TrueBlue (TBI) 10-Q2023 Q1 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

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

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.

As of April 19, 2023, there were 31,023,360 shares of the registrant’s common stock outstanding.

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 thirteen weeks ended March 26, 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 thirteen weeks ended March 26, 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:

NOTE 3:    RESTRICTED CASH AND INVESTMENTS

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

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 26, 2023 and December 25, 2022, were as follows:

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.

Company-owned life insurance policies

We hold company-owned life insurance policies to support our deferred compensation liability. Unrealized gains and losses related to investments still held at March 26, 2023 and March 27, 2022, which are included in selling, general and administrative expense on our Consolidated Statements of Operations and Comprehensive Income (Loss), were as follows:

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:

Prepaid expenses and other current assets

Other current liabilities

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 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 March 26, 2023. The weighted average discount rate was 2.1% and 2.0% at March 26, 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:

Payments made against self-insured claims were $11.9 million and $9.7 million for the thirteen weeks ended March 26, 2023 and March 27, 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 thirteen weeks ended March 26, 2023 and fifty-two weeks ended December 25, 2022 were 3.5% and 3.0%, respectively. The discounted workers’ compensation reserve for excess claims was $73.9 million and $76.7 million, as of March 26, 2023 and December 25, 2022, respectively. The discounted receivables from insurance companies, net of valuation allowance, were $72.5 million and $75.2 million as of March 26, 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 $4.8 million and $11.3 million was recorded in cost of services on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the thirteen weeks ended March 26, 2023 and March 27, 2022, 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 26, 2023, $7.2 million was utilized by outstanding standby letters of credit, leaving $292.8 million unused under the Revolving Credit Facility. 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 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.

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 26, 2023:

As of March 26, 2023, we were in compliance with all effective covenants related to the Revolving Credit Facility.

Subsequent event

The ICE Benchmark Administration Limited, in its capacity as administrator of LIBOR, announced that it will discontinue publication of LIBOR (other than one-week and two-month tenors) after June 2023. In anticipation of this change, we entered into an amendment to our credit agreement effective March 30, 2023 to replace LIBOR as our benchmark rate (the “LIBOR Transition Amendment”). This amendment replaced LIBOR with the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York, plus an adjustment of 0.10%, and is not expected to have a significant impact on our financial statements or related disclosures. All other terms of our credit agreement remain unchanged.

NOTE 7:    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 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.

NOTE 8:    SHAREHOLDERS' EQUITY

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

NOTE 9:    INCOME TAXES

Our income tax provision or benefit for interim periods is determined using an estimate of our annual effective tax rate, adjusted for any discrete items 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 full year pre-tax 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 income tax rate for the thirteen weeks ended March 26, 2023 was 13.0%. The difference between the statutory federal income tax rate of 21.0% and our effective tax rate was primarily due to hiring tax credits, including the Work Opportunity Tax Credit (“WOTC”). WOTC 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 and our effective tax rate result from state income taxes and certain non-deductible and non-taxable items.

NOTE 10:    NET INCOME (LOSS) PER SHARE

Diluted common shares were calculated as follows:

NOTE 11:    SEGMENT INFORMATION

Our operating segments and reportable segments are described below:

The following table presents our revenue disaggregated by major source and segment and a reconciliation of segment revenue from services to total company revenue:

The following table presents a reconciliation of segment profit (loss) to income (loss) before tax expense (benefit):

Asset information by reportable segment is not presented as we do not manage our segments on a balance sheet basis.

COMMENT ON FORWARD LOOKING STATEMENTS

Certain statements in this Form 10-Q, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements involve risks and uncertainties, and future events and circumstances could differ significantly from those anticipated in the forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “goal,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially from those expressed or implied in our forward-looking statements, including the risks and uncertainties described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part I, Item 2 of this Form 10-Q),“Quantitative and Qualitative Disclosures about Market Risk” (Part I, Item 3 of this Form 10-Q), and “Risk Factors” (Part II, Item 1A of this Form 10-Q). We undertake no duty to update or revise publicly any of the forward-looking statements after the date of this report or to conform such statements to actual results or to changes in our expectations, whether because of new information, future events, or otherwise.

