Command Center, Inc. (OTCQB: CCNI), a national provider of on-demand and temporary staffing solutions, reported financial results for the second quarter ended June 27, 2014.
Second Quarter 2014 Financial Highlights vs. Year-Ago Quarter
- Same store sales up 0.7% to $21.6 million
- Gross margins increased from 25.2% to 26.9%
- Operating income up 197% to $1.6 million
- Net income up 217% to a record $1.5 million or $0.02 per diluted share
“During the second quarter, we continued our emphasis on improving customer service and operational efficiency in order to improve profitability and prepare the company for future growth,” said Bubba Sandford, Command Center’s president and CEO. “Our success in this approach was demonstrated by the record net income in the second quarter, which also generated the most profitable first half in our company’s history, with net income up 300% to more than $2 million. The 170 basis point increase in the second quarter gross margin also reflects the success of our strategy to improve customer service.”
Second Quarter 2014 Financial Results
Revenues in the second quarter of 2014 decreased 7% to $21.6 million compared to $23.2 million in the second quarter of 2013. The decrease in revenue is primarily attributable to the closure of five underperforming stores during the past year.
Same store revenues increased approximately 0.7% to $21.6 million in Q2 2014 compared to $21.5 million in Q2 2013. Gross margins improved to 26.9% in Q2 2014 versus 25.2% in the year-ago quarter. The increase in same store sales and improved margins resulted, in large part, from the company’s continued focus on attracting and servicing quality accounts.
Net income in the second quarter increased to $1.5 million compared to $473,000 in the year-ago quarter, resulting in diluted earnings per share of $0.02 in the second quarter of 2014 compared to $0.01 in the year-ago quarter. Operating income was up 197% to $1.6 million versus $550,000 in the year-ago quarter. These improvements are attributable to the higher gross margins and a $1.1 million or 21% reduction in SG&A expense over the same period last year.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, and the change in fair value of derivative liabilities) increased 151% to $1.7 million from $678,000 in the year-ago quarter (see discussion about the presentation of adjusted EBITDA, a non-GAAP term, below).
Cash at June 27, 2014 totaled $2.8 million compared to $1.3 million at June 28, 2013. The increase in cash was due to improved cash generation from operations, which was offset by $3.0 million in cash used to reduce the company’s liability under its account purchase facility with Wells Fargo Bank, N.A. Command Center reduced the liability to allow Wells Fargo to provide a $3.6 million letter of credit to the company’s new workers’ compensation insurance carrier. The company expects this arrangement to result in total savings in interest expense and lower policy costs totaling approximately $400,000 in the current policy year.
During the quarter the company also entered into the Seventh Amendment to its Account Purchase Agreement with Wells Fargo, wherein the facility maximum under the agreement increased from $14 million to $15 million.
Further details about Command Center’s Q2 2014 results are available in its Quarterly Report Form 10-Q, which is accessible in the investor relations section of the company’s website at www.commandonline.com.
Company Outlook
“During the last year we have focused on improving our operations and strengthening our financial position,” said Sandford. “We have improved customer satisfaction, employee training and operational efficiency. We are now in a position to invest in growth by expanding our market presence, as we have with the recent opening of our 54th field office in Houston, Texas.
“Opening our Houston field office is the first step in our expansion plan. The Texas region represents one of the fastest growing regions in the country and an excellent opportunity for us to build on our success servicing many of the same oil field clients as we do in North Dakota. We continue to evaluate additional opportunities for expansion and are confident we now have the financial strength and trained personnel to take advantage of these opportunities.
“We look forward to sharing our value proposition and story at the upcoming Liolios Group Gateway Conference in San Francisco on September 4, where we will be meeting with a number of institutional investors and analysts throughout the day.”
About Command Center
Command Center provides flexible on-demand employment solutions to businesses in the United States, primarily in the areas of light industrial, hospitality and event services. Through 54 field offices, the company provides employment annually for nearly 33,000 field team members working for 3,600 clients.
For more information about Command Center, go to www.commandonline.com.
Important Cautions Regarding Forward-Looking Statements
This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, the severity and duration of the general economic downturn, the availability of workers’ compensation insurance coverage, the availability of capital and suitable financing for the company's activities, the ability to attract, develop and retain qualified store managers and other personnel, product and service demand and acceptance, changes in technology, the impact of competition and pricing, government regulation, and other risks set forth in the Form 10-K filed with the Securities and Exchange Commission on March 20, 2014 and in other statements filed from time to time with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by these cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.
