Command Center, Inc. (OTCQB: CCNI), a national provider of on-demand and temporary staffing solutions, reported financial results for the third quarter and nine months ended September 26, 2014.
Third Quarter 2014 Financial Highlights vs. Year-Ago Quarter
- Revenues up 7% to $27.7 million
- Gross margins increased 190 basis points to 27.7% from 25.8%
- Operating income up 16% to record $2.5 million
- Net income including goodwill impairment and income tax benefit increased to $6.0 million or $0.09 per diluted share
- Adjusted EBITDA up 28% to record $2.9 million
“Increased revenue this quarter is the result of our broad, ongoing strategy of targeting good accounts at the right price,” said Bubba Sandford, Command Center’s president and CEO. “We have continued to increase focus and training on providing the best service possible to our customers so that we maximize revenue while maintaining margins. We are now realizing the fruits of this long-term plan, which is also demonstrated by our record income. While revenue growth is certainly an important objective moving forward, we always want to do so while maintaining a high level of profitability for shareholders. As we have stated before, we believe this general strategy will serve the company well in both the long and short term.”
Third Quarter and First Nine Months of 2014 Financial Results
Revenue in the third quarter of 2014 increased 7% to $27.7 million compared to $25.9 million in the third quarter of 2013. The increase in revenue is primarily attributable to the 10.6% increase in same store sales. The third quarter is historically the company’s highest revenue quarter. Revenue for the first nine months of 2014 was $67.8 million compared to $69.1 million for the same period in 2013.
Gross margins improved to 27.7% in Q3 2014 from 25.8% in the year-ago quarter. For the first nine months of 2014, gross margins improved to 27.1% from 25.7% in the same period in 2013. The improved margins in both periods resulted primarily from the company’s continued focus on attracting and servicing quality accounts.
Operating income increased 16% to $2.5 million versus $2.2 million in the year-ago quarter. The improvement is attributable to higher gross margins, partially offset by an 8% increase in SG&A expense over the same period last year. Operating income for the first nine months of 2014 was $4.8 million compared to $2.9 million in the same period in 2013, with SG&A expense down $1.5 million to $13.1 million compared to $14.6 for the same period in 2013.
Net income in the third quarter of 2014 increased to $6.0 million compared to $1.2 million in the year-ago quarter, resulting in diluted earnings per share of $0.09 in the third quarter of 2014 compared to $0.02 in the year-ago quarter. Net income for the third quarter 2014 includes a one-time non-cash charge of $807,000 for impairment of goodwill relating to the January 2012 acquisition of substantially all of the assets of Disaster Recovery Services of Louisiana, LLC. In addition, the company recognized the tax benefit of its deferred tax asset resulting in a one-time non-cash tax credit of $4.3 million. Net Income excluding the impairment of goodwill and tax benefit in the third quarter of 2014 was $2.5 million or $0.04 per share. Net income for the first nine months of 2014 was $8.0 million or $0.12 per diluted share compared to $1.7 million or $0.03 per diluted share for the same period in 2013.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, and the change in fair value of derivative liabilities) increased 28% to $2.9 million or $0.04 per share from $2.3 million or $0.04 per share in the year-ago quarter. For the nine months of 2014 adjusted EBITDA increased to $5.3 million from $3.2 million for the same period in 2013 (see discussion about the presentation of adjusted EBITDA, a non-GAAP term, and its reconciliation to the nearest GAAP metric, below).
Cash at September 26, 2014, totaled $6.0 million compared to $5.8 million at December 27, 2013. The increase in cash was due to improved cash generation from operations, which was offset by $3.4 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.
Further details about Command Center’s Q3 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
“Looking forward, we anticipate the company’s growth will be both organic and through acquisitions,” said Sandford. “We are confident we now have the financial strength and well-trained personnel to take advantage of these growth opportunities. As we do this, it is essential that we continue to maintain a high level of customer satisfaction in order to maximize profitability. With that in mind, in addition to our Houston, Texas office opened in September, we are opening a new branch office in Watford City, North Dakota, and we will continue to search out and evaluate additional opportunities for expansion on an ongoing basis.”
“We also look forward to sharing our year-to-date results and broader story at the upcoming LD Micro conference in Los Angeles on December 2, 2014,” added Sandford, “where we will be presenting and 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 current field offices, the company provides employment annually for over 30,000 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 (the company previously referred to this metric as “EBITDA-D”), and Income excluding impairment of goodwill and tax benefit.
