tbi-20220327

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 27, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-14543

____________________________________

TrueBlue, Inc.

(Exact name of registrant as specified in its charter)

______________________________________

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)

Registrant’s telephone number, including area code: (253) 383-9101

______________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, no par value	TBI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 14, 2022, there were 33,271,632 shares of the registrant’s common stock outstanding.

TrueBlue, Inc.

Table of Contents


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Consolidated financial statements (unaudited)	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations and Comprehensive Income	4
	Consolidated Statements of Cash Flows	5
	Notes to consolidated financial statements	6
Item 2.	Management’s discussion and analysis of financial condition and results of operations	14
Item 3.	Quantitative and qualitative disclosures about market risk	23
Item 4.	Controls and procedures	23

PART II. OTHER INFORMATION
Item 1.	Legal proceedings	24
Item 1A.	Risk factors	24
Item 2.	Unregistered sales of equity securities and use of proceeds	32
Item 3.	Defaults upon senior securities	32
Item 4.	Mine safety disclosures	32
Item 5.	Other information	32
Item 6.	Index to exhibits	33

	Signatures	34

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PART I. FINANCIAL INFORMATION


Item 1.			CONSOLIDATED FINANCIAL STATEMENTS

TRUEBLUE, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)


(in thousands, except par value data)	March 27, 2022		December 26, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	36,720	$	49,896
Accounts receivable, net of allowance of $4,885 and $6,687	325,197		353,882
Prepaid expenses and other current assets	25,667		31,614
Income tax receivable	10,765		9,681
Total current assets	398,349		445,073
Property and equipment, net	87,751		88,090
Restricted cash and investments	216,163		221,026
Deferred income taxes, net	28,096		29,330
Goodwill	94,716		94,538
Intangible assets, net	20,667		22,211
Operating lease right-of-use assets, net	55,735		55,197
Workers’ compensation claims receivable, net	62,816		61,386
Other assets, net	16,626		16,375
Total assets	$	980,919	$	1,033,226
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued expenses	$	63,544	$	77,172
Accrued wages and benefits	81,142		100,173

Current portion of workers’ compensation claims reserve	58,890		61,596

Current operating lease liabilities	12,581		12,097
Other current liabilities	9,740		7,508
Total current liabilities	225,897		258,546
Workers’ compensation claims reserve, less current portion	197,472		194,598
Long-term debt, less current portion	4,000		—

Long-term deferred compensation liabilities	27,951		28,806
Long-term operating lease liabilities	54,923		54,927

Other long-term liabilities	3,125		3,282
Total liabilities	513,368		540,159

Commitments and contingencies (Note 7)

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; 33,608 and 34,861 shares issued and outstanding	1		1
Accumulated other comprehensive loss	(15,620)		(15,747)
Retained earnings	483,170		508,813
Total shareholders’ equity	467,551		493,067
Total liabilities and shareholders’ equity	$	980,919	$	1,033,226

See accompanying notes to consolidated financial statements

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TRUEBLUE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(unaudited)


	Thirteen weeks ended
(in thousands, except per share data)	March 27, 2022		March 28, 2021
Revenue from services	$	551,515	$	458,706
Cost of services	411,670		348,132
Gross profit	139,845		110,574
Selling, general and administrative expense	120,568		97,401
Depreciation and amortization	7,287		6,962

Income from operations	11,990		6,211


Interest expense and other income, net	505		575
Income before tax expense (benefit)	12,495		6,786
Income tax expense (benefit)	1,976		(112)
Net income	$	10,519	$	6,898

Net income per common share:
Basic	$	0.31	$	0.20
Diluted	$	0.30	$	0.20

Weighted average shares outstanding:
Basic	33,929		34,674
Diluted	34,544		35,066

Other comprehensive income:
Foreign currency translation adjustment	$	127	$	496
Comprehensive income	$	10,646	$	7,394

See accompanying notes to consolidated financial statements

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TRUEBLUE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Thirteen weeks ended
(in thousands)	March 27, 2022		March 28, 2021
Cash flows from operating activities:
Net income	$	10,519	$	6,898
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	7,287		6,962

Provision for credit losses	989		207
Stock-based compensation	3,812		3,343
Deferred income taxes	1,258		(5,002)
Non-cash lease expense	3,281		3,920
Other operating activities	2,608		(438)
Changes in operating assets and liabilities:
Accounts receivable	27,702		18,025
Income tax receivable	(1,252)		4,910
Operating lease right-of-use asset	—		3,501
Other assets	4,267		(4,578)
Accounts payable and other accrued expenses	(13,257)		(9,633)
Accrued wages and benefits	(19,031)		4,249