BUSINESS OVERVIEW

TrueBlue, Inc. (the “company,” “TrueBlue,” “we,” “us” and “our”) is a leading provider of specialized workforce solutions that help our clients improve productivity and grow their businesses. Client demand for contingent workforce solutions and outsourced recruiting services is cyclical and dependent on the overall strength of the economy and labor market, as well as trends in workforce flexibility. During periods of rising economic uncertainty, clients reduce their contingent labor in response to lower volumes and reduced appetite for expanding production or inventory, which reduces the demand for our services. That environment also reduces demand for permanent placement recruiting, whether outsourced or in-house. However, as the economy emerges from periods of uncertainty, contingent labor providers are uniquely positioned to respond quickly to increasing demand for labor and rapidly fill new or temporary positions, replace absent employees, and convert fixed labor costs to variable costs. Similarly, companies turn to hybrid or fully outsourced recruiting models during periods of rapid re-hiring and high employee turnover. In order to competitively differentiate our services and grow market share in these highly fragmented industries, we are committed to executing our digital strategies to increase our ability to attract and retain clients, employees and associates and reduce the cost of delivering our services. We have implemented these core strategies for each of our business segments: PeopleReady, PeopleScout and PeopleManagement.

PeopleReady

PeopleScout

PeopleManagement

PeopleManagement provides recruitment and on-site management of a facility’s contingent industrial workforce throughout the U.S., Canada and Puerto Rico. Our client engagements are generally multi-location and multi-year, and include scalable recruiting, screening, hiring and management of the contingent workforce. Once operational, we deploy dedicated management and service teams that work side-by-side with a client’s full-time workforce. Our teams are an integral part of the production and logistics process, and specialize in labor-intensive manufacturing, warehousing and distribution. PeopleManagement also provides dedicated and contingent commercial drivers to the transportation and distribution industries through our Centerline Drivers (“Centerline”) brand. Centerline matches drivers to each client’s specific needs, allowing them to improve productivity, control costs, ensure compliance and deliver improved service. Our primary focus at PeopleManagement continues to be growing our client base by targeting local and underserved markets, as well as investing in customer and associate care programs to improve retention.

Fiscal first quarter of 2023 highlights

Total company revenue declined 15.6% to $465.3 million for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. PeopleReady revenue declined 17.4%, primarily due to the absence of the post-pandemic demand surge we benefited from in the prior period. PeopleScout revenue declined 15.3%, as clients responded to economic uncertainty by reducing hiring volumes. PeopleManagement revenue declined 12.6%, as clients responded to economic uncertainty by shifting otherwise outsourced work to their permanent workforce.

Total company gross profit as a percentage of revenue for the thirteen weeks ended March 26, 2023 increased by 110 basis points to 26.5%, compared to 25.4% for the same period in the prior year. This increase was primarily driven by lower workers’ compensation costs and higher bill rates within our PeopleReady segment, which have increased ahead of pay rates.

Total company selling, general and administrative (“SG&A”) expense increased 1.7% to $122.6 million for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. The increase in SG&A expense was primarily related to workforce reduction costs within our PeopleScout and PeopleManagement segments at the end of the fiscal quarter, as well as investments we are making within our PeopleReady segment related to sales team training and geographical expansion of our skilled trades business.

As of March 26, 2023, we were in a strong financial position with cash and cash equivalents of $47.2 million, no outstanding debt, and $292.8 million available under our revolving credit agreement (“Revolving Credit Facility”), for total liquidity of $340.0 million.

RESULTS OF OPERATIONS

The following table presents selected financial data:

Total company revenue declined 15.6% to $465.3 million for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. The decline was driven by economic uncertainty, as well as the absence of the post-pandemic demand surge we benefited from within our PeopleReady business in the prior year. In addition, clients have responded to macroeconomic uncertainty by reducing hiring volumes within our PeopleScout business and through higher utilization of their permanent workforce for previously outsourced work within our PeopleManagement business.

PeopleReady

PeopleReady revenue declined 17.4% to $252.6 million for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. The decline in revenue was primarily due to the absence of the demand surge we benefited from in the prior year, as the post-pandemic recovery effort peaked and fueled our client’s need for contingent labor. During the last half of fiscal 2022, demand for our services slowed as clients faced economic uncertainty and paused the use of variable labor to supplement their core workforce. However, sequential weekly revenue trends for the thirteen weeks ended March 26, 2023 were consistent with historical patterns.

PeopleScout

PeopleScout revenue declined 15.3% to $69.5 million for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. PeopleScout revenue declined as clients responded to economic uncertainty by reducing hiring volumes. In the prior year, PeopleScout benefited from increased customer volume, primarily in the travel and leisure and retail industries.

PeopleManagement

PeopleManagement revenue declined 12.6% to $143.2 million for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. PeopleManagement revenue declined as clients responded to economic uncertainty by reducing volumes in our on-site business, primarily among retail clients, as well as commercial driving services.

