Command Center, Inc. (OTCQB: CCNI), a national provider of on-demand and temporary staffing solutions, reported financial results for the fourth quarter and full year ended December 26, 2014.

Financial Highlights

  • Revenue was $24.0 million in Q4 2014 and $91.8 million in the full year, with both periods declining approximately 2% versus comparable year-ago periods.
  • Gross margins in Q4 2014 increased 340 basis points to 29.7%, with the full year up 190 basis points to 27.8%.
  • Operating income in Q4 2014 was $1.7 million, up 22% from Q4 2013, with the full year improving 49% to $6.5 million.
  • Net income in Q4 2014 was $1.1 million, decreasing 9% from Q4 2013, with the full year up 210% to $9.1 million.
  • Adjusted EBITDA was $1.8 million in Q4 2014, up 19% from Q4 2013, with the full year up 49% to $7.0 million.

Full Year and Fourth Quarter 2014 Financial Results

Revenues in the fourth quarter of 2014 decreased approximately 2% to $24.0 million, compared to $24.6 million in the same year-ago quarter. For the full year, revenue totaled $91.8 million, a decline of 2% from $93.7 million in 2013. The decrease in revenue in both periods was a result of the company’s continued transition and focus on higher margin, higher quality customer engagements. Same-store sales were flat in the fourth quarter of 2014 and increased 4.5% for the full year.

Gross margins in the fourth quarter improved to 29.7% from 26.2% in the same year-ago quarter and for the full year improved 190 basis points to 27.8% from 25.9%. Improved gross margins in both periods resulted primarily from the company’s continued focus on attracting and servicing quality accounts. The company also continues to benefit from its strategies for improving employee safety in the form of lower workers’ compensation related costs. These efforts include employee training programs, enhanced onsite monitoring of work locations, and continuous and consistent evaluation of current and potential job duties of our workers.

Operating income for the fourth quarter of 2014 increased 22% to $1.7 million versus $1.4 million in the year-ago quarter and for the full year was up 49% to $6.5 million versus $4.4 million in 2013. The improvement in both periods is largely attributable to higher gross margins. While lower SG&A costs for the year also contributed to the improvement, SG&A costs in the fourth quarter of 2014 increased 8% over the same year-ago period as the result of hiring additional staff to support future anticipated growth. Non-cash compensation also increased approximately $316,000 in the fourth quarter of 2014, as the company broadened its equity compensation program to include all full time employees.

Net income in the fourth quarter of 2014 decreased 9% to $1.1 million, compared to $1.2 million in the year-ago quarter. For the full year of 2014, net income increased 210% to $9.1 million, compared to $2.9 million in 2013. Fully diluted earnings per share in the fourth quarter of 2014 and 2013 were $0.02 and were $0.14 for the full year of 2014 compared to $0.05 in 2013.

Excluding the provision for income taxes, net income in the fourth quarter of 2014 was $1.7 million or $0.02 per diluted share, with no such tax provision occurring in the comparative year-ago quarter. In the third quarter of 2014, the company recognized the benefit of its net operating loss (NOL) with a reduction in income tax expense. In the fourth quarter of 2014 and going forward, the company will record income tax expense at normal rates, with an offsetting reduction in its deferred tax asset until the NOL is depleted.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, and the change in fair value of derivative liabilities) for the fourth quarter of 2014 increased 19% to $1.8 million or $0.03 per diluted share from $1.5 million or $0.02 per diluted share in the year-ago period. For the full year, adjusted EBITDA increased 49% to $7.0 million or $0.11 per diluted share from $4.7 million or $0.08 per share 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 December 26, 2014, increased to $8.6 million compared to $5.8 million at December 27, 2013, with the increase resulting from greater cash flow from operations.

In 2014, the company opened three branch locations, ending the year with 55 stores operating in 22 states. The company also served more than 3,400 customers in 2014, utilizing more than 32,000 temporary employees.

