QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
þ | Accelerated filer | ☐ | ||||||||||||||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||||||||||||||
Emerging growth company | ||||||||||||||||||||||||||
Page | ||||||||
September 30, 2019 | December 31, 2018 | ||||||||||
ASSETS: | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Marketable securities, at fair value | |||||||||||
Accounts and notes receivable, less allowance for doubtful accounts of $ | |||||||||||
Inventories and supplies | |||||||||||
Prepaid expenses and other assets | |||||||||||
Total current assets | |||||||||||
Property and equipment, net | |||||||||||
Goodwill | |||||||||||
Other intangible assets, less accumulated amortization of $ | |||||||||||
Notes receivable — long–term portion, less allowance for doubtful accounts of $ | |||||||||||
Deferred compensation funding, at fair value | |||||||||||
Deferred income taxes | |||||||||||
Other noncurrent assets | |||||||||||
Total assets | $ | $ | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY: | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued payroll, accrued and withheld payroll taxes | |||||||||||
Other accrued expenses | |||||||||||
Borrowings under line of credit | |||||||||||
Income taxes payable | |||||||||||
Accrued insurance claims | |||||||||||
Total current liabilities | |||||||||||
Accrued insurance claims — long-term portion | |||||||||||
Deferred compensation liability | |||||||||||
Lease liability — long-term portion | |||||||||||
Commitments and contingencies (Note 15) | |||||||||||
STOCKHOLDERS’ EQUITY: | |||||||||||
Common stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Retained earnings | |||||||||||
Accumulated other comprehensive income, net of taxes | |||||||||||
Common stock in treasury, at cost, | ( | ( | |||||||||
Total stockholders’ equity | |||||||||||
Total liabilities and stockholders’ equity | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
Revenues | $ | $ | $ | $ | |||||||||||||||||||
Operating costs and expenses: | |||||||||||||||||||||||
Costs of services provided | |||||||||||||||||||||||
Selling, general and administrative expense | |||||||||||||||||||||||
Other income (expense): | |||||||||||||||||||||||
Investment and other income, net | |||||||||||||||||||||||
Interest expense | ( | ( | ( | ( | |||||||||||||||||||
Income before income taxes | |||||||||||||||||||||||
Income tax provision | |||||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Per share data: | |||||||||||||||||||||||
Basic earnings per common share | $ | $ | $ | $ | |||||||||||||||||||
Diluted earnings per common share | $ | $ | $ | $ | |||||||||||||||||||
Weighted average number of common shares outstanding: | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted | |||||||||||||||||||||||
Comprehensive income: | |||||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Other comprehensive income: | |||||||||||||||||||||||
Unrealized gain (loss) on available-for-sale marketable securities, net of taxes | ( | ( | |||||||||||||||||||||
Total comprehensive income | $ | $ | $ | $ |
Nine Months Ended September 30, | |||||||||||
2019 | 2018 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | $ | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Bad debt provision | |||||||||||
Stock-based compensation expense | |||||||||||
Deferred income tax benefit | |||||||||||
Amortization of premium on marketable securities | |||||||||||
Unrealized gain on deferred compensation fund investments | ( | ( | |||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts and notes receivable | ( | ( | |||||||||
Inventories and supplies | |||||||||||
Prepaid expenses and other assets | |||||||||||
Deferred compensation funding | ( | ( | |||||||||
Accounts payable and other accrued expenses | ( | ||||||||||
Accrued payroll, accrued and withheld payroll taxes | |||||||||||
Income taxes payable | ( | ( | |||||||||
Accrued insurance claims | |||||||||||
Deferred compensation liability | |||||||||||
Net cash provided by operating activities | |||||||||||
Cash flows from investing activities: | |||||||||||
Disposals of fixed assets | |||||||||||
Additions to property and equipment | ( | ( | |||||||||
Purchases of marketable securities | ( | ( | |||||||||
Sales of marketable securities | |||||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities: | |||||||||||
Dividends paid | ( | ( | |||||||||
Reissuance of treasury stock pursuant to Dividend Reinvestment Plan | |||||||||||
Proceeds from the exercise of stock options | |||||||||||
Net repayments from short-term borrowings | ( | ( | |||||||||
Payments of statutory withholding on net issuance of restricted stock units | ( | ( | |||||||||
Net cash used in financing activities | ( | ( | |||||||||
Net change in cash and cash equivalents | |||||||||||
Cash and cash equivalents at beginning of the period | |||||||||||
Cash and cash equivalents at end of the period | $ | $ |
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income, net of taxes | Retained Earnings | Treasury Stock | Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2018 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
Comprehensive income: | |||||||||||||||||||||||||||||||||||||||||
Net income for the period | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Unrealized gain on available-for-sale marketable securities, net of taxes | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Comprehensive income for the period | $ | ||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and other stock-based compensation, net of shares tendered for payment | — | — | — | ||||||||||||||||||||||||||||||||||||||
Payment of statutory withholding on issuance of restricted stock and restricted stock units | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
Share-based compensation expense — stock options, restricted stock and restricted stock units | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Treasury shares issued for Deferred Compensation Plan funding and redemptions | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Shares issued pursuant to Employee Stock Plan | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Dividends paid and accrued, $ | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Shares issued pursuant to Dividend Reinvestment Plan | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Other | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Balance, March 31, 2019 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
Comprehensive income: | |||||||||||||||||||||||||||||||||||||||||
Net income for the period | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Unrealized gain on available-for-sale marketable securities, net of taxes | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Comprehensive income for the period | $ | ||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and other stock-based compensation, net of shares tendered for payment | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Share-based compensation expense — stock options, restricted stock and restricted stock units | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Treasury shares issued for Deferred Compensation Plan funding and redemptions | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||
Dividends paid and accrued, $ | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Shares issued pursuant to Dividend Reinvestment Plan | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Balance, June 30, 2019 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
Comprehensive income: | |||||||||||||||||||||||||||||||||||||||||
Net income for the period | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Unrealized gain on available-for-sale marketable securities, net of taxes | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Comprehensive income for the period | $ | ||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and other stock-based compensation, net of shares tendered for payment | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Payment of statutory withholding on issuance of restricted stock and restricted stock units | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
Share-based compensation expense — stock options, restricted stock and restricted stock units | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Treasury shares issued for Deferred Compensation Plan funding and redemptions | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||
Dividends paid and accrued, $ | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Shares issued pursuant to Dividend Reinvestment Plan | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Balance, September 30, 2019 | $ | $ | $ | $ | $ | ( | $ |
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income, net of taxes | Retained Earnings | Treasury Stock | Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2017 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
Comprehensive income: | |||||||||||||||||||||||||||||||||||||||||
Net income for the period | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Unrealized gain on available-for-sale marketable securities, net of taxes | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Comprehensive income for the period | $ | ( | |||||||||||||||||||||||||||||||||||||||
Exercise of stock options and other stock-based compensation, net of shares tendered for payment | — | — | — | ||||||||||||||||||||||||||||||||||||||
Payment of statutory withholding on issuance of restricted stock and restricted stock units | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
Share-based compensation expense — stock options, restricted stock and restricted stock units | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Treasury shares issued for Deferred Compensation Plan funding and redemptions | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||
Shares issued pursuant to Employee Stock Plan | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Dividends paid and accrued, $ | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Shares issued pursuant to Dividend Reinvestment Plan | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Other | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Balance, March 31, 2018 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