Gross profit as a percentage of revenue grew 110 basis points to 26.5% for the thirteen weeks ended March 26, 2023, compared to 25.4% for the same period in the prior year. Within our staffing businesses, lower workers’ compensation costs from favorable development of prior year reserves contributed 100 basis points of expansion. An additional 20 basis points of expansion was a result of higher bill rates in our staffing businesses, which have increased ahead of pay rates. This expansion was partially offset by a contraction of 10 basis points, due to an unfavorable revenue shift toward our lower margin staffing businesses.

Total company SG&A expense increased by $2.1 million or 1.7% for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. We incurred $1.0 million in workforce reduction costs at the end of the fiscal quarter, primarily within our PeopleScout business, which are expected to generate cost savings for the remainder of fiscal 2023. Additionally, SG&A expense increased as a result of investments we have made within our PeopleReady segment, primarily in training for our sales team, as well as hiring additional account managers to broaden the geographical footprint of our skilled trades business.

Depreciation and amortization decreased for the thirteen weeks ended March 26, 2023 compared to the same period in the prior year, due to certain assets becoming fully depreciated or amortized during 2022.

Our tax provision and our effective tax rate are subject to variation due to several factors, including variability in accurately predicting our annual pre-tax and taxable income and loss by jurisdiction, tax credits, government audit developments, changes in laws, regulations and administrative practices, and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income and loss. 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 or loss is lower.

The items creating a difference between income taxes computed at the statutory federal income tax rate and income taxes reported on the Consolidated Statements of Operations and Comprehensive Income (Loss) are as follows:

For the thirteen weeks ended March 26, 2023, we received an income tax benefit of $(0.6) million and had an effective tax rate of 13.0%, compared to income tax expense of $2.0 million and an effective tax rate of 15.8% for the same period in the prior year.

The difference between the statutory federal income tax rate of 21.0% and our effective tax rate of 13.0% for the thirteen weeks ended March 26, 2023 was primarily due to the benefit of hiring tax credits, including the Work Opportunity Tax Credit (“WOTC”), and stock-based compensation, partially offset by state income taxes and non-deductible items.

WOTC, our primary hiring tax credit, is designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates. WOTC is generally calculated as a percentage of wages over a twelve-month period up to worker maximums by targeted groups. Based on historical results and business trends, we estimate the amount of WOTC we expect to earn related to wages of the current year. However, the estimate is subject to variation because 1) a small percentage of our workers qualify for one or more of the many targeted groups; 2) the targeted groups are subject to different incentive credit rates and limitations; 3) credits fluctuate depending on economic conditions and qualified worker retention periods; and 4) state and federal offices can delay their credit certification processing and have inconsistent certification rates. We recognize an adjustment to prior year hiring tax credits if credits certified by government offices differ from original estimates. The U.S. Congress has approved the WOTC program through the end of 2025.

Segment profit should not be considered a measure of financial performance in isolation or as an alternative to net income (loss) on the Consolidated Statements of Operations and Comprehensive Income (Loss) in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and may not be comparable to similarly titled measures of other companies.

PeopleReady segment profit declined $15.3 million, and also declined as a percentage of revenue, for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. These declines were primarily due to the decline in revenue and the associated impact from higher operating leverage, partially offset by lower workers’ compensation costs and higher bill rates, which have increased ahead of pay rates.

PeopleScout segment profit declined $2.0 million, and also declined as a percentage of revenue, for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. These declines were a result of the decline in revenue, combined with the relatively fixed cost structure of the recruiting business. We took actions, in the form of workforce reductions, at the end of the fiscal quarter to reduce our fixed costs for the remainder of 2023.

PeopleManagement segment profit (loss) declined $3.2 million, and also declined as a percentage of revenue, for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. These declines were primarily due to the decline in revenue and the associated impact from higher operating leverage. We took actions during the fiscal first quarter to reduce costs for the remainder of 2023.

FUTURE OUTLOOK

The following highlights represent our operating outlook. These expectations are subject to revision as our business changes with the overall economy.

Operating outlook

Liquidity outlook

LIQUIDITY AND CAPITAL RESOURCES

We believe we have a strong financial position and sufficient sources of funding to meet our short and long term obligations. As of March 26, 2023, we had $47.2 million in cash and cash equivalents. We also had $292.8 million available under our $300.0 million Revolving Credit Facility, as $7.2 million was utilized by outstanding standby letters of credit. We have an option to increase the total line of credit amount from $300.0 million to $450.0 million, subject to bank approval.

