Quarterly SG&A Expenses Decline 7.3%
Sequentially; Quarterly Net Income Increases 98% Sequentially
Command Center, Inc. (Nasdaq: CCNI), a national provider of
on-demand and temporary staffing solutions, today reported
financial results for the fourth quarter and year ended December
28, 2018.
Fourth Quarter 2018 Financial Summary
- Revenue of $24.4 million compared to
$24.5 million in the year ago period.
- Gross margin of 27.1% compared to 24.5%
in the year ago period.
- The fourth quarter of 2018 included a
benefit related to changes in workers’ compensation accruals of
$172,000, compared to an expense of $303,000 in the fourth quarter
last year.
- Net income of $1.1 million, or $0.23
per diluted share, compared to a net loss of $(89,000), or $(0.02)
per diluted share in the year ago period.
- Adjusted EBITDA (excluding stock-based
compensation expense) of $1.6 million compared to $687,000 in the
year ago period.
Full Year 2018 Financial Summary
- Revenue of $97.4 million compared to
$98.1 million in the year ago period.
- Gross margin of 25.6% compared to 25.9%
in the year ago period.
- Command Center recorded an expense
related to changes in workers’ compensation accruals of $555,000 in
2018, compared to an expense of $303,000 in 2017.
- Net income of $1.0 million, or $0.20
per diluted share, compared to $1.7 million, or $0.33 per diluted
share in the year ago period.
- Adjusted EBITDA (excluding stock-based
compensation expense) of $4.1 million compared to $4.2 million in
the year ago period.
- Repurchased approximately 324,000
shares of common stock at an aggregate cost of approximately $1.8
million, resulting in an average price of $5.65 per share.
Definitive Merger Agreement
On April 8, 2019 the company announced it has entered into a
definitive agreement (“Merger Agreement”) to merge with Hire Quest
Holdings, LLC, operating as Trojan Labor and Acrux Staffing, a
privately-held provider of blue collar, light industrial and
administrative staffing, in an all-stock transaction. The
transaction is expected to close in the second quarter of 2019, or
shortly thereafter, subject to standard closing conditions,
including shareholder approval. Upon completion of the transaction,
Hire Quest will be merged with Command Center. The company expects
to issue a proxy statement containing full details of the proposed
transaction for shareholder consideration and approval.
Management Commentary
“In addition to favorable workers’ compensation accrual
adjustments compared to previous periods, the $1.2 million
improvement in net income demonstrates our progress in streamlining
operations and improving operating efficiency,” said Rick Coleman,
president and CEO of Command Center. “The strong end to a solid
year gives us momentum as we move towards completing our pending
merger with Hire Quest Holdings, LLC. As part of the integration of
the two companies, we will be transitioning our existing branches
to the more profitable franchise model deployed by Hire Quest. We
are a solid organization with a proven ability to generate cash and
effectively deploy capital. Gaining the additional scale from the
pending merger and operating from a more profitable franchise
model, we will have an ecosystem of franchises that incentivizes
improved performance and maximizes results for all
stakeholders.”
Fourth Quarter 2018 Financial Results
Revenue in the fourth quarter of 2018 was $24.4 million,
compared to $24.5 million in the year-ago quarter, a decrease of
$81,000, or 0.3%.
Gross margin in the fourth quarter was 27.1%, compared to 24.5%
in the year-ago quarter. This increase is primarily related to
fluctuations in the company’s workers’ compensation expense.
Selling, general and administrative (“SG&A”) expense in the
fourth quarter was $5.2 million, compared to $5.4 million in the
year-ago quarter.
As a result of increased margin and lower SG&A, income from
operations increased by $766,000 to $1.3 million in the fourth
quarter of 2018, compared to $556,000 in the fourth quarter of
2017.
The financial results in the fourth quarter of 2018 included a
benefit related to changes in workers’ compensation accruals of
$172,000, compared to an expense of $303,000 in the fourth quarter
last year.
Net income in the fourth quarter of 2018 was $1.1 million, or
$0.23 per diluted share, compared to a net loss of $89,000, or
$(0.02) per diluted share, in the year-ago quarter.
