DENVER–(BUSINESS WIRE)–Command Center, Inc. (Nasdaq: CCNI), a national provider of on-demand
and temporary staffing solutions, today reported financial results for
the first quarter ended March 29, 2019.
First Quarter 2019 Financial Summary
-
Revenue of $21.8 million compared to $22.5 million in the year-ago
period. - Gross margin of 25.9% compared to 24.9% in the year-ago period.
-
The first quarter of last year included an expense related to changes
in worker’s compensation accruals of $210,800, compared to no such
expense in the first quarter this year. -
Net loss of $(744,000), or $(0.16) per diluted share, compared to a
net loss of $(1.2 million), or $(0.24) per diluted share in the
year-ago period. -
Adjusted EBITDA (excluding stock-based compensation expense) of
negative $118,000 compared to $417,000 in the year-ago period.
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 has filed a preliminary proxy statement with the U.S. Securities
and Exchange Commission (“SEC”), and once any SEC comments have been
addressed, the company expects to mail the definitive proxy statement
containing full details of the proposed transaction to shareholders for
consideration and approval.
Management Commentary
“Command Center was impacted by typical seasonality in the first
quarter, and along with a significant reduction in services from one
large customer for the period, we experienced lower revenue and recorded
a loss from operations,” commented Rick Coleman, president and CEO of
Command Center. “During the quarter, we recognized approximately
$659,000 in non-recurring expenses related to our pending merger with
Hire Quest Holdings, LLC and also approximately $249,000 in bonus
payments and accruals for bonuses earned at the end of 2018. These
expenses contributed significantly to our operating and net losses, and
absent these charges, we would have been profitable.”
“The company’s proxy statement has been submitted to the SEC,” added Mr.
Coleman. “Once we have addressed any comments from the SEC, we will mail
the proxy to shareholders and schedule our annual meeting. Contingent on
shareholder approval, we’ll subsequently announce the details of our
tender offer. In the interim, we are working closely with the team at
Hire Quest to facilitate a smooth integration of our two businesses
anticipating the finalization of the merger. We continue to believe this
combination will provide meaningful benefits and result in significant
shareholder value.”
First Quarter 2019 Financial Results
Revenue in the first quarter of 2019 was $21.8 million, compared to
$22.5 million in the year-ago quarter, a decrease of $713,000, or 3.2%.
This decrease is primarily due to a significant revenue decline from a
large customer, poor weather in parts of the country, and the loss of
key salespeople.
Gross margin in the first quarter was 25.9%, compared to 24.9% in the
year-ago quarter. This increase is primarily related to a decrease in
workers’ compensation costs as well as lower unemployment costs.
Continued low unemployment rates resulted in upward pressure on wages
and related payroll taxes for field team members, which partially offset
the increase in gross margin for the quarter.
Selling, general and administrative (“SG&A”) expense in the first
quarter was $6.6 million, a decrease of approximately $664,000 from $7.2
million for the first quarter last year. This decrease is primarily due
to the impairment of the company’s workers’ compensation deposit in
receivership of approximately $1.5 million that was incurred last year.
Excluding this expense, SG&A increased by approximately $876,000. This
increase was primarily due to higher legal and professional fees related
to the recently announced agreement and plan of merger with Hire Quest,
as well as costs related to recruiting, stock-based compensation, bank
fees, and bad debt, which were partially offset by lower IT-related
costs.
Command Center reported a loss from operations of $(986,000), compared
to a loss from operations of $(1.7 million) in the first quarter last
year.
Net loss in the first quarter of 2019 was $(744,000), or $(0.16) per
diluted share, compared to a net loss of $(1.2 million), or $(0.24) per
diluted share, in the year-ago quarter.
Adjusted EBITDA in the first quarter was a negative $118,000, compared
to Adjusted EBITDA of $417,000 in the year-ago quarter. Adjusted EBITDA
in the first quarter of 2019 included $712,000 in non-recurring charges,
and $88,000 in non-cash compensation compared to $2.0 million in
non-recurring charges and $27,000 in non-cash compensation in the
year-ago quarter.
Balance Sheet and Capital Structure
Cash and cash equivalents at March 29, 2019, were $7.5 million, compared
to $8.0 million at December 28, 2018.
During the first quarter of 2019 but prior to the execution of the
definitive merger agreement, the company purchased approximately 48,000
shares of common stock through its share repurchase program for an
aggregate consideration of approximately $198,000 resulting in an
average price of $4.15 per share. These shares were subsequently
retired. In conjunction with the recently announced merger with Hire
Quest, LLC and the related pending tender offer, the company has
discontinued purchases under this program.
Conference Call
Command Center will hold a conference call on Tuesday, May 14, 2019 at
10 a.m. Eastern time (8 a.m. Mountain time) to discuss the first quarter
2019 results.
| Date: | Tuesday, May 14, 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: | 13690414 | ||
Please call into the conference bridge 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 [email protected].