Workers’ compensation claims reserve	168		(1,499)
Operating lease liabilities	(3,319)		(3,320)
Other liabilities	1,410		338
Net cash provided by operating activities	26,442		27,883
Cash flows from investing activities:
Capital expenditures	(5,779)		(10,003)




Purchases of restricted available-for-sale investments	—		(14)
Sales of restricted available-for-sale investments	—		452

Maturities of restricted held-to-maturity investments	6,034		6,371

Net cash provided by (used in) investing activities	255		(3,194)
Cash flows from financing activities:
Purchases and retirement of common stock	(36,326)		—
Net proceeds from employee stock purchase plans	319		255
Common stock repurchases for taxes upon vesting of restricted stock	(3,970)		(2,555)
Net change in revolving credit facility	4,000		—


Other	(72)		(94)
Net cash used in financing activities	(36,049)		(2,394)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(57)		262
Net change in cash, cash equivalents and restricted cash	(9,409)		22,557
Cash, cash equivalents and restricted cash, beginning of period	103,185		118,612
Cash, cash equivalents and restricted cash, end of period	$	93,776	$	141,169
Supplemental disclosure of cash flow information:
Cash paid (received) during the period for:
Interest	$	193	$	477
Income taxes	1,878		(20)
Operating lease liabilities	4,093		4,142
Non-cash transactions:
Property and equipment purchased but not yet paid	3,159		702
Right-of-use assets obtained in exchange for new operating lease liabilities	3,948		1,453

See accompanying notes to consolidated financial statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1: 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”) and rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, certain information and footnote disclosures usually found in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The financial statements reflect all adjustments which, in the opinion of management, are necessary to fairly state the financial statements for the interim periods presented. We follow the same accounting policies for preparing both quarterly and annual financial statements.

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The severity, magnitude and duration, as well as the economic consequences of the coronavirus (“COVID-19”) pandemic, are uncertain and difficult to predict. Therefore, our accounting estimates and assumptions could change materially in future periods.

These financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 26, 2021. The results of operations for the thirteen weeks ended March 27, 2022 are not necessarily indicative of the results expected for the full fiscal year nor for any other fiscal period.

Recently adopted accounting standards

There were no new accounting standards adopted during the thirteen weeks ended March 27, 2022 that had an impact on our financial statements.

Recently issued accounting standards not yet adopted

There are no accounting standards which have not yet been adopted that are expected to have a significant impact on our financial statements and related disclosures.

NOTE 2: FAIR VALUE MEASUREMENT

Assets measured at fair value on a recurring basis

Our assets measured at fair value on a recurring basis consisted of the following:


	March 27, 2022
(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)
Cash and cash equivalents	$	36,720	$	36,720	$	—	$	—
Restricted cash and cash equivalents	57,056		57,056		—		—
Cash, cash equivalents and restricted cash (1)	93,776		93,776		—		—

Municipal debt securities	56,155		—		56,155		—
Corporate debt securities	69,680		—		69,680		—
Agency mortgage-backed securities	112		—		112		—
U.S. government and agency securities	1,004		—		1,004		—
Restricted investments classified as held-to-maturity (2)	$	126,951	$	—	$	126,951	$	—

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	December 26, 2021
(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)
Cash and cash equivalents	$	49,896	$	49,896	$	—	$	—
Restricted cash and cash equivalents	53,289		53,289		—		—
Cash, cash equivalents and restricted cash (1)	103,185		103,185		—		—

Municipal debt securities	58,505		—		58,505		—
Corporate debt securities	78,357		—		78,357		—
Agency mortgage-backed securities	152		—		152		—
U.S. government and agency securities	1,070		—		1,070		—
Restricted investments classified as held-to-maturity (2)	$	138,084	$	—	$	138,084	$	—

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

(2)Refer to Note 3: Restricted Cash and Investments for additional details on our held-to-maturity debt securities.