Adjusted EBITDA in the fourth quarter was $1.6 million, compared
to $687,000 in the year-ago quarter. Adjusted EBITDA in the fourth
quarter of 2018 included $105,000 in non-recurring charges and
$88,000 in non-cash compensation, compared to $0 in non-recurring
charges and $33,000 in non-cash compensation in the year-ago
quarter.
Full-Year 2018 Financial Results
Revenue for the full-year 2018 was $97.4 million, compared to
$98.1 million in 2017, a decrease of $683,000, or 0.7%.
Gross margin remained strong at 25.6% in 2018, a slight decrease
from 25.9% in 2017.
SG&A in 2018 was $23.4 million, which included $2.2 million
in non-recurring charges, compared to $21.3 million in 2017.
Command Center recorded an expense related to changes in
workers’ compensation accruals of $555,000 in 2018, compared to an
expense of $303,000 in 2017.
Net income in 2018 was $1 million, or $0.20 per diluted share,
compared to $1.7 million, or $0.33 per diluted share in 2017.
Adjusted EBITDA was $4.1 million, or 4.2% of revenue in 2018,
compared to $4.2 million, or 4.3% of revenue, in 2017. Included in
adjusted EBITDA in 2018 were $2.2 million in non-recurring charges
and $395,000 in non-cash compensation, compared to $0 in
non-recurring charges and $155,000 in non-cash compensation in
2017.
Balance Sheet and Capital Structure
Cash and cash equivalents at December 28, 2018, was $8.0
million, compared to $7.8 million at December 29, 2017.
During 2018, the company purchased approximately 324,000 shares
of common stock through its share repurchase program at an
aggregate price of approximately $1.8 million resulting in an
average price of $5.65 per share. These shares were subsequently
retired. As of December 28, 2018, approximately $2.8 million
remains under the current repurchase program.
Effective December 7, 2017, the company implemented a 1-for-12
reverse stock split. Approximately 60.6 million shares of common
stock were exchanged for approximately 5.1 million newly issued
shares. All stock prices, per share amounts, and number of shares
in the consolidated financial statements and related notes have
been retroactively adjusted to reflect the reverse stock split.
Conference Call
Command Center will hold a conference call on Wednesday, April
10, 2019 at 10 a.m. Eastern time (8 a.m. Mountain time) to discuss
the pending merger transaction and its fourth quarter and full-year
2018 results.
Date: Wednesday, April 10, 2019 Time: 10 a.m. Eastern
time (8 a.m. Mountain time) Toll-free dial-in number:
1-877-705-6003 International dial-in number: 1-201-493-6725
Conference ID: 13689444
Please call the conference telephone number 5-10 minutes prior
to the start time. An operator will register your name and
organization. If you have any difficulty connecting with the
conference call, please contact Hayden IR at ccni@haydenir.com.
The conference call will be broadcast live and available for
replay here and via the investor relations section of Command
Center’s website at www.commandonline.com. A replay of the
conference call will be available after 1 p.m. Eastern time on the
same day and continuing through April 24, 2019.
Toll-free replay number: 1-844-512-2921 International
replay number: 1-412-317-6671 Replay ID: 13689444
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 67 field
offices in 22 states, the company provides employment annually for
approximately 33,000 field team members working for over 3,200
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, national,
regional and local economic conditions, 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 our most recent reports on
Forms 10-K and 10-Q filed with the Securities and Exchange
Commission, copies of which are available on our website at
www.commandonline.com and the SEC website at www.sec.gov. 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
the non-GAAP term Adjusted EBITDA. Adjusted EBITDA is defined as
earnings before interest, taxes, depreciation and amortization,
non-cash compensation, and certain non-recurring expenses,
including reserve for workers’ compensation deposits. The company
uses Adjusted EBITDA as a financial measure as management believes
investors find it to be a useful tool to perform more meaningful
comparisons of past, present and future operating results, and as a
means to evaluate our results of operations. The company believes
this metric is a useful compliment 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.
Command Center, Inc.
