Market Overview

TrueBlue Reports Fiscal Fourth Quarter 2017 Results

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TrueBlue, Inc. (NYSE:TBI) announced today its fiscal fourth quarter 2017
results.

Revenue was $670 million, a decrease of 9 percent, compared to revenue
of $735 million in the fiscal fourth quarter of 2016. Excluding the
previously disclosed reduction in the scope of services provided to the
company's former largest customer, revenue declined by 8 percent. Net
income per diluted share was $0.40 compared to $0.43 in the fiscal
fourth quarter of 2016. Adjusted net income per diluted share1 was
$0.51 compared to $0.56 in the fiscal fourth quarter of 2016.

The fiscal fourth quarter of 2016 included a 14th week and
two additional days from moving the week-ending date from Friday to
Sunday. On a comparable basis,2 revenue for the fiscal fourth
quarter declined by 2 percent, or excluding the company's former largest
customer, revenue declined by 1 percent.

"We saw improving fundamentals this quarter driven by strong execution
across the business," TrueBlue CEO Steve Cooper said. "The broad-based
improvements in the PeopleReady and PeopleManagement third quarter
revenue trends continued throughout the fourth quarter, and PeopleScout
delivered another quarter of double-digit growth.

"We also made additional progress with our digital strategy. Adoption of
JobStackTM, our PeopleReady mobile app, continued to climb,
and we also launched AffinixTM in our PeopleScout business, a
next generation technology that improves the candidate experience and
streamlines the sourcing process."

2018 Outlook

The company estimates revenue for the fiscal first quarter of 2018 will
range from $557 million to $572 million. It also expects net income per
diluted share will range from $0.03 to $0.11. Adjusted net income per
diluted share is expected to be $0.18 to $0.24.

The company estimates its historical effective income tax rate of 28
percent will drop to roughly 16 percent in fiscal 2018 and 2019 as a
result of recent tax reform legislation. The lower rate could extend
beyond 2019 if Congress extends the Work Opportunity Tax Credit (WOTC).
If the WOTC is not extended beyond 2019, the company estimates its
effective income tax rate will return to roughly 28 percent.

Management will discuss fiscal fourth quarter 2017 results on a
webcast at 2 p.m. PT (5 p.m. ET), today, Wednesday, Feb. 7. The webcast
can be accessed on TrueBlue's website: www.trueblue.com.

About TrueBlue:

TrueBlue (NYSE:TBI) is a leading provider of specialized workforce
solutions that help clients create growth, improve efficiency and
increase reliability. TrueBlue connected approximately 740,000 people
with work during 2017 in a wide variety of industries through its
PeopleReady segment offering industrial staffing services,
PeopleManagement segment offering contingent and productivity-based
onsite staffing services, and PeopleScout segment offering Recruitment
Process Outsourcing (RPO) and Managed Service Provider (MSP) solutions.
Learn more at www.trueblue.com.

1 See the financial statements accompanying the release and
the company's website for more information on non-GAAP terms.

2 The comparable period in 2016 excludes the first week
(ended Sept. 30) of the fourth quarter and the two additional days
associated with the change in week-ending date.

Forward-looking Statements

This document contains forward-looking statements relating to our plans
and expectations, all of which are subject to risks and uncertainties.
Such statements are based on management's expectations and assumptions
as of the date of this release and involve many risks and uncertainties
that could cause actual results to differ materially from those
expressed or implied in our forward-looking statements including: (1)
national and global economic conditions, (2) our ability to attract and
retain customers, (3) our ability to maintain profit margins, (4) new
laws and regulations that could have a material effect on our operations
or financial results, (5) our ability to successfully complete and
integrate acquisitions (6) our ability to attract sufficient qualified
candidates and employees to meet the needs of our customers, (7) our
ability to successfully execute on new business strategies and
initiatives such as the consolidation of our service lines and
leveraging of mobile technology, and (8) uncertainty surrounding the
interpretation and application of the recent 2017 Tax Cuts and Jobs Act
and any reduction or change in tax credits we utilize, including the
Work Opportunity Tax Credit. Other information regarding factors that
could affect our results is included in our Securities Exchange
Commission (SEC) filings, including the company's most recent reports on
Forms 10-K and 10-Q, copies of which may be obtained by visiting our
website at www.trueblue.com
under the Investor Relations section or the SEC's website at www.sec.gov.
We assume no obligation to update or revise any forward-looking
statement, whether as a result of new information, future events, or
otherwise, except as required by law. Any other reference to future
financial estimates are included for informational purposes only and
subject to risk factors discussed in our most recent filings with the
SEC.

