Author Topic: CCNI - Command Center  (Read 13320 times)

KJP

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Re: CCNI -- Command Center
« Reply #20 on: February 08, 2018, 08:41:10 AM »
1. The insider activity was for board compensation.

Was the Rimmy Malhotra/Nicoya Fund purchase I linked to for board compensation?  I believe footnote two on the Form 4 refers only to the 1,666 shares directly owned by Malhotra, not the 8,500 shares purchased by the Nicoya Fund on 12/29.  If that's not right, and the 8,500 shares were for board compensation, where is that reflected on the Form 4?

For convenience, here's the transaction I'm talking about:  https://www.sec.gov/Archives/edgar/data/1140102/000165495418000051/xslF345X03/section16.xml


2. Typically majority change in the Board can trigger change in control.  So it is strange to resign before any board change.  Of course new Boards don't like to pay change in control so they will look into possible justification of termination for cause.  Maybe he didn't want that to happen.

Yes, this is possible.  Based on what is known from the disclosures, what do you believe is likely going on?


Tim Eriksen

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Re: CCNI -- Command Center
« Reply #21 on: February 08, 2018, 08:56:52 AM »
Sorry my bad.  You are correct on item 1. 

KJP

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Re: CCNI -- Command Center
« Reply #22 on: February 08, 2018, 09:43:11 AM »
Sandford's employment agreement was for a three-year term starting July 1, 2015.  See paragraph 7(a) here:  https://www.sec.gov/Archives/edgar/data/1140102/000135448815004666/ccni_ex101.htm

A "change of control" under the agreement does not include a change in the identity of the majority of the board.  See paragraph 7(b)(iv).

As a result of Sandford's apparently voluntary termination of the agreement, it appears he will receive no additional compensation.  See paragraph 7(b)(vi)(1).

So, Sandford's employment agreement was due to expire in July 2018 and he wouldn't get any additional comp if a majority of the board changed before then.  Based on the board resignations and activist campaign, it looks to me like a change in the board is coming.  In light of that, Sandford may have wanted to be reupped sooner rather than later and the board declined to do it, so he quit.

That's obviously speculation on my part.  I'd still love to hear another view on how to connect the various dots here.

DTEJD1997

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Re: CCNI -- Command Center
« Reply #23 on: February 08, 2018, 10:30:30 AM »
CEO has now resigned:  https://www.sec.gov/Archives/edgar/data/1140102/000165495418001177/ccni_8k.htm

Two board members AND THE CEO IS OUT?  Put a fork in them, they are done....

Earlier you said you sold because, among other things, the CEO seemed dishonest or incompetent.  Now you say that that CEO's resignation is a big negative.  How can both be true?

There's obviously alot going on behind the scenes here.  We know there is pressure from an activist campaign and looming proxy contest, the board has formed a "strategic alternatives" committee led by a new board addition who has a financial background and an ownership stake in the company, the annual meeting's been delayed, and two old-guard board members and the CEO have recently resigned.  Meanwhile, the company's operations have turned the corner, it's got ~20% of its market cap in net cash on the balance sheet and it's generating more cash every quarter. 

Perhaps I'm missing something, but I think the facts above suggest the activist campaign is having its effect behind the scenes and there's likely a transaction of some form in the offing.  If there are other inferences to draw from the facts noted above (or any others), it would be great to hear what they are and discuss them.

EDIT:  Three more points:

1.  The only recent insider activity has been a small (~$50k) purchase by a fund controlled by one of the directors:  https://www.sec.gov/Archives/edgar/data/1140102/000165495418000051/xslF345X03/section16.xml

2.  According to the most recent proxy statement, the now former CEO Bubba Sandford would have received $1.1 million in change-of-control payments if a change of control occurred on his watch.  It's unlikely he would just resign and give that up for nothing if a sale was actually in the offing.

3.  One way to manipulate earnings for a company like this is through worker's comp reserves/accruals.  Anyone interested in that can review the disclosures about that topic.

I don't think I said it was the CEO, I think it was CFO?  The person in charge of compiling the financials?  I think it was a woman?

Of course, assuming that I am correct, it still does not reflect well on the CEO.  I seem to remember that whole C level was a mess.

Doesn't matter too much to me though.  I sold out for a loss a long time ago.  I also don't think CCNI will end well for others.  Of course, I've been wrong before!

Foreign Tuffett

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Re: CCNI -- Command Center
« Reply #24 on: March 07, 2018, 10:01:55 AM »
Does anyone know when their annual meeting will be held?

