tbi-20230924

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: September 24, 2023

☐ 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 October 18, 2023, there were 31,139,746 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 (Loss)	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	17
Item 3.	Quantitative and qualitative disclosures about market risk	29
Item 4.	Controls and procedures	29

PART II. OTHER INFORMATION
Item 1.	Legal proceedings	30
Item 1A.	Risk factors	30
Item 2.	Unregistered sales of equity securities, use of proceeds, and issuer purchases of equity securities	30
Item 3.	Defaults upon senior securities	30
Item 4.	Mine safety disclosures	30
Item 5.	Other information	30
Item 6.	Index to exhibits	31

	Signatures	32

Page - 2

Table of Contents

PART I. FINANCIAL INFORMATION


Item 1.			CONSOLIDATED FINANCIAL STATEMENTS

TRUEBLUE, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)


(in thousands, except par value and share count data)	September 24, 2023		December 25, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	47,113	$	72,054
Accounts receivable, net of allowance of $2,762 and $3,212	276,233		314,275
Prepaid expenses and other current assets	23,021		32,530
Income tax receivable	13,239		11,353
Total current assets	359,606		430,212
Property and equipment, net	102,809		95,823
Restricted cash and investments	198,829		213,734
Deferred income taxes, net	29,120		25,842
Goodwill	84,753		93,784
Intangible assets, net	11,823		16,205
Operating lease right-of-use assets, net	52,393		50,823
Workers’ compensation claims receivable, net	61,858		75,185
Other assets, net	13,840		17,800
Total assets	$	915,031	$	1,019,408
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued expenses	$	48,879	$	76,644
Accrued wages and benefits	87,080		92,237
Income tax payable	158		1,137
Current portion of workers’ compensation claims reserve	44,091		50,005

Current operating lease liabilities	12,438		11,963
Other current liabilities	7,928		10,889
Total current liabilities	200,574		242,875
Workers’ compensation claims reserve, less current portion	173,361		201,005


Long-term deferred compensation liabilities	31,323		26,213
Long-term operating lease liabilities	51,651		50,601

Other long-term liabilities	1,496		2,399
Total liabilities	458,405		523,093

Commitments and contingencies (Note 8)

Shareholders’ equity:
Preferred stock, $0.131 par value, 20,000,000 shares authorized; No shares issued and outstanding	—		—
Common stock, no par value, 100,000,000 shares authorized; 31,108,594 and 32,729,689 shares issued and outstanding	1		1
Accumulated other comprehensive loss	(21,070)		(20,018)
Retained earnings	477,695		516,332
Total shareholders’ equity	456,626		496,315
Total liabilities and shareholders’ equity	$	915,031	$	1,019,408

See accompanying notes to consolidated financial statements

Page - 3

Table of Contents

TRUEBLUE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(unaudited)


	Thirteen weeks ended				Thirty-nine weeks ended
(in thousands, except per share data)	September 24, 2023		September 25, 2022		September 24, 2023		September 25, 2022
Revenue from services	$	473,196	$	575,721	$	1,414,072	$	1,696,489
Cost of services	349,023		419,802		1,036,295		1,242,194
Gross profit	124,173		155,919		377,777		454,295
Selling, general and administrative expense	120,715		124,351		364,642		366,953
Depreciation and amortization	6,184		7,483		18,875		22,015
Goodwill and intangible asset impairment charge	—		—		9,485		—
Income (loss) from operations	(2,726)		24,085		(15,225)		65,327


Interest and other income (expense), net	390		703		1,982		1,098
Income (loss) before tax expense (benefit)	(2,336)		24,788		(13,243)		66,425
Income tax expense (benefit)	(2,326)		4,092		(1,621)		11,197
Net income (loss)	$	(10)	$	20,696	$	(11,622)	$	55,228

Net income (loss) per common share:
Basic	$	0.00	$	0.64	$	(0.37)	$	1.67
Diluted	$	0.00	$	0.63	$	(0.37)	$	1.65

Weighted average shares outstanding:
Basic	30,932		32,434		31,397		33,023
Diluted	30,932		32,818		31,397		33,511