The company uses adjusted EBITDA and Income excluding impairment of goodwill and tax benefit as a financial measure since management believes investors find them 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 and Income excluding impairment of goodwill and tax benefit are 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 and Income excluding impairment of goodwill and tax benefit to net income for the periods presented:
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||||||||||||||||
| (in thousands) | September 26, 2014 | September 27, 2013 | September 26, 2014 | September 27, 2013 | |||||||||||||||||||||||||||||||||
| Total Operating Revenue | $ | 27,699 | $ | 25,910 | $ | 67,819 | $ | 69,109 | |||||||||||||||||||||||||||||
| Cost of Staffing Services | 20,020 | 72.3 | % | 19,226 | 74.2 | % | 49,425 | 72.9 | % | 51,323 | 74.3 | % | |||||||||||||||||||||||||
| Gross profit | 7,679 | 27.7 | % | 6,684 | 25.8 | % | 18,394 | 27.1 | % | 17,786 | 25.7 | % | |||||||||||||||||||||||||
| Selling, general and administrative expenses | 4,768 | 17.2 | % | 4,416 | 17.0 | % | 13,118 | 19.3 | % | 14,574 | 21.1 | % | |||||||||||||||||||||||||
| Depreciation and amortization | 365 | 1.3 | % | 67 | 0.3 | % | 499 | 0.7 | % | 284 | 0.4 | % | |||||||||||||||||||||||||
| Income from operations | 2,546 | 9.2 | % | 2,201 | 8.5 | % | 4,777 | 7.0 | % | 2,928 | 4.2 | % | |||||||||||||||||||||||||
| Interest expense and other financing expense | (46 | ) | -0.2 | % | (89 | ) | -0.3 | % | (210 | ) | -0.3 | % | (428 | ) | -0.6 | % | |||||||||||||||||||||
| Impairment of goodwill | (807 | ) | -2.9 | % | - | 0.0 | % | (806 | ) | -1.2 | % | - | 0.0 | % | |||||||||||||||||||||||
| Change in fair value of warrant liability | - | 0.0 | % | (884 | ) | -3.4 | % | - | 0.0 | % | (787 | ) | -1.1 | % | |||||||||||||||||||||||
| Net income before income taxes | 1,693 | 6.1 | % | 1,228 | 4.7 | % | 3,761 | 5.5 | % | 1,713 | 2.5 | % | |||||||||||||||||||||||||
| Benefit from income taxes | 4,308 | 15.6 | % | - | 0.0 | % | 4,246 | 6.3 | % | - | 0.0 | % | |||||||||||||||||||||||||
| Net income | $ | 6,001 | 21.7 | % | $ | 1,228 | 4.7 | % | $ | 8,007 | 11.8 | % | $ | 1,713 | 2.5 | % | |||||||||||||||||||||
| Non-GAAP Data | |||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA-D | $ | 2,911 | 10.5 | % | $ | 2,268 | 8.8 | % | $ | 5,277 | 7.8 | % | $ | 3,212 | 4.6 | % | |||||||||||||||||||||
Income before goodwill impairment and tax benefit | 2,500 | 9.0 | % | 1,228 | 4.4 | % | 4,568 | 16.5 | % | 1,713 | 6.2 | % | |||||||||||||||||||||||||
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||
| (in thousands) | September 26, 2014 | September 27, 2013 | September 26, 2014 | September 27, 2013 | |||||||||||||||
Income before goodwill impairment and tax benefit | $ | 2,500 | $ | 1,228 | $ | 4,568 | $ | 1,713 | |||||||||||
| Impairment of goodwill | (807 | ) | - | (807 | ) | - | |||||||||||||
| Benefit from income taxes | 4,308 | - | 4,246 | - | |||||||||||||||
| Net income (loss) | $ | 6,001 | $ | 1,228 | $ | 8,007 | $ | 1,713 | |||||||||||
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||
| (in thousands) | September 26, 2014 | September 27, 2013 | September 26, 2014 | September 27, 2013 | |||||||||||||||||
| Adjusted EBITDA-D | $ | 2,911 | $ | 2,268 | $ | 5,277 | $ | 3,212 | |||||||||||||
| Interest expense and other financing expense | (46 | ) | (89 | ) | (210 | ) | (428 | ) | |||||||||||||
| Depreciation and amortization | (1,172 | ) | (67 | ) | (1,305 | ) | (284 | ) | |||||||||||||
| Change in fair value of derivative liability | - | (884 | ) | - | (787 | ) | |||||||||||||||
| Benefit from income taxes | 4,308 | - | 4,246 | - | |||||||||||||||||
| Net income (loss) | $ | 6,001 | $ | 1,228 | $ | 8,007 | $ | 1,713 | |||||||||||||
| Command Center, Inc. | |||||||||||
| Consolidated Condensed Balance Sheets | |||||||||||
September 26, 2014 | December 27, 2013 | ||||||||||
| ASSETS | (unaudited) | ||||||||||
| Current Assets | |||||||||||
| Cash | $ | 6,036,208 | $ | 5,820,309 | |||||||
