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What changed in HEALTHCARE SERVICES GROUP INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of HEALTHCARE SERVICES GROUP INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+129 added−149 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-17)

Top changes in HEALTHCARE SERVICES GROUP INC's 2023 10-K

129 paragraphs added · 149 removed · 108 edited across 5 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

36 edited+8 added−13 removed64 unchanged
Biggest changeThe impacts may include, but would not be limited to: • Decreased availability and/or increased cost of supplies due to increased demand around essential cleaning supplies including disinfecting agents, personal protective equipment (“PPE”), and food and food-related products due to increased global demand and disruptions along the global supply chains of these manufactures and distributors; • Disruption to operations due to the unavailability of employees due to illness, quarantines, risk of illness, travel restrictions, vaccination mandates, or other factors that limit the availability of our existing or potential workforce; • Limitations to the availability of our key personnel due to travel restrictions and access restrictions to our customers ’ facilities; • Our ability to meet more stringent, medically-required procedures, and infection control requirements at customer facilities; • Elevated employee turnover which may impact our facility level performance and/or increase payroll expense and recruiting-related expenses; • New or additional measures required by national, state or local governments to combat COVID-19, such as a COVID-19 vaccine mandate, may impact the availability of our employees and/or increase operating costs. • Decreased census in the nursing home and long-term care industry, which could impact the financial health of our customers and thereby increase our associated credit risk with customers and increase pressures to modify our contractual terms; and • Significant disruption of global financial markets, which could negatively impact us or our customers’ ability to access capital in the future. 7 Table of Contents The further spread of COVID-19, and the requirements to take action to help limit the spread of the virus, could impact the resources required to carry out our business as usual and may have a material adverse effect on our results of operations, financial condition and cash flows.
Biggest changeThe impacts may include, but would not be limited to: • Decreased availability and/or increased cost of supplies due to increased demand around essential cleaning supplies including disinfecting agents, personal protective equipment (“PPE”) and food and food-related products due to increased global demand and disruptions along the global supply chains of these manufactures and distributors; • Disruption to operations due to the unavailability of employees due to illness, quarantines, risk of illness, travel restrictions, vaccination mandates, or other factors that limit the availability of our existing or potential workforce; • Limitations to the availability of our key personnel due to travel restrictions and access restrictions to our customers ’ facilities; • Our ability to meet more stringent, medically-required procedures, and infection control requirements at customer facilities; • Elevated employee turnover which may impact our facility level performance and/or increase payroll expense and recruiting-related expenses; • New or additional measures required by national, state or local governments may impact the availability of our employees and/or increase operating costs. • Decreased census in the nursing home and long-term care industry, which could impact the financial health of our customers and thereby increase our associated credit risk with customers and increase pressures to modify our contractual terms; and • Significant disruption of global financial markets, which could negatively impact us or our customers’ ability to access capital in the future. 6 Table of Contents We have been, and may continue to be, adversely affected by inflationary or market fluctuations, including impact of tariffs, in the cost of products consumed in providing our services or our cost of labor.
To the extent there is an outbreak of food related illness in any of our customer facilities, it could materially harm our business, results of operations and financial condition. Additionally, the Company may be subject to liability if the consumption of our food products causes injury, illness or death.
To the extent there is an outbreak of food related illness in any of our customer facilities, it could materially harm our business, consolidated results of operations and financial condition. Additionally, the Company may be subject to liability if the consumption of our food products causes injury, illness or death.
Expenses resulting from failed inspections of the departments that we service could result in our customers being fined and seeking recovery from us, which could also adversely impact our financial condition, results of operations, and cash flows. Federal, state and local tax rules can adversely impact our results of operations and financial position.
Expenses resulting from failed inspections of the departments that we service could result in our customers being fined and seeking recovery from us, which could also adversely impact our financial condition, consolidated results of operations and cash flows. Federal, state and local tax rules can adversely impact our results of operations and financial position.
Any requirements to provide additional benefits to our employees or the payment of penalties if such benefits are not provided, would increase our expenses. If we are unable to pass-through these charges to our customers to cover these expenses, such increases could adversely impact our operating costs and our results of operations.
Any requirements to provide additional benefits to our employees, or the payment of penalties if such benefits are not provided, would increase our expenses. If we are unable to pass-through these charges to our customers to cover these expenses, such increases could adversely impact our operating costs and our consolidated results of operations.
In addition, if Genesis fails to abide by current payment terms it could increase our accounts receivable balance and have a material adverse effect on our financial condition, results of operations, and cash flows. No other single customer or customer group represented more than 10% of consolidated revenues for the years ended December 31, 2022, 2021, and 2020.
In addition, if Genesis fails to abide by current payment terms it could increase our accounts receivable balance and have a material adverse effect on our financial condition, results of operations, and cash flows. No other single customer or customer group represented more than 10% of consolidated revenues for the years ended December 31, 2023, 2022, and 2021.
Although we have contractual rights to pass through cost increases we incur to our customers due to regulatory changes, our delay in, or inability to pass such costs through to our customers, could have a material adverse effect on our financial condition, results of operations and cash flows. 12 Table of Contents In addition, if we fail to comply with applicable laws, we may be subject to lawsuits, investigations, criminal sanctions or civil remedies, including fines, penalties, damages, reimbursements, or injunctions.
Although we have contractual rights to pass through cost increases we incur to our customers due to regulatory changes, our delay in, or inability to pass such costs through to our customers, could have a material adverse effect on our financial condition, consolidated results of operations and cash flows. 11 Table of Contents In addition, if we fail to comply with applicable laws, we may be subject to lawsuits, investigations, criminal sanctions or civil remedies, including fines, penalties, damages, reimbursements or injunctions.
As a result of the costs and expenses of defending ourselves against lawsuits or claims, and risks and consequences of legal actions, regardless of merit, our results of operations and financial position could be adversely affected or cause variability in our results compared to expectations. 13 Table of Contents Risks Related to Cybersecurity and Data Privacy Cyber-attacks and breaches could cause operational disruptions, fraud or theft of sensitive information.
As a result of the costs and expenses of defending ourselves against lawsuits or claims, and risks and consequences of legal actions, regardless of merit, our consolidated results of operations and financial position could be adversely affected or cause variability in our results compared to expectations. 12 Table of Contents Risks Related to Cybersecurity and Data Privacy Cyber-attacks and breaches could cause operational disruptions, fraud or theft of sensitive information.
These laws frequently evolve through case law, legislative changes and changes in regulatory interpretation, implementation and enforcement. Our policies and procedures and compliance programs are subject to adjustments in response to these changing regulatory and enforcement environments, which could increase our cost of services provided.
These laws frequently evolve through case law, legislative changes and changes in regulatory interpretation, implementation and enforcement. Our policies and procedures and compliance programs are subject to adjustments in response to these changing regulatory and enforcement environments, which could increase our costs of services provided.
COVID-19, the further spread of COVID-19, additional coronavirus outbreaks, or other pandemics, epidemics, or outbreaks of a contagious illness, and similar events, may cause harm to us, our employees, customers, vendors, supply chain partners, and financial institutions, which could have a material adverse effect on our results of operations, financial condition and cash flows.
COVID-19, additional coronavirus outbreaks, or other pandemics, epidemics, or outbreaks of a contagious illness, and similar events, may cause harm to us, our employees, customers, vendors, supply chain partners and financial institutions, which could have a material adverse effect on our results of operations, financial condition and cash flows.
