Healthcare Services Slips To Loss On Charges, Revenue Misses Estimate

(RTTNews) - Healthcare Services Group Inc (HCSG) Tuesday reported third-quarter net loss of $22.2 million or $0.31 per share, mainly reflecting charges related to corporate reorganization. This compares with a profit of $13.8 million or $0.20 per share last year.

Revenues for the quarter were $320 million compared with $298.5 million in the prior year.

Analysts polled by Thomson Reuters estimated earnings of $0.22 per share on revenues of $330.9 million for the quarter. Analysts' estimates typically exclude special items.

The company said it recorded an adjustment in the third quarter of 2014 to reflect estimated current and future insurance claims projected to be closed out over the next 15 to 17 years, along with charges related to the corporate reorganization, self-funded health insurance program transition and other related expenses.

Healthcare Services announced that in fiscal year 2015, it will transition its workers compensation and certain employee health & welfare insurance programs to HCSG Insurance Corp ("HCSG Insurance" or the "Captive").

The company said it will commence the reorganization of its corporate structure through the formation of about ten separate legal entities, each consisting of divisional and regional operating units.

In addition to the administrative and operational benefits provided by the Captive, the company expects the insurance program enhancements to be accretive to earnings in fiscal 2015 and thereafter.

Additionally, upon completion of its reorganization, the company expects to accelerate, for tax purposes, the deductibility of estimated current and future insurance claims.

The resulting tax benefit should favorably impact cash and marketable securities by about $20 million upon full funding of the Captive.

The company also announced that it has secured new service agreements with expected annualized revenue of over $120 million, to begin during the fourth quarter of 2014.

Also, the company declared a quarterly cash dividend of $0.175 per share.

Healthcare Services provides housekeeping and other services to nursing homes, retirement complexes, rehabilitation centers, and hospitals.