
• | On July 13, 2018, we replaced our Second Amended and Restated Revolving Credit Agreement, which was subject to borrowing limits tied primarily to eligible billed accounts receivable, and entered into a new credit agreement. This agreement provides a $300 million credit line with an option, subject to lender approval, to increase the amount to $450 million (see Note 8: Long-term debt, to our Consolidated Financial Statements found in Item 1 of this Quarterly Report on Form 10-Q). |
• | We had cash and cash equivalents of $35 million at September 30, 2018. |
• | The majority of our workers’ compensation payments are made from restricted cash rather than cash from operations. At September 30, 2018, we had restricted cash and investments totaling $241 million. |
S&P | Moody’s | Fitch | |
Short-term rating | A-1/SP-1 | P-1/MIG-1 | F-1 |
Long-term rating | A | A2 | A |
(in thousands) | September 30, 2018 | December 31, 2017 | ||||
Cash collateral held by workers’ compensation insurance carriers | $ | 22,122 | $ | 22,148 | ||
Cash and cash equivalents held in Trust | 28,494 | 16,113 | ||||
Investments held in Trust | 162,519 | 171,752 | ||||
Letters of credit (1) | 6,707 | 7,748 | ||||
Surety bonds (2) | 21,961 | 19,829 | ||||
Total collateral commitments | $ | 241,803 | $ | 237,590 |
(1) | We have agreements with certain financial institutions to issue letters of credit as collateral. |
(2) | Our surety bonds are issued by independent insurance companies on our behalf and bear annual fees based on a percentage of the bond, which is determined by each independent surety carrier. These fees do not exceed 2.0% of the bond amount, subject to a minimum charge. The terms of these bonds are subject to review and renewal every one to four years and most bonds can be canceled by the sureties with as little as 60 days’ notice. |
(in thousands) | September 30, 2018 | December 31, 2017 | ||||
Total workers’ compensation reserve | $ | 265,918 | $ | 274,323 | ||
Add back discount on workers’ compensation reserve (1) | 20,238 | 19,277 | ||||
Less excess claims reserve (2) | (48,984 | ) | (48,826 | ) | ||
Reimbursable payments to insurance provider (3) | 11,786 | 5,492 | ||||
Other (4) | (7,155 | ) | (12,676 | ) | ||
Total collateral commitments | $ | 241,803 | $ | 237,590 |
(1) | Our workers’ compensation reserves are discounted to their estimated net present value while our collateral commitments are based on the gross, undiscounted reserve. |
(2) | Excess claims reserve includes the estimated obligation for claims above our deductible limits. These are the responsibility of the insurance carriers against which there are no collateral requirements. |
(3) | This amount is included in restricted cash and represents a timing difference between claim payments made by our insurance carrier and the reimbursement from cash held in the Trust. When claims are paid by our carrier, the amount is removed from the workers’ compensation reserve but not removed from collateral until reimbursed to the carrier. |
(4) | Represents the difference between the self-insured reserves and collateral commitments. |
• | changes in medical and time loss (“indemnity”) costs; |
• | changes in mix between medical only and indemnity claims; |
• | regulatory and legislative developments impacting benefits and settlement requirements; |
• | type and location of work performed; |
• | the impact of safety initiatives; and |
• | positive or adverse development of claims. |
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Item 4. | CONTROLS AND PROCEDURES |
Item 1. | LEGAL PROCEEDINGS |
Item 1A. | RISK FACTORS |
Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Period | Total number of shares purchased (1) | Weighted average price paid per share (2) | Total number of shares purchased as part of publicly announced plans or programs (3) | Maximum number of shares (or approximate dollar value) that may yet be purchased under plans or programs at period end (4) | ||||
07/02/2018 through 07/29/2018 | 1,468 | $27.05 | 1,500 | $73.5 million | ||||
07/30/2018 through 08/26/2018 | 2,154 | $27.93 | 172,410 | $68.6 million | ||||
08/27/2018 through 09/30/2018 | 1,386 | $29.08 | 26,900 | $67.8 million | ||||
Total | 5,008 | $27.99 | 200,810 |
(1) | During the thirteen weeks ended September 30, 2018, we purchased 5,008 shares in order to satisfy employee tax withholding obligations upon the vesting of restricted stock. These shares were not acquired pursuant to any publicly announced purchase plan or program. |
(2) | Weighted average price paid per share does not include any adjustments for commissions. |
(3) | The weighted average price per share for shares repurchased under the share repurchase program during the period was $28.28. |
(4) | On September 15, 2017, our Board of Directors authorized a $100 million share repurchase program of our outstanding common stock. The share repurchase program does not obligate us to acquire any particular amount of common stock and does not have an expiration date. As of September 30, 2018, $67.8 million remains available for repurchase under the current authorization. |
Item 3. | DEFAULTS UPON SENIOR SECURITIES |
Item 4. | MINE SAFETY DISCLOSURES |
Item 5. | OTHER INFORMATION |
Item 6. | EXHIBITS |
Incorporated by reference | |||||
Exhibit number | Exhibit description | Filed herewith | Form | File no. | Date of first filing |
3.1 | 8-K | 001-14543 | 05/12/2016 | ||
3.2 | 10-Q | 001-14543 | 10/30/2017 | ||
10.1 | 8-K | 001-14543 | 07/16/2018 | ||
10.2 | 8-K | 001-14543 | 09/18/2018 | ||
10.3 | 8-K | 001-14543 | 09/18/2018 | ||
10.4 | 8-K | 001-14543 | 09/18/2018 | ||
31.1 | X | ||||
31.2 | X | ||||
32.1 | X | ||||
101.INS | XBRL Instance Document. | ||||
101.SCH | XBRL Taxonomy Extension Schema. | ||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase. | ||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase. | ||||
101.LAB | XBRL Taxonomy Extension Label Linkbase. | ||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase. |
TrueBlue, Inc. | ||||
/s/ A. Patrick Beharelle | 11/5/2018 | |||
Signature | Date | |||
By: | A. Patrick Beharelle, Director and Chief Executive Officer | |||
/s/ Derrek L. Gafford | 11/5/2018 | |||
Signature | Date | |||
By: | Derrek L. Gafford, Chief Financial Officer and Executive Vice President | |||
/s/ Norman H. Frey | 11/5/2018 | |||
Signature | Date | |||
By: | Norman H. Frey, Chief Accounting Officer and Senior Vice President |
1. | I have reviewed this Quarterly Report on Form 10-Q of TrueBlue, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ A. Patrick Beharelle |
A. Patrick Beharelle |
Chief Executive Officer (Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of TrueBlue, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Derrek L. Gafford |
Derrek L. Gafford |
Chief Financial Officer (Principal Financial Officer) |
(1) | The Quarterly Report of the company on Form 10-Q, for the fiscal period ended September 30, 2018 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the company. |
/s/ A. Patrick Beharelle | /s/ Derrek L. Gafford | |
A. Patrick Beharelle | Derrek L. Gafford | |
Chief Executive Officer | Chief Financial Officer | |
(Principal Executive Officer) | (Principal Financial Officer) |
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Document and Entity Information - shares |
9 Months Ended | |
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Sep. 30, 2018 |
Oct. 15, 2018 |
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Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | TBI | |
Entity Central Index Key | TrueBlue, Inc. | |
Current Fiscal Year End Date | 0000768899 | |
Well-Known Seasoned Issuer | --12-30 | |
Filer Category | Large Accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Common Stock Shares Outstanding (in shares) | 40,485,261 |
CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Allowance for doubtful accounts | $ 8,056 | $ 4,344 |
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 | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 40,472,000 | 41,098,000 |
