COEUR D’ALENE, Idaho--(BUSINESS WIRE)--Command Center, Inc. (OTCQB: CCNI), a national provider of on-demand and temporary staffing solutions, reported financial results for the second quarter ended June 26, 2015.
Second Quarter 2015 Financial Highlights vs. Same Year-Ago Quarter
- Revenue up 5.3% to $22.8 million
- Gross margins increased 20 basis points to 27.1%
- Operating income was $932,000 compared to $1.6 million
- Net income was $530,000 compared to $1.5 million
- Adjusted EBITDA totaled $1.1 million compared to $1.8 million
Second Quarter 2015 Financial Results
Revenues in the second quarter of 2015 increased 5.3% to $22.8 million, compared to $21.7 million in the same year-ago quarter. Revenue from branches outside the Bakken Shale region of North Dakota grew by 12% compared to the same year-ago period. This increase was more than sufficient to offset the 24% decline from the company’s five branches located in the Bakken Shale region. While the Bakken region remains a highly profitable area for the company, it is now clear that revenue from this region will not likely return to the historically high levels experienced in 2014.
Gross margins in the second quarter increased 20 basis points to 27.1% from 26.9% in 2014. The company continues to benefit from lower workers’ compensation costs, which declined to 2.8% of revenue in the second quarter compared to 4.0% of revenue in the year-ago quarter. The impact of lower workers’ compensation costs was partially offset by a decrease in margins related to the decline in higher-margin revenue in the Bakken Shale region.
The company’s operating income for the second quarter of 2015 was $932,000 compared to $1.6 million in the year-ago period. The lower operating income is a result of the company’s investment in programs designed to improve revenue and profitability from existing branches. This includes additional employee training and the hiring of new supervisory personnel, as well as greater employment benefits designed to attract and retain high-quality people. Non-cash compensation increased $93,000 in the second quarter of 2015 versus the same year-ago period, as the company extended its equity compensation program to include all full-time employees.
Included in SG&A costs for the second quarter of 2015 are two non-recurring charges. The first charge is a $250,000 valuation allowance on $1.8 million in deposits the company placed with its former workers’ compensation insurance carrier, Freestone Insurance (formerly Dallas National Insurance Company). Freestone Insurance was placed in receivership by the State of Delaware in 2014. The company continues to believe it has a priority claim to the return of its collateral deposits. However, the receiver has not yet disclosed financial information regarding the amount of funds available for distribution to insureds in the same position as the company. The second charge is a $175,000 reserve for a note issued by Labor Smart, Inc. The company purchased the note from a creditor of Labor Smart and issued Labor Smart a notice of default. The company then filed suit to collect on the full value of the note, and Labor Smart has similarly filed suit against the company seeking to offset collection efforts. The company’s valuation of the Labor Smart note was determined in part by publicly available financial information, including in particular, the financial statements in the Form 10-Q filed by Labor Smart on May 18, 2015.
Net income in the second quarter of 2015 was $530,000 compared to $1.5 million in the year-ago quarter, or $0.01 per share as compared to $0.02 in the year-ago quarter.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, and non-cash compensation) in the second quarter of 2015 was $1.1 million or $0.02 per diluted share as compared to $1.8 or $0.03 per diluted share in the year-ago period (see discussion about the presentation of adjusted EBITDA, a non-GAAP term, and its reconciliation to the nearest GAAP metric, below).
The company’s cash balance at June 26, 2015, was $5.2 million, compared to $8.6 million at December 26, 2014, with the decrease resulting largely from the reduction of the company’s liability under its account purchase agreement by $1.7 million. Additionally, the company renewed its workers’ compensation policy with ACE Insurance Company in April 2015 and increased the collateral securing this policy by adding $2.1 million to the previous letter of credit provided to the insurer in 2014.
The company ended the quarter with 57 branches operating in 22 states.