NOTE 3: RESTRICTED CASH AND INVESTMENTS

The following is a summary of the carrying value of our restricted cash and investments:


(in thousands)	March 27, 2022		December 26, 2021
Cash collateral held by insurance carriers	$	29,133	$	28,957
Cash and cash equivalents held in Trust	25,550		21,590
Investments held in Trust	128,798		135,419

Company-owned life insurance policies	30,309		32,318
Other restricted cash and cash equivalents	2,373		2,742
Total restricted cash and investments	$	216,163	$	221,026

Held-to-maturity

Restricted cash and investments include 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 amortized cost and estimated fair value of our held-to-maturity investments held in Trust, aggregated by investment category as of March 27, 2022 and December 26, 2021, were as follows:


	March 27, 2022
(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Municipal debt securities	$	55,956	$	354	$	(155)	$	56,155
Corporate debt securities	71,732		119		(2,171)		69,680
Agency mortgage-backed securities	113		—		(1)		112
U.S. government and agency securities	997		7		—		1,004
Total held-to-maturity investments	$	128,798	$	480	$	(2,327)	$	126,951

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	December 26, 2021
(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Municipal debt securities	$	56,346	$	2,159	$	—	$	58,505
Corporate debt securities	77,925		995		(563)		78,357
Agency mortgage-backed securities	148		4		—		152
U.S. government and agency securities	1,000		70		—		1,070
Total held-to-maturity investments	$	135,419	$	3,228	$	(563)	$	138,084

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


	March 27, 2022
(in thousands)	Amortized cost		Fair value
Due in one year or less	$	19,778	$	19,833
Due after one year through five years	108,002		106,204
Due after five years through ten years	1,018		914
Total held-to-maturity investments	$	128,798	$	126,951

Actual maturities may differ from contractual maturities because the issuers of certain debt securities have the right to call or prepay their obligations without penalty. We have no significant concentrations of counterparties in our held-to-maturity investment portfolio.

Deferred compensation investments and company-owned life insurance policies

We hold company-owned life insurance policies to support our deferred compensation liability. During the year ended December 26, 2021, we also held mutual funds and money market funds. As of December 26, 2021, all of the mutual funds and money market funds were converted into company-owned life insurance policies. Unrealized gains and losses related to investments still held at March 27, 2022 and March 28, 2021, which are included in selling, general and administrative expense on our Consolidated Statements of Operations and Comprehensive Income, were as follows:


	Thirteen weeks ended
(in thousands)		March 27, 2022		March 28, 2021
Unrealized gains (losses)		$	(2,011)	$	877

NOTE 4: SUPPLEMENTAL BALANCE SHEET INFORMATION

Accounts receivable allowance for credit losses

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


	Thirteen weeks ended
(in thousands)	March 27, 2022		March 28, 2021
Beginning balance	$	6,687	$	2,921

Current period provision	989		207
Write-offs	(2,784)		(669)
Foreign currency translation	(7)		3
Ending balance	$	4,885	$	2,462

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Prepaid expenses and other current assets


(in thousands)	March 27, 2022		December 26, 2021
Prepaid software agreements	$	9,560	$	10,078
Other prepaid expenses	9,750		8,858
Other current assets	6,357		12,678
Prepaid expenses and other current assets	$	25,667	$	31,614

NOTE 5: WORKERS’ COMPENSATION INSURANCE AND RESERVES

We provide workers’ compensation insurance for our associates and permanent employees. The majority of our current workers’ compensation insurance policies cover claims for a particular event above a $2.0 million deductible limit, on a “per occurrence” basis. This results in our being substantially self-insured.

Our workers’ compensation reserve for claims below the deductible limit is discounted to its estimated net present value using discount rates based on average returns of “risk-free” U.S. Treasury instruments available during the year in which the liability was incurred. The weighted average discount rate was 1.6% at March 27, 2022 and December 26, 2021. Payments made against self-insured claims are made over a weighted average period of approximately 5.5 years as of March 27, 2022.

The following table presents a reconciliation of the undiscounted workers’ compensation reserve to the discounted workers’ compensation reserve for the periods presented:


(in thousands)	March 27, 2022		December 26, 2021
Undiscounted workers’ compensation reserve	$	272,724	$	273,000
Less discount on workers’ compensation reserve	16,362		16,806
Workers’ compensation reserve, net of discount	256,362		256,194
Less current portion	58,890		61,596
Long-term portion	$	197,472	$	194,598

Payments made against self-insured claims were $9.7 million and $11.2 million for the thirteen weeks ended March 27, 2022 and March 28, 2021, respectively.