In addition, we use several non-GAAP financial measures when presenting
our financial results in this document. Please refer to the
reconciliations between our GAAP and non-GAAP financial measures in the
appendix to this document and on our website at www.trueblue.com
under the Investor Relations section for a complete perspective on both
current and historical periods. The presentation of these non-GAAP
financial measures is used to enhance the understanding of certain
aspects of our financial performance. It is not meant to be considered
in isolation, superior to, or as a substitute for the directly
comparable financial measures prepared in accordance with U.S. GAAP, and
may not be comparable to similarly titled measures of other companies.

TRUEBLUE, INC.
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 
  Q4 2017   Q4 2016   2017   2016
13 Weeks Ended 14 Weeks Ended (1) 52 Weeks Ended 53 Weeks Ended (1)

(in thousands, except per share data)

  Dec 31, 2017   Jan 1, 2017 Dec 31, 2017   Jan 1, 2017
Revenue from services $ 669,625 $ 734,951 $ 2,508,771 $ 2,750,640
Cost of services   501,880     554,064   1,874,298     2,070,922  
Gross profit 167,745 180,887 634,473 679,718
Selling, general and administrative expense 132,644 145,387 510,794 546,477
Depreciation and amortization 11,465 12,019 46,115 46,692
Goodwill and intangible asset impairment charge             103,544  
Income (loss) from operations 23,636 23,481 77,564 (16,995 )
Interest and other income (expense), net   (24 )   (572 ) (14 )   (3,345 )
Income (loss) before tax expense 23,612 22,909 77,550 (20,340 )
Income tax expense (benefit)   7,185     4,822   22,094     (5,089 )
Net income (loss)   $ 16,427     $ 18,087   $ 55,456     $ (15,251 )
 
Net income (loss) per common share:
Basic $ 0.41 $ 0.43 $ 1.35 $ (0.37 )
Diluted $ 0.40 $ 0.43 $ 1.34 $ (0.37 )
 
Weighted average shares outstanding:
Basic 40,545 41,638 41,202 41,648
Diluted 40,856 41,980 41,441 41,648
 
(1) Our fiscal period ends on the Sunday closest to the last day of Dec.
In fiscal years consisting of 53 weeks, the final quarter consists
of 14 weeks, while in fiscal years consisting of 52 weeks, all
quarters consist of 13 weeks.
 
TRUEBLUE, INC.
SUMMARY CONSOLIDATED BALANCE SHEETS

(Unaudited)

 
  2017   2016

(in thousands)

  Dec 31, 2017 Jan 1, 2017
ASSETS
Cash and cash equivalents $ 28,780 $ 34,970
Accounts receivable, net 374,273 352,606
Other current assets   25,226   40,227
Total current assets 428,279 427,803
Property and equipment, net 60,163 63,998
Restricted cash and investments 239,231 231,193
Goodwill and intangible assets, net 331,309 349,894
Other assets, net   50,049   57,557
Total assets   $ 1,109,031   $ 1,130,445
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities 212,419 251,135
Long-term debt, less current portion 116,489 135,362
Other long-term liabilities   225,276   218,769
Total liabilities 554,184 605,266
Shareholders' equity   554,847   525,179
Total liabilities and shareholders' equity   $ 1,109,031   $ 1,130,445
 
TRUEBLUE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 
  2017   2016
52 Weeks Ended 53 Weeks Ended

(in thousands)