Comprehensive income: | |||||||||||||||||||||||||||||||||||||||||
Net income for the period | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Unrealized gain on available-for-sale marketable securities, net of taxes | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Comprehensive income for the period | $ | ||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and other stock-based compensation, net of shares tendered for payment | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Share-based compensation expense — stock options, restricted stock and restricted stock units | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Treasury shares issued for Deferred Compensation Plan funding and redemptions | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||
Dividends paid and accrued, $ | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Shares issued pursuant to Dividend Reinvestment Plan | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Balance, June 30, 2018 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
Comprehensive income: | |||||||||||||||||||||||||||||||||||||||||
Net income for the period | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Unrealized gain on available-for-sale marketable securities, net of taxes | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Comprehensive income for the period | $ | ||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and other stock-based compensation, net of shares tendered for payment | — | — | — | ||||||||||||||||||||||||||||||||||||||
Payment of statutory withholding on issuance of restricted stock and restricted stock units | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
Share-based compensation expense — stock options, restricted stock and restricted stock units | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Treasury shares issued for Deferred Compensation Plan funding and redemptions | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||
Shares issued pursuant to Employee Stock Plan | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
Dividends paid and accrued, $ | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Shares issued pursuant to Dividend Reinvestment Plan | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Contingent shares settled pursuant to acquisition | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
Other | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Balance, September 30, 2018 | $ | $ | $ | ( | $ | $ | ( | $ |
September 30, 2019 | December 31, 2018 | ||||||||||
(in thousands) | |||||||||||
Short-term | |||||||||||
Accounts and notes receivable | $ | $ | |||||||||
Allowance for doubtful accounts | ( | ( | |||||||||
Total net short-term accounts and notes receivable | $ | $ | |||||||||
Long-term | |||||||||||
Notes receivable | $ | $ | |||||||||
Allowance for doubtful accounts | ( | ( | |||||||||
Total net long-term notes receivable | $ | $ | |||||||||
Total net accounts and notes receivable | $ | $ |
Unrealized Gains and Losses on Available-for-Sale Securities1 | |||||||||||
Nine Months Ended September 30, | |||||||||||
2019 | 2018 | ||||||||||
(in thousands) | |||||||||||
Accumulated other comprehensive income — beginning balance | $ | $ | |||||||||
Other comprehensive income (loss) before reclassifications | ( | ||||||||||
(Gains) losses reclassified from other comprehensive income2 | ( | ||||||||||
Net current period other comprehensive income (loss)3 | ( | ||||||||||
Accumulated other comprehensive income (loss) — ending balance | $ | $ | ( |
Amounts Reclassified from Accumulated Other Comprehensive Income | |||||||||||
2019 | 2018 | ||||||||||
(in thousands) | |||||||||||
Three Months Ended September 30, | |||||||||||
Gains (losses) from the sale of available-for-sale securities | $ | $ | ( | ||||||||
Tax (expense) benefit | ( | ||||||||||
Net gain (loss) reclassified from accumulated other comprehensive income | $ | $ | ( | ||||||||
Nine Months Ended September 30, | |||||||||||
Gains (losses) from the sale of available-for-sale securities | $ | $ | ( | ||||||||
Tax (expense) benefit | ( | ||||||||||
Net gain (loss) reclassified from accumulated other comprehensive income | $ | $ | ( |
September 30, 2019 1 | December 31, 2018 | ||||||||||
(in thousands) | |||||||||||
Housekeeping and Dietary equipment | $ | $ | |||||||||
Computer hardware and software | |||||||||||
Operating lease — right-of-use assets1 | — | ||||||||||
Other2 | |||||||||||
Total property and equipment, at cost | |||||||||||
Less accumulated depreciation | |||||||||||
Total property and equipment, net | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2019 | 2019 | ||||||||||
(in thousands) | |||||||||||
Lease cost1 | |||||||||||
Operating lease cost | |||||||||||
Short-term lease cost | |||||||||||
Variable lease cost | |||||||||||
Total lease cost |
September 30, 2019 | ||||||||
(dollar amounts in thousands) | ||||||||
Other information | ||||||||
Cash paid for amounts included in the measurement of lease liabilities | ||||||||
Operating cash flows from operating leases | $ | |||||||
Weighted-average remaining lease term — operating leases | ||||||||
Weighted-average discount rate — operating leases | % |
Period/Year | Operating Leases | |||||||
(in thousands) | ||||||||
October 1 to December 31, 2019 | $ | |||||||
2020 | ||||||||
2021 | ||||||||
2022 | ||||||||
2023 | ||||||||
2024 | ||||||||
Thereafter | ||||||||
Total minimum lease payments | $ |
Period/Year | Total Amortization Expense | |||||||
(in thousands) | ||||||||
October 1 to December 31, 2019 | $ | |||||||
2020 | $ | |||||||
2021 | $ | |||||||
2022 | $ | |||||||
2023 | $ | |||||||
2024 | $ | |||||||
Thereafter | $ |
As of September 30, 2019 | |||||||||||||||||||||||||||||
Fair Value Measurement Using: | |||||||||||||||||||||||||||||
Carrying Amount | Total Fair Value | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||
Financial Assets: | |||||||||||||||||||||||||||||
Marketable securities | |||||||||||||||||||||||||||||
Municipal bonds — available-for-sale | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Deferred compensation fund | |||||||||||||||||||||||||||||
Money Market 1 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Balanced and Lifestyle | |||||||||||||||||||||||||||||
Large Cap Growth | |||||||||||||||||||||||||||||
Small Cap Growth | |||||||||||||||||||||||||||||
Fixed Income | |||||||||||||||||||||||||||||
International | |||||||||||||||||||||||||||||
Mid Cap Growth | |||||||||||||||||||||||||||||
Deferred compensation fund | $ | $ | $ | $ | $ |
As of December 31, 2018 | |||||||||||||||||||||||||||||
Fair Value Measurement Using: | |||||||||||||||||||||||||||||
Carrying Amount | Total Fair Value | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||
Financial Assets: | |||||||||||||||||||||||||||||
Marketable securities | |||||||||||||||||||||||||||||
Municipal bonds — available-for-sale | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Deferred compensation fund | |||||||||||||||||||||||||||||
Money Market 1 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Balanced and Lifestyle | |||||||||||||||||||||||||||||
Large Cap Growth | |||||||||||||||||||||||||||||
Small Cap Growth | |||||||||||||||||||||||||||||
Fixed Income | |||||||||||||||||||||||||||||
International | |||||||||||||||||||||||||||||
Mid Cap Growth | |||||||||||||||||||||||||||||
Deferred compensation fund | $ | $ | $ | $ | $ |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Other-than-temporary Impairments | |||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||
September 30, 2019 | |||||||||||||||||||||||||||||
Type of security: | |||||||||||||||||||||||||||||
Municipal bonds — available-for-sale | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
Total debt securities | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
December 31, 2018 | |||||||||||||||||||||||||||||
Type of security: | |||||||||||||||||||||||||||||
Municipal bonds — available-for-sale | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
Total debt securities | $ | $ | $ | ( | $ | $ |
Municipal Bonds — Available-for-Sale | ||||||||||||||
Contractual maturity: | September 30, 2019 | December 31, 2018 | ||||||||||||
(in thousands) | ||||||||||||||
Maturing in one year or less | $ | $ | ||||||||||||
Maturing in second year through fifth year | ||||||||||||||
Maturing in sixth year through tenth year | ||||||||||||||
Maturing after ten years | ||||||||||||||
Total debt securities | $ | $ |
Nine Months Ended September 30, | |||||||||||
2019 | 2018 | ||||||||||
(in thousands) | |||||||||||
Stock options | $ | $ | |||||||||
Restricted stock and restricted stock units | |||||||||||
Employee Stock Purchase Plan | |||||||||||
Total pre-tax stock-based compensation expense charged against income 1 | $ | $ |
Stock Options Outstanding | |||||||||||
Number of Shares | Weighted Average Exercise Price | ||||||||||
(in thousands) | |||||||||||
December 31, 2018 | $ | ||||||||||
Granted | $ | ||||||||||
Exercised | ( | $ | |||||||||
Forfeited | ( | $ | |||||||||
Expired | ( | $ | |||||||||
September 30, 2019 | $ |
Nine Months Ended September 30, | |||||||||||
2019 | 2018 | ||||||||||
Risk-free interest rate | % | % | |||||||||
Weighted average expected life | |||||||||||
Expected volatility | % | % | |||||||||
Dividend yield | % | % |
September 30, 2019 | |||||
(amounts in thousands, except per share data) | |||||
Outstanding: | |||||
Aggregate intrinsic value | $ | ||||
Weighted average remaining contractual life | |||||
Exercisable: | |||||
Number of options | |||||
Weighted average exercise price | $ | ||||
Aggregate intrinsic value | $ | ||||
Weighted average remaining contractual life |
Restricted Stock Units and Restricted Stock | |||||||||||
Number | Weighted Average Grant Date Fair Value | ||||||||||
(in thousands) | |||||||||||
December 31, 2018 | $ | ||||||||||
Granted | $ | ||||||||||
Vested | ( | $ | |||||||||
Forfeited | ( | $ | |||||||||
September 30, 2019 | $ |
Nine Months Ended September 30, | |||||||||||
2019 | 2018 | ||||||||||
Risk-free interest rate | |||||||||||
Weighted average expected life (years) | |||||||||||
Expected volatility | |||||||||||