Consolidated Balance Sheets
December 28, 2018 December 29, 2017
ASSETS Current assets Cash $ 7,934,287 $ 7,768,631
Restricted cash 69,423 12,853 Accounts receivable, net of allowance
for doubtful accounts 9,041,361 9,394,376 Prepaid expenses,
deposits, and other assets 380,930 740,280 Prepaid workers'
compensation 212,197 167,597 Current portion of workers'
compensation deposits - 99,624 Total
current assets 17,638,198 18,183,361 Property and equipment, net
329,255 372,145 Deferred tax asset 1,079,908 721,602 Workers'
compensation risk pool deposit, less current portion, net 193,984
201,563 Workers' compensation risk pool deposit in receivership,
net 260,000 1,800,000 Goodwill and other intangible assets, net
3,930,900 4,085,576 Total assets $
23,432,245 $ 25,364,247
LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities Accounts
payable $ 219,945 $ 563,402 Account purchase agreement facility
398,894 853,562 Other current liabilities 821,142 898,809 Accrued
wages and benefits 1,218,699 1,503,688 Current portion of workers'
compensation claims liability 1,003,643
1,031,500 Total current liabilities 3,662,323 4,850,961
Workers' compensation claims liability, less current portion
878,455 917,497 Total liabilities
4,540,778 5,768,458 Commitments and
contingencies
Stockholders' equity Preferred stock - $0.001
par value, 416,666 shares authorized; none issued - - Common stock
- $0.001 par value, 8,333,333 shares authorized; 4,680,871 and
4,993,672 shares issued and outstanding, respectively 4,681 4,994
Additional paid-in capital 54,536,852 56,211,837 Accumulated
deficit (35,650,066 ) (36,621,042 ) Total
stockholders' equity 18,891,467 19,595,789
Total liabilities and stockholders' equity $ 23,432,245
$ 25,364,247
Command Center, Inc.
Consolidated Statements of
Income
Thirteen weeks ended Fifty-two weeks ended
December 28, 2018 December 29, 2017
December 28, 2018 December 29, 2017
Revenue $ 24,436,403 $ 24,517,022 $ 97,388,820 $ 98,072,198 Cost of
staffing services 17,823,152 18,507,033
72,450,295 72,641,609 Gross profit 6,613,251 6,009,989
24,938,525 25,430,589 Selling, general and administrative expenses
5,220,411 5,355,705 23,433,198 21,347,681 Depreciation and
amortization 70,787 98,217 323,852
386,413 Income from operations 1,322,053 556,067 1,181,475
3,696,495 Interest expense and other financing expense 239
4,128 2,116 11,619 Net income before
income taxes 1,321,814 551,939 1,179,359 3,684,876 Provision for
income taxes 239,434 640,737 205,072
2,005,528 Net income $ 1,082,380 $ (88,798 ) $ 974,287 $
1,679,348
Earnings per share: Basic $ 0.23 $ (0.02 )
$ 0.20 $ 0.33 Diluted $ 0.23 $ (0.02 ) $ 0.20 $ 0.33
Weighted average shares outstanding: Basic 4,695,902
5,006,212 4,853,000 5,043,254 Diluted 4,695,902 5,244,377 4,855,019
5,105,006
Please note: numbers may not foot due to rounding
The following tables present a reconciliation of net income
(loss) to Adjusted EBITDA for the periods presented (in
thousands):
Thirteen weeks ended
Fifty-two weeks ended December 28, 2018
December 29, 2017 December 28, 2018
December 29, 2017 Net income $ 1,082 $ (89 ) $ 974 $ 1,679
Interest expense - 4 2 12 Provision for income taxes 240 641 205
2,006 Depreciation and amortization 71 98 324 386 Non-cash
compensation 88 33 395 155 Reserve for workers' compensation
deposit - - 1,540 - Other non-recurring expense 105 -
634 - Adjusted EBITDA $ 1,586 $ 687 $
4,074 $ 4,238
Please note: numbers may not foot due to rounding
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version on businesswire.com: https://www.businesswire.com/news/home/20190409005958/en/
Company
Contact:Command Center, Inc.Cory Smith, CFO(866)
464-5844Email: cory.smith@commandonline.comInvestor Relations Contact:Hayden
IRBrett Maas(646) 536-7331Email: brett@haydenir.com
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