Any failure to meet the market’s expectations for our revenue and operating results may have an adverse effect on the market price of our Common Stock. Risks Related to Customers and Distributors We provide services to several customers which contribute significantly, on an individual as well as an aggregate basis, to our total revenues.
Any failure to meet the market’s expectations for our revenue and operating results may have an adverse effect on the market price of our Common Stock. 7 Table of Contents Risks Related to Customers and Distributors We provide services to several customers which contribute significantly, on an individual as well as an aggregate basis, to our total revenues.
These factors, in addition to delays in payments from customers have resulted in, and could continue to result in, significant additional bad debts. 9 Table of Contents The Company has substantial investment in the creditworthiness and financial condition of our customers. The largest current asset on our balance sheet is the accounts and notes receivable balance from our customers.
These factors, in addition to delays in payments from customers have resulted in, and could continue to result in, significant additional bad debts. The Company has substantial investment in the creditworthiness and financial condition of our customers. The largest current asset on our balance sheet is the accounts and notes receivable balance from our customers.
Although we engage third-party experts to assist us in estimating appropriate reserves, the determination of the required reserves is dependent upon significant actuarial judgments. Changes in our insurance reserves as a result of our periodic evaluation of the related liabilities may cause significant fluctuations in our operating results.
Although we engage third-party experts to assist us in estimating appropriate reserves, the determination of the required reserves is dependent upon significant actuarial judgments. Changes in our insurance reserves as a result of our periodic evaluation of the related liabilities may cause significant fluctuations in our consolidated results of operations.
In order to provide for such collection issues and the general risk associated with the granting of credit terms, we have recorded bad debt provisions (in an Allowance for Doubtful Accounts) of $32.0 million for the year ended December 31, 2022 as compared to $10.5 million and $9.6 million for the years ended December 31, 2021 and 2020, respectively.
In order to provide for such collection issues and the general risk associated with the granting of credit terms, we have recorded bad debt provisions (in an Allowance for Doubtful Accounts) of $35.6 million for the year ended December 31, 2023 as compared to $32.0 million and $10.5 million for the years ended December 31, 2022 and 2021, respectively.
Potential causes of such declines include national or local economic downturns, COVID-19's impact on census and operating costs, customers’ dependence on continued Medicare and Medicaid funding and the impact of additional regulatory actions and/or insufficient funding. We have sometimes extended the period of payment for certain customers beyond contractual terms.
Potential causes of such declines include national or local economic downturns, reduced census, increased operating costs, customers’ dependence on continued Medicare and Medicaid funding and the impact of additional regulatory actions and/or insufficient funding. We have sometimes extended the period of payment for certain customers beyond contractual terms.
In the event we are not able to pass-through any portion of the tax increase, our results of operations, financial condition and cash flows could be adversely impacted. Our business and financial results could be adversely affected by unfavorable results of material litigation or governmental inquiries.
We seek to pass through to our customers such tax increases. In the event we are not able to pass through any portion of the tax increase, our financial condition, consolidated results of operations and cash flows could be adversely impacted. Our business and financial results could be adversely affected by unfavorable results of material litigation or governmental inquiries.
Although we have taken steps to maintain our internal control structure as required, we cannot guarantee that a control deficiency will not result in a misstatement in the future. 11 Table of Contents Our business could be negatively affected as a result of actions of activist shareholders, and such activism could impact the trading value of our securities.
Although we have taken steps to maintain our internal control structure as required, including steps to remediate our material weakness, we cannot guarantee that a control deficiency will not result in a misstatement in the future. 10 Table of Contents Our business could be negatively affected as a result of actions of activist shareholders, and such activism could impact the trading value of our securities.
Any of these cyber incidents may result in a violation of applicable laws or regulations (including privacy and other laws), damage our reputation, cause a loss of customers and give rise to monetary fines and other penalties, which all could have an adverse effect on our financial condition, results of operations, and liquidity. Item 1B. Unresolved Staff Comments. None.
Any of these cyber incidents may result in a violation of applicable laws or regulations (including privacy and other laws), damage our reputation, cause a loss of customers and give rise to monetary fines and other penalties, which all could have an adverse effect on our financial condition, results of operations, and liquidity.
We typically do not enter into long-term contractual agreements with our customers for the rendering of our services. Our agreements with customers 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.
We primarily provide our services pursuant to agreements which have a one year service term, cancellable by either party upon 30 to 90 days’ notice after an initial 60 to 120 day service agreement period. We typically do not enter into long-term contractual agreements with our customers for the rendering of our services.
Further, the current Russia-Ukraine conflict has created extreme volatility in the global financial markets and is expected to have further global economic consequences, including disruptions of the global supply chain and energy markets and heightened volatility of commodity food prices. Any such volatility or disruptions may have adverse consequences on us or the third parties on whom we rely.
Further, current international conflicts have created extreme volatility in the global financial markets and are expected to have further global economic consequences, including disruptions of the global supply chain and energy markets and heightened volatility of commodity food prices. Any such volatility or disruptions may have adverse consequences on us or the third parties on whom we rely.
The prices we pay for the principal items we consume in performing our services are dependent primarily on current market prices. We have consolidated certain supply purchases with national vendors through agreements containing negotiated prospective pricing.
Additionally, we rely on certain vendors for a substantial portion of housekeeping, laundry and dietary supplies. The prices we pay for the principal items we consume in performing our services are dependent primarily on current market prices. We have consolidated certain supply purchases with national vendors through agreements containing negotiated prospective pricing.
In addition, if the Internal Revenue Service or other taxing authority disagrees on a tax position we have taken and upon final adjudication we are required to change such position, we could incur additional tax liability, including interest and penalties. Such costs and expenses could have a material adverse impact on our financial condition, results of operations, and cash flows.
In addition, if the Internal Revenue Service or other taxing authority disagrees on a tax position we have taken and upon final adjudication we are required to change such position, we could incur additional tax liability, including interest and penalties.
Our business, financial condition and results of operations may be materially and adversely affected by any negative impact on the global economy, capital markets or commodity food prices resulting from the conflict in Ukraine or any other geopolitical tensions.
Our business, financial condition and results of operations may be materially and adversely affected by any negative impact on the global economy, capital markets or commodity food prices resulting from these conflicts or any other geopolitical tensions. Pandemics, epidemics or outbreaks of a contagious illness may adversely affect our operating results, cash flows and financial condition.
Therefore, we believe that our ability to recruit and sustain the internal development of managerial personnel is an important factor impacting future operating results and our ability to successfully execute projected growth strategies. Our professional management personnel are the key personnel in maintaining current and selling additional services to existing customers and obtaining new customers.
Therefore, we believe that our ability to recruit and sustain the internal development of managerial personnel is an important factor impacting future operating results and our ability to successfully execute projected growth strategies.
Any failure by our customers to make rent payments or comply with the provisions of their lease terms could result in the termination of such lease agreements. In such cases, our customers may lose their ability to continue conducting operations and as a result terminate their service agreements with us.
Any failure by our customers to make rent payments or comply with the provisions of their lease terms could result in the termination of such lease agreements.
For the year ended December 31, 2022, one distributor distributed more than 50% of our food and non-food dining supplies, and if our relationship or their business were to be disrupted, we could experience disruptions to our operations and cost structure.
