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GOODWILL AND INTANGIBLE ASSETS | 6 Months Ended
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Jun. 28, 2020
Goodwill and Intangible Assets Disclosure [Abstract] |
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS Goodwill The following table reflects changes in the carrying amount of goodwill during the period by reportable segments:
(in thousands) | PeopleReady | PeopleManagement | PeopleScout | Total company
Balance at | December 29, 2019 |  |  |  |
Goodwill before impairment | $ | 106,304 |  | $ | 81,092 |  | $ | 145,181 |  | $ | 332,577 |
Accumulated impairment loss | (46,210 | ) | (33,700 | ) | (15,169 | ) | (95,079 | )
Goodwill, net | 60,094 |  | 47,392 |  | 130,012 |  | 237,498 |
Impairment loss | — |  | (45,901 | ) | (94,588 | ) | (140,489 | )
Foreign currency translation | — |  | — |  | (3,009 | ) | (3,009 | )
Balance at | June 28, 2020 |  |  |  |
Goodwill before impairment | 106,304 |  | 81,092 |  | 142,172 |  | 329,568 |
Accumulated impairment loss | (46,210 | ) | (79,601 | ) | (109,757 | ) | (235,568 | )
Goodwill, net | $ | 60,094 |  | $ | 1,491 |  | $ | 32,415 |  | $ | 94,000 |
Intangible assets Finite-lived intangible assets The following table presents our purchased finite-lived intangible assets:
| June 28, 2020 |  | December 29, 2019
(in thousands) | Gross carrying amount | Accumulated amortization | Net carrying amount |  | Gross carrying amount | Accumulated amortization | Net carrying amount
Finite-lived intangible assets (1): |  |  |  |  |  |  |
Client relationships (2) | $ | 96,811 |  | $ | (71,665 | ) | $ | 25,146 |  |  | $ | 149,299 |  | $ | (83,317 | ) | $ | 65,982 |
Trade names/trademarks | 1,958 |  | (507 | ) | 1,451 |  |  | 2,052 |  | (441 | ) | 1,611 |
Technologies | 600 |  | (580 | ) | 20 |  |  | 600 |  | (520 | ) | 80 |
Total finite-lived intangible assets | $ | 99,369 |  | $ | (72,752 | ) | $ | 26,617 |  |  | $ | 151,951 |  | $ | (84,278 | ) | $ | 67,673 |
(1) | Excludes assets that are fully amortized.
(2) | Balance at June 28, 2020 is net of impairment loss of $34.7 million recorded in the twenty-six weeks ended June 28, 2020.
Amortization expense of our finite-lived intangible assets was $2.1 million and $5.0 million for the thirteen weeks ended June 28, 2020 and June 30, 2019, respectively, and $6.1 million and $10.0 million for the twenty-six weeks ended June 28, 2020 and June 30, 2019, respectively. Indefinite-lived intangible assets We also held indefinite-lived trade names/trademarks of $6.0 million as of June 28, 2020 and December 29, 2019. Impairments Goodwill We evaluate goodwill for impairment on an annual basis as of the first day of our fiscal second quarter, and whenever events or circumstances make it more likely than not that an impairment may have occurred. These events or circumstances could include a significant change in the business climate, operating performance indicators, competition, client engagement, legal factors, or sale or disposition of a significant portion of a reporting unit. We monitor the existence of potential impairment indicators throughout the fiscal year. Interim impairment test During the first quarter of 2020, the following events made it more likely than not that an impairment had occurred and accordingly, we performed an interim impairment test as of the last day of our fiscal first quarter. We experienced a significant decline in our stock price during the first quarter of 2020. As a result of the decline in stock price, our market capitalization fell significantly below the recorded value of our consolidated net assets. The reduced market capitalization reflected the expected continued weakness in pricing and demand for our staffing services in a volatile economic climate. This was further impacted in March 2020 by COVID-19, which created a sudden global economic shock. We experienced a significant drop in client demand associated with government and societal actions to address COVID-19.We have experienced and expect to continue to experience significant decreases to our revenues and corresponding operating results due to weakness in pricing and demand for our services during this severe economic downturn. While demand is expected to recover in the future, the rate of recovery will vary by geography and industry depending on the economic impact caused by COVID-19 and the rate at which infections decline to a contained level. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions to evaluate the impact of operating and macroeconomic changes on each reporting unit. The fair value of each reporting unit was estimated using a combination of a discounted cash flow methodology and the market valuation approach using publicly traded company multiples in similar businesses. 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 was risk-adjusted to reflect the specific risk profile of the reporting units and ranged from 11.5% to 12.0%. 