Command Center, Inc. (OTCQB: CCNI), a national provider of on-demand and temporary staffing solutions, reported financial results for the second quarter ended June 24, 2016.
Second Quarter 2016 Financial Overview vs. Year-Ago Quarter (where applicable)
- Revenue was $21.7 million compared to $22.8 million.
- Gross margin was 25.2% compared to 27.1%.
- Operating income was $0.4 million compared to $0.9 million.
- Net income was $0.3 million or $0.00 per diluted share compared to $0.5 million or $0.01 per diluted share.
- EBITDA was $0.5 million compared to $1.1 million.
- Adjusted EBITDA was $0.5 million compared to $1.6 million.
- Repurchased approximately 1.7 million shares of the company’s common stock at an average price of $0.40 per share.
- Acquired Hancock Staffing for $2.2 million, strengthening Command Center’s presence in Arkansas and Oklahoma.
Second Quarter 2016 Financial Results
Revenue in the second quarter declined 5% to $21.7 million, compared to $22.8 million in the year-ago quarter. The decline was driven in large part by a $1.6 million, or 42%, drop in revenue from the company’s North Dakota branches, which is a state economically dependent on the health of the oil industry. Revenue from branches outside North Dakota, and excluding revenue from the Hancock Staffing branches acquired during the quarter, was approximately $19.0 million, which is unchanged from the second quarter of 2015.
Gross margin in the second quarter was 25.2%, compared to 27.1% in the year-ago quarter. During the second quarter of 2015, the company recognized an approximate $250,000 benefit (or approximately 110 basis points) due to an actuarial adjustment associated with the prior year workers’ compensation liability. The remaining 80 basis point decline was primarily due to the reduction in higher margin revenue from North Dakota, as well as a higher mix of business that did not meet the company’s gross margin target. Compared to the first quarter of 2016, gross margin for the second quarter was up 50 basis points.
Operating income in the second quarter was $0.4 million compared to $0.9 million in the year-ago quarter. The decrease was due to lower gross margin, partially offset by a 4% reduction in selling, general and administrative (SG&A) expenses to $5.0 million, compared to $5.2 million in the year-ago quarter. SG&A in the second quarter of 2015 included a $0.3 million valuation allowance associated with deposits placed with the company’s former workers’ compensation insurance carrier and a $0.2 million reserve for a note issued by Labor Smart, Inc. SG&A expenses for the second quarter of 2016 were also approximately 3% lower than the first quarter of 2016.
EBITDA (a non-GAAP term defined below) in the second quarter was $0.5 million compared to $1.1 million in the year-ago quarter. Adjusted EBITDA (a non-GAAP term defined below) in the second quarter was $0.5 million compared to $1.6 million in the year-ago quarter.
Net income in the second quarter was $0.3 million or $0.00 per diluted share, compared to net income of $0.5 million or $0.01 per diluted share in the year-ago quarter.
Cash at June 24, 2016 was $2.2 million, compared to $7.6 million at December 25, 2015. During the second quarter, the company used approximately $2.5 million in cash to acquire the assets of Hancock Staffing, which included $2 million as purchase price and approximately $0.5 million paid to purchase Hancock Staffing’s accounts receivable line and pay other assumed liabilities.
Hancock Staffing operated one branch in Little Rock, Arkansas, and another in Oklahoma City, Oklahoma, with combined annualized revenue of approximately $8 million. The acquisition is immediately accretive to earnings. Hancock Staffing provided services in the same general market segments that Command Center currently operates, including light industrial, construction, hospitality and event services. The transaction was completed on June 3, 2016.
The company also repurchased 1,660,627 shares of its common stock in the second quarter for a total cost of $660,000, or an average price of $0.40 per share. There is approximately $2.7 million remaining under the $5 million plan. The company’s debt balance at June 24, 2016 was $0.8 million compared to $0.5 million at the end of 2015.
Command Center ended the quarter with 61 stores operating in 21 states.