Management Commentary
“Since coming to Command Center two years ago, we focused on driving increased shareholder value through the three core ‘Keys to Success’ that serve as the basis for our operations,” said Command Center’s president and CEO, Bubba Sandford. “First, we try to sell to customers who value our service. Secondly, we work to improve our margins whenever possible, and third, we strive to provide excellent service to our customers. We are also focused on driving positive cash flow by remaining lean and controlling our costs. Following these tenets has resulted in a strong balance sheet and a nimble organization.
“We are now into a new phase of our operations, as we enhance shareholder value by operating our existing business profitably and strategically investing our cash. During the second quarter, we implemented three of the four options we see for investing our cash by improving same-store revenue, implementing a stock repurchase program and investing in potential acquisition opportunities.
“Same-store revenues grew by 12% for those branches located outside the Bakken region. This growth is a direct result of our investment in branch training and support. Investing in same-store growth is fundamental to our operations and provides the greatest likely return in terms of creating shareholder value.
“In May of this year, we purchased a convertible promissory note issued by Labor Smart. We have since sent Labor Smart a notice of default on the note and a letter of intent to purchase their assets. We are currently pursuing the collection of the note through the court system. Despite their immediate debt problems, we view Labor Smart’s remaining business operations as an excellent fit with our organization.
“We also announced a $5 million stock repurchase plan that we initiated in the second quarter. During the quarter, we purchased 373,313 shares of our common stock at a total cost of approximately $258,000. To the extent the market does not fully reflect the strength of our business and the performance we have achieved, we plan to continue our share repurchase program. We do not believe the share repurchase program will prevent us from opening new branches or pursuing acquisition opportunities.
“As we continue to implement our strategy for enhancing shareholder value, we are confident we will remain profitable and continue to generate cash for investing in additional opportunities. We look forward to discussing our operations and plans at the upcoming Gateway Conference in San Francisco on September 9-10, where we are scheduled to meet with a number of institutional investors and analysts who are following our story.”
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 57 field offices, the company provides employment annually for more than 32,000 temporary employees working for approximately 3,400 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 4, 2015, 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 EBITDA, a non-GAAP term defined as earnings before interest, taxes, depreciation and amortization, and non-cash compensation (The company previously referred to this metric as “EBITDA-D.”).
The company uses 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. 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 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 26, 2015 | June 27, 2014 | June 26, 2015 | June 27, 2014 | ||||||||||
| EBITDA | $ | 1,138 | $ | 1,774 | $ | 1,534 | $ | 2,452 | |||||
| Interest expense and other financing expense | (72) | (110) | (113) | (163) | |||||||||
| Depreciation and amortization | (43) | (69) | (86) | (134) | |||||||||
| Provision for income taxes | (331) | (30) | (397) | (63) | |||||||||
| Non-cash compensation | (162) | (69) | (325) | (86) | |||||||||
| Net income | $ | 530 | $ | 1,496 | $ | 612 | $ | 2,007 | |||||
| Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||
| June 26, 2015 | June 27, 2014 | June 26, 2015 | June 27, 2014 | ||||||||||
| EBITDA per share | $ | 0.02 | $ | 0.03 | $ | 0.02 | $ | 0.04 | |||||
| Interest expense and other financing expense per share | (0.00) | (0.00) | (0.00) | (0.00) | |||||||||