In such cases, our customers may lose their ability to continue conducting operations and as a result terminate their service agreements with us. 8 Table of Contents For the year ended December 31, 2023, one distributor distributed more than 50% of our food and non-food dining supplies, and if our relationship or their business were to be disrupted, we could experience disruptions to our operations and cost structure.
Any perceived or real health risks related to the food industry could adversely affect our Dietary segment. We are subject to risks affecting the food industry generally including food spoilage and food contamination.
Our professional management personnel are the key personnel in maintaining current and selling additional services to existing customers and obtaining new customers. 9 Table of Contents Any perceived or real health risks related to the food industry could adversely affect our Dietary segment. We are subject to risks affecting the food industry generally including food spoilage and food contamination.
Dietary supplies, to a much greater extent than Housekeeping supplies, are impacted by commodity pricing factors, including the impact of tariffs, which in many cases are unpredictable and outside of our control. Price increases for food staples used throughout our Dietary operations, such as eggs, resulted in increased costs during 2022.
Dietary supplies, to a much greater extent than Housekeeping supplies, are impacted by commodity pricing factors, including the impact of tariffs, which in many cases are unpredictable and outside of our control. We seek to pass on to customers such increased costs but sometimes we are unable to do so.
Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused injury or illness could adversely affect our reputation. Failure to maintain effective internal control over financial reporting could have a material adverse effect on our ability to report our financial results on a timely and accurate basis.
Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused injury or illness could adversely affect our reputation.
Our delay in, or inability to pass such wage increases through to our customers could have a material adverse effect on our financial condition, results of operations, and cash flows. 8 Table of Contents Changes in interest rates and changes in financial market conditions may result in fluctuating and even negative returns in our investments, and could increase the cost of the borrowings under our borrowing agreements.
Our delay in, or inability to pass such wage increases through to our customers could have a material adverse effect on our financial condition, results of operations, and cash flows.
A conflicting position taken by a state or local taxation authority on the taxability of our services could result in additional tax liabilities and could negatively impact our competitive position in that jurisdiction. If we fail to comply with applicable tax laws and regulations, we could suffer civil or criminal penalties in addition to the delinquent tax assessment.
Consequently, in the ordinary course of business, a jurisdiction may contest our reporting positions with respect to the application of its tax code to our services. A conflicting position taken by a state or local taxation authority on the taxability of our services could result in additional tax liabilities and could negatively impact our competitive position in that jurisdiction.
A substantial number of our employees are hourly employees whose wage rates are affected by increases in the federal or state minimum wage rates, wage inflation or local job market adjustments. As collective bargaining agreements are renegotiated, we may need to increase the wages paid to bargaining unit employees covered by such collective bargaining agreements.
We seek to mitigate the impact of an unanticipated increase in such supplies’ costs through consolidation of vendors, which increases our ability to obtain more favorable pricing. A substantial number of our employees are hourly employees whose wage rates are affected by increases in the federal or state minimum wage rates, wage inflation or local job market adjustments.
In the taxing jurisdictions where our services have been determined to be subject to tax, the jurisdiction may increase the tax rate assessed on such services. We seek to pass-through to our customers such tax increases.
If we fail to comply with applicable tax laws and regulations, we could suffer civil or criminal penalties in addition to the delinquent tax assessment. In the taxing jurisdictions where our services have been determined to be subject to tax, the jurisdiction may increase the tax rate assessed on such services.
Consequently, our customers can often unilaterally decrease the amount of services we provide or terminate all services pursuant to the terms of our service agreements.
Our agreements with customers 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. Consequently, our customers can often unilaterally decrease the amount of services we provide or terminate all services pursuant to the terms of our service agreements.
Genesis remains largely compliant with the terms of the agreement as the parties continue discussions regarding a long-term contract structure. As of December 31, 2022, the Company had outstanding accounts receivable and notes receivable of $36.2 million and $20.4 million, respectively, from Genesis. Although we expect to continue the relationship with Genesis, there can be no assurance thereof.
Genesis contributed 10.9%, 10.0% and 10.8% of our total consolidated revenues for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, the Genesis outstanding accounts receivable and notes receivable were $61.8 million and $20.4 million, respectively. Although we expect to continue the relationship with Genesis, there can be no assurance thereof.
We seek to mitigate the impact of an unanticipated increase in such supplies’ costs through consolidation of vendors, which increases our ability to obtain more favorable pricing. Our cost of labor may be influenced by factors in certain market areas or changes in the respective collective bargaining agreements to which we are a party.
Also, our cost of labor may be influenced by changes in the respective collective bargaining agreements to which we are a party. As collective bargaining agreements are renegotiated, we may need to increase the wages paid to bargaining unit employees covered by such collective bargaining agreements.
Additionally, the taxability of our services is subject to various interpretations within the taxing jurisdictions in which we operate. Consequently, in the ordinary course of business, a jurisdiction may contest our reporting positions with respect to the application of its tax code to our services.
Such costs and expenses could have a material adverse impact on our financial condition, consolidated results of operations and cash flows. Additionally, the taxability of our services is subject to various interpretations within the taxing jurisdictions in which we operate.
Removed
COVID-19 and other pandemics, epidemics, or outbreaks of a contagious illness may adversely affect our operating results, cash flows and financial condition.
Added
Changes in interest rates and changes in financial market conditions may result in fluctuating and even negative returns in our investments and could increase the cost of the borrowings under our borrowing agreements.
Removed
The extent to which COVID-19 will impact our business and our financial results will depend on future developments, which are highly uncertain and cannot be predicted.
Added
We have identified a material weakness in our internal control over financial reporting, and if our remediation of such material weakness is not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.
Removed
Such developments may include the ongoing geographic spread of the virus, the severity of the disease, the duration of the outbreak and the type and duration of actions that may be taken by various governmental authorities in response to the outbreak and the impact on the United States and the global economy.
Added
During 2023, the Company identified a material weakness related to the design and operation of internal controls over financial reporting.
Removed
Any of these developments, individually or in aggregate, could materially impact our business and our financial results and condition. We may incur additional liabilities in our Paid Loss Retrospective Insurance Plan for general liability and workers’ compensation insurance related to COVID-19 which may adversely affect our operating results, cash flows and financial condition.
Added
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
Removed
As a result of the impact of COVID-19, litigation claims, enforcement actions, regulatory actions and investigations arising from personal injury and loss of life, have been and may, in the future, be asserted against us.
Added
In the course of preparing our consolidated financial statements as of and for the year ended December 31, 2023, we identified a material weakness related to accrued payroll liabilities from employee vested vacation. Our controls over accrued payroll liabilities were not sufficiently designed to consider all accounting and disclosure ramifications of such accrued payroll liabilities.
Removed
Although there can be no assurance, we expect many of these claims and actions, or any settlement of these claims and actions, to be covered by insurance and historically the maximum amount of our liability, net of any insurance recoverables, has been limited to our self-insurance retention levels.
Added
This material weakness resulted in immaterial misstatements in our 2022 and 2021 financial statements related to the accounting for accrued vacation, which was corrected prior to issuance of the Company’s 2023 financial statements.
Removed
We have been, and may continue to be, adversely affected by inflationary or market fluctuations, including impact of tariffs, in the cost of products consumed in providing our services or our cost of labor. Additionally, we rely on certain vendors for a substantial portion of housekeeping, laundry and dietary supplies.
