hcsg-20200421
FALSE000073101200007310122020-04-212020-04-21

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 21, 2020

HEALTHCARE SERVICES GROUP, INC.
(Exact name of registrant as specified in its charter)

Commission File Number: 0-12015

Pennsylvania23-2018365
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification number)

3220 Tillman Drive, Suite 300, Bensalem, Pennsylvania
(Address of principal executive office)

19020
(Zip Code)

Registrant's telephone number, including area code: 215-639-4274
        
Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

( ) Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
( ) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
( ) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
( ) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.01 par valueHCSGNASDAQ Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o


Item 2.02Results of Operations and Financial Condition.

On April 21, 2020, Healthcare Services Group, Inc. (the "Company") issued a press release (the "Press Release") announcing its earnings for the three months ended March 31, 2020. A copy of the Press Release is being furnished hereto as Exhibit 99.1 and is hereby incorporated by reference to this Current Report.

The information furnished herein, including Exhibit 99.1 shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended or the Exchange Act.

Item 8.01Other Events.

The Press Release also announced the Company's first quarter 2020 quarterly cash dividend of $0.20250 per common share, payable on June 26, 2020 to shareholders of record at the close of business on May 22, 2020.


Item 9.01Financial Statements and Exhibits.

( a ) Not applicable
( b ) Not applicable
( c ) Not applicable
( d ) Exhibits. The following exhibit is being furnished herewith:

99.1 Press Release and financial tables dated April 21, 2020, issued by Healthcare Services Group, Inc.



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


HEALTHCARE SERVICES GROUP, INC.
Date: April 21, 2020By:/s/ John C. Shea
Name: John C. Shea
Title: Chief Financial Officer


EXHIBIT INDEX

Exhibit NumberDescription
99.1
104Cover page Interactive Data File (embedded within the Inline XBRL document)

Document
Exhibit 99.1
Healthcare Services Group, Inc.

Reports Q1 2020 Results


BENSALEM, PA, April 21, 2020 (BUSINESS WIRE) -- Healthcare Services Group, Inc. (NASDAQ:HCSG) (the “Company”) reported for the three months ended March 31, 2020 revenue of $449.2 million, net income of $20.2 million, or $0.27 per basic and diluted common share, and cash flow from operations of $12.7 million. Additionally, the Company’s Board of Directors declared a quarterly cash dividend of $0.2025 per common share, the 67th consecutive increase since the initiation of dividend payments in 2003.

Ted Wahl, Chief Executive Officer, stated, “COVID-19 quickly became the dominant theme during the quarter. The pace at which the virus presented and altered operational protocol for our customers was unlike anything we’ve experienced in the industry. Our customers responded with innovation and resolve, and we’ve been right there with them, at our absolute best and delivering in the most extraordinary way. Our subject matter expertise in infection control and supply chain management has been rivaled only by the incredible dedication and commitment of our employees, at every level, but especially our heroes working in the facilities. Their passion, perseverance and courage in the face of great adversity is nothing short of inspirational.”

Mr. Wahl continued, “We’ll continue to closely monitor the impact of COVID-19 on the industry, as we work with our customers in managing this unique challenge. While quite a bit of uncertainty remains as to the path and impact of this virus on the industry, we’ve been encouraged by both the pace and significance of the enacted and proposed federal and state relief measures, which are providing meaningful financial support to an industry committed to combating this crisis.”

First Quarter Results

Revenue for the quarter was $449.2 million, with dining & nutrition and housekeeping & laundry segment revenues of $224.9 million and $224.3 million, respectively.

Direct cost of services was reported at $387.2 million, or 86.2%. Overall, the Company’s near-term goal is to manage Direct cost at 86.0%, excluding any COVID-19-related costs, temporary investments in management capacity or any new business start-up inefficiencies that may occur.

Dining & nutrition and housekeeping & laundry segment margins were 6.4% and 10.7%, respectively.

Selling, general and administrative (“SG&A”) was reported at $30.0 million, or 6.7%; after adjusting for the $5.7 million decrease in deferred compensation, actual SG&A was $35.7 million, or 8.0%. The Company continues to target SG&A of 7.5%, excluding any COVID-19 or SEC-related costs, with the primary opportunity for near-term leverage existing in top line growth.

The Company reported an effective tax rate of 24.6% and expects a 2020 tax rate of 24% to 26%.

Cash flow from operations for the quarter was $12.7 million, inclusive of the $4.6 million decrease in accrued payroll.


1

Exhibit 99.1
Mr. Wahl stated, “In the coming months, we will continue our intensive operational focus on mitigating the effects of COVID-19 and remain proactive in delivering the best possible outcomes on all fronts. We are prudently maintaining a strong balance sheet with no near-term maturities, which appropriately complements our cash position. Above all, we are deeply committed to supporting our customers in the care of their patients and residents, while simultaneously continuing to protect company resources, including our most valued resource - our employees.”