Common stock, shares outstanding | 40,472,000 | 41,098,000 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial statement preparation The accompanying unaudited consolidated financial statements (“financial statements”) of TrueBlue, Inc. (the “company,” “TrueBlue,” “we,” “us,” and “our”) are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures usually found in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The financial statements reflect all adjustments which, in the opinion of management, are necessary to fairly state the financial statements for the interim periods presented. We follow the same accounting policies for preparing both quarterly and annual financial statements. 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, 2017. The results of operations for the thirteen and thirty-nine weeks ended September 30, 2018, are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period. Goodwill and indefinite-lived intangible assets We evaluate goodwill and indefinite-lived intangible assets for impairment on an annual basis as of the first day of our fiscal second quarter, and more frequently if an event occurs or circumstances change that would indicate impairment may exist. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, customer engagement, or sale or disposition of a significant portion of a reporting unit. We monitor the existence of potential impairment indicators throughout the fiscal year. Based on our annual goodwill impairment test performed as of the first day of our fiscal second quarter, all reporting units’ fair values were substantially in excess of their respective carrying values. We consider a reporting unit’s fair value to be substantially in excess of its carrying value at a 20% premium or greater. Accordingly, no impairment loss was recognized for the thirty-nine weeks ended September 30, 2018 nor October 1, 2017. We performed our annual indefinite-lived intangible asset impairment test as of the first day of our fiscal second quarter and determined that the estimated fair values exceeded the carrying amounts for our indefinite-lived trade names. Accordingly, no impairment loss was recognized for the thirty-nine weeks ended September 30, 2018 nor October 1, 2017. Recently adopted accounting standards In May 2017, the Financial Accounting Standing Board (“FASB”) issued guidance to provide clarity and reduce diversity in practice when accounting for a change to the terms or conditions of share-based payment awards. The objective was to reduce the scope of transactions that would require modification accounting. Disclosure requirements remain unchanged. This amended guidance was effective for our fiscal years and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue), with early adoption permitted. We adopted this guidance for our fiscal first quarter of 2018. The adoption of the new standard did not have a material impact on our financial statements. In January 2017, the FASB issued guidance clarifying the definition of a business, which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. This guidance was effective for fiscal years and interim periods beginning December 15, 2017 (Q1 2018 for TrueBlue) on a prospective basis. This standard did not have a material impact on our financial statements. In Q2 2018, we acquired all of the outstanding equity interests of TMP Holdings LTD (“TMP”) and concluded that TMP represented a business based on this new guidance. See Note 3: Acquisition and divestiture, for further discussion of our acquisition of TMP. In November 2016, the FASB issued guidance to amend the presentation of restricted cash and restricted cash equivalents on the statement of cash flows. The standard requires restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This amended guidance was effective for fiscal years and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue). We adopted this guidance for our fiscal first quarter of 2018 using the retrospective transition method. Accordingly, the change in restricted cash and cash equivalents is no longer segregated in our Consolidated Statements of Cash Flows, and the $8.6 million previously presented in the investing section for the thirty-nine weeks ended October 1, 2017 is now included when reconciling the beginning-of-period and end-of-period cash, cash equivalents and restricted cash shown in our Consolidated Statements of Cash Flows. In October 2016, the FASB issued guidance on the accounting for income tax effects of intercompany sales or transfers of assets other than inventory. The guidance requires entities to recognize the income tax impact of an intra-entity sale or transfer of an asset other than inventory when the sale or transfer occurs, rather than when the asset has been sold to an outside party. This guidance was effective for fiscal years and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue). The guidance requires a modified retrospective application with a cumulative catch-up adjustment to opening retained earnings. We adopted this guidance for our fiscal first quarter of 2018. The adoption of the new standard did not have a material impact on our financial statements. In August 2016, the FASB issued guidance relating to how certain cash receipts and cash payments should be presented and classified in the statement of cash flows. The update was intended to reduce the existing diversity in practice. The amended guidance was effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 (Q1 2018 for TrueBlue). We adopted this guidance for our fiscal first quarter of 2018. The adoption of the new standard did not have an impact on our financial statements. In January 2016, the FASB issued guidance on the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The guidance was effective for annual and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue). Early adoption of the amendments in the guidance was not permitted, with limited exceptions. The guidance required a cumulative-effect adjustment be made to reclassify unrealized gains and losses related to available-for-sale equity securities from accumulated other comprehensive income, to retained earnings as of the beginning of the fiscal year of adoption. We adopted this guidance as of the first day of our fiscal first quarter of 2018 and reclassified from accumulated other comprehensive loss to retained earnings, $1.5 million in unrealized gains, net of tax on available-for-sale equity securities. Beginning in Q1 2018, change in market value for our available-for-sale equity securities is included in selling, general and administrative expense in our Consolidated Statements of Operation and Comprehensive Income. In May 2014, the FASB issued guidance outlining a single comprehensive model for accounting for revenue arising from contracts with clients, which supersedes the current revenue recognition guidance. This guidance requires an entity to recognize revenue when it transfers promised goods or services to clients in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We adopted this new guidance as of January 1, 2018 using the modified retrospective transition method. The adoption of this new guidance did not have a material impact on our consolidated financial statements as of the adoption date, nor for the thirteen and thirty-nine weeks ended September 30, 2018, except for expanded disclosures. Refer to Note 2: Revenue recognition for additional accounting policy and transition disclosures. Recently issued accounting pronouncements not yet adopted In February 2016, the FASB issued guidance on lease accounting. The new guidance will continue to classify leases as either finance or operating, but will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet, with classification affecting the pattern of expense recognition in the statement of operations. This guidance is effective for annual and interim periods beginning after December 15, 2018 (Q1 2019 for TrueBlue), and early adoption is permitted. A modified retrospective approach is required for all leases existing or entered into after the beginning of the earliest comparative period in the consolidated financial statements, with a cumulative-effect adjustment to retained earnings recorded at the earliest comparative period. During the third quarter of 2018, the FASB issued updated guidance that provides companies with the option to apply a practical expedient that allows adoption of the provisions of the new lease accounting guidance prospectively, with a cumulative-effect adjustment recorded to retained earnings upon the date of adoption. We plan to elect this practical expedient, and will adopt the guidance prospectively on the effective date. We established a cross-functional implementation team consisting of representatives from various departments to review our current contracts, accounting