Added
Furthermore, there is a possibility that material misstatements to the Company’s future annual or interim financial statements will not be prevented or detected in a timely basis as a result of the identified material weakness.
Removed
We seek to pass on to customers such increased costs but sometimes we are unable to do so.
Added
To address our material weakness, we have made changes to our controls as set forth in Part II, Item 9A “Controls and Procedures.” Unless otherwise described in Part II, Item 9A “Controls and Procedures”, we will not be able to fully remediate the material weakness until these steps have been completed and have been operating effectively for a sufficient period of time.
Removed
Genesis contributed 10.0%, 10.8% and 14.7% of our total consolidated revenues for the years ended December 31, 2022, 2021 and 2020, respectively. Genesis commenced a restructuring effort in 2020 that continued in 2022.
Removed
As part of Genesis’ restructuring effort, during 2021, the Company and Genesis reached an agreement in principle to modify pricing through December 2021 (at which time the original pricing terms resumed) and payment terms through December 2022, at which point the original payment terms would resume. The agreement was executed in 2022.
Removed
In the event that our known claims experience and/or industry trends result in an unfavorable change in initial estimates of costs to settle such claims resulting from, among other factors, the severity levels of reported claims and medical cost inflation, it would have an adverse effect on our consolidated results of operations, financial condition and cash flows.
Removed
Although we engage third-party experts to assist us in estimating appropriate reserves, the determination of the required reserves is dependent upon significant actuarial judgments.
Removed
Changes in our insurance reserves as a result of our periodic evaluation of the related liabilities may cause significant fluctuations in our operating results. 10 Table of Contents We primarily provide our services pursuant to agreements which have a one year term, cancellable by either party upon 30 to 90 days’ notice after an initial 60 to 120 day service agreement period.

Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−2 removed1 unchanged
Biggest changeThe other locations serve as divisional or regional offices providing management and administrative services to both of our operating segments in their respective geographical areas. Management does not foresee any difficulties with regard to the continued utilization of these premises. We also believe that such properties are sufficient to support our current operations.
Biggest changeThe other locations serve as divisional or regional offices providing management and administrative services to both of our operating segments in their respective geographical areas. No individual parcel of real estate owned or leased is of material significance to our total assets. Management does not foresee any difficulties with regard to the continued utilization of these premises.
Item 2. Properties. We lease our corporate offices, located at 3220 Tillman Drive, Suite 300, Bensalem, Pennsylvania 19020. We also lease office space at other locations in Colorado, Connecticut, Florida, New Jersey, South Carolina, Texas, and Virginia.
Item 2. Properties. We lease our corporate offices, located at 3220 Tillman Drive, Suite 300, Bensalem, Pennsylvania 19020. We also lease office space at other locations in Colorado, Connecticut, Florida, New Jersey, Texas and Virginia.
Removed
We own office furniture and equipment, housekeeping and laundry equipment, and vehicles. The office furniture, equipment and vehicles are primarily located at the corporate office, divisional and regional offices. We have housekeeping equipment at all customer facilities where we provide services under a full service housekeeping agreement.
Added
We also believe that such properties are sufficient to support our current operations.
Removed
Generally, the aggregate cost of housekeeping equipment located at each customer facility is approximately $3,200. Additionally, we have laundry installations at certain customer facilities. We believe that such laundry equipment, office furniture and equipment, housekeeping equipment and vehicles are sufficient to support our current operations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

13 edited+4 added−3 removed0 unchanged
Biggest changeThe Company has included the S&P Midcap 400 Index due to certain equity awards granted by the Company being benchmarked against this index. The graph tracks the performance of a $100 investment in our Common Stock and in each index (with the reinvestment of all dividends) from December 31, 2017 to December 31, 2022.
Biggest changeThe graph tracks the performance of a $100 investment in our Common Stock and in each index (with the reinvestment of all dividends) from December 31, 2018 to December 31, 2023. The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Securities Authorized for Issuance Under Equity Compensation Plans The following table sets forth the Company’s equity compensation plans, on an aggregated basis, the number of shares of our Common Stock subject to outstanding stock awards, the weighted-average exercise price of stock awards, and the number of shares remaining available for future award grants as of December 31, 2022.
Securities Authorized for Issuance Under Equity Compensation Plans The following table sets forth the Company’s equity compensation plans, on an aggregated basis, the number of shares of our Common Stock subject to outstanding stock awards, the weighted-average exercise price of stock awards, and the number of shares remaining available for future award grants as of December 31, 2023.
Treasury shares may be issued under the 1999 Plan and the Deferred Compensation Plan. 15 Table of Contents Performance Graph The following graph matches the Company’s cumulative five-year total shareholder return on Common Stock with the cumulative total returns of the NASDAQ Composite index, the S&P Midcap 400 Index, and the Russell 2000 index.
Treasury shares may be issued under the 1999 Plan and the Deferred Compensation Plan. 16 Table of Contents Performance Graph The following graph matches the Company’s cumulative five-year total shareholder return on Common Stock with the cumulative total returns of the NASDAQ Composite index, the S&P Midcap 400 Index, and the Russell 2000 index.
Comparison of 5 Year Cumulative Total Return* Among Healthcare Services Group, Inc., the Russell 2000 Index, the NASDAQ Composite Index, and the S&P Midcap 400 Index. *$100 invested on December 31, 2017 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright© 2023 Standard & Poor's, a division of S&P Global. All rights reserved.
Comparison of 5 Year Cumulative Total Return* Among Healthcare Services Group, Inc., the Russell 2000 Index, the NASDAQ Composite Index, and the S&P Midcap 400 Index. *$100 invested on December 31, 2018 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright© 2024 Standard & Poor's, a division of S&P Global. All rights reserved.
Represents shares of Common Stock issuable upon exercise of outstanding stock awards granted under the 2020 Omnibus Incentive Plan (the “2020 Plan”) and carryover shares from pre-existing equity plans. 2.
Represents shares of Common Stock issuable upon exercise of outstanding stock awards granted under the 2020 Amended Omnibus Incentive Plan (the “Amended 2020 Plan”) and carryover shares from pre-existing equity plans. 2.
Includes stock awards to purchase 1.4 million shares available for future grant under the 2020 Plan, 1.9 million shares available for issuance under the Company’s 1999 Employee Stock Purchase Plan as amended (the “1999 Plan”) and 0.3 million shares available for issuance under the Company’s Amended and Restated Deferred Compensation Plan (the “Deferred Compensation Plan”).
Includes stock awards to purchase 3.2 million shares available for future grant under the Amended 2020 Plan, 1.8 million shares available for issuance under the Company’s 1999 Employee Stock Purchase Plan as amended (the “1999 Plan”) and 0.2 million shares available for issuance under the Company’s Amended and Restated Deferred Compensation Plan (the “Deferred Compensation Plan”).
Holders As of February 15, 2023, we had approximately 400 holders of record of our Common Stock. This does not include persons who hold our Common Stock in nominee or “street name” accounts through brokers or banks.
Holders As of February 14, 2024, we had approximately 400 holders of record of our Common Stock. This does not include persons who hold our Common Stock in nominee or “street name” accounts through brokers or banks.
Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Issued and not Exercised) (in thousands, except per share amounts) Equity compensation plans approved by security holders 3,295 1 $ 31.56 3,555 2 Total 3,295 $ 31.56 3,555 1.
Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Issued and not Exercised) (in thousands, except per share amounts) Equity compensation plans approved by security holders 3,715 1 $ 30.43 5,204 2 Total 3,715 $ 30.43 5,204 1.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information The Company’s Common Stock is traded under the symbol “HCSG” on the Nasdaq Global Select Market. As of February 15, 2023, there were approximately 74.4 million shares of our Common Stock outstanding.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information The Company’s Common Stock is traded under the symbol “HCSG” on the Nasdaq Global Select Market. As of February 14, 2024, there were approximately 73.6 million shares of our Common Stock outstanding.
Copyright© 2023 Russell Investment Group. All rights reserved.
Copyright© 2024 Russell Investment Group. All rights reserved.
The stock price performance included in this graph is not necessarily indicative of future stock price performance. We have not defined a peer group based on either industry classification or financial characteristics. We believe the Company is unique in its service offerings and customer base, and among its closest industry peers, it is unique in size and financial profile.
We believe the Company is unique in its service offerings and customer base, and among its closest industry peers, it is unique in size and financial profile.
As such, we opted to utilize the Russell 2000 index to compare the Company performance to issuers with similar market capitalization.
As such, we do not believe that we can reasonably identify a peer group for the purposes of Regulation S-K Item 201(e)(1)(ii)(B) and have instead opted to utilize the Russell 2000 index to compare the Company performance to issuers with similar market capitalization.
December 31, Company / Index 2017 2018 2019 2020 2021 2022 Healthcare Services Group, Inc. $ 100.00 $ 77.61 $ 48.32 $ 57.76 $ 37.81 $ 26.97 Russell 2000 $ 100.00 $ 88.99 $ 111.70 $ 134.00 $ 153.85 $ 122.41 NASDAQ Composite $ 100.00 $ 97.16 $ 132.81 $ 197.47 $ 235.15 $ 158.65 S&P Midcap 400 $ 100.00 $ 88.92 $ 112.21 $ 127.54 $ 159.12 $ 138.34 16 Table of Contents Unregistered Sales of Equity Securities and Use of Proceeds None.
December 31, Company / Index 2018 2019 2020 2021 2022 2023 Healthcare Services Group, Inc. $ 100.00 $ 62.26 $ 74.42 $ 48.72 $ 34.75 $ 30.03 Russell 2000 $ 100.00 $ 125.52 $ 150.58 $ 172.90 $ 137.56 $ 160.85 NASDAQ Composite $ 100.00 $ 136.69 $ 198.10 $ 242.03 $ 163.28 $ 236.17 S&P Midcap 400 $ 100.00 $ 126.20 $ 143.44 $ 178.95 $ 155.58 $ 181.15 17 Table of Contents Unregistered Sales of Equity Securities and Use of Proceeds None.
Removed
Repurchases of Equity Securities On March 12, 2021, the Company’s Board of Directors authorized and the Company entered into a 10b5-1 plan (the “Plan”).
Added
The Company has also included the S&P Midcap 400 Index due to certain equity awards granted by the Company being benchmarked against this index.
Removed
The Plan was adopted under the safe harbor provided by Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934 (the "Exchange Act"), in order to assist the Company in implementing its share repurchase plans.
Added
Repurchases of Equity Securities On February 14, 2023, our Board of Directors authorized the repurchase of up to 7.5 million outstanding shares of common stock (the “Repurchase Plan”). We remain authorized to purchase 6.5 million shares of common stock under the Repurchase Plan.
Removed
As all shares authorized for repurchase under the Plan were repurchased during 2021, no repurchases under the Plan were made during the year ended December 31, 2022. Dividends For a description of the Company’s dividend policy please see the section entitled "Financing Activities" in Part II, Item 7 of this report on Form 10-K. Item 6. Reserved.
Added
Shares repurchased pursuant to the Repurchase Plan during the three months ended December 31, 2023, were as follows: Quarter Ended December 31, 2023 Total number of shares of Common Stock repurchased Average price paid per share of Common Stock Aggregate purchase price of Common Stock repurchases 1 Number of remaining shares authorized for repurchase (in thousands) October 1, 2023 - October 31, 2023 102,200 $ 9.75 $ 996 6,883 November 1, 2023 - November 30, 2023 406,200 $ 9.81 $ 3,983 6,477 December 1, 2023 - December 31, 2023 — $ — $ — 6,477 Fourth quarter 508,400 $ 9.80 $ 4,979 6,477 1.
Added
Excludes commissions and other costs of less than $$0.1 million. Item 6. Reserved.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

56 edited+8 added−23 removed46 unchanged
Biggest changeA summary of the changes in our total self-insurance liability is as follows: 2022 2021 2020 (in thousands) Accrued insurance claims - January 1, $ 89,394 $ 82,428 $ 87,622 Claim payments (25,175) (29,061) (30,828) Reserve accruals: Current year accruals 34,293 35,830 39,638 Changes to the provision for prior year claims (9,805) 197 (14,004) Change in accrued insurance claims (687) 6,966 (5,194) Accrued insurance claims - December 31, $ 88,707 $ 89,394 $ 82,428 24 Table of Contents Liquidity and Capital Resources At December 31, 2022, we had cash, cash equivalents and marketable securities of $121.5 million and working capital of $330.0 million, compared to December 31, 2021 cash, cash equivalents and marketable securities of $185.2 million and working capital of $355.3 million.
Biggest changeGeneral liability and workers’ compensation reserves for claims incurred but not reported are developed by a third-party actuary through review of our historical data and open claims. 24 Table of Contents A summary of the changes in our total self-insurance liability is as follows: 2023 2022 2021 (in thousands) Accrued insurance claims - January 1, $ 88,707 $ 89,394 $ 82,428 Claim payments (24,488) (25,175) (29,061) Reserve accruals: Current year accruals 32,693 34,293 35,830 Changes to the provision for prior year claims (12,534) (9,805) 197 Change in accrued insurance claims (4,329) (687) 6,966 Accrued insurance claims - December 31, $ 84,378 $ 88,707 $ 89,394 Liquidity and Capital Resources At December 31, 2023, we had cash, cash equivalents and marketable securities of $147.5 million and working capital of $354.8 million, compared to December 31, 2022 cash, cash equivalents and marketable securities of $121.5 million and working capital of $319.6 million.
All indebtedness for borrowed money including, but not limited to, reimbursement obligations in respect of letters of credit and guarantees of any such indebtedness. 2. Net income plus interest expense, income tax expense, depreciation, amortization, share compensation expense and extraordinary non-recurring losses/gains.
All indebtedness for borrowed money including, but not limited to, reimbursement obligations in respect of letters of credit and guarantees of any such indebtedness. 2. Net income plus interest expense, income tax expense, depreciation, amortization, share-based compensation expense and extraordinary non-recurring losses/gains.
Allowance for Doubtful Accounts The allowance for doubtful accounts (the “Allowance”) is established at the origination of an account or note receivable in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification subtopic 326 Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”).
Allowance for Doubtful Accounts The allowance for doubtful accounts (the “Allowance”) is established at the origination of an account or note receivable in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) subtopic 326 Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”).
Recently, our claims experiences have been favorable, as a result of our ongoing initiative to promote safety and accident prevention in the workplace, as well as proactive management of workers’ compensation claims.
