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


Contacts

Investor Relations
Liolios
Cody Slach, 949-574-3860
CCNI@liolios.com