Good morning everyone. And thank you for participating in today's conference call to discuss Command Center’s Financial Results for the Fourth Quarter Ended December 28, 2018. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

[Operator Instructions] Please note this call is being recorded. I would now turn the conference over to Jeff Stanlis of Hayden IR. Thank you. You may begin..

Thank you. I'd like to welcome everyone to the call today. Hosting the call are Command Center's CEO, Rick Coleman; and CFO, Cory Smith. Please be aware that some of the comments made during the call today may include forward-looking statements within the meaning of the federal securities laws.

Statements about our beliefs and expectations containing words such as may, could, would, will, should, believe, expect, anticipate, and similar expressions constitute forward-looking statements.

These statements involve risks and uncertainties regarding our operations, and future results could cause Command Center's results to differ materially from management's current expectations.

We encourage you to review the Safe Harbor statements and risk factors contained in the Company's earnings release and in its filings with the Securities and Exchange Commission, including without limitation the most recent Annual Report on Form 10-K and other periodic reports, which identifies specific risk factors that also may cause actual results or events to differ materially from those described in the forward-looking statements.

Copies of the Company's most recent reports on Forms 10-K and 10-Q may be obtained on the Company's website at www.commandonline.com or at the SEC's website at www.sec.gov. The Company does not undertake to publicly update or revise any forward-looking statements after the date of this conference call.

Also, please note that on this call, the Company will be discussing non-GAAP financial information. They are providing this information as a supplement to information prepared in accordance with the Accounting Principles Generally Accepted in the United States or GAAP.

You can find a reconciliation of those metrics to the reported GAAP results in the reconciliation table provided in the Company's earnings release. I would like to remind everyone that this call will be available for replay starting at 1:00 P.M. Eastern Time today.

A link to a website replay of this call is provided in the earnings release, which is available on the Company's website at www.commandonline.com. Any redistribution, retransmission, or rebroadcast of this call in any way without the expressed written consent of Command Center is strictly prohibited.

Now, I would like to turn the call over to the CEO, Rick Coleman. Rick, go ahead..

Thanks Jeff. Good morning and thanks everyone for joining us. Monday, we announced the signing of the definitive agreement to merge with Hire Quest Holdings, LLC, a privately-held provider of blue collar, light industrial, and administrative staffing solutions, operating as Trojan Labor and Acrux Staffing.

This planned all-stock transaction has tremendous potential for our organization giving us significant scale and a proven business model that we expect to drive significant improvements in profitability.

This agreement represents the culmination of the Board's comprehensive review of strategic alternatives, and we believe this path is the best way to create sustainable shareholder value. During this call, I will briefly discuss the strategic benefits of this transaction, and Cory will discuss the next steps to complete the merger.

We anticipate scheduling a call in the next few weeks with Hire Quest management to discuss the merger in more detail. Since the transaction is not yet closed and we have not yet completed the proxy statement, we’re limited in any additional details we can provide beyond what was in Monday's press release and yesterday's current report on form 8-K.

We ask for your patience and understanding in this regard. As a snapshot at closing on a combined basis, we will have 160 branches in 31 states.

Our combined scale and expanded geographic footprint in the light industrial and blue collar temporary staffing industry will differentiate us from competitors and is expected to help us secure new customers and a larger labor pool.

In the coming weeks, we will file a proxy statement that speaks to the pro forma financials for the combined organization. Please keep in mind that the transition of Command Center owned locations to the franchise model will alter that profile as we progress.

As we indicated in the press release, based on our current projections, after some period of integration and normalization, we believe the combined entities will produce annual EBITDA in excess of $15 million, exclusive of growth opportunities. Over the past year, Command Center has made significant progress in improving our profitability.

We achieved this by streamlining branch level operations by improving management at many branches and by maintaining our focus on expense control.

The planned combination with Hire Quest will accelerate our efforts as the franchise model keeps most of the revenue and cost at the franchise level with high-margin franchise fees going to the public company.

As we move forward and transition branches to franchises, we expect our current top line revenue to decline and our gross margins and operating margins to increase.

Under the new model, the franchises will have strong incentives to manage revenue growth, profitability, and worker safety, all of which we believe will contribute to more robust corporate financial performance and increased shareholder value. We enter this transformative acquisition from a position of strength.

Command Center ended 2018 with a strong quarter and we entered 2019 with a solid balance sheet and significant momentum. I will now turn the call over to Cory Smith, our CFO to review our financial results..

Thank you, Rick, and good morning everyone. Revenue in the fourth quarter of 2018 was $24.4 million compared to $24.5 million in the fourth quarter of 2017. This decrease of 0.3% is attributable to routine turnover in sales positions due to increased competition in the job market related to low unemployment rate.

In the fourth quarter of 2018, we recorded a benefit related to changes in worker's compensation accrual of $172,000 compared to an expense of $303,000 in the fourth quarter of last year. This represents a swing of $475,000. As a result, gross margin in the fourth quarter of 2018 improved to 27.1% from 24.5% in the fourth quarter of 2017.

Selling, general, and administrative expense in the fourth quarter was $5.2 million compared to $5.4 million in the year ago quarter, a decrease of $135,000 or 2.5%. This decrease was primarily due to lower bad debt and lower legal and professional fees and was offset by higher compensation and stock-based compensation costs.