Other comprehensive income (loss):
Foreign currency translation adjustment	$	(1,305)	$	(3,053)	$	(1,052)	$	(4,650)
Comprehensive income (loss)	$	(1,315)	$	17,643	$	(12,674)	$	50,578

See accompanying notes to consolidated financial statements

Page - 4

Table of Contents

TRUEBLUE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Thirty-nine weeks ended
(in thousands)	September 24, 2023		September 25, 2022
Cash flows from operating activities:
Net income (loss)	$	(11,622)	$	55,228
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	18,875		22,015
Goodwill and intangible asset impairment charge	9,485		—
Provision for credit losses	3,254		3,352
Stock-based compensation	10,219		7,675
Deferred income taxes	(3,344)		2,046
Non-cash lease expense	9,449		9,694
Other operating activities	(1,661)		8,772
Changes in operating assets and liabilities:
Accounts receivable	34,790		21,388
Income taxes receivable and payable	(3,001)		186

Other assets	26,795		(564)
Accounts payable and other accrued expenses	(26,879)		(22,935)
Accrued wages and benefits	(5,156)		(10,277)

Workers’ compensation claims reserve	(33,558)		(4,304)
Operating lease liabilities	(9,498)		(9,673)
Other liabilities	1,421		(2,529)
Net cash provided by operating activities	19,569		80,074
Cash flows from investing activities:
Capital expenditures	(23,095)		(22,685)


Payments for company-owned life insurance	(2,347)		—
Proceeds from company-owned life insurance	1,662		—


Purchases of restricted held-to-maturity investments	(26,894)		(4,950)
Maturities of restricted held-to-maturity investments	24,118		23,697

Net cash used in investing activities	(26,556)		(3,938)
Cash flows from financing activities:
Purchases and retirement of common stock	(34,178)		(60,939)
Net proceeds from employee stock purchase plans	704		780
Common stock repurchases for taxes upon vesting of restricted stock	(3,759)		(4,347)



Other	(96)		(203)
Net cash used in financing activities	(37,329)		(64,709)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(757)		(2,482)
Net change in cash, cash equivalents and restricted cash	(45,073)		8,945
Cash, cash equivalents and restricted cash, beginning of period	135,631		103,185
Cash, cash equivalents and restricted cash, end of period	$	90,558	$	112,130

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	721	$	828
Income taxes	$	4,732	$	8,907
Operating lease liabilities	$	11,718	$	11,824
Non-cash transactions:
Property and equipment purchased but not yet paid	$	3,550	$	3,131
Right-of-use assets obtained in exchange for new operating lease liabilities	$	10,943	$	7,015

See accompanying notes to consolidated financial statements

Page - 5

Table of Contents


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.

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 25, 2022. The results of operations for the thirty-nine weeks ended September 24, 2023 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 thirty-nine weeks ended September 24, 2023 that had a material 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:


	September 24, 2023
(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	$	47,113	$	47,113	$	—	$	—
Restricted cash and cash equivalents	43,445		43,445		—		—
Cash, cash equivalents and restricted cash (1)	$	90,558	$	90,558	$	—	$	—

Municipal debt securities	$	34,066	$	—	$	34,066	$	—
Corporate debt securities	77,301		—		77,301		—
Agency mortgage-backed securities	8,751		—		8,751		—
U.S. government and agency securities	932		—		932		—
Restricted investments classified as held-to-maturity (2)	$	121,050	$	—	$	121,050	$	—

Page - 6

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


	December 25, 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	$	72,054	$	72,054	$	—	$	—
Restricted cash and cash equivalents	63,577		63,577		—		—
Cash, cash equivalents and restricted cash (1)	$	135,631	$	135,631	$	—	$	—

Municipal debt securities	$	42,431	$	—	$	42,431	$	—
Corporate debt securities	76,097		—		76,097		—
Agency mortgage-backed securities	48		—		48		—
U.S. government and agency securities	949		—		949		—
Restricted investments classified as held-to-maturity (2)	$	119,525	$	—	$	119,525	$	—

(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.

