CCNI Command Center Inc

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 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 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.

 

         

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      

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

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Company Contact:Command Center, Inc.Cory Smith, CFO(866) 464-5844Email: cory.smith@commandonline.comInvestor Relations Contact:Hayden IRBrett Maas646-536-7331Email: brett@haydenir.com