policies and business practices to identify and quantify the potential impact of the new standard on our financial statements. We are completing this evaluation and expect that, upon adoption, a majority of our operating lease commitments will be recognized and have a material impact on our Consolidated Balance Sheets as operating lease liabilities and right-of-use assets. This change will also flow through the changes in operating assets and liabilities on our Consolidated Statements of Cash Flows. We do not expect the adoption to have a material impact on the pattern of expense recognition in our Consolidated Statements of Operations and Comprehensive Income. In June 2016, the FASB issued guidance on accounting for credit losses on financial instruments. This guidance sets forth a current expected credit loss model, which requires measurement of all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This guidance replaces the incurred loss impairment methodology under current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. We will be required to use a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. This guidance is effective for fiscal years beginning after December 15, 2019 (Q1 2020 for TrueBlue) with early adoption permitted no sooner than Q1 2019. A modified retrospective approach is required for all investments, except debt securities for which an other-than-temporary impairment had been recognized prior to the effective date, which will require a prospective transition approach. We plan to adopt this guidance on the effective date and are currently evaluating the impact of this standard on our consolidated financial statements, including accounting policies, processes and systems. Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption. Subsequent events We evaluated events and transactions occurring after the balance sheet date through the date the financial statements were issued, and identified no other events that were subject to recognition or disclosure. |
REVENUE RECOGNITION |
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Revenue Recognition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition | REVENUE RECOGNITION Adoption of new revenue recognition guidance On January 1, 2018, we adopted new revenue recognition guidance using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under the new revenue recognition guidance, while prior period amounts were not adjusted and continue to be reported in accordance with historic accounting guidance. The adoption of this new guidance did not have a material impact on our consolidated financial statements as of the adoption date, nor for the thirteen and thirty-nine weeks ended September 30, 2018, except for expanded disclosures. Revenue recognition We account for a contract when both parties to the contract have approved the contract, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Revenues are recognized over time, using an output measure, as the control of the promised services is transferred to the client in an amount that reflects the consideration we expect to be entitled to in exchange for those services. The majority of our contracts are short-term in nature as they are filling the temporary staffing needs of our clients, or include termination clauses that allow either party to cancel within a short termination period, without cause. Revenue includes billable travel and other reimbursable costs and are reported net of sales, use, or other transaction taxes collected from clients and remitted to taxing authorities. Payment terms vary by client and the services offered. We consider payment terms that exceed one year to be extended payment terms, however we do not extend payment terms beyond one year. Substantially all of our contracts include payment terms of 90 days or less. We primarily record revenue on a gross basis as a principal versus on a net basis as an agent in the Consolidated Statements of Operations and Comprehensive Income. We have determined that gross reporting as a principal is the appropriate treatment based upon the following key factors:
Contingent staffing We recognize revenue for our PeopleReady and PeopleManagement contingent staffing services over time as services are performed in an amount that reflects the consideration we expect to be entitled to in exchange for our services, which is generally calculated as hours worked multiplied by the agreed-upon hourly bill rate. The client simultaneously receives and consumes the benefits of the services as they are provided. We do not incur costs to obtain our contingent staffing contracts. Costs are incurred to fulfill some contingent staffing contracts, however these costs are not material and are expensed as incurred. Human resource outsourcing We primarily recognize revenue for our PeopleScout outsourced recruitment of permanent employees over time in an amount that reflects the consideration we expect to be entitled to in exchange for our services. The client simultaneously receives and consumes the benefits of the services as they are provided. We do not incur costs to obtain our outsourced recruitment of permanent employees’ contracts. The costs to fulfill these contracts are not material and are expensed as incurred. Unsatisfied performance obligations As a practical expedient, we do not disclose the value of unsatisfied performance obligations for (i) contracts with an expected original duration of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. Disaggregated revenue The following table presents our revenue disaggregated by major source:
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ACQUISITION AND DIVESTITURE |
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ACQUISITION AND DIVESTITURE | ACQUISITION AND DIVESTITURE Acquisition Effective June 12, 2018, we acquired all of the outstanding equity interests of TMP Holdings LTD (“TMP”), through our PeopleScout subsidiary, for a cash purchase price of $22.7 million, net of cash acquired of $7.0 million. TMP is a mid-sized recruitment process outsourcing (“RPO”) and employer branding service provider operating in the United Kingdom, which is the second largest RPO market in the world. This acquisition increases our ability to win multi-continent engagements by adding a physical presence in Europe, referenceable clients and employer branding capabilities. We incurred acquisition and integration-related costs of $1.2 million and $1.7 million for the thirteen and thirty-nine weeks ended September 30, 2018, respectively, which are included in selling, general and administrative expense on the Consolidated Statements of Operations and Comprehensive Income and cash flows from operating activities on the Consolidated Statements of Cash Flows for the thirty-nine weeks ended September 30, 2018. The following table reflects our preliminary allocation of the purchase price, net of cash acquired, to the fair value of the assets acquired and liabilities assumed:
(1) Goodwill represents the expected synergies with our existing business, the acquired assembled workforce, potential new customers and future cash flows after the acquisition of TMP, and is non-deductible for income tax purposes. Intangible assets include identifiable intangible assets for customer relationships and trade names/trademarks. We estimated the fair value of the acquired identifiable intangible assets, which are subject to amortization, using the income approach. The following table sets forth the components of identifiable intangible assets, their estimated fair values and useful lives as of June 12, 2018:
The acquired assets and assumed liabilities of TMP are included on our Consolidated Balance Sheet as of September 30, 2018, and the results of its operations and cash flows are reported on our Consolidated Statements of Operations and Comprehensive Income and Consolidated Statements of Cash Flows for the period from June 12, 2018 to September 30, 2018. The amount of revenue from TMP included in our Consolidated Statements of Operations and Comprehensive Income was $17.9 million from the acquisition date to September 30, 2018. The acquisition of TMP was not material to our consolidated results of operations and as such, pro forma financial information was not required. Divestiture Effective March 12, 2018, we entered into an asset purchase agreement to sell substantially all the assets and certain liabilities of PlaneTechs, LLC (“PlaneTechs”) to Launch Technical Workforce Solutions (“Launch”) for a preliminary purchase price of $11.4 million, of which $8.5 million was paid in cash, and $1.6 million in a note receivable due within nine months following the closing date. The note receivable has monthly principal payments of $0.1 million, which began in April 2018, and will continue through December 2018. The outstanding balance is included in prepaid expenses, deposits and other current assets on the Consolidated Balance Sheets. The remaining purchase price balance consists of the preliminary working capital adjustment, which is expected to be paid in cash during the fiscal fourth quarter of 2018 and is included in prepaid expenses, deposit and other current assets on the Consolidated Balance Sheets. The company recognized a preliminary pre-tax gain on the divestiture of $0.7 million, which is included in interest and other income on the Consolidated Statements of Operations and Comprehensive Income for the thirty-nine weeks ended September 30, 2018. Fiscal first quarter revenue through the closing date of the divestiture for the PlaneTechs business of $8.0 million was reported in the PeopleManagement reportable segment. The divestiture of PlaneTechs did not represent a strategic shift with a major effect on the company’s operations and financial results and, therefore was not reported as discontinued operations in the Consolidated Balance Sheets or Consolidated Statements of Operations and Comprehensive Income for the periods presented. The company has agreed to provide certain transition services to Launch for a period not to exceed nine months, which includes various back office services to support the PlaneTechs branch offices until personnel and systems are transferred to Launch. |
FAIR VALUE MEASUREMENT |
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FAIR VALUE MEASUREMENT | FAIR VALUE MEASUREMENT Our assets and liabilities measured at fair value on a recurring basis consisted of the following:
There were no material transfers between Level 1, Level 2 and Level 3 of the fair value hierarchy during the thirty-nine weeks ended September 30, 2018 nor October 1, 2017. |
RESTRICTED CASH AND INVESTMENTS |
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Restricted Cash and Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 debt and asset-backed securities. The majority of our collateral obligations are held in a trust at the Bank of New York Mellon (“Trust”). The following is a summary of the carrying value of our restricted cash and investments:
The amortized cost and estimated fair value of our held-to-maturity investments held in trust, aggregated by investment category are as follows:
The estimated fair value and gross unrealized losses of all investments classified as held-to-maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2018 and December 31, 2017, were as follows:
The total number of held-to-maturity securities in an unrealized loss position as of September 30, 2018 and December 31, 2017 were 124 and 83, respectively. The unrealized losses were the result of interest rate increases. Since the decline in estimated fair value is attributable to changes in interest rates and not credit quality, and the company has the intent and ability to hold these debt securities until recovery of amortized cost or until maturity, we do not consider these investments other than temporarily impaired. The amortized cost and fair value by contractual maturity of our held-to-maturity investments are as follows:
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. |
GOODWILL AND INTANGIBLE ASSETS |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and intangible assets | GOODWILL AND INTANGIBLE ASSETS Goodwill The following table reflects changes in the carrying amount of goodwill during the period by reportable segments:
Intangible Assets Finite-lived intangible Assets The following table presents our purchased finite-lived intangible assets:
Finite-lived intangible assets include customer relationships and trade names/trademarks of $6.3 million and $1.7 million, respectively, as of the acquisition date, based on our preliminary purchase price allocation relating to our acquisition of TMP Holdings LTD. For additional information, see Note 3: Acquisition and divestiture. Amortization expense of our finite-lived intangible assets was $5.2 million and $15.6 million for the thirteen and thirty-nine weeks ended September 30, 2018, respectively, and $5.4 million and $16.1 million for the thirteen and thirty-nine weeks ended October 1, 2017, respectively. Indefinite-lived intangible assets We also held indefinite-lived trade names/trademarks of $6.0 million as of September 30, 2018 and December 31, 2017. |
WORKERS' COMPENSATION INSURANCE AND RESERVES |
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Workers' Compensation Insurance and Reserves [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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. Our workers’ compensation reserve for claims below the deductible limit is discounted to its estimated net present value using discount rates based on average returns of “risk-free” U.S. Treasury instruments available during the year in which the liability was incurred. The weighted average discount rate was 2.0% and 1.8% at September 30, 2018 and December 31, 2017, respectively. Payments made against self-insured claims are made over a weighted average period of approximately five years as of September 30, 2018. The following table presents a reconciliation of the undiscounted workers’ compensation reserve to the discounted workers’ compensation reserve for the periods presented:
Payments made against self-insured claims were $50.7 million and $48.2 million for the thirty-nine weeks ended September 30, 2018 and October 1, 2017, respectively. Our workers’ compensation reserve includes estimated expenses related to claims above our self-insured limits (“excess claims”), and we record a corresponding receivable for the insurance coverage on excess claims based on the contractual policy agreements we have with insurance carriers. We discount this reserve and corresponding receivable to its estimated net present value using the discount rates based on average returns of “risk-free” U.S. Treasury instruments available during the year in which the liability was incurred. At September 30, 2018 and December 31, 2017, the weighted average rate was 2.8% and 2.5%, respectively. The claim payments are made and the corresponding reimbursements from our insurance carriers are received over an estimated weighted average period of approximately 15 years. The discounted workers’ compensation reserve for excess claims was $49.0 million and $48.8 million as of September 30, 2018 and December 31, 2017, respectively. The discounted receivables from insurance companies, net of valuation allowance, were $45.6 million and $45.0 million as of September 30, 2018 and December 31, 2017, respectively. Workers’ compensation expense of $17.8 million and $22.1 million was recorded in cost of services for the thirteen weeks ended September 30, 2018 and October 1, 2017, respectively. Workers’ compensation expense of $52.2 million and $64.2 million was recorded in cost of services for the thirty-nine weeks ended September 30, 2018 and October 1, 2017, respectively. |
LONG-TERM DEBT |
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term Debt | LONG-TERM DEBT The components of our borrowings were as follows:
Revolving credit facility On July 13, 2018, we entered into a credit agreement with Bank of America, N.A., Wells Fargo Bank, N.A., PNC Bank, N.A., KeyBank, N.A. and HSBC Bank USA, N.A. (“Revolving Credit Facility”). The agreement provides for a revolving line of credit of up to $300 million with an option, subject to lender approval, to increase the amount to $450 million, and matures in five years. At September 30, 2018, $107.9 million was utilized as a draw on the facility and $6.9 million was utilized by outstanding standby letters of credit, leaving $185.2 million available under the Revolving Credit Facility for additional borrowings. Under the terms of the agreement, we pay a variable rate of interest on funds borrowed based on the London Interbank Offered Rate (“LIBOR”) plus an applicable spread between 1.25% and 2.50%. Alternatively, at our option, we may pay interest based on a base rate plus an applicable spread between 0.25% and 1.50%. The applicable spread is determined by the consolidated leverage ratio, as defined in the credit agreement. The base rate is the greater of the prime rate (as announced by Bank of America), the federal funds rate plus 0.50%, or the one-month LIBOR rate plus 1.00%. At September 30, 2018, the applicable spread on LIBOR was 1.25% and the index rate was 2.15%, resulting in an interest rate of 3.40%. A commitment fee between 0.250% and 0.375% is applied against the Revolving Credit Facility’s unused borrowing capacity, with the specific rate determined by the consolidated leverage ratio, as defined in the credit agreement. Letters of credit are priced at a margin between 1.00% and 2.25%, plus a fronting fee of 0.50%. Obligations under the agreement are guaranteed by TrueBlue and material U.S. domestic subsidiaries, and are secured by certain collateral of TrueBlue and material U.S. domestic subsidiaries. The agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, including, among others, financial covenants based on our leverage and fixed charge coverage ratios, as defined in the credit agreement. We are currently in compliance with all covenants related to the Revolving Credit Facility. Term loan agreement On June 25, 2018, we pre-paid in full our outstanding obligations of approximately $22.0 million with Synovus Bank, terminating all commitments under this term loan (the “Term Loan”) dated February 4, 2013 (as subsequently amended). We did not incur any early termination penalties in connection with the termination of the Term Loan. |
COMMITMENTS AND CONTINGENCIES |
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Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Workers’ compensation commitments We have provided our insurance carriers and certain states with commitments in the form and amounts listed below:
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. |
SHAREHOLDERS' EQUITY |
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Shareholders' Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHAREHOLDER’S EQUITY | SHAREHOLDER’S EQUITY Changes in Shareholders’ Equity Changes in the balance of each component of shareholders’ equity during the reporting periods were as follows:
Changes in Accumulated Other Comprehensive Loss Changes in the balance of each component of accumulated other comprehensive loss during the reporting periods were as follows:
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INCOME TAXES |
9 Months Ended |
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Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | INCOME TAXES Our income tax provision or benefit 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 quarterly estimate of our annual effective tax rate are subject to variation due to several factors, including variability in accurately predicting our pre-tax and taxable income and loss by jurisdiction, tax credits, government audit developments, changes in laws, regulations and administrative practices, and relative changes in 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 for the thirty-nine weeks ended September 30, 2018 was 12.2%. The difference between the statutory federal income tax rate of 21.0% and our effective income tax rate results primarily from the federal Work Opportunity Tax Credit. This tax credit is designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates. Other differences between the statutory federal income tax rate of 21.0% and our effective tax rate result from state and foreign income taxes, certain non-deductible expenses, tax exempt interest, and tax effects of share based compensation. On December 22, 2017, Staff Accounting Bulletin No. 118 was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for income tax effects of the Tax Cuts and Jobs Act (the “Tax Act”). For the thirty-nine weeks ended September 30, 2018, we completed accounting for the Tax Act by recording immaterial adjustments to our transition tax and revaluation of net deferred tax assets at December 31, 2017. We also determined that unremitted earnings of our foreign subsidiaries should no longer remain subject to an indefinite reinvestment assertion and recorded a $0.4 million deferred tax liability related to foreign withholding taxes. |
NET INCOME (LOSS) PER SHARE |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NET INCOME PER SHARE | NET INCOME PER SHARE Diluted common shares were calculated as follows:
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SEGMENT INFORMATION |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION | SEGMENT INFORMATION Our operating segments are based on the organizational structure for which financial results are regularly reviewed by our chief operating decision-maker, our Chief Executive Officer, to determine resource allocation and assess performance. Our operating segments, also referred to as service lines, and reportable segments are described below: Our PeopleReady reportable segment provides blue-collar, contingent staffing through the PeopleReady operating segment. PeopleReady provides on-demand and skilled labor in a broad range of industries that include construction, manufacturing and logistics, warehousing and distribution, waste and recycling, hospitality, general labor and others. Our PeopleManagement reportable segment provides contingent labor and outsourced industrial workforce solutions, primarily on-premise at the client’s facility, through the following operating segments, which we have aggregated into one reportable segment in accordance with U.S. GAAP:
Effective March 12, 2018, we divested the PlaneTechs operating segment within our PeopleManagement reportable segment to Launch Technical Workforce Solutions. For additional information, see Note 3: Acquisition and divestiture. Our PeopleScout reportable segment provides high-volume, permanent employee recruitment process outsourcing, and management of outsourced labor service providers through the following operating segments, which we have aggregated into one reportable segment in accordance with U.S. GAAP:
Effective June 12, 2018, we acquired TMP through our PeopleScout subsidiary. Accordingly, the results associated with the acquisition are included in our PeopleScout operating segment. TMP is a mid-sized RPO and employer branding service provider operating in the United Kingdom which is the second largest RPO market in the world. This acquisition increases our ability to win multi-continent engagements by adding a physical presence in Europe, referenceable clients and employer branding capabilities. For additional information, see Note 3: Acquisition and divestiture. We evaluate performance based on segment revenue and segment profit. Inter-segment revenue is minimal. Commencing in the fiscal first quarter of 2018, we revised our internal segment performance measure to be segment profit, rather than the previously reported segment earnings before interest, taxes, depreciation and amortization (segment EBITDA). Segment profit includes revenue, related cost of services, and ongoing operating expenses directly attributable to the reportable segment. Segment profit excludes goodwill and intangible impairment charges, depreciation and amortization expense, unallocated corporate general and administrative expense, interest, other income and expense, income taxes, and costs not considered to be ongoing costs of the segment. The prior year amounts have been recast to reflect this change for consistency purposes. The following table presents a reconciliation of segment revenue from services to total company revenue:
The following table presents a reconciliation of Segment profit to income before tax expense:
Asset information by reportable segment is not presented since we do not manage our segments on a balance sheet basis. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Accounting Policies [Abstract] | |||||||||||||
Basis of presentation | Financial statement preparation The accompanying unaudited consolidated financial statements (“financial statements”) of TrueBlue, Inc. (the “company,” “TrueBlue,” “we,” “us,” and “our”) are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures usually found in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The financial statements reflect all adjustments which, in the opinion of management, are necessary to fairly state the financial statements for the interim periods presented. We follow the same accounting policies for preparing both quarterly and annual financial statements. 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, 2017. The results of operations for the thirteen and thirty-nine weeks ended September 30, 2018, are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period. |