Dividend yield |
Nine Months Ended September 30, | |||||||||||
2019 | 2018 | ||||||||||
(in thousands) | |||||||||||
SERP expense 1 | $ | $ | |||||||||
Unrealized gain recorded in SERP liability account | $ | $ |
Quarter Ended | |||||||||||||||||
September 30, 2019 | June 30, 2019 | March 31, 2019 | |||||||||||||||
(in thousands, except per share data) | |||||||||||||||||
Cash dividend paid per common share | $ | $ | $ | ||||||||||||||
Total cash dividends paid | $ | $ | $ | ||||||||||||||
Record date | August 23, 2019 | May 24, 2019 | February 15, 2019 | ||||||||||||||
Payment date | September 27, 2019 | June 28, 2019 | March 22, 2019 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
Cash dividends declared per common share |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Revenues | |||||||||||||||||||||||
Housekeeping1 | $ | $ | $ | $ | |||||||||||||||||||
Dietary | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Income before income taxes | |||||||||||||||||||||||
Housekeeping | $ | $ | $ | $ | |||||||||||||||||||
Dietary | |||||||||||||||||||||||
Corporate and eliminations2 | ( | ( | ( | ( | |||||||||||||||||||
Total | $ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Weighted average number of common shares outstanding - basic | |||||||||||||||||||||||
Effect of dilutive securities 1 | |||||||||||||||||||||||
Weighted average number of common shares outstanding - diluted |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Anti-dilutive |
Three Months Ended September 30, | |||||||||||||||||
2019 | 2018 | % Change | |||||||||||||||
(in thousands) | |||||||||||||||||
Revenues | |||||||||||||||||
Housekeeping1 | $ | 225,347 | $ | 240,837 | (6.4) | % | |||||||||||
Dietary | 230,259 | 264,663 | (13.0) | % | |||||||||||||
Consolidated | $ | 455,606 | $ | 505,500 | (9.9) | % | |||||||||||
Costs of services provided | |||||||||||||||||
Housekeeping1 | $ | 203,649 | $ | 214,061 | (4.9) | % | |||||||||||
Dietary | 221,431 | 248,384 | (10.9) | % | |||||||||||||
Corporate and eliminations | (26,676) | (24,183) | 10.3 | % | |||||||||||||
Consolidated | $ | 398,404 | $ | 438,262 | (9.1) | % | |||||||||||
Selling, general and administrative expense | |||||||||||||||||
Corporate and eliminations | $ | 33,479 | $ | 36,713 | (8.8) | % | |||||||||||
Investment and other income, net | |||||||||||||||||
Corporate and eliminations1 | $ | 733 | $ | 3,239 | (77.4) | % | |||||||||||
Interest expense | |||||||||||||||||
Corporate and eliminations1 | $ | (740) | $ | (782) | (5.4) | % | |||||||||||
Income (loss) before income taxes | |||||||||||||||||
Housekeeping | $ | 21,698 | $ | 26,776 | (19.0) | % | |||||||||||
Dietary | 8,828 | 16,279 | (45.8) | % | |||||||||||||
Corporate and eliminations | (6,810) | (10,073) | 32.4 | % | |||||||||||||
Consolidated | $ | 23,716 | $ | 32,982 | 28.1 | % |
Three Months Ended September 30, | |||||||||||
2019 | 2018 | ||||||||||
Revenues | 100.0 | % | 100.0 | % | |||||||
Operating costs and expenses: | |||||||||||
Costs of services provided | 87.4 | % | 86.7 | % | |||||||
Selling, general and administrative expense | 7.3 | % | 7.3 | % | |||||||
Other income (expense): | |||||||||||
Investment and other income, net | 0.2 | % | 0.6 | % | |||||||
Interest expense | (0.2) | % | (0.2) | % | |||||||
Income before income taxes | 5.3 | % | 6.4 | % | |||||||
Income tax | 1.2 | % | 1.4 | % | |||||||
Net income | 4.1 | % | 5.0 | % |
Three Months Ended September 30, | ||||||||||||||||||||
Costs of Services Provided - Key Indicators as a % of Consolidated Revenue | 2019 | 2018 | Change | |||||||||||||||||
Bad debt provision | 0.3% | 0.6% | (0.3)% | |||||||||||||||||
Self-insurance costs | 2.9% | 2.7% | 0.2% |
Three Months Ended September 30, | ||||||||||||||||||||
Costs of Services Provided - Key Indicators as a % of Segment Revenue | 2019 | 2018 | Change | |||||||||||||||||
Housekeeping labor and other labor-related costs | 80.9% | 78.9% | 2.0% | |||||||||||||||||
Housekeeping supplies | 7.4% | 7.9% | (0.5)% | |||||||||||||||||
Dietary labor and other labor-related costs | 64.2% | 56.3% | 7.9% | |||||||||||||||||
Dietary supplies | 29.4% | 34.4% | (5.0)% |
Three Months Ended September 30, | |||||||||||||||||||||||
2019 | 2018 | $ Change | % Change | ||||||||||||||||||||
(dollar amounts in thousands) | |||||||||||||||||||||||
Selling, general and administrative expense excluding change in deferred compensation liability | $ | 33,453 | $ | 35,139 | $ | (1,686) | (4.8) | % | |||||||||||||||
Gain on deferred compensation plan investments | 26 | 1,574 | (1,548) | (98.3) | % | ||||||||||||||||||
Selling, general and administrative expense | $ | 33,479 | $ | 36,713 | $ | (3,234) | (8.8) | % |
Nine Months Ended September 30, | |||||||||||||||||
2019 | 2018 | % Change | |||||||||||||||
(in thousands) | |||||||||||||||||
Revenues | |||||||||||||||||
Housekeeping1 | $ | 687,392 | $ | 729,400 | (5.8) | % | |||||||||||
Dietary | 706,426 | 778,249 | (9.2) | % | |||||||||||||
Consolidated | $ | 1,393,818 | $ | 1,507,649 | (7.6) | % | |||||||||||
Costs of services provided | |||||||||||||||||
Housekeeping1 | $ | 614,383 | $ | 645,763 | (4.9) | % | |||||||||||
Dietary | 672,460 | 731,669 | (8.1) | % | |||||||||||||
Corporate and eliminations | (60,689) | (33,887) | 79.1 | % | |||||||||||||
Consolidated | $ | 1,226,154 | $ | 1,343,545 | (8.7) | % | |||||||||||
Selling, general and administrative expense | |||||||||||||||||
Corporate and eliminations | $ | 113,189 | $ | 104,608 | 8.2 | % | |||||||||||
Investment and interest income | |||||||||||||||||
Corporate and eliminations1 | $ | 7,329 | $ | 7,624 | (3.9) | % | |||||||||||
Interest expense | |||||||||||||||||
Corporate and eliminations1 | $ | (2,579) | $ | (2,217) | 16.3 | % | |||||||||||
Income (loss) before income taxes | |||||||||||||||||
Housekeeping | $ | 73,009 | $ | 83,637 | (12.7) | % | |||||||||||
Dietary | 33,966 | 46,580 | (27.1) | % | |||||||||||||
Corporate and eliminations | (47,750) | (65,314) | (26.9) | % | |||||||||||||
Consolidated | $ | 59,225 | $ | 64,903 | (8.7) | % |
Nine Months Ended September 30, | |||||||||||
2019 | 2018 | ||||||||||
Revenues | 100.0 | % | 100.0 | % | |||||||
Operating costs and expenses: | |||||||||||
Costs of services provided | 88.0 | % | 89.1 | % | |||||||
Selling, general and administrative expense | 8.1 | % | 6.9 | % | |||||||
Other income (expense): | |||||||||||
Investment and other income, net | 0.5 | % | 0.5 | % | |||||||
Interest expense | (0.2) | % | (0.1) | % | |||||||
Income before income taxes | 4.2 | % | 4.4 | % | |||||||
Income tax | 1.0 | % | 0.9 | % | |||||||
Net income | 3.2 | % | 3.5 | % |
Nine Months Ended September 30, | ||||||||||||||||||||
Costs of Services Provided - Key Indicators as a % of Consolidated Revenue | 2019 | 2018 | Change | |||||||||||||||||
Bad debt provision | 1.6% | 2.8% | (1.2)% | |||||||||||||||||
Self-insurance costs | 2.8% | 2.7% | 0.1% |
Nine Months Ended September 30, | ||||||||||||||||||||
Costs of Services Provided - Key Indicators as a % of Segment Revenue | 2019 | 2018 | Change | |||||||||||||||||
Housekeeping labor and other labor-related costs | 79.8% | 78.9% | 0.9% | |||||||||||||||||
Housekeeping supplies | 7.5% | 7.9% | (0.4)% | |||||||||||||||||
Dietary labor and other labor-related costs | 63.2% | 56.8% | 6.4% | |||||||||||||||||
Dietary supplies | 29.6% | 34.7% | (5.1)% |
Nine Months Ended September 30, | |||||||||||||||||||||||
2019 | 2018 | $ Change | % Change | ||||||||||||||||||||
(dollar amounts in thousands) | |||||||||||||||||||||||
Selling, general and administrative expense excluding change in deferred compensation liability | $ | 108,224 | $ | 101,916 | $ | 6,308 | 6.2 | % | |||||||||||||||
Gain on deferred compensation plan investments | 4,965 | 2,692 | 2,273 | 84.4 | % | ||||||||||||||||||
Selling, general and administrative expense | $ | 113,189 | $ | 104,608 | $ | 8,581 | 8.2 | % |
Nine Months Ended September 30, | |||||||||||
2019 | 2018 | ||||||||||
(in thousands) | |||||||||||
Net cash provided by operating activities | $ | 80,222 | $ | 74,509 | |||||||
Net cash used in investing activities | $ | (4,256) | $ | (7,621) | |||||||
Net cash used in financing activities | $ | (61,419) | $ | (61,248) |
Quarter Ended | |||||||||||||||||
September 30, 2019 | June 30, 2019 | March 31, 2019 | |||||||||||||||
(amounts in thousands, except per share data) | |||||||||||||||||
Cash dividend paid per common share | $ | 0.19875 | $ | 0.19750 | $ | 0.19625 | |||||||||||
Total cash dividends paid | $ | 14,789 | $ | 14,688 | $ | 14,588 | |||||||||||
Record date | August 23, 2019 | May 24, 2019 | February 15, 2019 | ||||||||||||||
Payment date | September 27, 2019 | June 28, 2019 | March 22, 2019 |
Covenant Descriptions and Requirements | As of September 30, 2019 | |||||||
Funded debt 1 to EBITDA 2 ratio: less than 3.50 to 1.00 | 0.95 | |||||||
EBITDA to Interest Expense ratio: not less than 3.00 to 1.00 | 32.84 |
Allowance for Doubtful Accounts | |||||
(in thousands) | |||||
Balance December 31, 2018 | $ | 57,209 | |||
Provision for bad debts | 18,470 | ||||
Net write-offs of client accounts receivable | (7,049) | ||||
Balance March 31, 2019 | 68,630 | ||||
Provision for bad debts | 2,995 | ||||
Net write-offs of client accounts receivable | (18,206) | ||||
Balance June 30, 2019 | 53,419 | ||||
Provision for bad debts | 1,515 | ||||
Net write-offs of client accounts receivable | (1,662) | ||||
Balance September 30, 2019 | $ | 53,272 |
Balance December 31, 2018 | Additions | Deductions | Balance September 30, 2019 | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Impaired notes receivable | $ | 25,704 | $ | 3,763 | $ | (1,270) | $ | 28,197 | |||||||||||||||
Reserve for impaired notes receivable | $ | 13,472 | $ | 3,273 | $ | (1,055) | $ | 15,690 |
Exhibit Number | Description | |||||||
31.1 | ||||||||
31.2 | ||||||||
32.1 | ||||||||
101 | The following financial information from the Company’s Form 10-Q for the quarterly period ended September 30, 2019 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statement of Stockholders’ Equity, and (v) Notes to Consolidated Financial Statements |
HEALTHCARE SERVICES GROUP, INC. | |||||||||||
Date: | October 25, 2019 | /s/ Theodore Wahl | |||||||||
Theodore Wahl | |||||||||||
