Healthcare Services Group, Inc. Reports Results for the Three and Nine Months Ended September 30, 2018 and Announces Increas...
October 16 2018 - 5:18PM
Healthcare Services Group, Inc. (NASDAQ:HCSG) (the “Company”)
reported that revenues for the three months ended September 30,
2018 increased to $507 million compared to $491 million for the
same period in 2017. During the quarter the Company adjusted
its contractual relationships with two regional customers as well
as a number of independent facilities. The Company expects the
contract changes to impact housekeeping & laundry revenues
by approximately $10 million per quarter (with half of the decrease
reflected in the Q3 results), and favorably impact margins.
For the three months ended September 30, 2018,
net income was $26.1 million, or $0.35 per basic and diluted common
share, segment margins in housekeeping & laundry and dining
& nutrition services are estimated at 11.3% and 6.2%,
respectively and cash flow from operations was $47 million,
inclusive of the $25 million change in accrued payroll. Selling,
general and administrative (“SG&A”) was reported at 7.2% of
revenues, but after adjusting for the $1.6 million change in
deferred compensation, actual SG&A was 6.9% of revenues. During
the quarter, SG&A was also impacted by a $3 million,
state-specific sales tax settlement. The settlement related to
certain of the Company’s historical client service billings,
resolved the outstanding sales tax considerations and accordingly,
will have no impact on future earnings per share. Going forward,
the Company expects SG&A to approximate 6.75% of revenues, with
the on-going opportunity to garner additional efficiencies.
In addition, our Board of Directors declared a
quarterly cash dividend of $0.19500 per common share, payable on
December 28, 2018 to shareholders of record at the close of
business on November 23, 2018. This represents the 62nd
consecutive quarterly cash dividend payment, as well as the 61st
consecutive increase since our initiation of quarterly cash
dividend payments in 2003.
The Company will host a conference call on
Wednesday, October 17, 2018 at 8:30 a.m. Eastern Time to
discuss its results for the three and nine months ended September
30, 2018. The call may be accessed via phone at 800-893-5360. The
call will be simultaneously webcast under the “Events &
Presentations” section of the investor relations page on our
website, www.hcsg.com. A replay of the earnings call may be
accessed through the phone number above through 10:00 p.m. Eastern
Time on Wednesday, October 17, 2018. The webcast will also be
available on our website for one year following the date of the
earnings call.
The Company also announced that it will be
attending and presenting at the 2018 Stephens New York Investment
Conference on November 7, 2018 at the Lotte New York Palace Hotel
in New York and the Credit Suisse 27th Annual Healthcare Conference
on November 14, 2018 at The Phoenician in Scottsdale, Arizona.
Cautionary Statement Regarding
Forward-Looking Statements
This release and any schedules incorporated by
reference into it may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
which are not historical facts but rather are based on current
expectations, estimates and projections about our business and
industry, and our beliefs and assumptions. Words such as
“believes,” “anticipates,” “plans,” “expects,” “will,” “goal,” and
similar expressions are intended to identify forward-looking
statements. The inclusion of forward-looking statements should not
be regarded as a representation by us that any of our plans will be
achieved. We undertake no obligation to publicly update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise. Such forward-looking
information is also subject to various risks and uncertainties.
Such risks and uncertainties include, but are not limited to, risks
arising from our providing services exclusively to the healthcare
industry, primarily providers of long-term care; having a
significant portion of our consolidated revenues contributed by one
customer during the nine months ended September 30, 2018; credit
and collection risks associated with the healthcare industry; our
claims experience related to workers’ compensation and general
liability insurance; the effects of changes in, or interpretations
of laws and regulations governing the healthcare industry, our
workforce and services provided, including state and local
regulations pertaining to the taxability of our services and other
labor-related matters such as minimum wage increases; the Company's
expectations with respect to selling, general, and administrative
expense;continued realization of tax benefits arising from our
corporate reorganization and self-funded health insurance program;
risks associated with the reorganization of our corporate
structure; realization of our expectations regarding the impact of
the Tax Cuts and Jobs Act on our financial results; and the risk
factors described in Part I of our Form 10-K for the fiscal year
ended December 31, 2017 under “Government Regulation of Clients,”
“Competition” and “Service Agreements and Collections,” and under
Item IA. “Risk Factors” in such Form 10-K.
These factors, in addition to delays in payments
from clients and/or clients in bankruptcy or clients with which we
are in litigation to collect payment, have resulted in, and could
continue to result in, significant additional bad debts in the near
future. Additionally, our operating results would be adversely
affected if unexpected increases in the costs of labor and
labor-related costs, materials, supplies and equipment used in
performing services (including the impact of potential tariffs)
could not be passed on to our clients.