Net income in the fourth quarter of 2018 was $1.1 million or $0.23 per diluted share compared to a net loss of $89,000 or negative $0.02 per diluted share in the year ago quarter. Adjusted EBITDA in the fourth quarter of 2018 was $1.6 million compared to $687,000 in 2017.

Adjusted EBITDA in the fourth quarter of 2018 included $105,000 in non-recurring charges and $88,000 in non-cash compensation compared to zero dollars non-recurring charges and $33,000 non-cash compensation in 2017. Turning to the 2018 full year results.

Revenue for the fiscal year 2018 was $97.4 million compared to $98.1 million in 2017, a decrease of $683,000 or 0.7%. Gross margin remains strong at 25.6% in 2018, a slight decrease from 25.9% in 2017. SG&A in 2018 was $23.4 million, which included $2.2 million in non-recurring charges compared to $21.3 million in 2017.

We recorded an expense related to changes in worker's compensation accruals of $555,000 in 2018 compared to an expense of $303,000 in 2017. Net income in 2018 was $1 million or $0.20 per diluted share compared to $1.7 million or $0.33 per diluted share in 2017.

Adjusted EBITDA was $4.1 million or 4.2% of revenue in 2018 compared to $4.2 million or 4.3% of revenue in 2017. Included in adjusted EBITDA in 2018 were $2.2 million in non-recurring charges and $395,000 in non-cash compensation, compared to zero dollars of non-recurring charges and $155,000 in non-cash compensation in 2017.

Moving on to the balance sheet, cash and cash equivalents including restricted cash totaled approximately $8 million at December 28, 2018, compared to $7.8 million at December 29, 2017.

During 2018, we repurchased approximately 324,000 shares of common stock through our share repurchase program at an aggregate price of approximately $1.8 million resulting in an average price of $5.65 per share. These shares were subsequently retired.

In conjunction with our recently announced merger with Hire Quest, LLC and the related pending tender offer, we have discontinued purchases under this program, and we now shift to the pending merger with Hire Quest LLC.

The transaction is expected to close in the second quarter of 2019 or shortly thereafter subject to closing conditions, some of which include shareholder approval of an amendment to our charter increasing the number of authorized shares of company common stock and preferred stock, and to change the name of the Company to Hire Quest, Incorporated, shareholder approval of the issuance of company common stock pursuant to the merger agreement and the related change in control of the Company pursuant to NASDAQ listing rules and the Company and Hire Quest entering into a new $30 million credit facility with CBNC.

As soon as possible, we expect to file proxy statement containing full details of the proposed transaction with the Securities and Exchange Commission. This proxy will be delivered to Command Center shareholders following SEC review.

In connection with the transaction and contingent on the closing of the transaction, Command Center intends to commence a self-tender offer at $6 per share for up to 1.5 million shares of our common stock. If the number of shares properly tendered exceeds 1.5 million shares, we will purchase tendered shares on a pro rata basis.

There is no minimum number of shares in this tender offer. Stockholders should discuss whether to tender their shares with their broker or other financial or tax advisors. With that, let me turn the call back over to the operator for Q&A..

Thank you. [Operator instructions] Our first question is from [indiscernible]. Please proceed..

I don’t really have a question, but I just wanted to say that, I know this has been a very long and at times a painful process, but I wanted to congratulate you, Rick and rest of your team on the Board on what looks like a terrific transaction with Hire Quest. So, on behalf of many of the shareholders, we thank you all for your efforts..

Thanks Afram [ph], appreciate it. We also appreciate everyone's patience while we worked through the process of identifying the best path forward..

[Operator instructions] Our next question is from Michael Potter with Monarch Capital Group. Please proceed..

I just also want to say the same thing, congratulations on getting the transaction, move forward and it looks like -- actually, it doesn't really look like a great merger for both organizations.

Quick question on workman's comp going forward, since the model of the business is changing, how will this change, I guess working comp sinking [ph] fund?.

We will still be providing worker's compensation insurance for all of the workers out in the field. All the temporary workers will -- we will still be the employer of record for those temporary workers.

And so, although the combined company will be providing that insurance, it will actually be up to the franchises to manage safety programs and ensure that we keep our costs as low as possible. That will be of course managed with some oversight by the combined entity..

[Operator instructions] Our next question is from [Hans Vandenberg] with [indiscernible]. Please proceed..

I have a quick question.

Can you tell us what the included cost synergies are, if any that are included in that communicated 15 million EBITDA run rate that you expect to achieve sometime in the future?.

Hans [ph], unfortunately, we're not going to provide any guidance at this point, and we will be providing more information when the proxy comes out..

We have reached the end of our question-and-answer session. I would like to turn the call back over to Mr. Coleman for closing comments..

I would like to thank everyone again for joining the call and for your patience as we work through some very, very challenging matters related to finding our best path forward. As usual, I'd like to thank all of our employees, especially the ones who had a hand in getting this deal to the table, and we will keep you advised as we move forward..

Thank you. This concludes today's conference. You may disconnect your lines at this time and thank you for your participation..