President & Chief Executive Officer | |||||||||||
(Principal Executive Officer) | |||||||||||
Date: | October 25, 2019 | /s/ John C. Shea | |||||||||
John C. Shea | |||||||||||
Chief Financial Officer | |||||||||||
(Principal Financial and Accounting Officer) | |||||||||||
Date: | October 25, 2019 | /s/ Theodore Wahl | |||||||||
Theodore Wahl | |||||||||||
President & Chief Executive Officer | |||||||||||
(Principal Executive Officer) |
Date: | October 25, 2019 | /s/ John C. Shea | |||||||||
John C. Shea | |||||||||||
Chief Financial Officer | |||||||||||
(Principal Financial and Accounting Officer) |
/s/ Theodore Wahl | /s/ John C. Shea | |||||||
Theodore Wahl | John C. Shea | |||||||
President & Chief Executive Officer | Chief Financial Officer | |||||||
(Principal Executive Officer) | (Principal Financial and Accounting Officer) | |||||||
October 25, 2019 | October 25, 2019 |
Revenue - Remaining Performance Obligation (Details) $ in Millions |
Sep. 30, 2019
USD ($)
|
---|---|
Revenue from Contract with Customer [Abstract] | |
Remaining performance obligation | $ 743.7 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-10-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation percent | 22.70% |
Revenue, remaining performance obligation period | 12 months |
Revenue |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Revenue | Note 2—Revenue The Company presents its consolidated revenues disaggregated by reportable segment, as Management evaluates the nature, amount, timing and uncertainty of the Company’s revenues by segment. Refer to Note 13—Segment Information herein as well as the information below regarding the Company’s reportable segments. Housekeeping Housekeeping accounted for $687.4 million and $729.4 million of the Company’s consolidated revenues for the nine months ended September 30, 2019 and 2018, respectively, which represented approximately 49.3% and 48.4% of the Company's revenues in each respective period. The services provided under this segment include managing clients’ housekeeping departments, which are principally responsible for the cleaning, disinfecting and sanitizing of resident rooms and common areas of the clients’ facilities, as well as the laundering and processing of the bed linens, uniforms, resident personal clothing and other assorted linen items utilized at the clients’ facilities. Upon beginning service with a client facility, the Company typically hires and trains the employees previously employed by such facility and assigns an on-site manager to supervise and train the front-line personnel and coordinates housekeeping services with other facility support functions in accordance with client requests. Such management personnel also oversee the execution of various cost and quality control procedures including continuous training and employee evaluation, and on-site testing for infection control. Dietary Dietary services accounted for $706.4 million and $778.2 million of the Company’s consolidated revenues for the nine months ended September 30, 2019 and 2018, respectively, which represented approximately 50.7% and 51.6% of the Company's revenues in each respective period. Dietary services consist of managing clients’ dietary departments which are principally responsible for food purchasing, meal preparation and professional dietitian services, which include the development of menus that meet the dietary needs of residents. On-site management is responsible for all daily dietary department activities, with regular support being provided by a District Manager specializing in dietary services, as well as a registered dietitian. The Company also offers clinical consulting services to facilities which if contracted is a service bundled within the monthly service provided to clients. Upon beginning service with a client facility, the Company typically hires and trains the employees previously employed by such facility and assigns an on-site manager to supervise and train the front-line personnel and coordinates dietitian services with other facility support functions in accordance with client requests. Such management personnel also oversee the execution of various cost and quality control procedures including continuous training and employee evaluation. Revenue Recognition All of the Company's revenues are derived from contracts with customers. The Company accounts for revenue from contracts with customers in accordance with ASC 606, and as such, the Company recognizes revenue to depict the transfer of promised goods and services to customers in amounts that reflect the consideration to which the Company is entitled in exchange for those goods and services. The Company’s costs of obtaining contracts are not material. The Company performs services and provides goods in accordance with its contracts with its customers. Such contracts typically provide for a renewable one year service term, cancellable by either party upon 30 to 90 days' notice, after an initial period of 60 to 120 days. A performance obligation is the unit of account under ASC 606 and is defined as a promise in a contract to transfer a distinct good or service to the customer. The Company’s Housekeeping and Dietary contracts relate to the provision of bundles of goods, services or both, which represent a series of distinct goods and services that are substantially the same and that have the same pattern of transfer to the customer. The Company accounts for the series as a single performance obligation satisfied over time, as the customer simultaneously receives and consumes the benefits of the goods and services provided. Revenue is recognized using the output method, which is based upon the delivery of goods and services to the clients’ facilities. In limited cases, the Company provides goods, services or both, before the execution of a written contract. In these cases, the Company defers the recognition of revenue until a contract is executed. The amount of such deferred revenue was not material as of September 30, 2019 and December 31, 2018. Additionally, all such revenue amounts deferred as of December 31, 2018 were subsequently recognized as revenue during the nine months ended September 30, 2019. The transaction price is the amount of consideration to which the Company is entitled in exchange for transferring promised goods or services to its customers. The transaction price does not include taxes assessed or collected. The Company’s contracts detail the fees that the Company charges for the goods and services it provides. For certain contracts which contain a variable component to the transaction price, the Company is required to make estimates of the amount of consideration to which the Company will be entitled, based on variability in resident and patient populations serviced, product usage or quantities consumed. The Company recognizes revenue related to such estimates only when the Company determines that there will not be a significant reversal in the amount of revenue recognized. The Company’s contracts generally do not contain significant financing components, as payment terms are less than one year. The Company allocates the transaction price to each performance obligation, noting that the bundle of goods, services or goods and services provided under each Housekeeping and Dietary contract represents a single performance obligation that is satisfied over time. The Company recognizes the related revenue when it satisfies the performance obligation by transferring a bundle of promised goods, services or both to a customer. Such recognition is on a monthly or weekly basis, as goods are provided and services are performed. In some cases, the Company requires customers to pay in advance for goods and services to be provided. As of September 30, 2019 and December 31, 2018, the value of the contract liabilities associated with customer prepayments was not material. Additionally, all such revenue amounts deferred as of December 31, 2018 were subsequently recognized as revenue during the nine months ended September 30, 2019. Transaction Price Allocated to Remaining Performance Obligations The Company recognizes revenue as it satisfies the performance obligations associated with contracts with customers, which due to the nature of the goods and services provided by the Company, are satisfied over time. Contracts may contain transaction prices that are fixed, variable or both. The Company’s contracts with customers typically provide for an initial term of one year or less, with renewable one year service terms, cancellable by either party upon 30 to 90 days' notice after an initial period of 60 to 120 days. At September 30, 2019, the Company had $743.7 million related to performance obligations that were unsatisfied or partially unsatisfied for which the Company expects to recognize revenue. The Company expects to recognize revenue on approximately 22.7% of the remaining performance obligations over the next 12 months, with the balance to be recognized thereafter. These amounts exclude variable consideration primarily related to performance obligations that consists of a series of distinct service periods with revenues based on future performance that cannot be estimated at contract inception. The Company also has elected to apply the practical expedient that permits exclusion of information about the remaining performance obligations with original expected durations of one year or less.
|
Segment Information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Information of Reportable Segments |
1.Prior year Housekeeping were revised for the presentation of the revenues earned by the Company's wholly-owned captive insurance subsidiary. Refer to Note 1—Description of Business and Significant Accounting Policies herein for additional disclosure regarding the revision. 2.Primarily represents corporate office costs and related overhead, recording of certain inventories and supplies and workers compensation costs at the reportable segment level which use accounting methods that differ from those used at the corporate level, as well as consolidated subsidiaries’ operating expenses that are not allocated to the reportable segments, net of investment and other income and interest expense.