Dividend

The Company’s Board of Directors declared a quarterly cash dividend of $0.2025 per common share, payable on June 26, 2020 to shareholders of record at the close of business on May 22, 2020. This represents the 68th consecutive quarterly cash dividend payment, as well as the 67th consecutive increase since the initiation of quarterly cash dividend payments in 2003.

Current Expected Credit Loss Adoption

Effective January 1, 2020, the Company implemented the Current Expected Credit Loss (“CECL”) accounting standard, as required by the Financial Accounting Standards Board (“FASB”). The standard required a transition from an incurred loss methodology to an expected loss model when evaluating potential credit loss, primarily relating to the Company’s accounts and notes receivable. The implementation of CECL resulted in an initial, one-time increase of $42.2 million to the Company’s allowance for doubtful accounts through a reduction of stockholders' equity.

Conference Call and Upcoming Events

The Company will host a conference call on Wednesday, April 22, 2020, at 8:30 a.m. Eastern Time to discuss its results for the three months ended March 31, 2020. The call may be accessed via phone at 877-395-7164. The call will be simultaneously webcast under the “Events & Presentations” section of the Investor Relations page on the Company’s website, www.hcsg.com. A replay of the webcast will also be available on our website for one year following the date of the earnings call.
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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; the impact of and future effects of the COVID-19 pandemic or other potential pandemics having a significant portion of our consolidated revenues contributed by one customer during the three months ended March 31, 2020; 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; the impact of the SEC investigation and the related class action lawsuit; risks associated with the reorganization of our corporate structure; and the risk factors described in Part I of our Form 10-K for the fiscal year ended December 31, 2019 under “Government Regulation of Clients,” “Service Agreements and Collections,” and “Competition” 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 and COVID-19) 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/or 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 WahlMatthew J. McKee
President and Chief Executive OfficerChief Communications Officer
215-639-4274
investor-relations@hcsgcorp.com

3


HEALTHCARE SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share data)

For the Three Months Ended
March 31,
20202019
Revenues$449,150  $476,111  
Operating costs and expenses:
Cost of services provided387,156  427,265  
Selling, general and administrative30,017  41,101  
Income from operations31,977  7,745  
Other income, net:
Investment and other (expense) income(5,195) 4,147  
Income before income taxes26,782  11,892  
Income tax expense6,592  2,736  
Net income$20,190  $9,156  
Basic earnings per common share$0.27  $0.12  
Diluted earnings per common share$0.27  $0.12  
Cash dividends declared per common share$0.20250  $0.19750  
Basic weighted average number of common shares outstanding74,658  74,301  
Diluted weighted average number of common shares outstanding74,767  74,719  

4


HEALTHCARE SERVICES GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)

March 31, 2020December 31, 2019
Cash and cash equivalents$64,498  $27,329  
Marketable securities, at fair value90,497  90,711  
Accounts and notes receivable, net303,804  340,930  
Other current assets 61,757  56,762  
Total current assets520,556  515,732  
Property and equipment, net29,010  28,820  
Notes receivable - long-term49,466  46,992  
Goodwill51,084  51,084  
Other intangible assets, net21,311  22,353  
Deferred compensation funding30,008  37,247  
Other assets30,642  20,364  
Total Assets$732,077  $722,592  
Accrued insurance claims - current$23,729  $23,256  
Other current liabilities162,555  125,395  
Total current liabilities186,284  148,651  
Accrued insurance claims - long-term65,272  64,366  
Deferred compensation liability30,098  37,621  
Lease liability - long-term portion12,244  11,649  
Stockholders' equity438,179  460,305  
Total Liabilities and Stockholders' Equity$732,077  $722,592  


5
v3.20.1
Document
Apr. 21, 2020
Cover [Abstract]  
Document Type 8-K
Document Period End Date Apr. 21, 2020
Entity Registrant Name HEALTHCARE SERVICES GROUP, INC.
Entity File Number 0-12015
Entity Incorporation, State or Country Code PA
Entity Tax Identification Number 23-2018365
Entity Address, Address Line One 3220 Tillman Drive
Entity Address, Address Line Two Suite 300
Entity Address, City or Town Bensalem
Entity Address, State or Province PA
Entity Address, Postal Zip Code 19020
City Area Code 215
Local Phone Number 639-4274
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock, $.01 par value
Trading Symbol HCSG
Security Exchange Name NASDAQ
Entity Emerging Growth Company false
Amendment Flag false
Entity Central Index Key 0000731012