  Dec 31, 2017 Jan 1, 2017
Cash flows from operating activities:
Net income (loss) $ 55,456 $ (15,251 )
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 46,115 46,692
Goodwill and intangible asset impairment charge 103,544
Provision for doubtful accounts 6,808 8,308
Stock-based compensation 7,744 9,363
Deferred income taxes 2,440 (25,355 )
Other operating activities 2,066 7,910
Changes in operating assets and liabilities, net of effects of
acquisition of business:
Accounts receivable (28,483 ) 112,785
Income tax receivable 14,875 9,450
Other assets 5,289 470
Accounts payable and other accrued expenses (10,569 ) (4,101 )
Accrued wages and benefits (2,888 ) (7,313 )
Workers' compensation claims reserve (1,048 ) 11,070
Other liabilities   2,046   4,182  
Net cash provided by operating activities   99,851   261,754  
Cash flows from investing activities:
Capital expenditures (21,958 ) (29,042 )
Acquisition of business (72,476 )
Change in restricted cash 21,505 (19,773 )
Purchases of restricted investments (50,601 ) (37,173 )
Maturities of restricted investments   20,157   15,248  
Net cash used in investing activities   (30,897 ) (143,216 )
Cash flows from financing activities:
Purchases and retirement of common stock (36,680 ) (5,748 )
Net proceeds from stock option exercises and employee stock purchase
plans
1,646 1,542
Common stock repurchases for taxes upon vesting of restricted stock (3,127 ) (2,851 )
Net change in revolving credit facility (16,607 ) (105,579 )
Payments on debt (2,267 ) (2,456 )
Payment of contingent consideration at acquisition date fair value (18,300 )
Other     (29 )
Net cash used in financing activities (75,335 ) (115,121 )
Effect of exchange rate changes on cash and cash equivalents   191   1,772  
Net change in cash and cash equivalents (6,190 ) 5,189
Cash and cash equivalents, beginning of period   34,970   29,781  
Cash and cash equivalents, end of period   $ 28,780   $ 34,970  
 

TRUEBLUE, INC.

FISCAL 2016 COMPARABLE 13- AND 52-WEEK PERIODS

(Unaudited)

As previously reported, the company's 2016 fiscal fourth quarter
includes a 14th week and two additional days from moving the week-ending
date from Friday to Sunday. To facilitate comparison to the current
year, the company is providing 13-week and 52-week comparable operating
results.

   
Q4 2016 2016

(in thousands, except per share data)

 

13-Week
Comparable
Period (1)

 

52-Week
Comparable
Period (1)

Revenue from services $ 680,709 $ 2,696,398
Cost of services     512,501     2,029,359  
Gross profit 168,208 667,039
Selling, general and administrative expense 135,435 536,525
Depreciation and amortization 11,127 45,800
Goodwill and intangible asset impairment charge         103,544  
Income (loss) from operations 21,646 (18,830 )
Interest and other income (expense), net     (521 )   (3,294 )
Income (loss) before tax expense 21,125 (22,124 )
Income tax expense (benefit)     4,334     (5,577 )
Net income (loss)   $ 16,791   $ (16,547 )
 
Net income (loss) per common share:
Basic $

0.40

$ (0.40 )
Diluted $

0.40

$ (0.40 )
 
Weighted average shares outstanding:
Basic 41,638 41,648
Diluted 41,980 41,648
(1)   The 13-week comparable period represents the 13 weeks ended Jan. 1
2017. The 52-week comparable period represents the sum of the 13
weeks ended Jan. 1, 2017 and the 39 weeks ended Sept. 23, 2016.

TRUEBLUE, INC.

NON-GAAP FINANCIAL MEASURES AND NON-GAAP RECONCILIATIONS

In addition to financial measures presented in accordance with U.S.
GAAP, we monitor certain non-GAAP key financial measures. The
presentation of these non-GAAP financial measures is used to enhance the
understanding of certain aspects of our financial performance. It is not
meant to be considered in isolation, superior to, or as a substitute for
the directly comparable financial measures prepared in accordance with
U.S. GAAP, and may not be comparable to similarly titled measures of
other companies.

   
Non-GAAP Measure   Definition   Purpose of Adjusted Measures
EBITDA and Adjusted EBITDA

EBITDA excludes from net income (loss) the effects of:
-
interest expense,
- income taxes, and
- depreciation and
amortization.

Adjusted EBITDA, further excludes the effects of:
-
acquisition/integration and other costs,
- goodwill and
intangible asset impairment charge, and
- Work Opportunity
Tax Credit third-party processing fees.

 

- Enhances comparability on a consistent basis and provides
investors with useful insight into the underlying trends of the
business.

- Used by management to assess performance and
effectiveness of our business strategies by excluding certain
non-cash charges.

- Provides a measure, among others,
used in the determination of incentive compensation for management.
Adjusted net income (loss) and Adjusted net income (loss), per
diluted share

Net income (loss) and net income (loss) per diluted share,
excluding the effects of:
- acquisition/integration and other
costs,
- goodwill and intangible asset impairment charge,
-
amortization of intangibles of acquired businesses, as well as
accretion expense related to acquisition earn-out,
- tax
effect of each adjustment to U.S. GAAP net income (loss), and
-
adjusted income taxes to the expected effective tax rate.

