Healthcare Services Group Inc. Reports Operating Results (10-Q)

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Apr 20, 2009
Healthcare Services Group Inc. (HCSG, Financial) filed Quarterly Report for the period ended 2009-03-31.

Healthcare Services Group Inc. provides housekeeping laundry linen facility maintenance and food services to the health care industry including nursing homes retirement complexes rehabilitation centers and hospitals. Healthcare Services Group Inc. has a market cap of $688.6 million; its shares were traded at around $17.39 with a P/E ratio of 27.2 and P/S ratio of 1.1. The dividend yield of Healthcare Services Group Inc. stocks is 3.9%. Healthcare Services Group Inc. had an annual average earning growth of 25.7% over the past 5 years.

Highlight of Business Operations:

At March 31, 2009, we identified accounts totaling $9,731,000 that require an Allowance based on potential impairment or loss of value. An Allowance totaling $3,914,000 was provided for these accounts at such date. Actual collections of these accounts could differ from that which we currently estimate. If our actual collection experience is 5% less than our estimate, the related increase to our Allowance would decrease net income by $179,000.

At March 31, 2009, we had cash and cash equivalents, and marketable securities of $96,422,000 and working capital of $177,000,000 compared to December 31, 2008 cash and cash equivalents, and marketable securities of $86,915,000 and working capital of $177,573,000. We view our cash and cash equivalents, and marketable securities as our principal measure of liquidity. Our current ratio at March 31, 2009 decreased to 5.6 to 1 compared to 7.1 to 1 at December 31, 2008. This decrease resulted primarily from the timing of payments for accrued payroll, accrued and withheld payroll taxes, as well as the timing of payments for income taxes, which were somewhat offset by the increase in accounts and notes receivable resulting from primarily from our 8.9% increase in revenues. On an historical basis, our operations have generally produced consistent cash flow and have required limited capital resources. We believe our current and near term cash flow positions will enable us to fund our continued anticipated growth.

The net cash provided by our operating activities was $16,942,000 for the three month period ended March 31, 2009. The principal sources of net cash flows from operating activities for the three month period ended March 31, 2009 were net income, non-cash charges to operations for bad debt provisions, and depreciation and amortization. Additionally, operating activities cash flows increased by $7,149,000 as a result of the timing of payments for accrued payroll, accrued and withheld payroll taxes. The operating activity that used the largest amount of cash during the three month period ended March 31, 2009 was a net increase of $4,760,000 in accounts and notes receivable and long-term notes receivable resulting primarily from the 8.9% growth in the Companys 2009 first quarter revenues. Additionally, operating activities cash flows were decreased from the timing of payments under our various insurance plans, as well as for the payments of income taxes.

Our principal use of cash in investing activities for the three month period ended March 31, 2009 was $2,118,000 for the net purchases of marketable securities. Additionally, we expended $419,000 for the purchase of housekeeping equipment, computer software and equipment, and laundry equipment installations. Under our current plans, which are subject to revision upon further review, it is our intention to spend an aggregate of $1,000,000 to $1,500,000 during the remainder of 2009 for such capital expenditures.

On February 20, 2009 we paid, to shareholders of record on February 6, 2009, a regular quarterly cash dividend of $.17 per common share. Such regular quarterly cash dividend payment in the aggregate was $7,388,000. Additionally, on April 14, 2009, our Board of Directors declared a regular cash dividend of $.18 per common share to be paid on May 15, 2009 to shareholders of record as of April 24, 2009.

We have a $33,000,000 bank line of credit on which we may draw to meet short-term liquidity requirements in excess of internally generated cash flow. Amounts drawn under the line of credit are payable upon demand. At March 31, 2009, there were no borrowings under the line. However, at such date, we had outstanding a $31,925,000 irrevocable standby letter of credit which relate to payment obligations under our insurance programs. As a result of the letter of credit issued, the amount available under the line of credit was reduced by $31,925,000 at March 31, 2009.

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