|
Dividends |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends | Note 11—Dividends During the nine months ended September 30, 2019, the Company paid regular quarterly cash dividends totaling approximately $44.1 million as follows:
Additionally, on October 22, 2019, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.20000 per common share, which will be paid on December 27, 2019, to shareholders of record as of the close of business on November 22, 2019. Cash dividends declared for the periods presented were as follows:
|
Accounts and Notes Receivable |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts and Notes Receivable | Note 3—Accounts and Notes Receivable The Company’s accounts and notes receivable balances consisted of the following as of September 30, 2019 and December 31, 2018:
The Company makes credit decisions on a case-by-case basis after reviewing a number of qualitative and quantitative factors related to the specific client as well as current industry variables that may impact that client. There are a variety of factors that impact a client’s ability to pay in accordance with the Company’s contracts. These factors include, but are not limited to, fluctuating census numbers, litigation costs and the client’s participation in programs funded by federal and state governmental agencies. Deviations in the timing or amounts of reimbursements under those programs can impact the client’s cash flows and their ability to make timely payments. However, the client's obligation to pay the Company in accordance with the contracts are not contingent upon the client’s cash flow. Notwithstanding the Company’s efforts to minimize its credit risk exposure, the aforementioned factors, as well as other factors that impact client cash flows or ability to make timely payments, could have an indirect, yet material adverse effect on the Company’s results of operations and financial condition. The Company’s net current accounts and notes receivable balance increased from December 31, 2018. Fluctuations in net accounts and notes receivable are generally attributable to a variety of factors including, but not limited to, the timing of cash receipts from customers and the inception, transition or termination of client relationships. The Company deploys significant resources and has invested in tools and processes to optimize Management’s credit and collections efforts. When appropriate, the Company utilizes interest-bearing promissory notes to enhance the collectability of amounts due, by instituting definitive repayment plans and providing a means by which to further evidence the amounts owed. As of September 30, 2019 and December 31, 2018, the Company's promissory notes outstanding were $56.5 million and $63.3 million, respectively, net of reserves of $15.7 million and $13.5 million, respectively. In addition, the Company may amend contracts from full service to management-only arrangements, or adjust contractual payment terms, to accommodate clients who have in good faith established clearly-defined plans for addressing cash flow issues. These efforts are intended to minimize the Company’s collections risk.
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Leases |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Note 7—Leases The Company recognizes ROU Assets and lease liabilities (“Lease Liabilities”) for automobiles, office buildings, IT equipment, and small storage units for the temporary storage of operational equipment. The Company's leases have remaining lease terms ranging from less than 1 year to 10 years, and have extension options ranging from 1 year to 5 years. Most leases include the option to terminate the lease within 1 year. Upon adopting ASC 842, the Company made accounting policy elections using practical expedients offered under the guidance to combine lease and non-lease components within leasing arrangements and to recognize the payments associated with short-term leases in earnings on a straight-line basis over the lease term, with the cost associated with variable lease payments recognized when incurred. These accounting policy elections impact the value of the Company’s ROU Assets and Lease Liabilities. The value of the Company’s ROU Assets is determined as the non-depreciated fair value of its leasing arrangements and is recorded to Property and Equipment, net on the Company's Consolidated Balance Sheet. The value of the Company’s Lease Liabilities is the present value of fixed lease payments not yet paid, discounted using either the rate implicit in the lease contract if that rate can be determined, or the Company’s incremental borrowing rate ("IBR") and is recorded in Other accrued expenses and Lease liability — long-term portion on the Company's Consolidated Balance Sheet. Any future lease payments that are not fixed based on the terms of the lease contract, or fluctuate based on a factor other than an index or rate, are considered variable lease payments and are not included in the value of the Company's ROU Assets or Lease Liabilities. The Company's IBR is determined as the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Components of lease expense required by ASC 842 are presented below for the three and nine months ended September 30, 2019.
1.ASC 842 was adopted as of January 1, 2019. As such, prior period numbers remain unadjusted and in accordance with prior U.S. GAAP. Lease expense for the three and nine months ended September 30, 2018 was $1.0 million and $3.0 million, respectively and is recorded as a component of selling, general and administrative expense on the Consolidated Statements of Comprehensive Income. Supplemental information required by ASC 842 is presented below for the nine months ended September 30, 2019.
During the three months ended September 30, 2019, the Company's ROU Assets and Lease Liabilities were both reduced by less than $0.1 million due to lease cancellations which are accounted for as noncash transactions. During the nine months ended September 30, 2019, the Company's ROU Assets and Lease Liabilities were both reduced by $0.1 million due to lease cancellations. The following is a schedule by calendar year of future minimum lease payments under operating leases that have remaining terms as of September 30, 2019:
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Fair Value Measurements - Contractual Maturities of Debt Securities (Details) - USD ($) $ in Thousands |
Sep. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Fair Value Disclosures [Abstract] | ||
Maturing in one year or less | $ 970 | $ 1,645 |
Maturing in second year through fifth year | 13,191 | 24,649 |
Maturing in sixth year through tenth year | 24,708 | 14,769 |
Maturing after ten years | 40,845 | 35,299 |
Total debt securities | $ 79,714 | $ 76,362 |
Stock-Based Compensation - Assumptions for Fair Value of Options Granted (Details) |
9 Months Ended | |
---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
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Share-based Payment Arrangement [Abstract] | ||
Risk-free interest rate | 2.50% | 2.10% |
Weighted average expected life | 5 years 8 months 12 days | 5 years 9 months 18 days |
Expected volatility | 22.60% | 21.40% |
Dividend yield | 1.90% | 1.50% |
Other Contingencies (Details) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2019 |
Dec. 31, 2018 |
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Short-term Debt [Line Items] | ||
Bank line of credit | $ 475,000,000 | |
Borrowings under line of credit | 10,000,000 | $ 30,000,000 |
Reduction of bank line of credit | 62,700,000 | |
Standby Letter Of Credit | ||
Short-term Debt [Line Items] | ||
Irrevocable standby letter of credit, outstanding | $ 62,700,000 | |
LIBOR | ||
Short-term Debt [Line Items] | ||
Basis spread on variable rate | 1.15% | |
Prime Rate or Overnight Bank Funding Rate | ||
Short-term Debt [Line Items] | ||
Basis spread on variable rate | 0.50% |
Stock-Based Compensation - Deferred Compensation Plan (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
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Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||
SERP expense | $ 5,468 | $ 4,606 |
SERP | ||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||
SERP expense | 497 | 490 |
Unrealized gain recorded in SERP liability account | $ 4,964 | $ 2,692 |
Income Taxes (Details) |
Sep. 30, 2019
USD ($)
|
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Income Tax Disclosure [Abstract] | |
Unrecognized tax benefits | $ 0 |
Other Intangible Assets - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Finite-Lived Intangible Assets [Line Items] | ||||
Amortization of intangible assets | $ 1.0 | $ 1.1 | $ 3.1 | $ 3.3 |
Customer Relationships | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Useful life | 10 years |
Property and Equipment (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Dec. 31, 2018 |
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Property, Plant and Equipment [Line Items] | |||||
Total property and equipment, at cost | $ 58,761 | $ 58,761 | $ 35,630 | ||
Operating lease — right-of-use assets | 19,865 | 19,865 | |||
Less accumulated depreciation | 29,786 | 29,786 | 22,730 | ||
Total property and equipment, net | 28,975 | 28,975 | 12,900 | ||
Depreciation | 2,400 | $ 1,100 | 7,200 | $ 3,700 | |
Housekeeping and Dietary equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Total property and equipment, at cost | 24,562 | 24,562 | 22,596 | ||
Computer hardware and software | |||||
Property, Plant and Equipment [Line Items] | |||||
Total property and equipment, at cost | 12,637 | 12,637 | 12,114 | ||
Other | |||||
Property, Plant and Equipment [Line Items] | |||||
Total property and equipment, at cost | 1,697 | 1,697 | $ 920 | ||