- Enhances comparability on a consistent basis and provides
investors with useful insight into the underlying trends of the
business.

- Used by management to assess performance and
effectiveness of our business strategies by excluding certain
non-cash charges.
 

1. RECONCILIATION OF U.S. GAAP NET INCOME (LOSS) TO ADJUSTED
NET INCOME AND ADJUSTED NET INCOME, PER DILUTED SHARE ON A FISCAL AND
COMPARABLE PERIOD BASIS

(Unaudited)

 

       
Q4 2017 Q4 2016 Q1 2018 Outlook
(in thousands, except for per share data)*  

13 Weeks Ended
Dec 31, 2017

14 Weeks Ended
Jan 1, 2017

 

13-Week
Comparable

Period (6)

13 Weeks Ended
Apr 1, 2018

Net income $ 16,427 $ 18,087 $ 16,791 $ 1,300 $ 4,600
Acquisition/integration and other costs (1) 162 4,002 4,002 2,000 1,000
Amortization of intangible assets of acquired businesses (3) 5,331 6,391 5,934 5,200
Tax effect of adjustments to net income (4) (1,538 ) (2,910 ) (2,782 )

(1,200

)

(1,000 )
Adjust income taxes to normalized effective rate (5)     574     (1,593 )     (1,581 )          
Adjusted net income   $ 20,956   $ 23,977     $ 22,364   $ 7,300   $ 9,800  
 
Adjusted net income, per diluted share $ 0.51 $ 0.56 $ 0.52 $ 0.18 $ 0.24
 
Diluted weighted average shares outstanding 40,856 41,980 41,980 40,600
* Totals may not sum due to rounding
  2017   2016
52 Weeks Ended 53 Weeks Ended   52-Week
(in thousands, except for per share data)*   Dec 31, 2017 Jan 1, 2017   Comparable Period (6)
Net income (loss) $ 55,456 $ (15,251 ) $ (16,547 )
Acquisition/integration and other costs (1) 162 12,223 12,223
Goodwill and intangible asset impairment charge (2) 103,544 103,544
Amortization of intangible assets of acquired businesses (3) 22,290 27,069 26,612
Tax effect of adjustments to net income (4) (6,287 ) (39,994 ) (39,866 )
Adjust income taxes to normalized effective rate (5)   380   606     618  
Adjusted net income   $ 72,001   $ 88,197     $ 86,584  
 
Adjusted net income, per diluted share $ 1.74 $ 2.10 $ 2.06
 
Diluted weighted average shares outstanding 41,441 41,968 41,968
* Totals may not sum due to rounding
 

2. RECONCILIATION OF U.S. GAAP NET INCOME (LOSS) TO EBITDA AND
ADJUSTED EBITDA ON A FISCAL AND COMPARABLE PERIOD BASIS

(Unaudited)

       
Q4 2017   Q4 2016   Q1 2018 Outlook
(in thousands)*  

13 Weeks Ended
Dec 31, 2017

14 Weeks Ended
Jan 1, 2017

 

13-Week
Comparable
Period (6)

13 Weeks Ended
Apr 1, 2018

Net income

$

16,427

$ 18,087 $ 16,791 $ 1,300     $ 4,600
Income tax expense 7,185 4,822 4,334 200 900
Interest and other income (expense), net 24 572 521

(200)

Depreciation and amortization     11,465     12,019     11,127   11,000
EBITDA 35,101 35,500 32,773 12,300 16,300
Acquisition/integration and other costs (1) 162 4,002 4,002 2,000 1,000
Work Opportunity Tax Credit processing fees (7)     337     276     276   200
Adjusted EBITDA   $ 35,600   $ 39,778   $ 37,051   $ 14,500     $ 17,500
* Totals may not sum due to rounding
 
  2017   2016
52 Weeks Ended 53 Weeks Ended   52-Week
(in thousands)*   Dec 31, 2017 Jan 1, 2017   Comparable Period (6)
Net income (loss) $ 55,456 $ (15,251 ) $ (16,547 )
Income tax expense (benefit) 22,094 (5,089 ) (5,577 )
Interest and other income (expense), net 14 3,345 3,294
Depreciation and amortization   46,115   46,692   45,800  
EBITDA 123,679 29,697 26,970
Acquisition/integration and other costs (1) 162 12,223 12,223
Goodwill and intangible asset impairment charge (2) 103,544 103,544
Work Opportunity Tax Credit processing fees (7)   805   1,858   1,858  
Adjusted EBITDA   $ 124,646   $ 147,322   $ 144,595  
* Totals may not sum due to rounding

