Command Center reports Q2 net income up 217%
Second Quarter 2014 Financial Highlights vs. Year-Ago Quarter
• Same store sales up 0.7% to $21.6 million
• Gross margins increased from 25.2% to 26.9%
• Operating income up 197% to $1.6 million
• Net income up 217% to a record $1.5 million or $0.02 per diluted share
“During the second quarter, we continued our emphasis on improving customer service and operational efficiency in order to improve profitability and prepare the company for future growth,” said Bubba Sandford, Command Center’s president and CEO. “Our success in this approach was demonstrated by the record net income in the second quarter, which also generated the most profitable first half in our company’s history, with net income up 300% to more than $2 million. The 170 basis point increase in the second quarter gross margin also reflects the success of our strategy to improve customer service.”
Second Quarter 2014 Financial Results
Revenues in the second quarter of 2014 decreased 7% to $21.6 million compared to $23.2 million in the second quarter of 2013. The decrease in revenue is primarily attributable to the closure of five underperforming stores during the past year.
Same store revenues increased approximately 0.7% to $21.6 million in Q2 2014 compared to $21.5 million in Q2 2013. Gross margins improved to 26.9% in Q2 2014 versus 25.2% in the year-ago quarter. The increase in same store sales and improved margins resulted, in large part, from the company’s continued focus on attracting and servicing quality accounts.
Net income in the second quarter increased to $1.5 million compared to $473,000 in the year-ago quarter, resulting in diluted earnings per share of $0.02 in the second quarter of 2014 compared to $0.01 in the year-ago quarter. Operating income was up 197% to $1.6 million versus $550,000 in the year-ago quarter. These improvements are attributable to the higher gross margins and a $1.1 million or 21% reduction in SG&A expense over the same period last year.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, and the change in fair value of derivative liabilities) increased 151% to $1.7 million from $678,000 in the year-ago quarter (see discussion about the presentation of adjusted EBITDA, a non-GAAP term, below).
Cash at June 27, 2014 totaled $2.8 million compared to $1.3 million at June 28, 2013. The increase in cash was due to improved cash generation from operations, which was offset by $3.0 million in cash used to reduce the company’s liability under its account purchase facility with Wells Fargo Bank, N.A. Command Center reduced the liability to allow Wells Fargo to provide a $3.6 million letter of credit to the company’s new workers’ compensation insurance carrier. The company expects this arrangement to result in total savings in interest expense and lower policy costs totaling approximately $400,000 in the current policy year.
During the quarter the company also entered into the Seventh Amendment to its Account Purchase Agreement with Wells Fargo, wherein the facility maximum under the agreement increased from $14 million to $15 million.