Operating lease — right-of-use assets | |||||
Property, Plant and Equipment [Line Items] | |||||
Depreciation | $ 1,300 | $ 3,500 |
Other Contingencies |
9 Months Ended |
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Sep. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Other Contingencies | Note 15—Other Contingencies Line of Credit At September 30, 2019, the Company had a $475 million bank line of credit on which to draw for general corporate purposes. Amounts drawn under the line of credit are payable upon demand and generally bear interest at a float rate, based on the Company's leverage ratio, and starting at LIBOR plus 115 basis points (or if LIBOR becomes unavailable, the higher of the Overnight Bank Funding Rate, plus 50 basis points and the Prime Rate). As of September 30, 2019 and December 31, 2018 there were $10.0 million and $30.0 million in borrowings under the line of credit, respectively. The line of credit requires the Company to satisfy two financial covenants, with which the Company is in compliance as of September 30, 2019 and expects to remain in compliance. The line of credit expires on December 21, 2023. At September 30, 2019, the Company also had outstanding $62.7 million in irrevocable standby letters of credit, which relate to payment obligations under the Company's insurance programs. In connection with the issuance of the letters of credit, the amount available under the line of credit was reduced by $62.7 million at September 30, 2019. The letters of credit expire on January 2, 2020. Besides the $62.7 million letters of credit there are no other restrictions as to the amount which the Company can draw upon the $475 million line of credit. Tax Jurisdictions and Matters The Company provides services throughout the continental United States and is subject to numerous state and local taxing jurisdictions. In the ordinary course of business, a jurisdiction may contest the Company’s reporting positions with respect to the application of its tax code to the Company’s services, which could result in additional tax liabilities. The Company has tax matters with various taxing authorities. Because of the uncertainties related to both the probable outcomes and amount of probable assessments due, the Company is unable to make a reasonable estimate of a liability. The Company does not expect the resolution of any of these matters, taken individually or in the aggregate, to have a material adverse effect on the consolidated financial position or results of operations based on the Company’s best estimate of the outcomes of such matters. Legal Proceedings The Company is subject to various claims and legal actions in the ordinary course of business. Some of these matters include payroll and employee-related matters and examinations by governmental agencies. As the Company becomes aware of such claims and legal actions, the Company records accruals for any exposures that are probable and estimable. If adverse outcomes of such claims and legal actions are reasonably possible, Management assesses materiality and provides financial disclosure, as appropriate. As previously disclosed, the Securities and Exchange Commission (“SEC”) is conducting an investigation into the Company's earnings per share (“EPS”) calculation practices. Following receipt of a letter from the SEC in November 2017 regarding its inquiry into those practices followed by a subpoena in March 2018, the Company authorized its outside counsel to conduct an internal investigation, under the direction of the Company’s Audit Committee, into matters related to the SEC subpoena. This investigation was completed in March 2019 and the Company continues to cooperate with the SEC’s investigation and document requests. On March 22, 2019, a putative shareholder class action lawsuit was filed against the Company and its Chief Executive Officer in the U.S. District Court for the Eastern District of Pennsylvania. The initial complaint, which was filed by a plaintiff purportedly on behalf of all purchasers of our securities between April 11, 2017 and March 4, 2019 (the "Class Period"), alleges violations of the federal securities laws in connection with the matters related to the Company's EPS calculation practices. On September 17, 2019, the complaint was amended to, among other things, extend the Class Period to cover the period between April 8, 2014 and March 4, 2019, and to name additional individuals affiliated with the Company as defendants. The lead plaintiff seeks unspecified monetary damages and other relief on behalf of the plaintiff class. While the Company is vigorously defending against all litigation claims asserted, this litigation—along with the ongoing SEC investigation—could result in substantial costs to the Company and a diversion of the Company’s management’s attention and resources, which could harm its business. In addition, the uncertainty of the pending lawsuit or potential filing of additional lawsuits could lead to more volatility and a reduction in the Company’s stock price. Given the early stage of the litigation, at this time the Company is unable to reasonably estimate possible losses or form a judgment that an unfavorable outcome is either probable or remote. It is not currently possible to assess whether or not the outcome of these proceedings may have a material adverse effect on the Company. Government Regulations The Company’s clients are concentrated in the healthcare industry and are primarily providers of long-term care. The revenues of many of the Company’s clients are highly reliant on Medicare, Medicaid and third party payors’ reimbursement funding rates. New legislation or additional changes in existing regulations could directly impact the governmental reimbursement programs in which the clients participate. The full effect of any such programs would not be realized until these laws are fully implemented and government agencies issue applicable regulations or guidance.
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Changes in Accumulated Other Comprehensive Income by Component (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income | The following table provides a summary of the changes in accumulated other comprehensive income for the nine months ended September 30, 2019 and 2018:
1.All amounts are net of tax 2.Realized gains and losses were recorded pre-tax under “Investment and other income” in the Consolidated Statements of Comprehensive Income. For the nine months ended September 30, 2019, the Company recorded $0.1 million of realized gains from the sale of available-for-sale securities. For the nine months ended September 30, 2018, the Company recorded $0.2 million of realized losses from the sale of available-for-sale securities. Refer to Note 9—Fair Value Measurements herein for further information. 3.For the nine months ended September 30, 2019 and 2018, the changes in other comprehensive income (loss) were net of a tax expense of $0.7 million and a benefit of $0.3 million, respectively.
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Reclassification out of Accumulated Other Comprehensive Income |
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Dividends - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | |||||
---|---|---|---|---|---|---|---|
Oct. 22, 2019 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Equity [Abstract] | |||||||
Dividends paid | $ 14,789 | $ 14,688 | $ 14,588 | $ 44,065 | $ 42,748 | ||
Subsequent Event [Line Items] | |||||||
Dividends declared (in dollars per share) | $ 0.20000 | $ 0.19500 | $ 0.59625 | $ 0.58125 | |||
Subsequent Event | |||||||
Subsequent Event [Line Items] | |||||||
Dividends declared (in dollars per share) | $ 0.20000 |
Leases - Schedule of Future Minimum Lease Payments (Details) $ in Thousands |
Sep. 30, 2019
USD ($)
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Leases [Abstract] | |
October 1 to December 31, 2019 | $ 1,302 |
2020 | 4,847 |
2021 | 3,066 |
2022 | 1,777 |
2023 | 1,258 |
2024 | 1,285 |
Thereafter | 5,514 |
Total minimum lease payments | $ 19,049 |
Changes in Accumulated Other Comprehensive Income by Component - Reclassification Adjustments (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||||||
Tax (expense) benefit | $ (5,372) | $ (6,896) | $ (13,539) | $ (12,931) | ||||
Net income | 18,344 | $ 18,186 | $ 9,156 | 26,086 | $ 25,814 | $ 72 | 45,686 | 51,972 |
Realized Gains (Losses) on Sale of Available-for-sale Securities | Amounts Reclassified from Accumulated Other Comprehensive Income | ||||||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||||||
Gains (losses) from the sale of available-for-sale securities | 14 | (24) | 117 | (180) | ||||
Tax (expense) benefit | (3) | 5 | (27) | 35 | ||||
Net income | $ 11 | $ (19) | $ 90 | $ (145) |
Subsequent Events |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 16—Subsequent Events The Company evaluated all subsequent events through the filing date of this Form 10-Q. There were no events or transactions occurring during this subsequent reporting period which require recognition or additional disclosure in these financial statements.
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Property and Equipment (Tables) |
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment | The following table sets forth the amounts of property and equipment by each class of depreciable asset as of September 30, 2019 and December 31, 2018:
1.Upon the adoption of ASC 842 the Company recognized right-of-use assets pertaining to leases in Property and Equipment, net. Prior period amounts continue to be reported in accordance with previous guidance. 2.Includes furniture and fixtures, leasehold improvements and autos and trucks including auto leases.