3. RECONCILIATION OF U.S. GAAP REVENUE TO REVENUE EXCLUDING
THE COMPANY'S FORMER LARGEST CUSTOMER ON A FISCAL AND COMPARABLE PERIOD
BASIS

(Unaudited)

Due to a previously announced reduction in the scope of services with
its former largest customer, the company is providing results excluding
this customer to help investors assess the company's underlying results
with prior periods.

  Q4 2017   Q4 2016
(in thousands)  

13 Weeks Ended
Dec 31, 2017

14 Weeks Ended
Jan 1, 2017

 

13-Week Comparable
Period (6)

Revenue from services $ 669,625 $ 734,951   $ 680,709
Former largest customer revenue     (24,052 )   (33,603 )     (31,687 )
Revenue excluding former largest customer   $ 645,573   $ 701,348     $ 649,022  
 
  2017   2016
52 Weeks Ended 53 Weeks Ended   52-Week
(in thousands)   Dec 31, 2017 Jan 1, 2017   Comparable Period (6)
Revenue from services $ 2,508,771 $ 2,750,640 $ 2,696,398
Former largest customer revenue   (53,435 ) (171,164 )   (169,248 )
Revenue excluding former largest customer   $ 2,455,336   $ 2,579,476     $ 2,527,150  
 

4. RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES
TO FREE CASH FLOWS

(Unaudited)

  2017   2016
52 Weeks Ended 53 Weeks Ended
(in thousands)   Dec 31, 2017 Jan 1, 2017
Net cash provided by operating activities $ 99,851 $ 261,754
Capital expenditures   (21,958 ) (29,042 )
Free cash flows   $ 77,893   $ 232,712  
 
(1)   Other charges for the 13 weeks and 52 weeks ended Dec. 31, 2017,
include a workforce reduction charge of $2.5 million primarily
associated with employee reductions in the PeopleReady business,
offset by $2.3 million of workers' compensation benefit. The
workers' compensation benefit is associated with the favorable
settlement of insurance coverage associated with a former insurance
company and other items not considered part of our core operations.
For the prior year periods, acquisition/integration costs related to
the acquisition of the recruitment process outsourcing business of
Aon Hewitt, which was completed on Jan. 4, 2016. In addition, other
charges include costs associated with our exit from the Amazon
delivery business of $1.8 million, and branch signage write-offs of
$1.6 million due to our re-branding to PeopleReady in the fiscal
third quarter of 2016. Other charges included in the Q1 2018 outlook
primarily relate to cloud-based financial system upgrades.
 
(2) The goodwill and intangible asset impairment charge in the prior
year included the write-off of the CLP and Spartan reporting unit
trade names/trademarks of $4.3 million due to our re-branding to
PeopleReady during the fiscal third quarter of 2016, and $99.3
million of impairment charges recorded in the fiscal second quarter
of 2016 relating to our Staff Management | SMX, hrX and PlaneTechs
reporting units. Note, our PeopleScout and hrX service lines were
combined during fiscal 2016 and now represent a single operating
unit (PeopleScout).
 
(3) Amortization of intangible assets of acquired businesses as well as
accretion expense related to the SIMOS acquisition earn-out.
 
(4) Total tax effect of each of the adjustments to U.S. GAAP net income
(loss) per diluted share using the expected rate of 28 percent for
2017 and 2016. We expect the tax rate to be 16 percent in Q1 2018
due to the enacted U.S. Tax Cuts and Job Act.
 
(5) Adjusts the effective income tax rate to the expected rate of 28
percent for 2017 and 2016. We expect the tax rate to be 16 percent
in Q1 2018 due to the enacted U.S. Tax Cuts and Job Act.
 
(6) Our fiscal period ends on the Sunday closest to the last day of Dec.
In fiscal years consisting of 53 weeks, the final quarter consists
of 14 weeks, while in fiscal years consisting of 52 weeks, all
quarters consist of 13 weeks. The 13-week comparable period
represents the 13 weeks ended Jan. 1 2017. The 52-week comparable
period represents the sum of the 13 weeks ended Jan. 1, 2017 and the
39 weeks ended Sept. 23, 2016.
 
