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

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Jul 24, 2009
Healthcare Services Group Inc. (HCSG, Financial) filed Quarterly Report for the period ended 2009-06-30.

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 $826 million; its shares were traded at around $19.08 with a P/E ratio of 29 and P/S ratio of 1.4. The dividend yield of Healthcare Services Group Inc. stocks is 3.8%. Healthcare Services Group Inc. had an annual average earning growth of 25.7% over the past 5 years.

Highlight of Business Operations:

We are organized into two reportable segments; housekeeping, laundry, linen and facility maintenance (Housekeeping), and food services (Food). Housekeeping is being provided at all of our approximately 2,300 client facilities, generating approximately 78% or $257,083,000 of total consolidated revenues in the six month period ended June 30, 2009. Food is being provided to approximately 325 client facilities and contributed approximately 22% or $74,222,000 of 2009 six month period total consolidated revenues.

On April 30, 2009, we executed an Asset Purchase Agreement to acquire essentially all of the assets of Contract Environmental Services, Inc (CES), a South Carolina based corporation which is a provider of professional housekeeping, laundry and dietary services to long-term care and related facilities. We believe the acquisition of CES expands and compliments our position of being the largest provider of such services to long-term care and related facilities in the United States. The aggregate consideration, subject to future revision, was approximately $13,800,000 consisting of approximately: (i) $4,600,000 in cash, (ii) a current issuance of approximately 66,000 shares of our common stock (valued at approximately $1,183,000) and a future issuance of approximately 265,000 shares (valued at approximately $3,311,000) contingent upon the achievement of certain financial targets, and (iii) the repayment of approximately $4,700,000 of certain debt obligations of CES. The allocation of such consideration has resulted in our recording in the accompanying June 30, 2009 consolidated balance sheets of the following assets; (i) approximately $8,900,000 consisting primarily of accounts receivable, (ii) $5,400,000 of amortizable intangible assets, and (iii) $2,000,000 of goodwill. Additionally, pursuant to the transaction we assumed approximately $2,500,000 of certain other liabilities of the seller.

Consolidated revenues increased 15.5% to $170,896,000 in the 2009 second quarter compared to $147,918,000 in the 2008 second quarter as a result of the factors discussed below under Reportable Segments.

Consolidated revenues increased 12.2% to $331,305,000 in the six month period ended June 30, 2009 compared to $295,177,000 in the same 2008 period as a result of the factors discussed below under Reportable Segments.

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