Further details about the company’s results in 2014 are available in its Annual Report Form 10-K, accessible in the investor relations section of the company’s website at www.commandonline.com.

Management Commentary

“During 2014, despite a small decline in revenue, we achieved record profitability and cash flow,” said president and CEO, Bubba Sandford. “Our ongoing efforts to align our corporate culture to better support our branch offices and focus on providing excellent service to customers who appreciate our value have led to improving our operations and increasing shareholder value. By strengthening our cash balance we are in a stronger position to negotiate better terms for our workers’ compensation insurance and banking arrangements as well as invest in growth opportunities.

“During the year we expanded our number of branch locations to 55 field offices with the opening of three new offices in Houston, Texas, Knoxville, Tennessee, and Watford City, North Dakota.

“Part of our strategy is to remain diversified across a broad range of customers, industries and geographies, so we are not overly dependent on any one industry or customer. The sharp decline in oil prices in the second half of 2014 has led to a slowing of new drilling activity in North Dakota and Texas where we have a significant presence. However, we continue to see strong demand for temporary labor in both of these markets, as well as across the many industries and customers we service there.

“Two key events during the year that reflect our continued efforts to increase shareholder value and transparency were the appointments of John Stewart as chairman of the board and Jeff Wilson as our chief financial officer. Both John and Jeff possess considerable public company experience that will help our efforts to improve corporate governance and attract investors to our story.”

Stewart commented: “In my 30 years in North Dakota, there have been several economic cycles. The producers in the Bakken will continue to invest and expand despite the recent decline in oil prices. Oil and gas related activities have been going at breakneck speed for the past several years. The state will now have a chance to catch up on needed infrastructure projects that will support this long-term energy opportunity.”

Continued Sandford: “Another significant improvement in 2014 was our year end cash balance reaching $8.6 million, which equates to $0.13 per diluted share. We are continuously evaluating ways to deploy capital in a manner that builds long-term shareholder value while keeping in mind that we should maintain sufficient capital reserves for any unexpected opportunities that may arise.

“Our first objective is to continue improving same-store revenue growth and profitability through training and coaching of our branch managers and staff. We will continue to take advantage of opportunities to increase revenue and profitability in every market we serve. We believe this is the most direct and least expensive way to increase shareholder value.

“We plan to open additional branches in areas where we have an existing customer base and strong local economics. Our ability to open new branches will be determined in part by our ability to hire and train well qualified managers. Quality managers are essential to the profitable operation of any branch.

“We will also continue to evaluate acquisition opportunities and pursue only those that provide a good fit with our business and culture, as well as expand our geographic footprint or provide a lower cost of entry into a new market or industry.

“Finally, to the extent our market valuation does not fully reflect the strength of our business and the turnaround in performance we have achieved, we will consider implementing a stock repurchase program.

“Another key part of our strategy is to remain lean and nimble in order to take advantage of changes in the market. With our strong cash position, no long term-debt, and the support of a strengthening economy, we are well positioned to take advantage of the many opportunities for growth and expansion.”

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 55 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 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”).

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 to net income for the periods presented as well as per basic share information (in thousands except per share data):

    Thirteen Weeks Ended     Fifty-Two Weeks Ended

December 26,
2014

   

December 27,
2013

December 26,
2014

   

December 27,
2013

EBITDA $ 1,752 $ 1,473 $ 7,028 $ 4,719
Interest expense and other financing expense (39 ) (75 ) (249 ) (504 )
Depreciation and amortization (42 ) (67 ) (1,348 ) (351 )
Change in fair value of warrant liability - - - (787 )
Provision for income taxes   (552 )   (103 )   3,694     (137 )
Net income $ 1,118   $ 1,228   $ 9,126   $ 2,941  
 