Reconciliation of Non-GAAP Financial Measures
In addition to the results prepared in accordance with generally accepted accounting principles (“GAAP”), the company also presents adjusted EBITDA, a non-GAAP term defined as earnings before interest, taxes, depreciation and amortization, and the change in fair value of derivative liabilities. (Please note, the company previously referred to this metric as “EBITDA-D.”)
The company uses adjusted EBITDA as a financial measure since management believes investors find it a useful tool to perform more meaningful comparisons of past, present and future operating results, and as a complement to net income and other financial performance measures. Adjusted EBITDA is not intended to represent net income as defined by GAAP, and such information should not be considered as an alternative to net income or any other measure of performance prescribed by GAAP.
The following tables present a reconciliation of adjusted EBITDA to net income for the periods presented:
Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||||||||||||||||||||||||||
(in thousands) | June 27, 2014 | June 28, 2013 | June 27, 2014 | June 28, 2013 | |||||||||||||||||||||||||||||||||
Total Operating Revenue | $ | 21,662 | $ | 23,295 | $ | 40,120 | $ | 43,199 | |||||||||||||||||||||||||||||
Cost of Staffing Services | 15,824 | 73.1 | % | 17,412 | 74.7 | % | 29,404 | 73.3 | % | 32,097 | 74.3 | % | |||||||||||||||||||||||||
Gross profit | 5,838 | 26.9 | % | 5,882 | 25.2 | % | 10,716 | 26.7 | % | 11,102 | 25.7 | % | |||||||||||||||||||||||||
Selling, general and administrative expenses | 4,133 | 19.1 | % | 5,204 | 22.3 | % | 8,350 | 20.8 | % | 10,158 | 23.5 | % | |||||||||||||||||||||||||
Depreciation and amortization | 69 | 0.3 | % | 128 | 0.5 | % | 134 | 0.3 | % | 217 | 0.5 | % | |||||||||||||||||||||||||
Income from operations | 1,636 | 7.6 | % | 550 | 2.4 | % | 2,232 | 5.6 | % | 727 | 1.7 | % | |||||||||||||||||||||||||
Interest expense and other financing expense | (110 | ) | -0.5 | % | (119 | ) | -0.5 | % | (163 | ) | -0.4 | % | (339 | ) | -0.8 | % | |||||||||||||||||||||
Change in fair value of warrant liability | - | 0.0 | % | 42 | 0.2 | % | 0 | 0.0 | % | 97 | 0.2 | % | |||||||||||||||||||||||||
Net income before income taxes | 1,526 | 7.0 | % | 473 | 2.0 | % | 2,069 | 5.2 | % | 485 | 1.1 | % | |||||||||||||||||||||||||
Provision for income taxes | (30 | ) | -0.1 | % | - | 0.0 | % | (62 | ) | -0.2 | % | - | 0.0 | % | |||||||||||||||||||||||
Net income | $ | 1,496 | 6.9 | % | $ | 473 | 2.0 | % | $ | 2,007 | 5.0 | % | $ | 485 | 1.1 | % | |||||||||||||||||||||
Non-GAAP Data | |||||||||||||||||||||||||||||||||||||
Adjusted EBITDA | $ | 1,705 | 7.9 | % | $ | 678 | 2.9 | % | $ | 2,366 | 5.9 | % | $ | 944 | 2.2 | % | |||||||||||||||||||||
Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||||||||||
(in thousands) | June 27, 2014 | June 28, 2013 | June 27, 2014 | June 28, 2013 | |||||||||||||||||
Adjusted EBITDA | $ | 1,705 | $ | 678 | $ | 2,366 | $ | 944 | |||||||||||||
Interest expense and other financing expense | (110 | ) | (119 | ) | (163 | ) | (339 | ) | |||||||||||||
Depreciation and amortization | (69 | ) | (128 | ) | (134 | ) | (217 | ) | |||||||||||||
Change in fair value of warrant liability | - | 42 | 0 | 97 | |||||||||||||||||
Provision for income taxes | (30 | ) | - | (62 | ) | - | |||||||||||||||
Net income | $ | 1,496 | $ | 473 | $ | 2,007 | $ | 485 | |||||||||||||
Command Center, Inc. | |||||||||||
Consolidated Condensed Balance Sheets | |||||||||||
June 27, 2014 | December 27, 2013 | ||||||||||
ASSETS | (unaudited) | ||||||||||
Current Assets | |||||||||||
Cash | $ | 2,755,160 | $ | 5,820,309 | |||||||
Restricted cash | 19,197 | 25,619 | |||||||||
Accounts receivable, net of allowance for doubtful accounts | 9,418,680 | 10,577,250 | |||||||||