Recently, our claims experiences have been favorable as a result of our ongoing initiative to promote safety and accident prevention in the workplace and proactive management of workers’ compensation claims.
HCSG Insurance provides workers’ compensation, general liability and other insurance coverages to such entities with respect to such transitioned workforce, such entities provide housekeeping, laundry and dietary services as a subcontracted provider to the Company, and the Company provides strategic customer-service management and administrative support services to such entities. 18 Table of Contents Our ability to acquire new customers, retain existing customers and increase revenues are affected by many factors.
HCSG Insurance provides workers’ compensation, general liability and other insurance coverages to such entities with respect to such transitioned workforce, such entities provide housekeeping, laundry and dietary services as a subcontracted provider to the Company, and the Company provides strategic customer-service management and administrative support services to such entities. 19 Table of Contents Our ability to acquire new customers, retain existing customers and increase revenues are affected by many factors.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Years Ended December 31, 2022 and 2021 The following table summarizes the income statement key components that we use to evaluate our financial performance on a consolidated and reportable segment basis, for the years ended December 31, 2022 and 2021.
Years Ended December 31, 2023 and 2022 The following table summarizes the income statement key components that we use to evaluate our financial performance on a consolidated and reportable segment basis, for the years ended December 31, 2023 and 2022.
As noted above, we were in compliance with our financial covenants at December 31, 2022 and we expect to remain in compliance. The line of credit expires on November 22, 2027.
As noted above, we were in compliance with our financial covenants at December 31, 2023 and we expect to remain in compliance. The line of credit expires on November 22, 2027.
This discussion should be read in conjunction with our consolidated financial statements as of December 31, 2022 and for the year then ended and the notes accompanying those financial statements.
This discussion should be read in conjunction with our consolidated financial statements as of December 31, 2023 and for the year then ended and the notes accompanying those financial statements.
Although we have no specific material commitments for capital expenditures through the end of calendar year 2023, we estimate that for 2023 we will have capital expenditures of approximately $4.0 million to $6.0 million.
Although we have no specific material commitments for capital expenditures through the end of calendar year 2024, we estimate that for 2024 we will have capital expenditures of approximately $4.0 million to $6.0 million.
As a percentage of total revenues, these provisions represented approximately 1.9%, 0.6% and 0.5% for the years ended December 31, 2022, 2021 and 2020, respectively. Insurance Programs We self-insure or carry high deductible insurance plans and therefore retain a substantial portion of the risk associated with the expected losses under our general liability and workers compensation programs.
As a percentage of total revenues, these provisions represented approximately 2.1%, 1.9% and 0.6% for the years ended December 31, 2023, 2022 and 2021, respectively. Insurance Programs We self-insure or carry high deductible insurance plans and therefore retain a substantial portion of the risk associated with the expected losses under our general liability and workers compensation programs.
Losses on the plan investments during the year ended December 31, 2022 decreased our total selling, general and administrative expense for the period whereas gains on plan investments during the year ended 2021 increased our total selling, general and administrative expense.
Gains on the plan investments during the year ended December 31, 2023 increased our total selling, general and administrative expense for the period whereas losses on plan investments during the year ended 2022 decreased our total selling, general and administrative expense.
Our accounting for this plan utilizes current valuations from a third party actuary, which include assumptions based on data such as historical claims and pay-out experience, demographic factors, industry trends, severity factors, and other actuarial calculations.
Our accounting for this plan utilizes current valuations from a third-party actuary, which include assumptions based on data such as historical claims and payout experience, demographic factors, industry trends, severity factors and other actuarial calculations.
The table below summarizes those metrics for 2022, 2021 and 2020: Relation to Consolidated Revenues Year Ended December 31, 2022 2021 2020 Revenues 100.0 % 100.0 % 100.0 % Operating costs and expenses: Costs of services provided 88.5 % 86.2 % 84.8 % Selling, general and administrative expense excluding change in deferred compensation liability 8.8 % 10.1 % 8.0 % (Loss) gain on deferred compensation plan (0.5) % 0.4 % 0.6 % Selling, general and administrative expense 8.3 % 10.5 % 8.6 % Other (expense) income: Investment and other (expense) income, net (0.3) % 0.6 % 0.8 % Interest expense (0.2) % (0.1) % (0.1) % Income before income taxes 2.7 % 3.8 % 7.3 % Income tax 0.6 % 1.0 % 1.7 % Net income 2.1 % 2.8 % 5.6 % Our costs of services can vary and may impact our operating performance.
The table below summarizes those metrics for 2023, 2022 and 2021: Relation to Consolidated Revenues Year Ended December 31, 2023 2022 2021 Revenues 100.0 % 100.0 % 100.0 % Operating costs and expenses: Costs of services provided 87.2 % 88.6 % 86.2 % Selling, general and administrative expense excluding change in deferred compensation liability 9.6 % 8.8 % 10.1 % Gain (loss) on deferred compensation plan 0.4 % (0.5) % 0.4 % Selling, general and administrative expense 10.0 % 8.3 % 10.5 % Other income (expense): Investment and other income (loss), net 0.8 % (0.3) % 0.6 % Interest expense (0.5) % (0.2) % (0.1) % Income before income taxes 3.1 % 2.6 % 3.8 % Income tax 0.9 % 0.6 % 1.0 % Net income 2.2 % 2.0 % 2.8 % Our costs of services can vary and may impact our operating performance.
In order to provide for collections issues and the general risk associated with the granting of credit terms, we recorded a bad debt provision (in an Allowance for Doubtful Accounts) of $32.0 million, $10.5 million and $9.6 million in the years ended December 31, 2022, 2021 and 2020, respectively.
In order to provide for collections issues and the general risk associated with the granting of credit terms, we recorded a bad debt provision (in an Allowance for Doubtful Accounts) of $35.6 million, $32.0 million and $10.5 million in the years ended December 31, 2023, 2022 and 2021, respectively.
Capital Expenditures The level of capital expenditures is generally dependent on the number of new customers obtained. Such capital expenditures primarily consist of housekeeping and food service equipment purchases, laundry and linen equipment installations, computer hardware and software, and furniture and fixtures. Our capital expenditures totaled $5.2 million in 2022.
Capital Expenditures The level of capital expenditures is generally dependent on the number of new customers obtained. Such capital expenditures primarily consist of housekeeping and food service equipment purchases, laundry and linen equipment installations, computer hardware and software and furniture and fixtures. Our capital expenditures totaled $5.4 million in 2023.
Our current ratio was 2.8 to 1 at December 31, 2022 and 2.9 to 1 at December 31, 2021. Marketable securities represent fixed income investments that are highly liquid and can be readily purchased or sold through established markets. Such securities are held by HCSG Insurance to satisfy capital requirements of the state regulator related to captive insurance companies.
Our current ratio was 2.6 to 1 at both December 31, 2023 and 2022. Marketable securities represent fixed income investments that are highly liquid and can be readily purchased or sold through established markets. Such securities are held by HCSG Insurance to satisfy capital requirements of the state regulator related to captive insurance companies.
Our investment policy limits investment to certain types of instruments issued by institutions primarily with investment-grade ratings and places restrictions on concentration by type and issuer. 25 Table of Contents Financing Activities The primary use of cash for financing activities is the payment of dividends.