EBITDA per share $ 0.03 $ 0.02 $ 0.11 $ 0.08
Interest expense and other financing expense per share (0.00 ) (0.00 ) (0.00 ) (0.01 )
Depreciation and amortization per share (0.00 ) (0.00 ) (0.02 ) (0.01 )
Change in fair value of warrant liability per share - - - (0.01 )
Provision for income taxes per share   (0.01 )   (0.00 )   0.05     (0.00 )
Net income per share $ 0.02   $ 0.02   $ 0.14   $ 0.05  
 
 
Command Center, Inc.
Consolidated Balance Sheets
 
        December 26, 2014         December 27, 2013
ASSETS
Current Assets
Cash $ 8,600,249 $ 5,820,309
Restricted cash - 25,619
Accounts receivable, net of allowance for doubtful accounts 9,029,347 10,577,250
Prepaid expenses, deposits and other 260,242 328,920
Prepaid workers' compensation 581,355 28,044
Other receivables 7,949 27,933
Current portion of deferred tax asset 1,760,000 -
Current portion of workers' compensation deposits   1,114,000     1,113,000  
Total Current Assets 21,353,142 17,921,075
Property and equipment - net 430,987 350,767
Deferred tax asset, less current portion 2,095,000 -
Workers' compensation risk pool deposit, less current portion 1,790,633 1,783,112
Goodwill 2,500,000 3,306,786
Intangible assets - net   -     386,956  
Total Assets $ 28,200,762   $ 23,748,696  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 546,247 $ 402,672
Checks issued and payable 255,532 189,830
Account purchase agreement facility 2,900,104 8,050,633
Other current liabilities 249,445 326,319
Accrued wages and benefits 1,665,697 1,717,235

Current portion of workers' compensation premiums and claims liability

  1,305,248     1,648,058  
Total Current Liabilities 6,922,273 12,334,747
Long-Term Liabilities
Warrant liabilities - 1,386,088
Workers' compensation claims liability, less current portion   2,514,302     2,613,871  
Total Liabilities   9,436,575     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; 65,632,868 and 59,711,242 shares issued and outstanding, respectively

65,633 59,711
Additional paid-in capital 58,318,396 56,099,875
Accumulated deficit   (39,619,842 )   (48,745,596 )
Total Stockholders' Equity   18,764,187     7,413,990  
Total Liabilities and Stockholders' Equity $ 28,200,762   $ 23,748,696  
 
 
Command Center, Inc.
Consolidated Statements of Income
 
    Thirteen Weeks Ended     Fifty-Two Weeks Ended
December 26, 2014     December 27, 2013 December 26, 2014     December 27, 2013
Revenue $ 24,020,660 $ 24,638,788 $ 91,839,846 $ 93,748,261
Cost of staffing services   16,895,291     18,177,490     66,320,088     69,500,997  
Gross profit 7,125,369 6,461,298 25,519,758 24,247,264
Selling, general and administrative expenses 5,373,727 4,988,372 18,491,561 19,527,784
Depreciation and amortization   42,132     67,378     540,746     351,240  
Income from operations 1,709,510 1,405,548 6,487,451 4,368,240
Interest expense and other financing expense (39,137 ) (74,874 ) (248,729 ) (503,626 )
Impairment of goodwill - - (806,786 ) -
Change in fair value of derivative liabilities   -     80     87     (786,615 )
Net income before income taxes 1,670,373 1,330,754 5,432,023 3,077,999
Provision for income taxes   (551,880 )   (102,605 )   3,693,731     (137,128 )
Net income $ 1,118,493   $ 1,228,149   $ 9,125,754   $ 2,940,871  
 
Earnings per share:
Basic $ 0.02   $ 0.02   $ 0.14   $ 0.05  
Diluted $ 0.02   $ 0.02   $ 0.14   $ 0.05  
 
Weighted average shares outstanding:
Basic 65,365,148 59,611,242 63,866,729 59,613,989
Diluted 67,287,684 61,458,761 65,588,413 61,307,455


Contacts

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