Cash generated through our core operations is our primary source of liquidity. Our principal ongoing cash needs are to finance working capital, fund capital expenditures, repay outstanding Revolving Credit Facility balances, and execute share repurchases. We manage working capital through timely collection of accounts receivable, which we achieve through focused collection efforts and tightly monitoring trends in days sales outstanding. While client payment terms are generally 90 days or less, we pay our associates weekly, so additional financing through the use of our Revolving Credit Facility is sometimes necessary to support revenue growth. We also manage working capital through efficient cost management and strategically timing payments of accounts payable.

We continue to make investments in online and mobile apps to increase the competitive differentiation of our services over the long term and improve the efficiency of our service delivery model. In addition, we continue to transition our back-office technology from on-premise software platforms to cloud-based software solutions, to increase automation and the efficiency of running our business.

We have established investment policy directives for the Trust with the first priority to preserve capital, second to ensure sufficient liquidity to pay workers’ compensation claims, third to minimize risk by diversifying the investment portfolio, and fourth to maximize after-tax returns. Trust investments must meet minimum acceptable quality standards. The primary investments include U.S. Treasury securities, U.S. agency debentures, U.S. agency mortgages, corporate securities and municipal securities. For those investments rated by nationally recognized statistical rating organizations, the minimum ratings at time of purchase are:

Restricted cash and investments also includes collateral to support our non-qualified deferred compensation plan in the form of company-owned life insurance policies. Our non-qualified deferred compensation plan is managed by a third-party service provider, and the investments backing the company-owned life insurance policies align with the amount and timing of payments based on employee elections.

A summary of our cash flows for each period are as follows:

Cash flows from operating activities

Cash provided by operating activities consists of net income (loss) adjusted for non-cash benefits and expenses, and changes in operating assets and liabilities.

Demand for our services is generally lower during the fiscal first quarter, due in part to limitations in outside work during the winter months and slowdowns in manufacturing and logistics after the fiscal fourth quarter holiday season. This results in a deleveraging of accounts receivable and accounts payable compared to the prior year-end. Accrued wages and benefits can fluctuate based on whether the period end requires the accrual of one or two weeks of payroll, the amount and timing of bonus payments, and timing of payroll tax payments.

Net cash provided by accounts receivable collections through deleveraging during the thirteen weeks ended March 26, 2023 was partially offset by an increase in days sales outstanding primarily due to a higher percentage of receivables with longer payment terms. Cash provided by accounts receivable was further offset by net cash used for payments on accounts payable and accrued expenses. Net cash used for payments on accrued wages and benefits was primarily due to the timing and amount of annual bonus payments to employees, which are paid in the fiscal first quarter. In addition, our workers’ compensation claims reserve for estimated claims decreases as contingent labor services decline, as was the case in the current year.

Cash flows from investing activities

Investing cash flows consist of capital expenditures and purchases, sales, and maturities of restricted investments, which are managed in line with our workers’ compensation collateral funding requirements and timing of claim payments.

Capital expenditures for the thirteen weeks ended March 26, 2023 were higher than the thirteen weeks ended March 27, 2022 due in part to the continued investments we are making to upgrade our PeopleReady technology platform. For the thirteen weeks ended March 26, 2023, cash used for purchases of restricted investments were mostly offset by maturities. In the prior period, cash provided by maturities of restricted investments was not immediately reinvested by the Trust, and more than offset capital expenditures.

Cash flows from financing activities

Financing cash flows consist primarily of repurchases of common stock as part of our publicly announced share repurchase program, amounts to satisfy employee tax withholding obligations upon the vesting of restricted stock, the net change in our Revolving Credit Facility, and proceeds from the sale of common stock through our employee stock purchase plans.

Net cash used in financing activities during the thirteen weeks ended March 26, 2023 was primarily due to the repurchase of $24.7 million of our common stock in the open market. As of March 26, 2023, $64.3 million remains available for repurchase under existing authorizations.

SUMMARY OF CRITICAL ACCOUNTING ESTIMATES

Our critical accounting estimates are discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations; Summary of Critical Accounting Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 25, 2022.

NEW ACCOUNTING STANDARDS

Our quantitative and qualitative disclosures about market risk are discussed in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 25, 2022, and have not changed materially.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Security and Exchange Commission’s rules and forms. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

During the fiscal first quarter of 2023, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures at a reasonable assurance level, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level, as of March 26, 2023.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our most recently completed fiscal quarter that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

The certifications required by Rule 13a-14 of the Exchange Act are filed as exhibits 31.1 and 31.2, respectively, to this Quarterly Report on Form 10-Q.

The table below includes repurchases of our common stock pursuant to publicly announced plans or programs and those not made pursuant to publicly announced plans or programs during the thirteen weeks ended March 26, 2023.

Not applicable.

Not applicable.

None.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.