Management Commentary
“Overall revenue in the second quarter continued to be pressured by the decline in revenue from our branches in North Dakota’s oil-driven market,” said Command Center’s president and CEO, Bubba Sandford. “With revenue from branches outside North Dakota unchanged, several of those offices did not perform to the standards of excellence we demand from the field and everyone in the company. In the end, we just did not perform to the high expectations we set for ourselves as a company.
“As a result, we began taking measures in the second quarter and even more recently to improve operations in the field by making several changes. They include personnel changes and eliminating certain positions, as well as an overall flattening of the organization to foster a closer relationship between our branch and corporate-level staff. As we are always looking to manage and reduce costs, we also adjusted costs related to travel and other support items without compromising service to the branches.
“In the second quarter, we were able to use our strong cash position to purchase the operations of Hancock Staffing. We believe our diligence in finding the right acquisition is now paying off and will continue to add shareholder value in the future. The transaction, which closed on June 3rd, strengthens our presence in two important markets and is a prudent allocation of the company’s capital.”
“Similar to our organization,” Sandford continued, “Hancock Staffing built their business on a service-oriented culture, which has fostered high-quality, long-term client relationships. Integration of the offices has gone smoothly, and they are generating cash for the company. Capitalizing on the strength of our new team members from Hancock Staffing, we are hopeful to expand operations in the future in these market areas.
“For the remainder of 2016, we expect to focus on our existing branches to drive maximum efficiencies and profitability. We also always look at new store openings to increase concentration in our current markets, and as we rebuild our cash reserve, we expect that our balance sheet will enable us to remain opportunistic in seeking additional acquisitions. We continue to remain confident these strategies are the most optimal for driving long-term shareholder value.”
Conference Call
Command Center will hold a conference call today, August 9, at 11:00 a.m. Eastern time (9:00 a.m. Mountain time) to discuss its second quarter 2016 results.
Date: Tuesday, August 9, 2016
Time: 11:00 a.m. Eastern time (9:00
a.m. Mountain time)
Toll-free dial-in number: 1-888-708-5695
International
dial-in number: 1-913-312-0711
Conference ID: 2341941
The conference will be broadcast live and also available for replay at http://public.viavid.com/index.php?id=120736 and via the Investor section of Command Center’s website at www.commandonline.com.
A replay of the conference call will be available after 2:00 p.m. Eastern time on the same day and continuing through August 23, 2016.
Toll-free replay number: 1-877-870-5176
International replay
number: 1-858-384-5517
Replay ID: 2341941
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 61 field offices, the company provides employment annually for nearly 33,000 field team members working for 3,300 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 24, 2016, 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 non-GAAP terms EBITDA and Adjusted EBITDA. EBITDA is defined as earnings before interest, taxes, depreciation and amortization and non-cash compensation. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, non-cash compensation and specifically identified one-time expenses. The company uses EBITDA and Adjusted EBITDA as financial measures since management believes investors find these to be useful tools to perform more meaningful comparisons of past, present and future operating results, and as a complement to net income and other financial performance measures. EBITDA and Adjusted EBITDA 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 EBITDA and Adjusted EBITDA to net income for the periods presented as well as per basic share information (in thousands except per share data):