Our workers’ compensation reserve includes estimated expenses related to claims above our self-insured limits (“excess claims”), and we record a corresponding receivable for the insurance coverage on excess claims based on the contractual policy agreements we have with insurance carriers. We discount this reserve and corresponding receivable to its estimated net present value using the discount rates based on average returns of “risk-free” U.S. Treasury instruments available during the year in which the liability was incurred. The rates used to discount excess claims incurred during the thirteen weeks ended March 27, 2022 and fifty-two weeks ended December 26, 2021 were 1.9% and 1.8%, respectively. The claim payments are made and the corresponding reimbursements from our insurance carriers are received over an estimated weighted average period of approximately 17.0 years. The discounted workers’ compensation reserve for excess claims was $64.0 million and $62.7 million, as of March 27, 2022 and December 26, 2021, respectively. The discounted receivables from insurance companies, net of valuation allowance, were $62.8 million and $61.4 million as of March 27, 2022 and December 26, 2021, respectively.

Workers’ compensation cost consists primarily of changes in self-insurance reserves net of changes in discount, monopolistic jurisdictions’ premiums, insurance premiums and other miscellaneous expenses. Workers’ compensation cost of $11.3 million and $10.1 million was recorded in cost of services on our Consolidated Statements of Operations and Comprehensive Income for the thirteen weeks ended March 27, 2022 and March 28, 2021, respectively.

NOTE 6: LONG-TERM DEBT

We have a revolving credit agreement with Bank of America, N.A., Wells Fargo Bank, N.A., PNC Bank, N.A., KeyBank, N.A. and HSBC Bank USA, N.A., which provides for a revolving line of credit of up to $300.0 million, and is currently set to mature on March 16, 2025 (“Revolving Credit Facility”). We have an option to increase the amount to $450.0 million, subject to lender approval. Included in the Revolving Credit Facility is a $30.0 million sub-limit for “Swingline” loans and a $125.0 million sub-limit for letters of credit. At March 27, 2022, $4.0 million was drawn on the Revolving Credit Facility as a Swingline loan and $6.2 million was utilized by outstanding standby letters of credit, leaving $289.8 million unused under the Revolving Credit Facility. At December 26, 2021, $6.2 million was utilized by outstanding standby letters of credit.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Under the terms of the Revolving Credit Facility, we pay a variable rate of interest on funds borrowed under the revolving line of credit in excess of the Swingline loans, based on the U.S. Dollar London Interbank Offered Rate (“LIBOR”) plus an applicable spread between 1.25% and 3.50%. Alternatively, at our option, we may pay interest based on a base rate plus an applicable spread between 0.25% and 1.50%. The base rate is the greater of the prime rate (as announced by Bank of America), or the federal funds rate plus 0.50%. The applicable spread is determined by the consolidated leverage ratio, as defined in the Revolving Credit Facility.

Under the terms of the Revolving Credit Facility, we are required to pay a variable rate of interest on funds borrowed under the Swingline loan based on the base rate plus applicable spread between 0.25% and 1.50%, as described above. At March 27, 2022, the applicable spread on the base rate was 0.25% and the base rate was 3.50%, resulting in an interest rate of 3.75%.

A commitment fee between 0.25% and 0.50% is applied against the Revolving Credit Facility’s unused borrowing capacity, with the specific rate determined by the consolidated leverage ratio, as defined in the second amendment to our credit agreement. Letters of credit are priced at a margin between 1.00% and 3.25%, plus a fronting fee of 0.50%.

Obligations under the Revolving Credit Facility are guaranteed by TrueBlue and material U.S. domestic subsidiaries, and are secured by substantially all of the assets of TrueBlue and material U.S. domestic subsidiaries. The second amendment to our credit agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, including, among others, financial covenants.

The following financial covenants, as defined in the second amendment to our credit agreement, were in effect as of March 27, 2022:

•Consolidated leverage ratio less than 3.00, defined as our funded indebtedness divided by trailing twelve months consolidated EBITDA, as defined in the amended credit agreement. As of March 27, 2022, our consolidated leverage ratio was 0.08.

•Consolidated fixed charge coverage ratio greater than 1.25, defined as the trailing twelve months bank-adjusted cash flow divided by cash interest expense. As of March 27, 2022, our consolidated fixed charge ratio was 88.61.

As of March 27, 2022, we were in compliance with all effective covenants related to the Revolving Credit Facility.

NOTE 7:

SEC Form 10-Q filed by TrueBlue Inc.