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Goodwill and Intangible Assets, Policy | Goodwill and indefinite-lived intangible assets We evaluate goodwill and indefinite-lived intangible assets for impairment on an annual basis as of the first day of our fiscal second quarter, and more frequently if an event occurs or circumstances change that would indicate impairment may exist. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, customer engagement, or sale or disposition of a significant portion of a reporting unit. We monitor the existence of potential impairment indicators throughout the fiscal year. Based on our annual goodwill impairment test performed as of the first day of our fiscal second quarter, all reporting units’ fair values were substantially in excess of their respective carrying values. We consider a reporting unit’s fair value to be substantially in excess of its carrying value at a 20% premium or greater. Accordingly, no impairment loss was recognized for the thirty-nine weeks ended September 30, 2018 nor October 1, 2017. We performed our annual indefinite-lived intangible asset impairment test as of the first day of our fiscal second quarter and determined that the estimated fair values exceeded the carrying amounts for our indefinite-lived trade names. Accordingly, no impairment loss was recognized for the thirty-nine weeks ended September 30, 2018 nor October 1, 2017. |
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New Accounting Pronouncements And Changes In Accounting Principles, Policy | Recently adopted accounting standards In May 2017, the Financial Accounting Standing Board (“FASB”) issued guidance to provide clarity and reduce diversity in practice when accounting for a change to the terms or conditions of share-based payment awards. The objective was to reduce the scope of transactions that would require modification accounting. Disclosure requirements remain unchanged. This amended guidance was effective for our fiscal years and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue), with early adoption permitted. We adopted this guidance for our fiscal first quarter of 2018. The adoption of the new standard did not have a material impact on our financial statements. In January 2017, the FASB issued guidance clarifying the definition of a business, which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. This guidance was effective for fiscal years and interim periods beginning December 15, 2017 (Q1 2018 for TrueBlue) on a prospective basis. This standard did not have a material impact on our financial statements. In Q2 2018, we acquired all of the outstanding equity interests of TMP Holdings LTD (“TMP”) and concluded that TMP represented a business based on this new guidance. See Note 3: Acquisition and divestiture, for further discussion of our acquisition of TMP. In November 2016, the FASB issued guidance to amend the presentation of restricted cash and restricted cash equivalents on the statement of cash flows. The standard requires restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This amended guidance was effective for fiscal years and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue). We adopted this guidance for our fiscal first quarter of 2018 using the retrospective transition method. Accordingly, the change in restricted cash and cash equivalents is no longer segregated in our Consolidated Statements of Cash Flows, and the $8.6 million previously presented in the investing section for the thirty-nine weeks ended October 1, 2017 is now included when reconciling the beginning-of-period and end-of-period cash, cash equivalents and restricted cash shown in our Consolidated Statements of Cash Flows. In October 2016, the FASB issued guidance on the accounting for income tax effects of intercompany sales or transfers of assets other than inventory. The guidance requires entities to recognize the income tax impact of an intra-entity sale or transfer of an asset other than inventory when the sale or transfer occurs, rather than when the asset has been sold to an outside party. This guidance was effective for fiscal years and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue). The guidance requires a modified retrospective application with a cumulative catch-up adjustment to opening retained earnings. We adopted this guidance for our fiscal first quarter of 2018. The adoption of the new standard did not have a material impact on our financial statements. In August 2016, the FASB issued guidance relating to how certain cash receipts and cash payments should be presented and classified in the statement of cash flows. The update was intended to reduce the existing diversity in practice. The amended guidance was effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 (Q1 2018 for TrueBlue). We adopted this guidance for our fiscal first quarter of 2018. The adoption of the new standard did not have an impact on our financial statements. In January 2016, the FASB issued guidance on the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The guidance was effective for annual and interim periods beginning after December 15, 2017 (Q1 2018 for TrueBlue). Early adoption of the amendments in the guidance was not permitted, with limited exceptions. The guidance required a cumulative-effect adjustment be made to reclassify unrealized gains and losses related to available-for-sale equity securities from accumulated other comprehensive income, to retained earnings as of the beginning of the fiscal year of adoption. We adopted this guidance as of the first day of our fiscal first quarter of 2018 and reclassified from accumulated other comprehensive loss to retained earnings, $1.5 million in unrealized gains, net of tax on available-for-sale equity securities. Beginning in Q1 2018, change in market value for our available-for-sale equity securities is included in selling, general and administrative expense in our Consolidated Statements of Operation and Comprehensive Income. In May 2014, the FASB issued guidance outlining a single comprehensive model for accounting for revenue arising from contracts with clients, which supersedes the current revenue recognition guidance. This guidance requires an entity to recognize revenue when it transfers promised goods or services to clients in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We adopted this new guidance as of January 1, 2018 using the modified retrospective transition method. The adoption of this new guidance did not have a material impact on our consolidated financial statements as of the adoption date, nor for the thirteen and thirty-nine weeks ended September 30, 2018, except for expanded disclosures. Refer to Note 2: Revenue recognition for additional accounting policy and transition disclosures. Recently issued accounting pronouncements not yet adopted In February 2016, the FASB issued guidance on lease accounting. The new guidance will continue to classify leases as either finance or operating, but will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet, with classification affecting the pattern of expense recognition in the statement of operations. This guidance is effective for annual and interim periods beginning after December 15, 2018 (Q1 2019 for TrueBlue), and early adoption is permitted. A modified retrospective approach is required for all leases existing or entered into after the beginning of the earliest comparative period in the consolidated financial statements, with a cumulative-effect adjustment to retained earnings recorded at the earliest comparative period. During the third quarter of 2018, the FASB issued updated guidance that provides companies with the option to apply a practical expedient that allows adoption of the provisions of the new lease accounting guidance prospectively, with a cumulative-effect adjustment recorded to retained earnings upon the date of adoption. We plan to elect this practical expedient, and will adopt the guidance prospectively on the effective date. We established a cross-functional implementation team consisting of representatives from various departments to review our current contracts, accounting policies and