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Healthcare Services Group, Inc. Reports Q4 & 2018 Results, Progress On Near Term Priorities, and Q4 Cash Dividend Increase
During the fourth quarter, the Company continued to make significant progress on its near-term priorities of:
- Implementing and adhering to its facility level operating systems, which ensures that customer service, experience and financial performance are in line with both Company and customer commitments. The Company exited the year with strong operating momentum and expects its cost of services to return to historical levels of 86% or better in 2019.
- Strengthening customer payment terms and conditions, which includes increasing customer payment frequency from monthly to semimonthly or weekly. To date, the Company has successfully transitioned over 40% of its customers to an accelerated payment model and expects to further that trend in 2019.
- Replenishing the management pipeline, to ensure it is well prepared for future growth and expansion. The Company enters the new year having significantly grown its management pipeline over the past few months and expects to continue its heightened focus on hiring and developing management candidates through the first half of 2019.
In line with its near-term priorities and similar to last quarter’s housekeeping & laundry contract initiative, the Company adjusted its contractual relationships with several dining customers during the quarter, the most significant of which was
Direct cost of services is reported at
Selling, general and administrative (“SG&A”) was reported at 6.4%, but after adjusting for the
The Company’s effective tax rate was 9.9% and 16.4% for the quarter and year, respectively and was impacted by the timing and amount of the Worker Opportunity Tax Credit (“WOTC”), state-specific tax credits and other discrete items. The Company expects its 2019 tax rate to approximate 21% to 23%, including WOTC, but excluding other discrete items that impacted its 2018 rate.
In addition, the Company’s Board of Directors declared a quarterly cash dividend of
The Company will host a conference call on
The Company also announced that it will present at Oppenheimer's 29th Annual Healthcare Conference on
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 year ended
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.
|Theodore Wahl||Matthew J. McKee|
|President and Chief Executive Officer||Chief Communications Officer|
|HEALTHCARE SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
|For the Three Months Ended||For the Year Ended|
|December 31,||December 31,|
|Operating costs and expenses:|
|Cost of services provided||425,256||432,694||1,771,981||1,612,510|
|Selling, general and administrative||31,995||33,591||136,603||126,732|
|Income from operations||39,157||33,125||100,237||126,889|
|Other (expense) income:|
|Investment and interest||(4,150)||1,553||(327)||6,076|
|Income before income taxes||35,007||34,678||99,910||132,965|
|Basic earnings per common share||$||0.43||$||0.27||$||1.13||$||1.20|
|Diluted earnings per common share||$||0.42||$||0.27||$||1.12||$||1.19|
|Cash dividends declared per common share||$||0.19625||$||0.19125||$||0.77750||$||0.75750|
|Basic weighted average number of common shares outstanding||74,092||73,601||74,002||73,355|
|Diluted weighted average number of common shares outstanding||74,653||74,631||74,612||74,348|
|HEALTHCARE SERVICES GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
|December 31, 2018||December 31, 2017|
|Cash and cash equivalents||$||26,025||$||9,557|
|Marketable securities, at fair value||76,362||73,221|
|Accounts and notes receivable, net||341,838||378,720|
|Other current assets||63,911||65,908|
|Total current assets||508,136||527,406|
|Property and equipment, net||12,900||13,509|
|Notes receivable - long term||43,043||15,476|
|Other intangible assets, net||26,518||30,881|
|Deferred compensation funding||29,113||28,885|
|Accrued insurance claims - current||$||20,696||$||22,245|
|Other current liabilities||142,695||162,225|
|Total current liabilities||163,391||184,168|
|Accrued insurance claims - long term||58,904||62,454|
|Deferred compensation liability||29,528||29,429|
|Total liabilities and stockholders' equity||$||692,603||$||676,003|
Source: Healthcare Services Group, Inc.