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||||||||||||||
June 24, 2016 | June 26, 2015 | June 24, 2016 | June 26, 2015 | |||||||||||||||||||||||||
Total Operating Revenue | $ | 21,676 | $ | 22,804 | $ | 40,742 | $ | 41,783 | ||||||||||||||||||||
Cost of Staffing Services | 16,224 | 74.8 | % | 16,615 | 72.9 | % | 30,578 | 75.1 | % | 30,226 | 72.3 | % | ||||||||||||||||
Gross profit | 5,452 | 25.2 | % | 6,189 | 27.1 | % | 10,165 | 24.9 | % | 11,557 | 27.7 | % | ||||||||||||||||
Selling, general and administrative expenses | 5,019 | 23.2 | % | 5,213 | 22.8 | % | 10,187 | 24.8 | % | 10,349 | 24.8 | % | ||||||||||||||||
Depreciation and amortization | 62 | 0.2 | % | 43 | 0.2 | % | 101 | 0.2 | % | 86 | 0.2 | % | ||||||||||||||||
Income from operations | 371 | 1.7 | % | 933 | 4.1 | % | (123 | ) | -0.1 | % | 1,122 | 2.7 | % | |||||||||||||||
Interest expense and other financing expense | (37 | ) | -0.2 | % | (72 | ) | -0.3 | % | (77 | ) | -0.2 | % | (113 | ) | -0.3 | % | ||||||||||||
Impairment of goodwill | - | 0.0 | % | - | 0.0 | % | - | 0.0 | % | - | 0.0 | % | ||||||||||||||||
Change in fair value of warrant liability | - | 0.0 | % | - | 0.0 | % | - | 0.0 | % | - | 0.0 | % | ||||||||||||||||
Net income before income taxes | 335 | 1.5 | % | 861 | 3.8 | % | (200 | ) | -0.2 | % | 1,009 | 2.4 | % | |||||||||||||||
Provision for income taxes | (60 | ) | -0.3 | % | (331 | ) | -1.5 | % | (60 | ) | -0.1 | % | (397 | ) | -0.9 | % | ||||||||||||
Net income | $ | 275 | 1.3 | % | $ | 530 | 2.3 | % | $ | (260 | ) | -0.4 | % | $ | 612 | 1.5 | % | |||||||||||
Non-GAAP Data | ||||||||||||||||||||||||||||
EBITDA | $ | 547 | 2.9 | % | $ | 1,138 | 5.0 | % | $ | 224 | 0.8 | % | $ | 1,534 | 3.7 | % | ||||||||||||
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||||||
June 24, 2016 | June 26, 2015 | June 24, 2016 | June 26, 2015 | |||||||||||||||||
Adjusted EBITDA | 547 | 1,563 | 473 | 1,959 | ||||||||||||||||
Adjustments: | ||||||||||||||||||||
Non-cash compensation | (114 | ) | (162 | ) | (246 | ) | (326 | ) | ||||||||||||
Non-cash taxes | (60 | ) | (331 | ) | (60 | ) | (397 | ) | ||||||||||||
Depreciation and amortization | (62 | ) | (43 | ) | (101 | ) | (86 | ) | ||||||||||||
Interest expense and other financing expense | (37 | ) | (72 | ) | (77 | ) | (113 | ) | ||||||||||||
Reserve for workers compensation deposit | (250 | ) | (250 | ) | (250 | ) | ||||||||||||||
Reserve for note receivable | (175 | ) | (175 | ) | ||||||||||||||||
Net Adjustments: | (273 | ) | (1,033 | ) | (734 | ) | (1,348 | ) | ||||||||||||
Net (Loss) Income (GAAP measure) | $ | 275 | $ | 530 | $ | (260 | ) | $ | 612 | |||||||||||
Command Center, Inc. | ||||||||||
Consolidated Condensed Balance Sheets | ||||||||||
June 24, 2016 | December 25, 2015 | |||||||||
ASSETS | ||||||||||
Current Assets | ||||||||||
Cash | $ | 2,233,575 | $ | 7,629,424 | ||||||
Restricted cash | 170,327 | - | ||||||||
Accounts receivable, net of allowance for doubtful accounts | 10,503,699 | 8,917,933 | ||||||||
Notes Receivable | - | - | ||||||||
Prepaid expenses, deposits and other | 312,881 | 292,352 | ||||||||
Prepaid workers' compensation | 527,591 | 756,005 | ||||||||