(7) These third-party processing fees are associated with generating the
Work Opportunity Tax Credits, which are designed to encourage
employers to hire workers from certain targeted groups with higher
than average unemployment rates and reduce our income taxes.
 
TRUEBLUE, INC.
SEGMENT INFORMATION
 
1. SEGMENT DATA

(Unaudited)

 
  Q4 2017   Q4 2016   2017   2016

13 Weeks
Ended

 

14 Weeks
Ended

52 Weeks
Ended

 

53 Weeks
Ended

(in thousands)   Dec 31, 2017   Jan 1, 2017 Dec 31, 2017   Jan 1, 2017
Revenue from services:
PeopleReady $ 393,029 $ 431,388 $ 1,511,360 $ 1,629,455
PeopleManagement 225,865 257,848 807,273 940,453
PeopleScout   50,731     45,715   190,138     180,732  
Total company   669,625     734,951   2,508,771     2,750,640  
 
Adjusted Segment EBITDA (1):
PeopleReady $ 21,128 $ 26,348 $ 79,044 $ 109,063
PeopleManagement 8,457 11,903 27,216 27,557
PeopleScout   10,283     6,589   39,354     34,285  
Total Adjusted Segment EBITDA 39,868 44,840 145,614 170,905
Corporate unallocated expense   (4,268 )   (5,062 ) (20,968 )   (23,583 )
Total company Adjusted EBITDA 35,600 39,778 124,646 147,322
Acquisition/integration and other costs (2) (162 ) (4,002 ) (162 ) (12,223 )
Goodwill and intangible asset impairment charge (3) (103,544 )
Work Opportunity Tax Credit processing fees (4)   (337 )   (276 ) (805 )   (1,858 )
EBITDA 35,101 35,500 123,679 29,697
Depreciation and amortization (11,465 ) (12,019 ) (46,115 ) (46,692 )
Interest and other income (expense), net (24 )   (572 ) (14 )   (3,345 )
Income (loss) before tax expense 23,612 22,909 77,550 (20,340 )
Income tax (expense) benefit   (7,185 )   (4,822 ) (22,094 )   5,089  
Net income (loss)   $ 16,427     $ 18,087   $ 55,456     $ (15,251 )
 
2. RECONCILIATION OF SEGMENT EBITDA TO ADJUSTED SEGMENT EBITDA

(Unaudited)

 
  Q4 2017   Q4 2016
13 Weeks Ended 14 Weeks Ended
Dec 31, 2017 Jan 1, 2017
(in thousands)   PeopleReady   PeopleManagement   PeopleScout PeopleReady   PeopleManagement   PeopleScout
Segment EBITDA (1) $ 20,924   $ 8,284   $ 10,161 $ 26,072   $ 9,766   $ 6,589
Acquisition/integration and other costs (2) (133 ) 173 122 2,137
Work Opportunity Tax Credit processing fees (4)   337           276        
Adjusted Segment EBITDA (1)   $ 21,128     $ 8,457     $ 10,283   $ 26,348     $ 11,903     $ 6,589
 
2017   2016
52 Weeks Ended 53 Weeks Ended
Dec 31, 2017 Jan 1, 2017
(in thousands) PeopleReady   PeopleManagement   PeopleScout PeopleReady   PeopleManagement   PeopleScout
Segment EBITDA (1) $ 78,372   $ 27,043   $ 39,232 $ 101,270   $ (60,452 )   $ 19,116
Acquisition/integration and other costs (2) (133 ) 173 122 1,660 3,909
Goodwill and intangible asset impairment charge (3) 4,275 84,100 15,169
Work Opportunity Tax Credit processing fees (4) 805         1,858      
Adjusted Segment EBITDA (1) $ 79,044     $ 27,216   $ 39,354   $ 109,063   $ 27,557     $ 34,285
 

3. SEGMENT DATA FOR FISCAL 2016 COMPARABLE 13- AND 52-WEEK
PERIODS

(Unaudited)

As previously reported, the company's 2016 fiscal fourth quarter
includes a 14th week and two additional days from moving the week-ending
date from Friday to Sunday. To facilitate comparison to the current
year, the company is providing 13-week and 52-week comparable operating
results.