Assets measured at fair value on a nonrecurring basis

In addition to assets that are recorded at fair value on a recurring basis, annual and interim impairment tests may subject our reporting units with goodwill and other intangible assets to nonrecurring fair value measurement. We performed our annual impairment tests for goodwill and indefinite-lived intangible assets as of the first day of our fiscal second quarter of 2023. Refer to Note 5: Goodwill and Intangible Assets for additional details on the impairment charges, valuation methodologies, and inputs used in the fair value measurements.

For our 2023 annual goodwill impairment test, the fair value of each reporting unit was estimated using a weighting of the income and market approaches, except for PeopleScout MSP, which relied only on the income approach. The various inputs to these fair value models are considered Level 3. As a result of the test, goodwill with a carrying value of $9.7 million associated with the PeopleScout MSP reporting unit was impaired, and an impairment charge of $8.9 million was recognized on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the thirty-nine weeks ended September 24, 2023.

For our 2023 annual indefinite-lived intangible asset impairment test, the fair value of our trade names/trademarks were estimated utilizing the relief from royalty method. The various inputs to this fair value model are considered Level 3. As a result of the test, one of our trade names/trademarks with a carrying value of $3.9 million was written down to its fair value, and an impairment charge of $0.6 million was recognized on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the thirty-nine weeks ended September 24, 2023.

NOTE 3: RESTRICTED CASH AND INVESTMENTS

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


(in thousands)	September 24, 2023		December 25, 2022
Cash collateral held by insurance carriers	$	24,727	$	29,567
Cash and cash equivalents held in Trust	17,842		30,857
Investments held in Trust	125,379		123,678

Company-owned life insurance policies	30,005		26,479
Other restricted cash and cash equivalents	876		3,153
Total restricted cash and investments	$	198,829	$	213,734

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”).

Page - 7

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The amortized cost and estimated fair value of our held-to-maturity investments held in Trust, aggregated by investment category as of September 24, 2023 and December 25, 2022, were as follows:


	September 24, 2023
(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Municipal debt securities	$	34,783	$	—	$	(717)	$	34,066
Corporate debt securities	80,759		—		(3,458)		77,301
Agency mortgage-backed securities	8,839		—		(88)		8,751
U.S. government and agency securities	998		—		(66)		932
Total held-to-maturity investments	$	125,379	$	—	$	(4,329)	$	121,050


	December 25, 2022
(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Municipal debt securities	$	42,892	$	2	$	(463)	$	42,431
Corporate debt securities	79,736		4		(3,643)		76,097
Agency mortgage-backed securities	50		—		(2)		48
U.S. government and agency securities	1,000		—		(51)		949
Total held-to-maturity investments	$	123,678	$	6	$	(4,159)	$	119,525

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


	September 24, 2023
(in thousands)	Amortized cost		Fair value
Due in one year or less	$	32,068	$	31,617
Due after one year through five years	85,528		81,848
Due after five years through ten years	7,783		7,585
Total held-to-maturity investments	$	125,379	$	121,050

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.

Company-owned life insurance policies

We hold company-owned life insurance policies to support our deferred compensation liability. During the thirteen and thirty-nine weeks ended September 24, 2023, we received proceeds from company-owned life insurance policies of $1.7 million, of which $1.4 million was in excess of the cash surrender value of the related policies and recognized in selling, general and administrative (“SG&A”) expense on our Consolidated Statements of Operations and Comprehensive Income (Loss). Unrealized gains and losses related to investments still held at September 24, 2023 and September 25, 2022, which are included in SG&A expense on our Consolidated Statements of Operations and Comprehensive Income (Loss), were as follows:


	Thirteen weeks ended				Thirty-nine weeks ended
(in thousands)	September 24, 2023		September 25, 2022		September 24, 2023		September 25, 2022
Unrealized gains (losses)	$	(493)	$	(1,516)	$	1,482	$	(7,076)

Page - 8

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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:


	Thirty-nine weeks ended
(in thousands)	September 24, 2023		September 25, 2022
Beginning balance	$	3,212	$	6,687

Current period provision	3,254		3,352
Write-offs	(3,702)		(6,731)
Foreign currency translation	(2)		(22)
Ending balance	$	2,762	$	3,286

Prepaid expenses and other current assets

The balance of prepaid expenses and other current assets was made up of the following:


(in thousands)	September 24, 2023		December 25, 2022
Prepaid software agreements	$	8,626	$	9,994
Other prepaid expenses	8,640		9,455
Other current assets	5,755		13,081
Prepaid expenses and other current assets	$	23,021	$	32,530

Page - 9

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 5: GOODWILL AND INTANGIBLE ASSETS

Goodwill

The following table reflects changes in the carrying amount of goodwill during the period by reportable segment:


(in thousands)		PeopleReady		PeopleScout		PeopleManagement		Total company
Balance at	December 25, 2022
Goodwill before impairment		$	106,304	$	141,956	$	81,092	$	329,352
Accumulated impairment charge		(46,210)		(109,757)		(79,601)		(235,568)
Goodwill, net		60,094		32,199		1,491		93,784

Impairment charge		—		(8,885)		—		(8,885)
Foreign currency translation		—		(146)		—		(146)

Balance at	September 24, 2023
Goodwill before impairment		106,304		141,810		81,092		329,206
Accumulated impairment charge		(46,210)		(118,642)		(79,601)		(244,453)
Goodwill, net		$	60,094	$	23,168	$	1,491	$	84,753

We performed our annual impairment test as of the first day of our fiscal second quarter of 2023, for our reporting segments with remaining goodwill: PeopleReady; PeopleManagement Centerline; PeopleScout RPO; and PeopleScout MSP. The fair value of each reporting unit was estimated using a weighting of the income and market valuation approaches. The income approach applied a fair value methodology to each reporting unit based on discounted cash flows. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internally-developed forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested. The weighted average cost of capital used in our most recent impairment test ranged from 13.0% to 13.5%. We also applied a market approach, which develops a value correlation based on the market capitalization of similar publicly traded companies, referred to as a multiple, to apply to the operating results of the reporting units. The primary market multiples to which we compare are revenue and earnings before interest, taxes, depreciation, and amortization. The income and market approaches were equally weighted in our most recent annual impairment test, except for PeopleScout MSP which relied only on the income approach.

The combined fair values for all reporting units were then reconciled to our aggregate market value of our shares of common stock on the date of valuation, while considering a reasonable control premium. We consider a reporting unit’s fair value to be substantially in excess of its carrying value at a 20% premium or greater. Based on our most recent impairment test, all of our reporting units’ fair values were substantially in excess of their respective carrying values, except for PeopleScout MSP.

As a result of our 2023 annual impairment test, we concluded that the carrying amount of the PeopleScout MSP reporting unit exceeded its fair value and we recorded a non-cash goodwill impairment charge of $8.9 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the thirty-nine weeks ended September 24, 2023. The PeopleScout MSP goodwill impairment was related to our revised internal revenue projections, which anticipated the current year declining trends would continue into future periods. These projections were updated based on our then-current outlook and a recent industry analysis, which indicated that our business would underperform due to a strategic lack of investment in technology within an increasingly competitive market. The remaining goodwill balance for the PeopleScout MSP reporting unit was $0.8 million as of September 24, 2023.

Additionally, following performance of the annual impairment test, we did not identify any events or conditions that make it more likely than not that an additional impairment may have occurred. Accordingly, no further impairment loss was recognized during the thirty-nine weeks ended September 24, 2023.

Intangible assets

Indefinite-lived intangible assets

We held indefinite-lived trade names/trademarks of $5.4 million and $6.0 million as of September 24, 2023 and December 25, 2022, respectively, related to businesses within our PeopleScout and PeopleManagement segments.

Page - 10

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

As a result of our 2023 annual impairment test, we concluded that the carrying amount of a trade name/trademark related to the PeopleManagement segment exceeded its estimated fair value and recorded a non-cash impairment charge of $0.6 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the thirty-nine weeks ended September 24, 2023. The charge was primarily the result of an increase in the discount rate, as well as lower projected revenues given our then-current outlook. The remaining balance for this trade name/trademark was $3.3 million as of September 24, 2023.

Additionally, following performance of the annual impairment test, we did not identify any additional events or conditions that make it more likely than not that an additional impairment may have occurred. Accordingly, no further impairment loss was recognized during the thirty-nine weeks ended September 24, 2023.