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 continuing through May 28, 2019.
| Toll-free replay number: | 1-844-512-2921 | ||
| International replay number: | 1-412-317-6671 | ||
| Replay ID: | 13690414 | ||
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 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.
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Command Center, Inc. Consolidated Balance Sheets |
|||||||
| March 29, 2019 | December 28, 2018 | ||||||
| ASSETS | (unaudited) | ||||||
| Current assets | |||||||
| Cash | $ 7,338,186 | $ 7,934,287 | |||||
| Restricted cash | 139,859 | 69,423 | |||||
| Accounts receivable, net of allowance for doubtful accounts | 9,063,215 | 9,041,361 | |||||
| Prepaid expenses, deposits, and other assets | 460,953 | 380,930 | |||||
| Prepaid workers’ compensation | 313,814 | 212,197 | |||||
| Total current assets | 17,316,027 | 17,638,198 | |||||
| Property and equipment, net | 288,375 | 329,255 | |||||
| Right-of-use asset | 1,795,451 | – | |||||
| Deferred tax asset | 1,321,644 | 1,079,908 | |||||
| Workers’ compensation risk pool deposit, less current portion, net | 191,521 | 193,984 | |||||
| Workers’ compensation risk pool deposit in receivership, net | 260,000 | 260,000 | |||||
| Goodwill and other intangible assets, net | 3,903,963 | 3,930,900 | |||||
| Total assets | $ 25,076,981 | $ 23,432,245 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities | |||||||
| Accounts payable | $ 904,981 | $ 219,945 | |||||
| Account purchase agreement facility | – | 398,894 | |||||
| Other current liabilities | 788,831 | 821,142 | |||||
| Accrued wages and benefits | 1,583,534 | 1,218,699 | |||||
| Current portion of lease liability | 930,874 | – | |||||
| Current portion of workers’ compensation claims liability | 1,003,643 | 1,003,643 | |||||
| Total current liabilities | 5,211,863 | 3,662,323 | |||||
| Lease liability, less current portion | 915,203 | – | |||||
| Workers’ compensation claims liability, less current portion | 912,754 | 878,455 | |||||
| Total liabilities | 7,039,821 | 4,540,778 | |||||
| Commitments and contingencies (Note 9) | |||||||
| 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; 4,633,120 and 4,680,871 shares issued and outstanding, respectively |
4,633 | 4,681 | |||||
| Additional paid-in capital | 54,426,617 | 54,536,852 | |||||
| Accumulated deficit | (36,394,089) | (35,650,066) | |||||
| Total stockholders’ equity | 18,037,161 | 18,891,467 | |||||
| Total liabilities and stockholders’ equity | $ 25,076,981 | $ 23,432,245 | |||||
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Command Center, Inc. Consolidated Statement of Operations (unaudited) |
||||||||
| Thirteen weeks ended | ||||||||
| March 29, 2019 | March 30, 2018 | |||||||
| Revenue | $ 21,754,898 | $ 22,467,398 | ||||||
| Cost of staffing services | 16,122,635 | 16,873,331 | ||||||
| Gross profit | 5,632,263 | 5,594,067 | ||||||
| Selling, general and administrative expenses | 6,550,012 | 7,213,620 | ||||||
| Depreciation and amortization | 67,817 | 92,591 | ||||||
| Loss from operations | (985,566) | (1,712,144) | ||||||
| Interest expense and other financing expense | 80 | 2,163 | ||||||
| Net loss before income taxes | (985,646) | (1,714,307) | ||||||
| Provision for income taxes | (241,623) | (496,618) | ||||||
| Net loss | $ (744,023) | $ (1,217,689) | ||||||
| Loss per share: | ||||||||
| Basic | $ (0.16) | $ (0.24) | ||||||
| Diluted | $ (0.16) | $ (0.24) | ||||||
| Weighted average shares outstanding: | ||||||||
| Basic | 4,662,275 | 4,983,157 | ||||||
| Diluted | 4,662,275 | 4,983,157 | ||||||
The following tables present a reconciliation of net income (loss) to
EBITDA and Adjusted EBITDA for the periods presented (in thousands):
| Thirteen weeks ended | ||||||||
| March 29, 2019 | March 30, 2018 | |||||||
| Net income | $ (744) | $ (1,218) | ||||||
| Interest expense | – | 2 | ||||||
| Provision for income taxes | (242) | (497) | ||||||
| Depreciation and amortization | 68 | 93 | ||||||
| Non-cash compensation | 88 | 27 | ||||||
| Other non-recurring expense | 712 | 2,010 | ||||||
| Adjusted EBITDA | $ (118) | $ 417 | ||||||
Please note: numbers may not foot due to rounding
Contacts
Company Contact:
Command
Center, Inc.
Cory Smith, CFO
(866) 464-5844
Email: [email protected]
Investor
Relations Contact:
Hayden IR
Brett Maas
646-536-7331
Email:
[email protected]
