Command Center Reports Second Quarter 2014 Financial Results

Q2 Net Income up 217% to Record $1.5 Million

Company Opens Houston Field Office

COEUR D’ALENE, Idaho--()--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

Liolios Group, Inc. Investor Relations
Chris Tyson, 949-574-3860
CCNI@liolios.com

Release Summary

Command Center reports record second quarter earnings of $1.5 million.

Contacts

Liolios Group, Inc. Investor Relations
Chris Tyson, 949-574-3860
CCNI@liolios.com