ACQUISITION

We account for our business acquisitions using the purchase method of accounting in accordance with ASC 805, Business Combinations. The fair value of the net assets acquired and the results of the acquired business are included in the Consolidated Financial Statements from the acquisition date forward. We are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and results of operations during the reporting period. Estimates are used in accounting for, among other things, the fair value of acquired net operating assets, property and equipment, intangible assets, useful lives of property and equipment and amortizable lives for acquired intangible assets. Any excess of the purchase consideration over the identified fair value of the assets and liabilities acquired is recognized as goodwill. All acquisition related costs are expensed as incurred and recorded in operating expenses. Additionally, we recognize liabilities for anticipated restructuring costs that will be necessary due to the elimination of excess capacity, redundant assets or unnecessary functions and record them as operating expenses. We estimate the preliminary fair value of acquired assets and liabilities as of the date of acquisition based on information available at that time. The valuation of these tangible and identifiable intangible assets and liabilities is subject to further management review and may change between the preliminary allocation and the final allocation. Any changes to these estimates may have a material impact on our operating results or financial condition.

Effective February 4, 2013, we acquired substantially all of the assets, properties and contractual rights and assumed certain liabilities of MDT Personnel, LLC and its subsidiaries ("MDT") for $53.2 million, which was paid in cash. MDT supplied blue-collar labor to industries similar to those served by TrueBlue, including construction, event staffing, disaster recovery, hospitality, and manufacturing through its network of 105 branches in 25 states. We expect the acquisition of MDT to enhance TrueBlue's national position as the leading provider of blue-collar temporary labor.

We expect to generate synergies from fully integrating and blending MDT's operations with our existing business lines. MDT was primarily integrated into the Labor Ready business line. The integration of the MDT operations was completed during first quarter of 2013. We consolidated 65 branches, blended our sales and service teams and fully integrated all former MDT locations into our enterprise systems to optimize our combined operational efficiencies post acquisition. We expect to complete the integration of all remaining administrative services during the second quarter of 2013 and exit the former MDT administrative center. During the quarter ended March 29, 2013, we incurred restructuring costs related to our integration of the acquisition of MDT. These activities consisted of integrating our branch network capacity, sales and services teams and infrastructure and included closing, consolidating and relocating certain branch offices and administrative operations, eliminating redundant assets, and reducing excess administrative workforce and capacity. The integration costs of $2.2 million are included in selling, general and administrative operating expenses in the Consolidated Statements of Operations & Comprehensive Income (Loss) and operating cash flows in the Consolidated Statements of Cash Flows. At March 29, 2013, we have a liability for incurred but not yet paid integration costs of $1.6 million included in accounts payable and other accrued expenses in our Consolidated Balance Sheets.

Purchase price allocation

The allocation of the purchase price to MDT's tangible and identifiable intangible assets acquired and liabilities assumed was based on their estimated fair values as of the date of the acquisition. The valuation of these tangible and identifiable intangible assets and liabilities is preliminary, subject to completion of a formal valuation process and further management review, and will be adjusted as additional information becomes available. The fair valuation estimates particularly subject to change are those relating to accounts receivable, identifiable intangible assets subject to amortization and liabilities assumed. Such adjustments may have a material effect on our results of operations and financial position. The excess of the purchase price over the tangible and identifiable intangible assets acquired and liabilities assumed has been allocated to goodwill. We expect to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than our 2013 fiscal year-end.

The following table summarizes the preliminary allocation of the purchase price, based on the estimated fair value of the assets acquired and liabilities assumed as of the acquisition date of February 4, 2013 (in millions):



Accounts receivable, net of allowance for doubtful accounts (1)	$	31.2
Prepaid expenses, deposits and other current assets	1.2
Property and equipment, net	0.5
Restricted cash and investments	6.9
Intangible assets, net	10.2
Total assets acquired	50.0

Accounts payable and other accrued expenses	7.4
Accrued wages and benefits	2.0
Workers' compensation claims reserve	9.8
Other long-term liabilities	0.1
Total liabilities assumed	19.3

Net identifiable assets acquired	30.7
Goodwill (2)	22.5
Net assets acquired	$	53.2

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(1)	The gross contractual amount of accounts receivable is $32.9 million and, of this amount, we expect $1.7 million to be uncollectible.


(2)	Goodwill is deductible for income tax purposes over 15 years as of March 29, 2013.

Intangibles assets include identifiable intangible assets for customer relationships, non-compete agreements and trade names. Customer related intangibles are primarily comprised of contractual arrangements and customer relationships.We have estimated the fair value of the acquired identifiable intangible assets, which are subject to amortization using the income approach. No residual value is estimated for any of the intangible assets. These estimates are preliminary and are subject to completion of the formal valuation process, review by management and other adjustments, which may be material.

The following table sets forth the preliminary estimate for the components of identifiable intangible assets and their estimated useful lives (in millions, except for estimated useful lives, in years):



	Estimated Fair Value		Estimated Useful Life
Customer relationships	$	7.8	8.0
Trade name/trademarks	1.0		1.5
Non-compete agreements	1.4		5.0

The acquired assets and liabilities of MDT are included in our Consolidated Balance Sheets as of March 29, 2013 and the results of its operations and cash flows are reported in our Consolidated Statements of Operations and Comprehensive Income (Loss) and Consolidated Statements of Cash Flows from February 4, 2013 through March 29, 2013 for the quarter ended March 29, 2013.

MDT operations were fully integrated with our existing operations and our customers, temporary workforce, field employees and locations were merged. The nature of the customers and the services provided by TrueBlue and the former MDT are substantially the same. We competed in the marketplace for the same customers, temporary workers, sales and service personnel. Accordingly, subsequent to merging our operations, it is not possible to segregate and to reasonably estimate the revenues and expenses related exclusively to the former MDT operations.

Pro forma financial information

The following table reflects the pro forma consolidated results of operations for the periods presented, as though the acquisition of MDT had occurred as of the beginning of the period being reported on, after giving effect to related income tax effects.

The pro forma financial information combines our results of operations with the unaudited financial information of MDT used by MDT management for internal reporting purposes. Any changes required by an audit of the MDT financial information could be material. The pro forma financial information presented is for illustrative purposes only and is not indicative of the results of operations that would have been realized if the acquisition had been completed on the dates indicated, nor is it indicative of future operating results.

The pro forma consolidated results of operations do not include, among other items, the effects of:


•	differences in our operating cost structure for workers compensation, payroll taxes and other costs of our respective temporary workforce.


•	potential losses in gross profit due to revenue attrition from combining the two companies.


•	any costs of restructuring and integration associated with the acquisition.

Further, as discussed above, the valuation of tangible and identifiable intangible assets and liabilities is preliminary, subject to completion of a formal valuation process and further management review, and will be adjusted as additional information is evaluated during the allocation period. Such adjustments may have a material effect on our results of operations and financial position, including the pro forma financial data as presented below (in millions, except per share data).



	Thirteen weeks ended
	March 29, 2013			March 30, 2012
Revenue from services	$	370.6		$	360.4
Net income (loss)	(0.2		)	0.3
Net income (loss) per common share - diluted	(0.01		)	0.01