Our investment policy limits investment to certain types of instruments issued by institutions primarily with investment-grade ratings and places restrictions on concentration by type and issuer. 25 Table of Contents Financing Activities The primary use of cash for financing activities is repurchases of common stock.
We believe that our existing capacity under the line of credit and our history of favorable operating cash flows provide adequate liquidity to fund our operations for the next twelve months following the date of this report, inclusive of the potential impact of COVID-19.
We believe that our existing capacity under the line of credit and our history of favorable operating cash flows provide adequate liquidity to fund our operations for the next twelve months following the date of this report.
Material Off-Balance Sheet Arrangements We have no material off-balance sheet arrangements other than our irrevocable standby letter of credit previously discussed.
Material Off-Balance Sheet Arrangements We have no material off-balance sheet arrangements other than our irrevocable standby letter of credit previously discussed. 27 Table of Contents
Dietary services were provided to approximately 1,700 customer facilities at December 31, 2022 and contributed approximately 52.9% or $894.5 million of our consolidated revenues for the year ended December 31, 2022. Our workers’ compensation, general liability and certain employee health and welfare insurance programs are provided by HCSG Insurance Corp. (“HCSG Insurance” or the “Captive”), our wholly-owned captive insurance subsidiary.
Dietary services were provided to approximately 1,700 customer facilities at December 31, 2023 and contributed approximately 54.1% or $904.7 million of our consolidated revenues for the year ended December 31, 2023. Our workers’ compensation, general liability and certain employee health and welfare insurance programs are provided by HCSG Insurance Corp. (“HCSG Insurance” or the “Captive”), our wholly-owned captive insurance subsidiary.
We are on a calendar year end, and except where otherwise indicated, “2022” refers to the year ended December 31, 2022, and “2021” refers to the year ended December 31, 2021.
We are on a calendar year end, and except where otherwise indicated, “2023” refers to the year ended December 31, 2023, and “2022” refers to the year ended December 31, 2022.
If our customers experience a negative impact in their cash flows, it could have a material adverse effect on our results of operations and financial condition. 23 Table of Contents Accrued Insurance Claims We have a Paid Loss Retrospective Insurance Plan for general liability, workers’ compensation insurance and other self-insurance programs, which comprise approximately 30.4% of our liabilities at December 31, 2022.
If our customers experience a negative impact in their cash flows, it could have a material adverse effect on our consolidated results of operations and financial condition. Accrued Insurance Claims We have a Paid Loss Retrospective Insurance Plan for general liability, workers’ compensation insurance and other self-insurance programs, which comprise approximately 25.3% of our liabilities at December 31, 2023.
Costs of services provided Consolidated Consolidated costs of services provided increased 5.7% to $1.5 billion for the year ended December 31, 2022 compared to the corresponding period in 2021.
Costs of services provided Consolidated Consolidated costs of services provided decreased 2.7% to $1.5 billion for the year ended December 31, 2023 compared to the corresponding period in 2022.
At December 31, 2022, we borrowed $25.0 million under the line of credit. 26 Table of Contents The line of credit requires us to satisfy two financial covenants.
At December 31, 2023, we borrowed $25.0 million under the line of credit. The line of credit requires us to satisfy two financial covenants.
Any such adjustments or revisions to estimates could result in material differences from previously reported amounts. The policies discussed below are not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP, with no need for our judgment in their application.
Any such adjustments or revisions to estimates could result in material differences from previously reported amounts. 23 Table of Contents The policies discussed below are not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S.
At December 31, 2022, we also had outstanding $81.0 million in irrevocable standby letters of credit, which relate to payment obligations under our insurance programs. In connection with the issuance of the letters of credit, the amount available under the line of credit was reduced by $81.0 million to $194.0 million at December 31, 2022.
At December 31, 2023, we also had outstanding $85.9 million in irrevocable standby letters of credit, which relate to payment obligations under our insurance programs. In connection with the issuance of the letters of credit, the amount available under the line of credit was reduced by $85.9 million to $189.1 million at December 31, 2023.
Such management personnel also oversee the execution of various cost and quality control procedures including continuous training and employee evaluation. At December 31, 2022, Housekeeping services were provided at approximately 2,600 customer facilities, generating approximately 47.1% or $795.7 million of our consolidated revenues for the year ended December 31, 2022.
Such management personnel also oversee the execution of various cost and quality control procedures including continuous training and employee evaluation. At December 31, 2023, Housekeeping services were provided to approximately 2,300 customer facilities, generating approximately 45.9% or $766.7 million of our consolidated revenues for the year ended December 31, 2023.
Costs of services provided for Dietary, as a percentage of Dietary revenues, increased to 96.8% for the year ended December 31, 2022 from 94.4% in the corresponding period in 2021. 21 Table of Contents The following table provides a comparison of the key indicators we consider when managing costs of services provided at the segment level, as a percentage of the respective segment’s revenues: Year Ended December 31, Costs of Services Provided - Key Indicators as a % of Segment Revenue 2022 2021 Change Housekeeping labor and other labor-related costs 81.4% 80.9% 0.5% Housekeeping supplies 6.8% 6.5% 0.3% Dietary labor and other labor-related costs 61.5% 64.0% (2.5)% Dietary supplies 32.0% 27.9% 4.1% Variations within these key indicators relate to the provision of services at new facilities and changes in the mix of customers for whom we provide supplies or do not provide supplies.
The following table provides a comparison of the key indicators we consider when managing costs of services provided at the segment level, as a percentage of the respective segment’s revenues: Year Ended December 31, Costs of Services Provided - Key Indicators as a % of Segment Revenue 2023 2022 Change Housekeeping labor and other labor-related costs 82.2% 81.4% 0.8% Housekeeping supplies 7.0% 6.8% 0.2% Dietary labor and other labor-related costs 59.3% 61.5% (2.2)% Dietary supplies 34.2% 32.0% 2.2% Variations within these key indicators relate to the provision of services at new facilities and changes in the mix of customers for whom we provide supplies or do not provide supplies.
The covenants and their respective status at December 31, 2022 were as follows: Covenant Descriptions and Requirements As of December 31, 2022 Funded debt 1 to EBITDA 2 ratio: less than 3.50 to 1.00 1.19 EBITDA 2 to Interest Expense ratio: not less than 3.00 to 1.00 22.36 1.
The covenants and their respective status at December 31, 2023 were as follows: Covenant Descriptions and Requirements As of December 31, 2023 Funded debt 1 to EBITDA 2 ratio: less than 3.50 to 1.00 0.97 EBITDA 2 to Interest Expense ratio: not less than 3.00 to 1.00 9.92 1.
For the years ended December 31, 2022, 2021, and 2020 our cash flows were as follows: Year Ended December 31, 2022 2021 2020 (in thousands) Net cash (used in) provided by operating activities $ (8,167) $ 37,108 $ 217,213 Net cash provided by (used in) investing activities $ 2,580 $ (22,990) $ (36,845) Net cash used in financing activities $ (38,928) $ (82,654) $ (68,367) Operating Activities Our primary sources of cash from operating activities are the revenues generated from our Housekeeping and Dietary services.
For the years ended December 31, 2023, 2022 and 2021 our cash flows were as follows: Year Ended December 31, 2023 2022 2021 (in thousands) Net cash provided by (used in) operating activities $ 43,498 $ (8,167) $ 37,108 Net cash (used in) provided by investing activities $ (3,293) $ 2,580 $ (22,990) Net cash used in financing activities $ (12,154) $ (38,928) $ (82,654) Operating Activities Our primary sources of cash from operating activities are the revenues generated from our Housekeeping and Dietary services.