business practices to identify and quantify the potential impact of the new standard on our financial statements. We are completing this evaluation and expect that, upon adoption, a majority of our operating lease commitments will be recognized and have a material impact on our Consolidated Balance Sheets as operating lease liabilities and right-of-use assets. This change will also flow through the changes in operating assets and liabilities on our Consolidated Statements of Cash Flows. We do not expect the adoption to have a material impact on the pattern of expense recognition in our Consolidated Statements of Operations and Comprehensive Income. In June 2016, the FASB issued guidance on accounting for credit losses on financial instruments. This guidance sets forth a current expected credit loss model, which requires measurement of all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This guidance replaces the incurred loss impairment methodology under current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. We will be required to use a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. This guidance is effective for fiscal years beginning after December 15, 2019 (Q1 2020 for TrueBlue) with early adoption permitted no sooner than Q1 2019. A modified retrospective approach is required for all investments, except debt securities for which an other-than-temporary impairment had been recognized prior to the effective date, which will require a prospective transition approach. We plan to adopt this guidance on the effective date and are currently evaluating the impact of this standard on our consolidated financial statements, including accounting policies, processes and systems. Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption. |
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Revenue Recognition, Policy | Revenue recognition We account for a contract when both parties to the contract have approved the contract, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Revenues are recognized over time, using an output measure, as the control of the promised services is transferred to the client in an amount that reflects the consideration we expect to be entitled to in exchange for those services. The majority of our contracts are short-term in nature as they are filling the temporary staffing needs of our clients, or include termination clauses that allow either party to cancel within a short termination period, without cause. Revenue includes billable travel and other reimbursable costs and are reported net of sales, use, or other transaction taxes collected from clients and remitted to taxing authorities. Payment terms vary by client and the services offered. We consider payment terms that exceed one year to be extended payment terms, however we do not extend payment terms beyond one year. Substantially all of our contracts include payment terms of 90 days or less. We primarily record revenue on a gross basis as a principal versus on a net basis as an agent in the Consolidated Statements of Operations and Comprehensive Income. We have determined that gross reporting as a principal is the appropriate treatment based upon the following key factors:
Contingent staffing We recognize revenue for our PeopleReady and PeopleManagement contingent staffing services over time as services are performed in an amount that reflects the consideration we expect to be entitled to in exchange for our services, which is generally calculated as hours worked multiplied by the agreed-upon hourly bill rate. The client simultaneously receives and consumes the benefits of the services as they are provided. We do not incur costs to obtain our contingent staffing contracts. Costs are incurred to fulfill some contingent staffing contracts, however these costs are not material and are expensed as incurred. Human resource outsourcing We primarily recognize revenue for our PeopleScout outsourced recruitment of permanent employees over time in an amount that reflects the consideration we expect to be entitled to in exchange for our services. The client simultaneously receives and consumes the benefits of the services as they are provided. We do not incur costs to obtain our outsourced recruitment of permanent employees’ contracts. The costs to fulfill these contracts are not material and are expensed as incurred. Unsatisfied performance obligations As a practical expedient, we do not disclose the value of unsatisfied performance obligations for (i) contracts with an expected original duration of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. |
REVENUE RECOGNITION (Tables) |
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Revenue Recognition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation Of Revenue | The following table presents our revenue disaggregated by major source:
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ACQUISITION AND DIVESTITURE (Tables) |
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Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table reflects our preliminary allocation of the purchase price, net of cash acquired, to the fair value of the assets acquired and liabilities assumed:
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Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination | The following table sets forth the components of identifiable intangible assets, their estimated fair values and useful lives as of June 12, 2018:
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FAIR VALUE MEASUREMENT (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements, Recurring and Nonrecurring | Our assets and liabilities measured at fair value on a recurring basis consisted of the following:
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RESTRICTED CASH AND INVESTMENTS (Tables) |
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Cash and Investments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of restricted cash and investments | The following is a summary of the carrying value of our restricted cash and investments:
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Schedule of held-to-maturity investments | The amortized cost and estimated fair value of our held-to-maturity investments held in trust, aggregated by investment category are as follows:
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Schedule of continuous unrealized loss position | The estimated fair value and gross unrealized losses of all investments classified as held-to-maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2018 and December 31, 2017, were as follows:
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Schedule of held-to-maturity investments by contractual maturity | The amortized cost and fair value by contractual maturity of our held-to-maturity investments are as follows:
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GOODWILL AND INTANGIBLE ASSETS (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | The following table reflects changes in the carrying amount of goodwill during the period by reportable segments:
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Schedule of Finite-Lived Intangible Assets | The following table presents our purchased finite-lived intangible assets:
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WORKERS' COMPENSATION INSURANCE AND RESERVES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Workers' Compensation Insurance and Reserves [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of workers' compensation claims reserve | The following table presents a reconciliation of the undiscounted workers’ compensation reserve to the discounted workers’ compensation reserve for the periods presented:
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LONG-TERM DEBT (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | The components of our borrowings were as follows:
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COMMITMENTS AND CONTINGENCIES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of workers’ compensation collateral commitments | We have provided our insurance carriers and certain states with commitments in the form and amounts listed below:
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SHAREHOLDERS' EQUITY (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Shareholders' Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stockholders Equity | Changes in the balance of each component of shareholders’ equity during the reporting periods were as follows:
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Schedule of Accumulated Other Comprehensive Income (Loss) | Changes in the balance of each component of accumulated other comprehensive loss during the reporting periods were as follows:
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NET INCOME (LOSS) PER SHARE (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of adjusted net income and diluted common shares | Diluted common shares were calculated as follows:
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SEGMENT INFORMATION (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Information | The following table presents a reconciliation of segment revenue from services to total company revenue:
The following table presents a reconciliation of Segment profit to income before tax expense:
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Recently adopted accounting standards (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Oct. 01, 2017 |
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Change in accounting standard cumulative-effect adjustment | $ (1,525) | $ 0 |
Restatement Adjustment | Accounting Standards Update 2016-18 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Decrease in restricted cash | 8,600 | |
Accumulated Net Investment Gain (Loss) Attributable to Parent | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Change in accounting standard cumulative-effect adjustment | $ (1,525) | $ 0 |
ACQUISITION AND DIVESTITURE Acquisition (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Jun. 12, 2018 |
Sep. 30, 2018 |
Oct. 01, 2017 |
Sep. 30, 2018 |
Oct. 01, 2017 |
|
Business Acquisition [Line Items] | |||||
Cash purchase price, net of cash acquired | $ 22,742 | $ 0 | |||
Acquisition-related costs | $ 1,226 | $ 0 | 1,683 | $ 0 | |
TMP | |||||
Business Acquisition [Line Items] | |||||
Cash purchase price, net of cash acquired | $ 22,742 | ||||
Cash acquired from acquisition | $ 7,000 | ||||
Acquisition-related costs | $ 1,226 | $ 1,683 |
ACQUISITION AND DIVESTITURE Intangible Assets (Details) - TMP $ in Thousands |
Jun. 12, 2018
USD ($)
|
---|---|
Business Acquisition [Line Items] | |
Estimated fair value | $ 8,024 |
Customer relationships | |
Business Acquisition [Line Items] | |
Estimated fair value | 6,286 |
Trade name/trademarks | |
Business Acquisition [Line Items] | |
Estimated fair value | $ 1,738 |
Estimated useful life in years | 14 years |
Minimum | Customer relationships | |
Business Acquisition [Line Items] | |
Estimated useful life in years | 3 years |
Maximum | Customer relationships | |
Business Acquisition [Line Items] | |
Estimated useful life in years | 7 years |
ACQUISITION AND DIVESTITURE Divestiture (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Mar. 12, 2018 |
Sep. 30, 2018 |
Oct. 01, 2017 |
Sep. 30, 2018 |
Oct. 01, 2017 |
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Divestiture of business | $ 10,414 | $ 0 | |||
Divestiture non-cash consideration | 971 | 0 | |||
Revenue from services | $ 680,371 | $ 660,780 | 1,849,060 | $ 1,839,146 | |
PlaneTechs | |||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Divestiture, amount of consideration received | $ 11,400 | ||||
Divestiture of business | 8,500 | ||||
Divestiture non-cash consideration | $ 1,600 | ||||
Debt Instrument, Periodic Payment | 100 | ||||
Gain on disposition of assets | $ 700 | ||||
Revenue from services | $ 8,000 |
GOODWILL AND INTANGIBLE ASSETS - Narrative (Details) - USD ($) $ in Millions |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Trade name/trademarks | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Indefinite-lived Intangible Assets (Excluding Goodwill) | $ 6.0 | $ 6.0 |
WORKERS' COMPENSATION INSURANCE AND RESERVES - Reconciliation of Workers' Compensation Claims Reserve (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Workers' Compensation Insurance and Reserves [Abstract] | ||
Undiscounted workers’ compensation reserve | $ 286,156 | $ 293,600 |
Less discount on workers’ compensation reserve | 20,238 | 19,277 |
Workers' compensation reserve, net of discount | 265,918 | 274,323 |
Less current portion | 70,950 | 77,218 |
Long-term portion | $ 194,968 | $ 197,105 |
WORKERS' COMPENSATION INSURANCE AND RESERVES - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Sep. 30, 2018 |
Oct. 01, 2017 |
Sep. 30, 2018 |
Oct. 01, 2017 |
Dec. 31, 2017 |
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Workers' Compensation Deductible Limit [Line Items] | |||||
Workers' compensation claim deductible limit | $ 2,000 | ||||
Weighted average period - claim payments below deductible limit | 5 years | ||||
Payments made against self-insured claims | $ 50,700 | $ 48,200 | |||
Weighted average period - claim payments and receivables above deductible limit | 15 years | ||||
Excess claims | $ 49,000 | $ 49,000 | $ 48,800 | ||
Workers' compensation claim receivables net of valuation allowance | 45,644 | 45,644 | 45,048 | ||
Workers Compensation Expense | $ 17,800 | $ 22,100 | $ 52,200 | $ 64,200 | |
Below limit | |||||
Workers' Compensation Deductible Limit [Line Items] | |||||
Weighted average rate | 2.00% | 1.80% | |||
Above Limit | |||||
Workers' Compensation Deductible Limit [Line Items] | |||||
Weighted average rate | 2.80% | 2.50% |
LONG-TERM DEBT Summary of long-term debt (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Instrument [Line Items] | ||
Total | $ 107,900 | $ 118,756 |
Long-term debt, less current portion | 107,900 | 116,489 |
Bank of America, N.A. and Wells Fargo Capital Finance, LLC | ||
Debt Instrument [Line Items] | ||
Total | 107,900 | 95,900 |
Synovus Bank | ||
Debt Instrument [Line Items] | ||
Total | 0 | 22,856 |
Current portion of long-term debt | $ 0 | $ 2,267 |
LONG-TERM DEBT Term Loan Agreement (Details) - USD ($) $ in Thousands |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2018 |
Oct. 01, 2017 |
Dec. 31, 2017 |
|
Debt Instrument [Line Items] | |||
Repayments of Long-term Debt, Long-term Capital Lease Obligations, and Capital Securities | $ 22,855 | $ 1,700 | |
Total | 107,900 | $ 118,756 | |
Synovus Bank | |||
Debt Instrument [Line Items] | |||
Repayments of Long-term Debt, Long-term Capital Lease Obligations, and Capital Securities | 22,000 | ||
Total | 0 | 22,856 | |
Current portion of long-term debt | 0 | 2,267 | |
Bank of America, N.A. and Wells Fargo Capital Finance, LLC | |||
Debt Instrument [Line Items] | |||
Total | $ 107,900 | $ 95,900 |
COMMITMENTS AND CONTINGENCIES - Workers' Compensation Commitments (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Dec. 31, 2017 |
|
Workers' Compensation Commitments [Line Items] | ||
Cash collateral held by workers’ compensation insurance carriers | $ 22,122 | $ 22,148 |
Cash and cash equivalents held in Trust | 28,494 | 16,113 |
Investments held in Trust | 162,519 | 171,752 |
Letters of credit | 6,707 | 7,748 |
Surety bonds | 21,961 | 19,829 |
Total collateral commitments | $ 241,803 | $ 237,590 |
Surety bonds annual fee limit, % of bond amount | 2.00% | |
Surety bonds required cancellation notice | 60 days | |
Minimum | ||
Workers' Compensation Commitments [Line Items] | ||
Surety bonds review and renewal period if elected | 1 year | |
Maximum | ||
Workers' Compensation Commitments [Line Items] | ||
Surety bonds review and renewal period if elected | 4 years |
INCOME TAXES - Narrative (Details) $ in Millions |
9 Months Ended |
---|---|
Sep. 30, 2018
USD ($)
| |
Income Tax Disclosure [Abstract] | |
Effective income tax rate reconciliation, percent | 12.20% |
Income tax expense (benefit) based on statutory rate | 21.00% |
Deferred tax liabilities | $ 0.4 |
NET INCOME (LOSS) PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Oct. 01, 2017 |
Sep. 30, 2018 |
Oct. 01, 2017 |
|
Earnings Per Share [Abstract] | ||||
Net income | $ 24,380 | $ 21,221 | $ 50,867 | $ 39,029 |
Weighted average number of common shares used in basic net income per common share | 39,743 | 41,046 | 40,138 | 41,420 |
Dilutive effect of non-vested restricted stock | 330 | 230 | 279 | 251 |
Weighted average number of common shares used in diluted net income per common share | 40,073 | 41,276 | 40,417 | 41,671 |
Net income per common share: | ||||
Basic (in dollars per share) | $ 0.61 | $ 0.52 | $ 1.27 | $ 0.94 |
Diluted (in dollars per share) | $ 0.61 | $ 0.51 | $ 1.26 | $ 0.94 |
Anti-dilutive shares | 414 | 354 | 500 | 388 |
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