Also, did anyone else notice that the two directors that resigned in Jan. were both on the audit committee? R. Rimmy Malhotra, the only remaining audit committee member, is a fairly recent (2016) addition to the board. Combine this with the recent resignation of the CEO, and it makes me wonder if we are about to enter the next chapter in their financial control issues.

All this being said, on a quantitative basis this thing looks cheap, but IMO it's only suitable for a quantitative basket type approach.

KJP

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Re: CCNI -- Command Center
« Reply #25 on: April 16, 2018, 02:23:12 PM »
Now two board seats open:  https://www.sec.gov/Archives/edgar/data/1140102/000165495418000762/ccni_ex991.htm

I expect the proxy fight to be resolved by the activist (Ephraim Fields) receiving a few seats on the Board.

As I expected, the proxy contest has settled with Fields getting a board seat and an agreed slate of directors running at the upcoming annual meeting:  https://www.otcmarkets.com/stock/CCNI/news?id=189272

KJP

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Re: CCNI -- Command Center
« Reply #26 on: May 31, 2018, 12:50:24 PM »
Command Center is uplisting to Nasdaq next week:  http://www.irdirect.net/prviewer/release/id/3123553

KJP

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Re: CCNI -- Command Center
« Reply #27 on: August 14, 2018, 12:58:14 PM »
The business appears to have turned the corner over the last year, but the share price hasn't budged.  After accounting for cash and DTAs, this is a company on the upswing now trading around 7 p/e.  Also, the company is using its excess cash to buy back shares.  Nobody would confuse this with a great business, but if you can collect enough companies like it at valuations like this, I think you will do well.

Quick math:
Rev: $100 million
GM: 26%
GP: $26 million
SG&A:  $22 million
EBIT: $4 million
Tax Rate: 37.5%
NI: $2.5 million

Shares: 61 million
Share Price: $0.37
Market Cap:  $22.5 million
Cash + DTAs: $5 million
EV: $17.5 milion

EV/NI = 7

Another essentially steady quarter:  http://www.irdirect.net/CCNI/corporate_overview?title_override=Recent%20News

Since March they've bought back ~3% of the shares.  During the Q2 call management stated that, at current prices, they will continue to favor buying back shares, rather than spending cash on acquisitions.

Although the stock price is up about 30% from when I posted the numbers quoted above, it still appears to be cheap in light of the tax cut and the sensible capital allocation.

Current back of the envelope annual numbers:

Rev: $100 million
GM: 26%
GP: $26 million
SG&A:  $22 million
EBIT: $4 million
Tax Rate: 25%
NI: $3 million

Shares: 4.875 million  [1 for 12 reverse split]
Share Price: $5.70
Market Cap:  $28 million
Excess Cash: $5 million
EV: $23 milion

EV/NI = ~7.5

« Last Edit: August 14, 2018, 12:59:55 PM by KJP »

KJP

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Re: CCNI -- Command Center
« Reply #28 on: November 20, 2018, 10:42:12 AM »
Revenue was flat, but there was ~250bps gross margin compression for the quarter:  http://www.irdirect.net/prviewer/release/id/3452525
The market appears to believe the GM decline (and then some) is permanent.  On the call, management blamed most of the gross margin decline on an uptick in workers comp. costs, but we'll see.

At $3.70/share, the market cap is about $17 million.  Subtracting $5 million in excess net cash gives an adjusted market cap of ~$12 million.  With the exception of some things that I think can fairly be described as non-recurring, SG&A has been flat.  So, on $98 million in revenue, the current multiples at various gross margins are roughly the following:

26% GM = $2.6 million net income = adjusted P/E of 4.6
25% GM = $1.875 million net income = adjusted P/E of 6.4
24.5% GM = $1.5 million of net income = adjusted P/E of 8
24% GM = $1.14 million of net income = adjusted P/E of 10.5

The company continues to produce free cash flow and to buy back shares with its excess cash.
« Last Edit: November 21, 2018, 06:22:18 AM by KJP »

Tim Eriksen

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Re: CCNI -- Command Center
« Reply #29 on: November 20, 2018, 11:49:54 AM »
I have higher earnings at those levels based on normalized SG&A of just over $21 million annually.  You also included taxes which they currently don't pay due to NOLs. That will likely change in a year or so.

26% GM = $4.0 million pre-tax net income = adjusted P/E (net of cash) of 3
25% GM = $3.1 million pre-tax net income = adjusted P/E of 4
24.5% GM = $2.6 million pre-tax of net income = adjusted P/E of 4.6
24% GM = $2.1 million of pre-tax net income = adjusted P/E of 5.7

I am using 24.5% GM for forward estimates which was what they had in the last quarter.  Five year average is 26%