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. As a result of this impairment test, we concluded that the carrying amounts of goodwill for PeopleScout RPO, PeopleScout MSP and PeopleManagement On-Site reporting units exceeded their implied fair values and we recorded a non-cash impairment loss of $140.5 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the twenty-six weeks ended June 28, 2020. The total goodwill carrying value of $45.9 million for PeopleManagement On-site reporting unit was fully impaired. The goodwill impairment charge for PeopleScout RPO and PeopleScout MSP was $92.2 million and $2.4 million, respectively. Annual impairment test Given the proximity of our interim impairment measurement date (last day of our fiscal first quarter - March 29, 2020) to our annual goodwill impairment measurement date (first day of our fiscal second quarter - March 30, 2020), we performed a qualitative assessment to determine whether it is more likely than not that the fair value of any of our reporting units is less than the carrying value. We considered the current and expected future economic and market conditions surrounding COVID-19 and concluded that it was not more likely than not that the goodwill associated with our reporting units were impaired as of the first day of our fiscal second quarter. Therefore, a quantitative assessment was not performed as of March 30, 2020. Additionally, we did not identify any events or conditions that make it more likely than not that an impairment may have occurred during the thirteen weeks ended June 28, 2020. The remaining goodwill balances for PeopleScout RPO and PeopleScout MSP were $22.7 million and $9.7 million, respectively, as of June 28, 2020. Should actual results decline further or longer than we have currently estimated, the remaining goodwill balances may be further impaired. We will continue to closely monitor the operational performance of these reporting units as it relates to goodwill impairment. Finite-lived intangible assets We generally record acquired intangible assets that have finite useful lives, such as client relationships, in connection with business combinations. We review intangible assets that have finite useful lives and other long-lived assets whenever an event or change in circumstances indicates that the carrying value of the asset may not be recoverable. Factors considered important that could result in an impairment review include, but are not limited to, significant underperformance relative to historical or planned operating results or significant changes in business strategies. We estimate the recoverability of these assets by comparing the carrying amount of the asset to the future undiscounted cash flows that we expect the asset to generate. An impairment loss is recognized when the estimated undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value based on discounted cash flow analysis or other valuation techniques. Interim impairment test With the decrease in demand for our services due to the economic impact caused by the response to COVID-19, we lowered our future expectations, which was the primary trigger of an impairment to our acquired client relationships intangible assets for our PeopleScout RPO and PeopleManagement On-Site reporting units of $34.7 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the twenty-six weeks ended June 28, 2020. The impairment charge for PeopleScout RPO and PeopleManagement On-site reporting units was $25.0 million and $9.7 million, respectively. Considerable management judgment was necessary to determine key assumptions, including projected revenue of acquired clients and an appropriate discount rate of 12.0%. Additionally, we did not identify any events or conditions that make it more likely than not that an impairment may have occurred during the thirteen weeks ended June 28, 2020. The remaining client relationship intangible asset balances related to assets impaired for PeopleScout RPO and PeopleManagement On-site were $5.8 million and $8.1 million, respectively, as of June 28, 2020. Indefinite-lived intangible assets We have indefinite-lived intangible assets related to our Staff Management and PeopleScout trade names. We test our trade names annually for impairment, and when indicators of potential impairment exist. We utilize the relief from royalty method to determine the fair value of each of our trade names. If the carrying value exceeds the fair value, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value. Management uses considerable judgment to determine key assumptions, including projected revenue, royalty rates and appropriate discount rates. Interim impairment test We performed an interim impairment test of our indefinite-lived intangible assets as of the last day of our first fiscal quarter for 2020 and determined that the estimated fair values exceeded the carrying amounts for our indefinite-lived trade names. Accordingly, no impairment loss was recognized. Annual impairment test Given the proximity of our interim impairment measurement date (last day of our fiscal first quarter - March 29, 2020) to our annual indefinite-lived trade names impairment measurement date (first day of our fiscal second quarter - March 30, 2020), we performed a qualitative assessment to determine whether it is more likely than not that the fair value of any of our indefinite-lived trade names is less than the carrying value. We concluded that it was not more likely than not that the indefinite-lived intangible assets associated with our Staff Management and PeopleScout trade names were impaired as of the first day of our fiscal second quarter. Therefore, a quantitative assessment was not performed as of March 30, 2020. Additionally, we did not identify any events or conditions that make it more likely than not that an impairment may have occurred during the thirteen weeks ended June 28, 2020.

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