Other receivables | - | - | ||||||||
Current portion of deferred tax asset | 878,085 | 878,085 | ||||||||
Current portion of workers' compensation deposits | 406,219 | 398,319 | ||||||||
Total Current Assets | 15,032,378 | 18,872,118 | ||||||||
Property and equipment - net | 552,094 | 408,657 | ||||||||
Deferred tax asset, less current portion | 2,023,851 | 2,083,851 | ||||||||
Workers' compensation risk pool deposit, less current portion | 2,006,814 | 2,256,814 | ||||||||
Goodwill | 3,809,938 | 2,500,000 | ||||||||
Intangible assets - net | 648,238 | - | ||||||||
Total Assets | $ | 24,073,312 | $ | 26,121,439 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
Current Liabilities | ||||||||||
Accounts payable | $ | 353,670 | $ | 304,009 | ||||||
Checks issued and payable | 385,547 | 487,087 | ||||||||
Account purchase agreement facility | 398,252 | 479,616 | ||||||||
Other current liabilities | 442,634 | 323,222 | ||||||||
Contingent liability | - | - | ||||||||
Accrued wages and benefits | 867,157 | 1,452,558 | ||||||||
Current portion of workers' compensation premiums and claims liability | 966,332 | 1,201,703 | ||||||||
Total Current Liabilities | 3,413,592 | 4,248,196 | ||||||||
Long-Term Liabilities | ||||||||||
Warrant liabilities | - | - | ||||||||
Workers' compensation claims liability, less current portion | 1,912,705 | 2,231,735 | ||||||||
Total Liabilities | 5,326,298 | 6,479,931 | ||||||||
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; 62,298,961 and 64,305,288 shares issued and outstanding, respectively | 62,299 | 64,305 | ||||||||
Additional paid-in capital | 57,119,952 | 57,752,301 | ||||||||
Accumulated deficit | (38,435,236 | ) | (38,175,098 | ) | ||||||
Total Stockholders' Equity | 18,747,015 | 19,641,508 | ||||||||
Total Liabilities and Stockholders' Equity | $ | 24,073,312 | $ | 26,121,439 | ||||||
Command Center, Inc. | ||||||||||||||||||||
Consolidated Condensed Statements of Income | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||||||
June 24, 2016 | June 26, 2015 | June 24, 2016 | June 26, 2015 | |||||||||||||||||
Revenue | $ | 21,675,874 | $ | 22,804,235 | $ | 40,742,446 | $ | 41,783,060 | ||||||||||||
Cost of staffing services | 16,223,788 | 16,615,458 | 30,577,834 | 30,225,746 | ||||||||||||||||
Gross profit | 5,452,086 | 6,188,777 | 10,164,612 | 11,557,314 | ||||||||||||||||
Selling, general and administrative expenses | 5,018,879 | 5,212,940 | 10,186,680 | 10,349,006 | ||||||||||||||||
Depreciation and amortization | 61,712 | 43,224 | 101,045 | 86,216 | ||||||||||||||||
Income from operations | 371,495 | 932,613 | (123,113 | ) | 1,122,092 | |||||||||||||||
Interest expense and other financing expense | (36,643 | ) | (71,685 | ) | (77,024 | ) | (112,935 | ) | ||||||||||||
Impairment of goodwill | - | - | - | - | ||||||||||||||||
Change in fair value of derivative liabilities | - | - | - | - | ||||||||||||||||
Net income before income taxes | 334,852 | 860,928 | (200,137 | ) | 1,009,157 | |||||||||||||||
Provision for income taxes | (60,000 | ) | (330,787 | ) | (60,000 | ) | (397,478 | ) | ||||||||||||
Net income | $ | 274,852 | $ | 530,141 | $ | (260,137 | ) | $ | 611,679 | |||||||||||
Earnings per share: | ||||||||||||||||||||
Basic | $ | 0.00 | $ | 0.01 | $ | (0.00 | ) | $ | 0.01 | |||||||||||
Diluted | $ | 0.00 | $ | 0.01 | $ | (0.00 | ) | $ | 0.01 | |||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||
Basic | 63,558,745 | 65,922,974 | 63,781,844 | 65,834,624 | ||||||||||||||||
Diluted | 64,317,089 | 67,270,422 | 63,781,844 | 67,159,337 |
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Contacts:
Liolios
Cody Slach, 949-574-3860
CCNI@liolios.com