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| HCSG > SEC Filings for HCSG > Form 10-Q on 20-Apr-2009 | All Recent SEC Filings |
20-Apr-2009
Quarterly Report
their inability to make payments to us on agreed upon payment terms. These
factors, in addition to delays in payments from clients, have resulted in, and
could continue to result in, significant additional bad debts in the near
future. Additionally, our operating results would be adversely affected if
unexpected increases in the costs of labor and labor related costs, materials,
supplies and equipment used in performing services could not be passed on to our
clients.
In addition, we believe that to improve our financial performance we must
continue to obtain service agreements with new clients, provide new services to
existing clients, achieve modest price increases on current service agreements
with existing clients and maintain internal cost reduction strategies at our
various operational levels. Furthermore, we believe that our ability to sustain
the internal development of managerial personnel is an important factor
impacting future operating results and successfully executing projected growth
strategies.
RESULTS OF OPERATIONS
The following discussion is intended to provide the reader with information that
will be helpful in understanding our financial statements including the changes
in certain key items in comparing financial statements period to period. We also
intend to provide the primary factors that accounted for those changes, as well
as a summary of how certain accounting principles affect our financial
statements. In addition, we are providing information about the financial
results of our two operating segments to further assist in understanding how
these segments and their results affect our consolidated results of operations.
This discussion should be read in conjunction with our financial statements as
of March 31, 2009 and December 31, 2008 and the periods then ended and the notes
accompanying those financial statements.
Overview
We provide housekeeping, laundry, linen, facility maintenance and food
services to the health care industry, including nursing homes, retirement
complexes, rehabilitation centers and hospitals located throughout the United
States.
We believe that we are the largest provider of housekeeping and laundry services
to the long-term care industry in the United States, rendering such services to
approximately 2,200 facilities in 47 states as of March 31, 2009. Although we do
not directly participate in any government reimbursement programs, our clients'
reimbursements are subject to government regulation. Therefore, they are
directly affected by any legislation relating to Medicare and Medicaid
reimbursement programs.
We provide our services primarily pursuant to full service agreements with our
clients. In such agreements, we are responsible for the management and hourly
employees located at our clients' facilities. We also provide services on the
basis of a management-only agreement for a very limited number of clients. Our
agreements with clients typically provide for a one year service term,
cancelable by either party upon 30 to 90 days notice after the initial 90-day
period.
We are organized into two reportable segments; housekeeping, laundry, linen and
facility maintenance ("Housekeeping"), and food services ("Food"). Housekeeping
is being provided at all of our approximately 2,200 client facilities,
generating approximately 79% or $126,182,000 of 2009 first quarter total
revenues. Food is being provided to approximately 275 client facilities and
contributed approximately 21% or $34,227,000 of 2009 first quarter total
revenues.
The services provided by Housekeeping consist primarily of the cleaning,
disinfecting and sanitizing of patient rooms and common areas of a client's
facility, as well as the laundering and processing of the personal clothing
belonging to the facility's patients. Also within the scope of this segment's
service is the laundering and processing of the bed linens, uniforms and other
assorted linen items utilized by a client facility.
Food consists of providing for the development of a menu that meets the
patient's dietary needs, and the purchasing and preparing of the food for
delivery to the patients.
As of March 31, 2009, we operate one wholly-owned subsidiary, Huntingdon
Holdings, Inc. ("Huntingdon"). Huntingdon invests our cash and cash equivalents,
as well as managing our portfolio of marketable securities. On March 1, 2009, we
sold our wholly-owned subsidiary HCSG Supply, Inc. ("Supply") for approximately
$1,100,000, financed principally through our acceptance of a secured promissory
note which is recorded in our notes receivable in the accompanying March 31,
2009 balance sheet. As a result of the Supply sale, we recorded an immaterial
gain in our 2009 first quarter consolidated statements of income.
Consolidated Operations
The following table sets forth, for the periods indicated, the percentage
which certain items bear to consolidated revenues:
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