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Revenue - Additional Information (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Dec. 31, 2018 |
|
Disaggregation of Revenue [Line Items] | |||||
Revenue | $ 455,606,000 | $ 505,500,000 | $ 1,393,818,000 | $ 1,507,649,000 | |
Renewal term | 1 year | ||||
Contract liabilities | 0 | $ 0 | $ 0 | ||
Description of timing | The Company’s contracts with customers typically provide for an initial term of one year or less, with renewable one year service terms, cancellable by either party upon 30 to 90 days' notice after an initial period of 60 to 120 days.At September 30, 2019, the Company had $743.7 million related to performance obligations that were unsatisfied or partially unsatisfied for which the Company expects to recognize revenue. The Company expects to recognize revenue on approximately 22.7% of the remaining performance obligations over the next 12 months, with the balance to be recognized thereafter. These amounts exclude variable consideration primarily related to performance obligations that consists of a series of distinct service periods with revenues based on future performance that cannot be estimated at contract inception. The Company also has elected to apply the practical expedient that permits exclusion of information about the remaining performance obligations with original expected durations of one year or less. | ||||
Minimum | |||||
Disaggregation of Revenue [Line Items] | |||||
Cancellation notice period | 30 days | ||||
Initial period preceding cancellation notice | 60 days | ||||
Maximum | |||||
Disaggregation of Revenue [Line Items] | |||||
Cancellation notice period | 90 days | ||||
Initial period preceding cancellation notice | 120 days | ||||
Housekeeping | |||||
Disaggregation of Revenue [Line Items] | |||||
Revenue | 225,347,000 | 240,837,000 | $ 687,392,000 | $ 729,400,000 | |
Percent of revenue | 49.30% | 48.40% | |||
Dietary | |||||
Disaggregation of Revenue [Line Items] | |||||
Revenue | $ 230,259,000 | $ 264,663,000 | $ 706,426,000 | $ 778,249,000 | |
Percent of revenue | 50.70% | 51.60% |
Dividends (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Dividends Payable | During the nine months ended September 30, 2019, the Company paid regular quarterly cash dividends totaling approximately $44.1 million as follows:
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Schedule of Dividends Payable on Outstanding Weighted Average Number of Basic Common Shares | Cash dividends declared for the periods presented were as follows:
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Description of Business and Significant Accounting Policies |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Description of Business and Significant Accounting Policies | Note 1—Description of Business and Significant Accounting Policies Nature of Operations Healthcare Services Group, Inc. (the “Company”) provides management, administrative and operating expertise and services to the housekeeping, laundry, linen, facility maintenance and dietary service departments of the healthcare industry, including nursing homes, retirement complexes, rehabilitation centers and hospitals located throughout the United States. Although the Company does not directly participate in any government reimbursement programs, the Company’s clients receive government reimbursements related to Medicare and Medicaid. Therefore, they are directly affected by any legislation relating to Medicare and Medicaid reimbursement programs. The Company provides services primarily pursuant to full service agreements with its clients. In such agreements, the Company is responsible for the day-to-day management of employees located at the clients’ facilities. The Company also provides services on the basis of management-only agreements for a limited number of clients. Both full service and management-only agreements with clients typically provide for renewable one year service terms, cancellable by either party upon 30 to 90 days’ notice after an initial period of 60 to 120 days. The Company is organized into two reportable segments: housekeeping, laundry, linen and other services (“Housekeeping”), and dietary department services (“Dietary”). Housekeeping consists of managing the clients’ housekeeping departments, which are principally responsible for the cleaning, disinfecting and sanitizing of resident rooms and common areas of a client’s facility, as well as the laundering and processing of the bed linens, uniforms, resident personal clothing and other assorted linen items utilized at a client facility. Dietary consists of managing the clients’ dietary departments, which are principally responsible for food purchasing, meal preparation and dietitian professional services, which includes the development of menus that meet residents’ dietary needs. Unaudited Interim Financial Data The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, these consolidated financial statements do not include all of the information and footnotes necessary for a complete presentation of financial position, results of operations and cash flows. However, in the Company’s opinion, all adjustments which are of a normal recurring nature and are necessary for a fair presentation have been reflected in these consolidated financial statements. The balance sheet shown in this report as of December 31, 2018 has been derived from the audited financial statements for the year ended December 31, 2018. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The results of operations for the nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for any future period. Use of Estimates in Financial Statements In preparing financial statements in conformity with U.S. GAAP, estimates and assumptions are made that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results could differ from those estimates. Significant estimates are used in determining, but are not limited to, the Company’s allowance for doubtful accounts, accrued insurance claims, valuations, deferred taxes and reviews for potential impairment. The estimates are based upon various factors including current and historical trends, as well as other pertinent industry and regulatory authority information. Management regularly evaluates this information to determine if it is necessary to update the basis for its estimates and to adjust for known changes. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Healthcare Services Group, Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Cash and Cash Equivalents Cash and cash equivalents are held in U.S. financial institutions or in custodial accounts with U.S. financial institutions. Cash equivalents are defined as short-term, highly liquid investments with a maturity of three months or less at time of purchase that are readily convertible into cash and have insignificant interest rate risk. Accounts and Notes Receivable Accounts and notes receivable consist of Housekeeping and Dietary segment receivables from contracts with customers. Accounts receivable initially are recorded at the transaction amount, and are recorded after the Company has an unconditional right to payment where only the passage of time is required before payment is received. Each reporting period, the Company evaluates the collectability of outstanding receivable balances and records an allowance for doubtful accounts representing an estimate of probable losses. Additions to the allowance for doubtful accounts are made by recording a charge to bad debt expense reported in costs of services provided. Notes receivable are initially recorded when accounts receivable are transferred into a promissory note. Notes receivable are recorded as an alternative to accounts receivable to memorialize an unqualified promise to pay a specific sum, typically with interest, in accordance with a defined payment schedule. Refer to Note 3—Accounts and Notes Receivable herein for further information. Inventories and Supplies Inventories and supplies include housekeeping, linen and laundry supplies, as well as food provisions and supplies. Non-linen inventories and supplies are stated at cost to approximate a first-in, first-out (FIFO) basis. Linen supplies are amortized on a straight-line basis over their estimated useful life of 24 months. Revenue Recognition The Company recognizes revenue from contracts with customers when or as the promised goods and services are provided to customers. Revenues are reported net of sales taxes that are collected from customers and remitted to taxing authorities. The guidance under the Financial Accounting Standards Board ("FASB") Accounting Standards Codification subtopic 606 Revenue from Contracts with Customers ("ASC 606") became effective and was adopted by the Company as of January 1, 2018 by applying the modified retrospective method for contracts that were not completed as of January 1, 2018. The standard requires the Company to recognize revenue as the promised goods and services within the terms of the Company’s contracts are performed and satisfied. The amount of revenue recognized by the Company is based on the consideration to which the Company is entitled in exchange for providing the contracted goods and services. The adoption of this standard did not have a material impact on the Company's accounting for revenue earned relating to the Housekeeping and Dietary segments. The Company also did not recognize an opening adjustment to retained earnings as a result of the adoption of the standard. Refer to Note 2—Revenue herein for further information. Leases The guidance under FASB Accounting Standards Codification subtopic ASC 842 Leases (“ASC 842”) became effective and was adopted by the Company as of January 1, 2019, by applying a modified retrospective transition approach which resulted in the capitalization of the Company's existing operating leases as of January 1, 2019. As such, the Company records assets and liabilities on the balance sheet to recognize the rights and obligations arising from leasing arrangements with contractual terms greater than 12 months, as permitted by U.S. GAAP. A leasing arrangement includes any contract which entitles the Company to the right of use of an identified tangible asset where there are no restrictions as to the direct of use of the asset, and the Company obtains substantially all of the economic benefits from the right of use. As of September 30, 2019 and December 31, 2018, the Company was only the lessee of operating lease arrangements. The Company did not recognize an opening adjustment to retained earnings as a result of the adoption of ASC 842, and prior period amounts continue to be reported in accordance with previous guidance. Refer to Note 7—Leases herein for further information. Income Taxes The Company uses the asset and liability method of accounting for income taxes. Under this method, income tax expense or benefits are recognized for the amount of taxes payable or refundable for the current period. The Company accrues for probable tax obligations as required, based on facts and circumstances in various regulatory environments. In addition, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. When appropriate, valuation allowances are recorded to reduce deferred tax assets to amounts for which realization is more likely than not. Uncertain income tax positions taken or expected to be taken in tax returns are reflected within the Company’s financial statements based on a recognition and measurement process. Earnings per Common Share Basic earnings per common share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is computed using the weighted-average number of common shares outstanding and dilutive common shares, such as those issuable upon exercise of stock options and upon the vesting of restricted stock and restricted stock units. Share-Based Compensation The Company estimates the fair value of share-based awards on the date of grant using the Black-Scholes valuation model for stock options and using the share price on the date of grant for restricted stock and restricted stock units. The value of the award is recognized ratably as an expense in the Company’s Consolidated Statements of Comprehensive Income over the requisite service periods, with adjustments made for forfeitures as they occur. Identifiable Intangible Assets and Goodwill Identifiable intangible assets are amortized on a straight-line basis over their respective lives. Goodwill represents the excess of cost over the fair value of net assets of acquired businesses. Management reviews the carrying value of goodwill annually during the fourth quarter to assess for impairment, or more often if events or circumstances indicate that the carrying value may exceed its estimated fair value. No impairment loss was recognized on the Company’s intangible assets or goodwill during the nine months ended September 30, 2019 and 2018. Reclassification Certain prior period amounts have been reclassified to conform to current year presentation. The Company has modified its presentation of interest expense, which is now presented separately in the Consolidated Statements of Comprehensive Income. Correction of Immaterial Errors During 2019, the Company updated its presentation of the tax benefit from equity compensation plans in the Consolidated Statements of Cash Flows. The tax benefit from equity compensation plans is now reflected as a component of the change in income taxes payable in 2018, as opposed to an offset to stock-based compensation expense. There was no impact to the Company's net cash provided by operating activities as a result of the correction in the Consolidated Statement of Cash Flows. Additionally, the Company updated its presentation of the income and costs associated with the Company's wholly-owned captive insurance company. Historically, such income and costs were reflected in the Company's revenues and costs of services provided within the Housekeeping segment. Such income and costs are now presented in "Investment and other income, net" in the Consolidated Statements of Comprehensive Income and for segment reporting purposes, those amounts are reflected in Corporate and eliminations. For the three and nine months ended September 30, 2018 revenues have been revised to reflect such changes in the amounts of $1.4 million and $4.8 million, respectively. For the same periods, costs of services have been revised to reflect such changes in the amounts of $0.9 million and $3.2 million, respectively. These amounts for the three and nine months ended September 30, 2018, in the Consolidated Statement of Comprehensive Income resulted in a corresponding increase of $0.5 million and $1.6 million to Investment and other income, net, respectively. There was no impact to the Company's net income as a result of the historical errors or the corrections. Concentrations of Credit Risk The Company's financial instruments that are subject to credit risk are cash and cash equivalents, marketable securities, deferred compensation funding and accounts and notes receivable. At September 30, 2019 and December 31, 2018, substantially all of the Company’s cash and cash equivalents and marketable securities were held in one large financial institution located in the United States. The Company’s marketable securities are fixed income investments which are highly liquid and can be readily purchased or sold through established markets. The Company’s clients are concentrated in the healthcare industry and are primarily providers of long-term care. The revenues of many of the Company’s clients are highly reliant on Medicare, Medicaid and third party payors’ reimbursement funding rates. New legislation or changes in existing regulations could directly impact the governmental reimbursement programs in which the clients participate. As a result, the Company may not realize the full effects of such programs until these laws are fully implemented and governmental agencies issue applicable regulations or guidance. Recent Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, and ASU 2019-05 (collectively, "ASC 326"). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivables. The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The standard is effective for interim and annual reporting periods beginning after December 15, 2019. The ultimate impact of ASC 326 will depend on the composition of the Company's accounts and notes receivables and economic conditions and forecasts at the time of adoption. The impact of ASC 326 could also be subject to further regulatory or accounting guidance and other management validation and judgments. As of September 30, 2019, the Company is still evaluating the impacts of ASC 326 on its consolidated financial statements.