| Depreciation and amortization per share | (0.00) | (0.00) | (0.00) | (0.00) | |||||||||
| Provision for income taxes per share | (0.01) | (0.00) | (0.01) | (0.00) | |||||||||
| Non-cash compensation per share | (0.00) | (0.00) | (0.00) | (0.00) | |||||||||
| Net income per share | $ | 0.01 | $ | 0.02 | $ | 0.01 | $ | 0.03 | |||||
| Command Center, Inc. | |||||||
|
Consolidated Condensed Balance Sheets |
|||||||
| June 26, 2015 | December 26, 2014 | ||||||
| ASSETS | (unaudited) | ||||||
| Current Assets | |||||||
| Cash | $ | 5,151,188 | $ | 8,600,249 | |||
| Restricted cash | 8,951 | - | |||||
| Accounts receivable, net of allowance for doubtful accounts | 10,251,718 | 9,029,347 | |||||
| Prepaid expenses, deposits and other | 526,578 | 260,242 | |||||
| Prepaid workers' compensation | 1,096,541 | 581,355 | |||||
| Other receivables | 8,162 | 7,949 | |||||
| Current portion of deferred tax asset | 910,000 | 1,760,000 | |||||
| Current portion of workers' compensation deposits | 980,000 | 1,114,000 | |||||
| Total Current Assets | 18,933,138 | 21,353,142 | |||||
| Property and equipment – net | 383,739 | 430,987 | |||||
| Deferred tax asset, less current portion | 2,689,000 | 2,126,000 | |||||
| Workers' compensation risk pool deposit, less current portion | 1,702,241 | 1,790,633 | |||||
| Goodwill | 2,500,000 | 2,500,000 | |||||
| Total Assets | $ | 26,208,118 | $ | 28,200,762 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| Current Liabilities | |||||||
| Accounts payable | $ | 335,975 | $ | 546,247 | |||
| Checks issued and payable | 438,912 | 255,532 | |||||
| Account purchase agreement facility | 1,239,921 | 2,900,104 | |||||
| Other current liabilities | 267,943 | 249,445 | |||||
| Accrued wages and benefits | 1,133,892 | 1,665,697 | |||||
| Current portion of workers' compensation premiums and claims liability | 1,141,062 | 1,305,248 | |||||
| Total Current Liabilities | 4,557,705 | 6,922,273 | |||||
| Long-Term Liabilities | |||||||
| Workers' compensation claims liability, less current portion | 2,351,924 | 2,514,302 | |||||
| Total Liabilities | 6,909,629 | 9,436,575 | |||||
| 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; 65,622,527 and 65,632,868 shares issued and outstanding, respectively |
|||||||
| 65,622 | 65,633 | ||||||
| Additional paid-in capital | 58,509,445 | 58,318,396 | |||||
| Accumulated deficit | (39,276,578) | (39,619,842) | |||||
| Total Stockholders' Equity | 19,298,489 | 18,764,187 | |||||
| Total Liabilities and Stockholders' Equity | $ | 26,208,118 | $ | 28,200,762 | |||
| Command Center, Inc. | |||||||||||||
| Consolidated Condensed Statements of Income | |||||||||||||
| (unaudited) | |||||||||||||
| Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||
| June 26, 2015 | June 27, 2014 | June 26, 2015 | June 27, 2014 | ||||||||||
| Revenue | $ | 22,804,235 | $ | 21,662,164 | $ | 41,783,060 | $ | 40,120,343 | |||||
| Cost of staffing services | 16,615,458 | 15,824,305 | 30,225,746 | 29,404,480 | |||||||||
| Gross profit | 6,188,777 | 5,837,859 | 11,557,314 | 10,715,863 | |||||||||
| Selling, general and administrative expenses | 5,212,940 | 4,132,511 | 10,349,006 | 8,349,218 | |||||||||
| Depreciation and amortization | 43,224 | 68,964 | 86,216 | 133,805 | |||||||||
| Income from operations | 932,613 | 1,636,384 | 1,122,092 | 2,232,840 | |||||||||
| Interest expense and other financing expense | (71,685) | (110,139) | (112,935) | (163,267) | |||||||||
| Net income before income taxes | 860,928 | 1,526,245 | 1,009,157 | 2,069,573 | |||||||||
| Provision for income taxes | (330,787) | (30,188) | (397,478) | (62,807) | |||||||||
| Net income | $ | 530,141 | $ | 1,496,057 | $ | 611,679 | $ | 2,006,766 | |||||
| Earnings per share: | |||||||||||||
| Basic | $ | 0.01 | $ | 0.02 | $ | 0.01 | $ | 0.03 | |||||
| Diluted | $ | 0.01 | $ | 0.02 | $ | 0.01 | $ | 0.03 | |||||
| Weighted average shares outstanding: | |||||||||||||
| Basic | 65,922,974 | 64,770,184 | 65,834,624 | 62,240,713 | |||||||||
| Diluted | 67,270,422 | 66,167,519 | 67,159,337 | 63,668,689 | |||||||||