Command Center reports Q3 2014 results revenue up 7% to $27.7m
Third Quarter 2014 Financial Highlights vs. Year-Ago Quarter
· Revenues up 7% to $27.7 million
· Gross margins increased 190 basis points to 27.7% from 25.8%
· Operating income up 16% to record $2.5 million
· Net income including goodwill impairment and income tax benefit increased to $6.0 million or $0.09 per diluted share
· Adjusted EBITDA up 28% to record $2.9 million
“Increased revenue this quarter is the result of our broad, ongoing strategy of targeting good accounts at the right price,” said Bubba Sandford, Command Center’s president and CEO. “We have continued to increase focus and training on providing the best service possible to our customers so that we maximize revenue while maintaining margins. We are now realizing the fruits of this long-term plan, which is also demonstrated by our record income. While revenue growth is certainly an important objective moving forward, we always want to do so while maintaining a high level of profitability for shareholders. As we have stated before, we believe this general strategy will serve the company well in both the long and short term.”
Third Quarter and First Nine Months of 2014 Financial Results
Revenue in the third quarter of 2014 increased 7% to $27.7 million compared to $25.9 million in the third quarter of 2013. The increase in revenue is primarily attributable to the 10.6% increase in same store sales. The third quarter is historically the company’s highest revenue quarter. Revenue for the first nine months of 2014 was $67.8 million compared to $69.1 million for the same period in 2013.
Gross margins improved to 27.7% in Q3 2014 from 25.8% in the year-ago quarter. For the first nine months of 2014, gross margins improved to 27.1% from 25.7% in the same period in 2013. The improved margins in both periods resulted primarily from the company’s continued focus on attracting and servicing quality accounts.
Operating income increased 16% to $2.5 million versus $2.2 million in the year-ago quarter. The improvement is attributable to higher gross margins, partially offset by an 8% increase in SG&A expense over the same period last year. Operating income for the first nine months of 2014 was $4.8 million compared to $2.9 million in the same period in 2013, with SG&A expense down $1.5 million to $13.1 million compared to $14.6 for the same period in 2013.
Net income in the third quarter of 2014 increased to $6.0 million compared to $1.2 million in the year-ago quarter, resulting in diluted earnings per share of $0.09 in the third quarter of 2014 compared to $0.02 in the year-ago quarter. Net income for the third quarter 2014 includes a one-time non-cash charge of $807,000 for impairment of goodwill relating to the January 2012 acquisition of substantially all of the assets of Disaster Recovery Services of Louisiana, LLC. In addition, the company recognized the tax benefit of its deferred tax asset resulting in a one-time non-cash tax credit of $4.3 million. Net Income excluding the impairment of goodwill and tax benefit in the third quarter of 2014 was $2.5 million or $0.04 per share. Net income for the first nine months of 2014 was $8.0 million or $0.12 per diluted share compared to $1.7 million or $0.03 per diluted share for the same period in 2013.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, and the change in fair value of derivative liabilities) increased 28% to $2.9 million or $0.04 per share from $2.3 million or $0.04 per share in the year-ago quarter. For the nine months of 2014 adjusted EBITDA increased to $5.3 million from $3.2 million for the same period in 2013 (see discussion about the presentation of adjusted EBITDA, a non-GAAP term, and its reconciliation to the nearest GAAP metric, below).
Cash at September 26, 2014, totaled $6.0 million compared to $5.8 million at December 27, 2013. The increase in cash was due to improved cash generation from operations, which was offset by $3.4 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.
Further details about Command Center’s Q3 2014 results are available in its Quarterly Report Form 10-Q, which is accessible in the investor relations section of the company’s website at www.commandonline.com.
“Looking forward, we anticipate the company’s growth will be both organic and through acquisitions,” said Sandford. “We are confident we now have the financial strength and well-trained personnel to take advantage of these growth opportunities. As we do this, it is essential that we continue to maintain a high level of customer satisfaction in order to maximize profitability. With that in mind, in addition to our Houston, Texas office opened in September, we are opening a new branch office in Watford City, North Dakota, and we will continue to search out and evaluate additional opportunities for expansion on an ongoing basis.”
“We also look forward to sharing our year-to-date results and broader story at the upcoming LD Micro conference in Los Angeles on December 2, 2014,” added Sandford, “where we will be presenting and meeting with a number of institutional investors and analysts throughout the day.”