 

13-Week
Comparable
Period (5)

 

52-Week
Comparable
Period (5)

(in thousands)    
Revenue from services:
PeopleReady $ 395,643 $ 1,593,710
PeopleManagement 240,989 923,594
PeopleScout   44,077     179,094
Total company   680,709     2,696,398
 
Adjusted Segment EBITDA (1):
PeopleReady $ 23,636 $ 106,351
PeopleManagement 11,299 26,953
PeopleScout   6,621     34,317
Total Adjusted Segment EBITDA   $ 41,556     $ 167,621
 

4. RECONCILIATION OF SEGMENT EBITDA TO ADJUSTED SEGMENT EBITDA
FOR FISCAL 2016 COMPARABLE 13- AND 52-WEEK PERIODS

(Unaudited)

  Q4 2016   2016
13-Week 52-Week
Comparable Period (5) Comparable Period (5)
(in thousands)   PeopleReady   PeopleManagement   PeopleScout PeopleReady   PeopleManagement   PeopleScout
Segment EBITDA (1) $ 23,360   $ 9,162   $ 6,621 $ 98,558   $ (61,056 )   $ 19,148
Acquisition/integration and other costs (2) 2,137 1,660 3,909
Goodwill and intangible asset impairment charge (3) 4,275 84,100 15,169
Work Opportunity Tax Credit processing fees (4)   276           1,858        
Adjusted Segment EBITDA (1)   $ 23,636     $ 11,299     $ 6,621   $ 106,351     $ 26,953     $ 34,317
 
(1)

Segment earnings before interest, taxes, depreciation and
amortization ("Segment EBITDA") is a primary measure of segment
performance. Segment EBITDA includes net sales to third parties,
related cost of sales, selling, general and administrative
expenses, and goodwill and intangible asset impairment charge
directly attributable to the reportable segment together with
certain allocated corporate general and administrative expenses.
Segment EBITDA excludes unallocated corporate general and
administrative expenses. Adjusted Segment EBITDA is a non-GAAP
financial measure and further excludes acquisition/integration and
other costs, goodwill and intangible asset impairment charge, and
Work Opportunity Tax Credit third-party processing fees. Adjusted
Segment EBITDA is a key measure used by management to assess
performance and, in our opinion, enhances comparability and
provides investors with useful insight into the underlying trends
of the business. It is not meant to be considered in isolation,
superior to, or as a substitute for the directly comparable
financial measures prepared in accordance with U.S. GAAP, and may
not be comparable to similarly titled measures of other companies.

 
(2) Other charges for the 13 weeks and 52 weeks ended Dec. 31, 2017,
include a workforce reduction charge of $2.5 million primarily
associated with employee reductions in the PeopleReady business,
offset by $2.3 million of workers' compensation benefit. The
workers' compensation benefit is associated with the favorable
settlement of insurance coverage associated with a former insurance
company and other items not considered part of our core operations.
For the prior year periods, acquisition/integration costs related to
the acquisition of the recruitment process outsourcing business of
Aon Hewitt, which was completed on Jan. 4, 2016. In addition, other
charges include costs associated with our exit from the Amazon
delivery business of $1.8 million, and branch signage write-offs of
$1.6 million due to our re-branding to PeopleReady in the fiscal
third quarter of 2016.
 
(3) The goodwill and intangible asset impairment charge in the prior
year included the write-off of the CLP and Spartan reporting unit
trade names/trademarks of $4.3 million due to our re-branding to
PeopleReady during the fiscal third quarter of 2016, and $99.3
million of impairment charges recorded in the fiscal second quarter
of 2016 relating to our Staff Management | SMX, hrX and PlaneTechs
reporting units. Note, our PeopleScout and hrX service lines were
combined during fiscal 2016 and now represent a single operating
unit (PeopleScout).
 
(4) These third-party processing fees are associated with generating the
Work Opportunity Tax Credits, which are designed to encourage
employers to hire workers from certain targeted groups with higher
than average unemployment rates and reduce our income taxes.
 
(5) Our fiscal period ends on the Sunday closest to the last day of Dec.
In fiscal years consisting of 53 weeks, the final quarter consists
of 14 weeks, while in fiscal years consisting of 52 weeks, all
quarters consist of 13 weeks. The 13-week comparable period
represents the 13 weeks ended Jan. 1 2017. The 52-week comparable
period represents the sum of the 13 weeks ended Jan. 1, 2017 and the
39 weeks ended Sept. 23, 2016.

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