| Restricted cash | 49,144 | 25,619 | |||||||||
| Accounts receivable, net of allowance for doubtful accounts | 11,727,116 | 10,577,250 | |||||||||
| Prepaid expenses, deposits and other | 348,171 | 328,920 | |||||||||
| Prepaid workers' compensation | 813,111 | 28,044 | |||||||||
| Other receivables | 1,550 | 27,933 | |||||||||
| Current portion of deferred tax asset | 1,268,000 | - | |||||||||
| Current portion of workers' compensation deposits | 1,098,000 | 1,113,000 | |||||||||
| Total Current Assets | 21,341,300 | 17,921,075 | |||||||||
| Property and equipment – net | 459,574 | 350,767 | |||||||||
| Deferred tax asset, less current portion | 3,049,000 | - | |||||||||
| Workers' compensation risk pool deposit, less current portion | 1,811,286 | 1,783,112 | |||||||||
| Goodwill | 2,500,000 | 3,306,786 | |||||||||
| Intangible assets – net | - | 386,956 | |||||||||
| Total Assets | $ | 29,161,160 | $ | 23,748,696 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Accounts payable | $ | 431,897 | $ | 402,672 | |||||||
| Checks issued and payable | 395,379 | 189,830 | |||||||||
| Account purchase agreement facility | 4,670,770 | 8,050,633 | |||||||||
| Other current liabilities | 284,000 | 326,319 | |||||||||
| Contingent liability | - | - | |||||||||
| Accrued wages and benefits | 1,900,184 | 1,717,235 | |||||||||
| Current portion of workers' compensation premiums and claims liability | 1,295,792 | 1,648,058 | |||||||||
Total Current Liabilities | 8,978,022 | 12,334,747 | |||||||||
| Long-Term Liabilities | |||||||||||
| Warrant liabilities | - | 1,386,088 | |||||||||
| Workers' compensation claims liability, less current portion | 2,863,189 | 2,613,871 | |||||||||
| Total Liabilities | 11,841,211 | 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 65,472,868 and 59,711,242 shares issued and outstanding, respectively | 65,473 | 59,711 | |||||||||
| Additional paid-in capital | 57,992,811 | 56,099,875 | |||||||||
| Accumulated deficit | (40,738,335 | ) | (48,745,596 | ) | |||||||
| Total Stockholders' Equity | 17,319,949 | 7,413,990 | |||||||||
Total Liabilities and Stockholders' Equity | $ | 29,161,160 | $ | 23,748,696 | |||||||
| Command Center, Inc. | |||||||||||||||||||||
| Consolidated Condensed Statements of Income | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||
| September 26, | September 27, | September 26, | September 27, | ||||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||
| Revenue | $ | 27,698,843 | $ | 25,910,195 | $ | 67,819,186 | $ | 69,109,474 | |||||||||||||
| Cost of staffing services | 20,020,317 | 19,226,068 | 49,424,797 | 51,323,507 | |||||||||||||||||
| Gross profit | 7,678,526 | 6,684,127 | 18,394,389 | 17,785,967 | |||||||||||||||||
| Selling, general and administrative expenses | 4,767,840 | 4,415,906 | 13,117,834 | 14,573,936 | |||||||||||||||||
| Depreciation and amortization | 364,809 | 66,812 | 498,614 | 283,861 | |||||||||||||||||
| Income from operations | 2,545,877 | 2,201,409 | 4,777,941 | 2,928,170 | |||||||||||||||||
| Interest expense and other financing expense | (46,237 | ) | (89,367 | ) | (209,592 | ) | (428,753 | ) | |||||||||||||
| Impairment of goodwill | (806,786 | ) | - | (806,786 | ) | - | |||||||||||||||
| Change in fair value of derivative liabilities | - | (884,099 | ) | 87 | (786,695 | ) | |||||||||||||||
| Net income before income taxes | 1,692,854 | 1,227,943 | 3,761,650 | 1,712,722 | |||||||||||||||||
| Benefit from income taxes | 4,307,642 | - | 4,245,611 | - | |||||||||||||||||
| Net income | $ | 6,000,496 | $ | 1,227,943 | $ | 8,007,261 | $ | 1,712,722 | |||||||||||||
Earnings per share: | |||||||||||||||||||||
| Basic | $ | 0.09 | $ | 0.02 | $ | 0.13 | $ | 0.03 | |||||||||||||
| Diluted | $ | 0.09 | $ | 0.02 | $ | 0.12 | $ | 0.03 | |||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||
| Basic | 65,365,148 | 59,611,242 | 63,282,191 | 59,611,242 | |||||||||||||||||
| Diluted | 67,287,684 | 61,458,761 | 65,058,301 | 61,275,207 | |||||||||||||||||
Contacts:
Chris Tyson, 949-574-3860
CCNI@liolios.com
