Command Security Corp. Reports Operating Results (10-Q)
Command Security Corp. has a market cap of $22.3 million; its shares were traded at around $2.05 with a P/E ratio of 13.7 and P/S ratio of 0.2.
Highlight of Business Operations:Our revenues increased by $1,168,284, or 3.3%, to $36,236,168 from $35,067,884 for the three months ended June 30, 2010 compared with the corresponding period of the prior year. The increase was due mainly to: (i) a full three months of revenues in the current fiscal quarter related to a contract that commenced at various dates during the prior year period to provide security services to a major transportation company that generated additional aggregate revenues of approximately $3,250,000, and (ii) expansion of security services provided to new customers, including an electronic design company, a technology company, and a major New York City based hospital, that resulted in additional aggregate revenues of approximately $688,000. The increase in our revenues was partially offset by: (i) the loss of revenues associated with skycap, wheelchair, cargo, security and baggage handling services previously provided to Delta Air Lines (“Delta”) at John F. Kennedy International Airport (“JFK”) of approximately $2,260,000; and (ii) reduced demand for our services from several of our airline customers that we believe is primarily related to trends in the aviation industry toward reduced capacity, which resulted in reductions of service hours that we provided to such carriers and a corresponding reduction of revenues from such carriers or an aggregate of approximately $620,000.
Our gross profit increased by $477,046, or 10.5%, to $5,021,833 (13.9% of revenues), from $4,544,787 (13.0% of revenues) for the three months ended June 30, 2010 compared with the corresponding period of the prior year. The increase was due mainly to: (i) a full three months of operations under a contract that commenced at various dates during the prior year period to provide security services to a major transportation company; and (ii) expanded security services provided to new customers as described above. The increase in gross profit was partially offset by: (i) the loss of Delta skycap, wheelchair, cargo, security and baggage handling services at JFK as noted above; and (ii) continued reductions of service hours for several of our airline customers which we believe is primarily resulting from a downturn in their respective businesses.
Our general and administrative expenses increased by $58,064, or 1.4%, to $4,127,374 (11.4% of revenues) from $4,069,310 (11.6% of revenues) for the three months ended June 30, 2010 compared with the corresponding period of the prior year. The increase in general and administrative expenses for the three months ended June 30, 2010 resulted primarily from higher stock compensation costs associated with stock option awards to key management personnel and directors. Partially offsetting the increase in general and administrative expenses are lower executive and administrative salaries and professional fees.
Interest expense decreased by $23,756, or 20.2%, to $93,739 from $117,495 for the three months ended June 30, 2010 compared with the corresponding period of the prior year. The decrease in interest expense for the three months ended June 30, 2010 was due mainly to lower weighted average interest rates and average outstanding borrowings, under our commercial revolving loan agreement. The decrease was partially offset by increased interest expense associated with our short-term insurance financing.
Working capital increased by $491,918, or 5.2%, to $9,915,376 as of June 30, 2010, from $9,423,458 as of March 31, 2010.
As described above on February 12, 2009, we entered into a new $20,000,000 Credit Agreement with Wells Fargo. As of the close of business on August 6, 2010, our cash availability was approximately $7,800,000, which we believe is sufficient to meet our needs for the foreseeable future barring any increase in reserves imposed by Wells Fargo. We believe that our existing funds, cash generated from operations, and existing sources of and access to financing are adequate to satisfy our working capital, capital expenditure and debt service requirements for the foreseeable future, barring any increase in reserves imposed by Wells Fargo. However, we cannot assure you that this will be the case, and we may be required to obtain alternative or additional financing to maintain and expand our existing operations through the sale of our securities, an increase in our credit facilities or otherwise. The financial markets generally, and the credit markets in particular, are and have been experiencing substantial turbulence and turmoil, and extreme volatility, both in the United States and, increasingly, in other markets worldwide. The current market situation has resulted generally in substantial reductions in available loans to a broad spectrum of businesses, increased scrutiny by lenders of the credit-worthiness of borrowers, more restrictive covenants imposed by lenders upon borrowers under credit and similar agreements and, in some cases, increased interest rates under commercial and other loans. If we require alternative or additional financing at this or any other time, we cannot assure you that such financing will be available upon commercially acceptable terms or at all. If we fail to obtain additional financing when and if required by us, our business, financial condition and results of operations would be materially adversely affected.
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