Finite-lived intangible assets

We did not identify any events or conditions that make it more likely than not that an impairment of our finite-lived intangible assets may have occurred during the thirty-nine weeks ended September 24, 2023.

NOTE 6: 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 our $5.0 million deductible limit, on a “per occurrence” basis. This results in our business being substantially self-insured.

Our workers’ compensation reserve for claims below the deductible limit is discounted to its estimated net present value. The discount rates used to estimate net present value are based on average returns of “risk-free” U.S. Treasury instruments available during the year in which the liability was incurred and the weighted average duration of the payments against the self-insured claims. Payments made against self-insured claims are made over a weighted average period of approximately 6 years as of September 24, 2023. The weighted average discount rate was 2.3% and 2.0% at September 24, 2023 and December 25, 2022, respectively.

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


(in thousands)	September 24, 2023		December 25, 2022
Undiscounted workers’ compensation reserve	$	237,242	$	270,468
Less discount on workers’ compensation reserve	19,790		19,458
Workers’ compensation reserve, net of discount	217,452		251,010
Less current portion	44,091		50,005
Long-term portion	$	173,361	$	201,005

Payments made against self-insured claims were $32.6 million and $28.1 million for the thirty-nine weeks ended September 24, 2023 and September 25, 2022, 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 and the weighted average duration of the payments against the excess claims. The claim payments are made and the corresponding reimbursements from our insurance carriers are received over an estimated weighted average period of approximately 17 years. The rates used to discount excess claims incurred during the thirty-nine weeks ended September 24, 2023 and fifty-two weeks ended December 25, 2022 were 3.9% and 3.0%, respectively. The discounted workers’ compensation reserve for excess claims was $63.1 million and $76.7 million, as of September 24, 2023 and December 25, 2022, respectively. The discounted receivables from insurance companies, net of valuation allowance, were $61.9 million and $75.2 million as of September 24, 2023 and December 25, 2022, 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 $7.8 million and $6.9 million was recorded in cost of services on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the thirteen weeks ended September 24, 2023 and September 25, 2022, respectively, and $18.5 million and $28.0 million for the thirty-nine weeks ended September 24, 2023 and September 25, 2022, respectively.

Page - 11

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 7: 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 September 24, 2023, $7.2 million was utilized by outstanding standby letters of credit, leaving $292.8 million unused under the Revolving Credit Facility, which is constrained by our most restrictive covenant making $123.0 million available for additional borrowing. At December 25, 2022, $7.2 million was utilized by outstanding standby letters of credit.

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 Secured Overnight Financing Rate, plus an adjustment of 0.10%, 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.

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 Revolving Credit Facility. 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 Revolving Credit Facility, were in effect as of September 24, 2023:

•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 September 24, 2023, our consolidated leverage ratio was 0.17.

•Consolidated fixed charge coverage ratio greater than 1.25, defined as the trailing twelve months bank-adjusted cash flow divided by cash interest expense. As of September 24, 2023, our consolidated fixed charge coverage ratio was 27.83.

As of September 24, 2023, we were in compliance with all effective covenants related to the Revolving Credit Facility.

Page - 12

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 8: COMMITMENTS AND CONTINGENCIES

Workers’ compensation commitments

We have provided our insurance carriers and certain states with commitments in the form and amounts listed below:


(in thousands)	September 24, 2023		December 25, 2022
Cash collateral held by workers’ compensation insurance carriers	$	18,872	$	23,716
Cash and cash equivalents held in Trust	17,842		30,857
Investments held in Trust	125,379		123,678
Letters of credit (1)	6,077		6,077
Surety bonds (2)	20,725		20,806
Total collateral commitments	$	188,895	$	205,134

(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.

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 and are immaterial. We also believe that the aggregate range of reasonably possible losses for the Company's exposure in excess of the amount accrued is expected to be immaterial to the Company. It remains possible that despite our current belief, material differences in actual outcomes or changes in management's evaluation or predictions could arise that could have a material effect on the Company's financial condition, results of operations or cash flows.

Page - 13

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 9: SHAREHOLDERS' EQUITY

Changes in the balance of each component of shareholders’ equity during the reporting periods were as follows:

Thirteen weeks ended

Thirty-nine weeks ended

(in thousands)

September 24,
2023