In addition, we believe that to improve our
financial performance we must continue to obtain service agreements
with new clients, retain and provide new services to existing
clients, achieve modest price increases on current service
agreements with existing clients and maintain internal cost
reduction strategies at our various operational levels.
Furthermore, we believe that our ability to sustain the internal
development of managerial personnel is an important factor
impacting future operating results and the successful execution of
our projected growth strategies.
Healthcare Services Group, Inc. is the largest
national provider of professional housekeeping, laundry and dietary
services to long-term care and related health care facilities.
Company Contacts: |
|
|
|
Theodore Wahl |
|
Matthew J. McKee |
President and Chief Executive Officer |
|
Chief Communications Officer |
|
|
|
215-639-4274 |
investor-relations@hcsgcorp.com |
|
|
HEALTHCARE SERVICES
GROUP, INC.CONSOLIDATED STATEMENTS OF
INCOME(Unaudited)(in thousands,
except per share data) |
|
|
For the Three Months
Ended |
|
For the Nine Months
Ended |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Revenues |
$ |
506,871 |
|
|
$ |
491,355 |
|
|
$ |
1,512,413 |
|
|
$ |
1,366,721 |
|
Operating costs and expenses: |
|
|
|
|
|
|
|
Cost of services provided |
439,203 |
|
|
426,924 |
|
|
1,346,725 |
|
|
1,179,816 |
|
Selling, general and administrative |
36,713 |
|
|
32,940 |
|
|
104,608 |
|
|
93,141 |
|
Income from operations |
30,955 |
|
|
31,491 |
|
|
61,080 |
|
|
93,764 |
|
Other income: |
|
|
|
|
|
|
|
Investment and interest |
2,027 |
|
|
1,439 |
|
|
3,823 |
|
|
4,523 |
|
Income before income taxes |
32,982 |
|
|
32,930 |
|
|
64,903 |
|
|
98,287 |
|
Income tax expense |
6,896 |
|
|
9,458 |
|
|
12,931 |
|
|
30,247 |
|
|
|
|
|
|
|
|
|
Net income |
$ |
26,086 |
|
|
$ |
23,472 |
|
|
$ |
51,972 |
|
|
$ |
68,040 |
|
|
|
|
|
|
|
|
|
Basic earnings per common share |
$ |
0.35 |
|
|
$ |
0.32 |
|
|
$ |
0.70 |
|
|
$ |
0.93 |
|
|
|
|
|
|
|
|
|
Diluted earnings per common share |
$ |
0.35 |
|
|
$ |
0.31 |
|
|
$ |
0.70 |
|
|
$ |
0.92 |
|
|
|
|
|
|
|
|
|
Cash dividends declared per common share |
$ |
0.19500 |
|
|
$ |
0.19000 |
|
|
$ |
0.58125 |
|
|
$ |
0.56625 |
|
|
|
|
|
|
|
|
|
Basic weighted average number of common shares outstanding |
74,019 |
|
|
73,461 |
|
|
73,972 |
|
|
73,272 |
|
|
|
|
|
|
|
|
|
Diluted weighted average number of common shares outstanding |
74,579 |
|
|
74,538 |
|
|
74,598 |
|
|
74,252 |
|
|
|
HEALTHCARE SERVICES GROUP,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(Unaudited)(in
thousands) |
|
|
September 30,
2018 |
|
December 31,
2017 |
Cash and cash equivalents |
$ |
15,197 |
|
|
$ |
9,557 |
|
Marketable securities, at fair value |
74,704 |
|
|
73,221 |
|
Accounts and notes receivable, net |
353,484 |
|
|
378,720 |
|
Other current assets |
64,793 |
|
|
65,908 |
|
Total current assets |
508,178 |
|
|
527,406 |
|
|
|
|
|
Property and equipment, net |
13,067 |
|
|
13,509 |
|
Notes receivable - long-term |
45,906 |
|
|
15,476 |
|
Goodwill |
51,084 |
|
|
51,084 |
|
Other intangible assets, net |
27,559 |
|
|
30,881 |
|
Deferred compensation funding |
32,946 |
|
|
28,885 |
|
Other assets |
9,232 |
|
|
8,762 |
|
Total Assets |
$ |
687,972 |
|
|
$ |
676,003 |
|
|
|
|
|
Accrued insurance claims - current |
$ |
24,167 |
|
|
$ |
22,245 |
|
Other current liabilities |
142,205 |
|
|
161,923 |
|
Total current liabilities |
166,372 |
|
|
184,168 |
|
|
|
|
|
Accrued insurance claims - long term |
68,782 |
|
|
62,454 |
|
Deferred compensation liability |
33,238 |
|
|
29,429 |
|
Stockholders' equity |
419,580 |
|
|
399,952 |
|
Total Liabilities and Stockholders' Equity |
$ |
687,972 |
|
|
$ |
676,003 |
|
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