Business context and reporting period
The filing is for Command Center, Inc., a manual on-demand staffing company operating 67 branches in 23 states as of May 8, 2018. It covers the 13 weeks ended March 30, 2018, compared with the 13 weeks ended March 31, 2017. The request metadata names Hirequest, Inc., but the filing itself identifies the registrant as Command Center, Inc.
Key financial metrics
| Metric | Q1 2018 | Q1 2017 |
|---|---|---|
| Revenue | $22.47 million | $22.35 million |
| Gross profit / margin | $5.59 million / 24.9% | $5.74 million / 25.7% |
| Operating income (loss) | ($1.71 million) / (7.6%) | $299,000 / 1.3% |
| Net income (loss) | ($1.22 million); diluted EPS ($0.24) | $182,000; diluted EPS $0.04 |
| Adjusted EBITDA, non-GAAP | $417,000 | $405,000 |
| Operating cash flow | ($168,000) | $1.39 million |
At March 30, 2018, cash was $6.71 million, restricted cash $37,000, and net accounts receivable $9.26 million. Current assets of $17.04 million exceeded current liabilities of $4.20 million by approximately $12.84 million. Total liabilities were $5.12 million. The account purchase agreement balance was $182,000, down from $854,000 at year-end; the filing reports no other conventional borrowings. The $14 million facility is secured by company assets and subject to a liquidity covenant, with which the company reported compliance.
Material changes versus the prior comparable period
- Revenue increased 0.5%, but gross profit declined approximately $144,000 and gross margin fell 0.8 percentage points. Management attributed modest growth partly to large national-account project work in 2017 that did not recur.
- Staffing costs rose to 75.1% of revenue from 74.3%, reflecting higher workers’ compensation costs, field wages, and payroll taxes.
- SG&A increased approximately $1.87 million to $7.21 million. The main driver was a $1.54 million reserve against the Freestone workers’ compensation deposit in receivership; other increases included payroll-related costs, former-CEO severance, and insurance expense.
- Cash declined approximately $1.04 million during the quarter. Operating cash use and $67,000 of capital expenditures were accompanied by $801,000 of financing cash use, including $672,000 of facility repayments and $129,000 of share repurchases.
Outlook, risks, contingencies, and unusual items
- The filing gives no quantified revenue or earnings guidance. Management cautions that quarterly results are not necessarily indicative of full-year results.
- Freestone Insurance Company is in liquidation. The company reduced the carrying value of its related deposit from $1.8 million to $260,000, recording a $1.54 million reserve. Recovery depends on court proceedings and available assets; management estimates potential loss could be as high as the remaining $260,000.
- The company is largely self-insured for workers’ compensation under a large-deductible policy, with primary responsibility for claims up to $500,000 per incident. At quarter-end, cash and non-cash collateral totaled approximately $6.3 million, including a $6.0 million letter of credit that reduces facility availability; the letter of credit increased to approximately $6.2 million on April 11.
- Customer concentration is notable: one client accounted for 14.7% of receivables and 10.5% of quarterly revenue. Industrial, manufacturing, and warehousing revenue rose to 38.4% of sales from 32.5%.
- After quarter-end, Richard K. Coleman, Jr. became CEO, with a $325,000 annual base salary and specified potential bonuses; the company also disclosed a former-CEO severance agreement. An April proxy-contest settlement included adding a director nominee and reimbursement of up to $100,000 of participants’ expenses.
- The company repurchased 22,461 shares for approximately $129,000 during the quarter, with about $4.5 million remaining under its three-year repurchase authorization. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Confirm the registrant identity: this 10-Q is filed by Command Center, Inc., notwithstanding the Hirequest, Inc. request metadata.
- Track the Freestone liquidation, court determination of claim priority, and any further changes to the $260,000 net carrying value.
- Assess workers’ compensation claim development, collateral requirements, and the effect of the letter of credit on usable borrowing capacity.
- Monitor whether revenue growth and gross margins recover, and whether SG&A returns toward prior levels after unusual charges.
- Review operating cash generation, facility utilization and covenant compliance, and the costs and execution of the repurchase plan and post-quarter leadership changes.