Prepaid expenses, deposits and other | 425,847 | 328,920 | |||||||||
Prepaid workers' compensation | 816,056 | 28,044 | |||||||||
Other receivables | 20,639 | 27,933 | |||||||||
Current portion of workers' compensation deposits | 1,098,000 | 1,113,000 | |||||||||
Total Current Assets | 14,553,579 | 17,921,075 | |||||||||
Property and equipment - net | 485,655 | 350,767 | |||||||||
Workers' compensation risk pool deposit, less current portion | 1,833,750 | 1,783,112 | |||||||||
Goodwill | 3,306,786 | 3,306,786 | |||||||||
Intangible assets - net | 322,464 | 386,956 | |||||||||
Total Assets | $ | 20,502,234 | $ | 23,748,696 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Current Liabilities | |||||||||||
Accounts payable | $ | 342,329 | $ | 402,672 | |||||||
Checks issued and payable | 665,241 | 189,830 | |||||||||
Account purchase agreement facility | 2,875,270 | 8,050,633 | |||||||||
Other current liabilities | 365,297 | 326,319 | |||||||||
Accrued wages and benefits | 1,149,906 | 1,717,235 | |||||||||
Current portion of workers' compensation premiums and claims liability | 1,234,395 | 1,648,058 | |||||||||
Total Current Liabilities | 6,632,438 | 12,334,747 | |||||||||
Long-Term Liabilities | |||||||||||
Warrant liabilities | - | 1,386,088 | |||||||||
Workers' compensation claims liability, less current portion | 2,632,041 | 2,613,871 | |||||||||
Total Liabilities | 9,264,479 | 16,334,706 | |||||||||
Commitments and contingencies | |||||||||||
Stockholders' Equity | |||||||||||
Preferred stock - $0.001 par value, 5,000,000 shares authorized; none issued | - | - | |||||||||
Common stock - 100,000,000 shares, $0.001 par value, authorized; 65,252,184 and 59,711,242 shares issued and outstanding, respectively | 65,253 | 59,711 | |||||||||
Additional paid-in capital | 57,911,332 | 56,099,875 | |||||||||
Accumulated deficit | (46,738,830 | ) | (48,745,596 | ) | |||||||
Total Stockholders' Equity | 11,237,755 | 7,413,990 | |||||||||
Total Liabilities and Stockholders' Equity | $ | 20,502,234 | $ | 23,748,696 | |||||||
Command Center, Inc. | |||||||||||||||||||||
Consolidated Condensed Statements of Income | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||||||||||
June 27, 2014 | June 28, 2013 | June 27, 2014 | June 28, 2013 | ||||||||||||||||||
Revenue | $ | 21,662,164 | $ | 23,294,561 | $ | 40,120,343 | $ | 43,199,279 | |||||||||||||
Cost of staffing services | 15,824,306 | 17,412,313 | 29,404,480 | 32,097,439 | |||||||||||||||||
Gross profit | 5,837,859 | 5,882,249 | 10,715,863 | 11,101,839 | |||||||||||||||||
Selling, general and administrative expenses | 4,132,787 | 5,204,200 | 8,349,994 | 10,158,029 | |||||||||||||||||
Depreciation and amortization | 68,964 | 128,038 | 133,805 | 217,049 | |||||||||||||||||
Income from operations | 1,636,108 | 550,011 | 2,232,064 | 726,761 | |||||||||||||||||
Interest expense and other financing expense | (110,138 | ) | (119,086 | ) | (163,355 | ) | (339,386 | ) | |||||||||||||
Change in fair value of derivative liabilities | - | 41,648 | 87 | 97,404 | |||||||||||||||||
Net income before income taxes | 1,525,969 | 472,573 | 2,068,797 | 484,779 | |||||||||||||||||
Provision for income taxes | (29,913 | ) | - | (62,031 | ) | - | |||||||||||||||
Net income | $ | 1,496,057 | $ | 472,573 | $ | 2,006,766 | $ | 484,779 | |||||||||||||
Earnings per share: | |||||||||||||||||||||
Basic | $ | 0.02 | $ | 0.01 | $ | 0.03 | $ | 0.01 | |||||||||||||
Diluted | $ | 0.02 | $ | 0.01 | $ | 0.03 | $ | 0.01 | |||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||
Basic | 64,770,184 | 59,611,242 | 62,240,713 | 59,611,242 | |||||||||||||||||
Diluted | 66,167,519 | 62,484,459 | 63,668,689 | 62,794,132 |
Contacts:
Chris Tyson, 949-574-3860
CCNI@liolios.com