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Consolidated Statements of Comprehensive Income - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Income Statement [Abstract] | ||||
Revenues | $ 455,606 | $ 505,500 | $ 1,393,818 | $ 1,507,649 |
Operating costs and expenses: | ||||
Costs of services provided | 398,404 | 438,262 | 1,226,154 | 1,343,545 |
Selling, general and administrative expense | 33,479 | 36,713 | 113,189 | 104,608 |
Other income (expense): | ||||
Investment and other income, net | 733 | 3,239 | 7,329 | 7,624 |
Interest expense | (740) | (782) | (2,579) | (2,217) |
Income before income taxes | 23,716 | 32,982 | 59,225 | 64,903 |
Income tax provision | 5,372 | 6,896 | 13,539 | 12,931 |
Net income | $ 18,344 | $ 26,086 | $ 45,686 | $ 51,972 |
Per share data: | ||||
Basic earnings per common share (in dollars per share) | $ 0.25 | $ 0.35 | $ 0.61 | $ 0.70 |
Diluted earnings per common share (in dollars per share) | $ 0.25 | $ 0.35 | $ 0.61 | $ 0.70 |
Weighted average number of common shares outstanding: | ||||
Basic (in shares) | 74,387 | 74,019 | 74,347 | 73,972 |
Diluted (in shares) | 74,507 | 74,579 | 74,615 | 74,598 |
Comprehensive income: | ||||
Net income | $ 18,344 | $ 26,086 | $ 45,686 | $ 51,972 |
Other comprehensive income: | ||||
Unrealized gain (loss) on available-for-sale marketable securities, net of taxes | 457 | (508) | 2,664 | (1,549) |
Total comprehensive income | $ 18,801 | $ 25,578 | $ 48,350 | $ 50,423 |
Allowance for Doubtful Accounts |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Receivables [Abstract] | |
Allowance for Doubtful Accounts | Note 4—Allowance for Doubtful Accounts The allowance for doubtful accounts is established when the Company determines that it is probable that receivables have been impaired and the Company can reasonably estimate the amount of the losses. The related provision for bad debts is charged to costs of services provided in the Company’s Consolidated Statements of Comprehensive Income. The allowance for doubtful accounts is evaluated based on the Company’s ongoing review of accounts and notes receivable and is inherently subjective as it requires estimates susceptible to significant revision as more information becomes available. The Company has had varying collections experience with respect to its accounts and notes receivable. The Company has sometimes extended the period of payment for certain clients beyond contractual terms. In order to provide for such collection issues and the general risk associated with the granting of credit terms, the Company recorded bad debt provisions (in Allowance for Doubtful Accounts) of $1.5 million and $23.0 million for the three and nine months ended September 30, 2019, respectively, and $3.0 million and $42.4 million for the three and nine months ended September 30, 2018, respectively. In making the credit evaluations, in addition to analyzing and anticipating, where possible, the specific cases described above, Management considers the general collection risk associated with trends in the long-term care industry. The Company establishes credit limits, performs ongoing credit evaluations and monitors accounts to minimize the risk of loss. Despite the Company’s efforts to minimize credit risk exposure, clients could be adversely affected if future industry trends change in such a manner as to negatively impact their cash flows. If the Company’s clients experience a negative impact on their cash flows, it could have a material adverse effect on the Company’s consolidated results of operations and financial condition.
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Other Intangible Assets |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Intangible Assets | Note 8—Other Intangible Assets The Company’s other intangible assets consist of customer relationships which were obtained through acquisitions and are recorded at their fair values at the date of acquisition. Intangible assets with determinable lives are amortized on a straight-line basis over their estimated useful lives. The customer relationships have a weighted-average amortization period of approximately 10 years. The following table sets forth the estimated amortization expense for intangibles subject to amortization for the remainder of 2019, the following five fiscal years and thereafter:
Amortization expense for the three months ended September 30, 2019 and 2018 was $1.0 million and $1.1 million, respectively. Amortization expense for the nine months ended September 30, 2019 and 2018 was $3.1 million and $3.3 million, respectively.
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Income Taxes |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 12—Income Taxes The Company's annual effective tax rate is impacted by the tax effects of option exercises and vested awards, which are treated as discrete items in the reporting period in which they occur, and therefore cannot be considered in the calculation of the estimated annual effective tax rate. The impact on the Company’s income tax provision through the nine months ended September 30, 2019 for such discrete items was not material. Differences between the effective tax rate and the applicable U.S. federal statutory rate arise primarily from the effect of state and local income taxes, share-based compensation and tax credits available to the Company. The actual 2019 effective tax rate will likely vary from the estimate depending on the availability of tax credits and the exercise of stock options and vesting of share-based awards. The Company accounts for income taxes using the asset and liability method, which results in recognizing income tax expense based on the amount of income taxes payable or refundable for the current year. Additionally, the Company regularly evaluates the tax positions taken or expected to be taken resulting from financial statement recognition of certain items. Based on the evaluation, there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. The evaluation was performed for the tax years ended December 31, 2013 through 2018 (with regard to U.S. federal income tax returns) and December 31, 2012 through 2018 (with regard to various state and local income tax returns), the tax years which remain subject to examination by major tax jurisdictions as of September 30, 2019. The Company may from time to time be assessed interest or penalties by taxing jurisdictions, although any such assessments historically have been minimal and immaterial to its financial results. When the Company has received an assessment for interest and/or penalties, it will be classified in the financial statements as selling, general and administrative expense. In addition, any interest or penalties relating to recognized uncertain tax positions would also be recorded in selling, general and administrative expense.
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Stock-Based Compensation - Summary of Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total pre-tax stock-based compensation expense charged against income | $ 5,468 | $ 4,606 |
Stock options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total pre-tax stock-based compensation expense charged against income | 1,970 | 2,231 |
Restricted stock and restricted stock units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total pre-tax stock-based compensation expense charged against income | 2,980 | 1,943 |
Employee Stock Purchase Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total pre-tax stock-based compensation expense charged against income | $ 518 | $ 432 |
Stock-Based Compensation - Summarized Information About Stock Awards (Details) $ / shares in Units, shares in Thousands, $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2019
USD ($)
$ / shares
shares
| |
Outstanding: | |
Aggregate intrinsic value | $ 2,449 |
Weighted average remaining contractual life | 5 years 7 months 6 days |
Exercisable: | |
Number of options (in shares) | shares | 1,295 |
Weighted average exercise price (in dollars per share) | $ / shares | $ 28.09 |
Aggregate intrinsic value | $ 2,448 |
Weighted average remaining contractual life | 4 years 4 months 24 days |
Leases - Additional Information (Details) $ in Millions |
3 Months Ended | 9 Months Ended |
---|---|---|
Sep. 30, 2019
USD ($)
|
Sep. 30, 2019
USD ($)
|
|
Lessee, Lease, Description [Line Items] | ||
Termination option | 1 year | |
Reduction in ROU Assets due to cancellation (less than $0.1 million for the three months ended September 30, 2019) | $ 0.1 | $ 0.1 |
Reduction in Lease Liability due to cancellation (less than $0.1 million for the three months ended September 30, 2019) | $ 0.1 | $ 0.1 |
Minimum | ||
Lessee, Lease, Description [Line Items] | ||
Remaining lease term | 1 year | 1 year |
Extension option | 1 year | 1 year |
Maximum | ||
Lessee, Lease, Description [Line Items] | ||
Remaining lease term | 10 years | 10 years |
Extension option | 5 years | 5 years |
Allowance for Doubtful Accounts - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Receivables [Abstract] | ||||
Bad debt provision | $ 1,500 | $ 3,000 | $ 22,980 | $ 42,387 |
Other Intangible Assets - Estimated Amortization Expense For Intangibles Subject To Amortization (Details) $ in Thousands |
Sep. 30, 2019
USD ($)
|
---|---|
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |
October 1 to December 31, 2019 | $ 1,042 |
2020 | 4,165 |
2021 | 4,165 |
2022 | 4,165 |
2023 | 3,168 |
2024 | 2,035 |
Thereafter | $ 4,654 |
Dividends - Cash Dividends per Common Share (Details) - $ / shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
|
Equity [Abstract] | ||||
Dividends declared (in dollars per share) | $ 0.20000 | $ 0.19500 | $ 0.59625 | $ 0.58125 |
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