The Allowance is evaluated quarterly based upon our financial models which consider historical collections experience, current market conditions, government funding of Medicare and Medicaid, and reasonable and supportable economic forecasts to estimate lifetime expected credit losses.
ASC 326 requires the Company to estimate the lifetime expected credit losses on such instruments and to record an allowance to offset the receivables. The Allowance is evaluated quarterly based upon our financial models which consider historical collections experience, current market conditions, government funding of Medicare and Medicaid and reasonable and supportable economic forecasts to estimate lifetime expected credit losses.
Dietary labor costs accounted for approximately 61.5% of Dietary revenues in 2022. Changes in wage rates as a result of legislative or collective bargaining actions, market factors, adjustments to staffing levels, and other variations in our use of labor or managing labor costs can result in variability of these costs.
Changes in wage rates as a result of legislative or collective bargaining actions, market factors, adjustments to staffing levels, and other variations in our use of labor or managing labor costs can result in variability of these costs. Housekeeping supplies, including linen products, accounted for approximately 7.0% of Housekeeping revenues in 2023.
We review two primary indicators (costs of labor and costs of supplies as percentages of segment revenues) to monitor and manage such costs. The variability of these costs may impact each segment differently, as Housekeeping is more significantly impacted by costs of labor than Dietary. Labor costs accounted for approximately 81.4% of Housekeeping revenues in 2022.
We review two primary indicators (costs of labor and costs of supplies as percentages of segment revenues) to monitor and manage such costs. The variability of these costs may impact each segment differently, as Housekeeping's percentage of revenue is more significantly impacted by costs of labor than that of Dietary.
There are also areas in which our judgment in selecting another available alternative would not produce a materially different result. See our audited consolidated financial statements and notes thereto which are included in this Annual Report on Form 10-K, which contain a discussion of our accounting policies and other disclosures required by U.S. GAAP.
See our audited consolidated financial statements and notes thereto which are included in this Annual Report on Form 10-K, which contain a discussion of our accounting policies and other disclosures required by U.S. GAAP.
The table below summarizes the changes in these components of selling, general and administrative expense: Year Ended December 31, 2022 2021 $ Change % Change (dollar amounts in thousands) Selling, general and administrative expense excluding change in deferred compensation liability $ 149,522 $ 166,432 $ (16,910) (10.2) % (Loss) gain on deferred compensation plan investments (9,178) 6,676 (15,854) (237.5) % Selling, general and administrative expense $ 140,344 $ 173,108 $ (32,764) (18.9) % Consolidated Investment and Interest Income, net Investment and other income decreased to an expense of $5.4 million for the year ended December 31, 2022 compared to income of $9.4 million for the corresponding 2021 period, primarily due to market fluctuations in the value of our trading security investments representing the funding for our deferred compensation plan.
The table below summarizes the changes in these components of selling, general and administrative expense: Year Ended December 31, 2023 2022 $ Change % Change (dollar amounts in thousands) Selling, general and administrative expense excluding change in deferred compensation liability $ 160,088 $ 149,522 $ 10,566 7.1 % Gain (loss) on deferred compensation plan investments 6,684 (9,178) 15,862 (172.8) % Selling, general and administrative expense $ 166,772 $ 140,344 $ 26,428 18.8 % Consolidated Investment and Interest Income, net Investment and other income was a gain of $12.9 million for the year ended December 31, 2023 compared to a loss of $5.4 million for the corresponding 2022 period, primarily due to market fluctuations in the value of our trading security investments representing the funding for our deferred compensation plan and increased interest income on notes receivable.
We believe we are the largest provider of housekeeping and laundry management services to the long-term care industry in the United States, rendering such services to approximately 2,600 facilities throughout the continental United States as of December 31, 2022. We provide services primarily pursuant to full service agreements with our customers.
We believe we are the largest provider of housekeeping and laundry management services to the long-term care industry in the United States. 18 Table of Contents We provide services primarily pursuant to full service agreements with our customers.
Accounts and Notes Receivable Decisions to grant or to extend credit to customers are made on a case-by-case basis and based on a number of qualitative and quantitative factors related to the particular customer as well as the general risks associated with operating within the healthcare industry.
On December 29, 2023, January 2, 2024 and January 3, 2024, the letters of credit were renewed, and they all expire during the first quarter of 2025. 26 Table of Contents Accounts and Notes Receivable Decisions to grant or to extend credit to customers are made on a case-by-case basis and based on a number of qualitative and quantitative factors related to the particular customer as well as the general risks associated with operating within the healthcare industry.
Reportable Segments Costs of services provided for Housekeeping, as a percentage of Housekeeping revenues, increased to 90.8% for the year ended December 31, 2022 from 90.3% in the corresponding period in 2021.
Costs of services provided for Dietary, as a percentage of Dietary revenues, decreased to 95.2% for the year ended December 31, 2023 from 96.8% in the corresponding period in 2022.
Consolidated Selling, General and Administrative Expense Included in selling, general and administrative expense are gains and losses associated with changes in the value of investments under our deferred compensation liability. These investments represent the amounts held on behalf of the participating employees as changes in the value of these investments affect the amount of our deferred compensation liability.
These investments represent the amounts held on behalf of the participating employees as changes in the value of these investments affect the amount of our deferred compensation liability.
In the event that our claims experience and/or industry trends result in an unfavorable change resulting from, among other factors, the severity levels of reported claims and medical cost inflation, as compared to historical claim trends, it would have an adverse effect on our results of operations and financial condition. 27 Table of Contents For general liability and workers’ compensation, we record a reserve for the estimated future cost of claims and related expenses that have been reported but not settled, including an estimate of claims incurred but not reported that are developed as a result of a review of our historical data and open claims, which is based on estimates provided by a third party actuary.
For general liability and workers’ compensation, we record a reserve for the estimated future cost of claims and related expenses that have been reported but not settled, including an estimate of claims incurred but not reported that are developed as a result of a review of our historical data and open claims, which is based on estimates provided by a third-party actuary.
Housekeeping supplies, including linen products, accounted for approximately 6.8% of Housekeeping revenues in 2022. In contrast, supplies consumed in performing our Dietary services accounted for approximately 32.0% of Dietary revenues. Generally, fluctuations in these expenses are influenced by factors outside of our control and are unpredictable.
In contrast, supplies consumed in performing our Dietary services accounted for approximately 34.2% of Dietary revenues. Generally, fluctuations in these expenses are influenced by factors outside of our control and are unpredictable. Housekeeping and Dietary supplies are principally commodity products and are affected by market conditions specific to the respective products.
The decrease to our 2022 tax rate compared to the corresponding 2021 period was primarily impacted by the tax effect of our settlement with the SEC to resolve its investigation raising the effective tax rate in 2021. 22 Table of Contents Critical Accounting Policies and Estimates The preparation of financial statements in accordance with accounting standards generally accepted in the United States (“U.S.
The increase to our 2023 tax rate compared to the corresponding 2022 period was primarily impacted by a decrease in federal and state tax adjustments relative to the increase in income before income taxes. Critical Accounting Policies and Estimates The preparation of financial statements in accordance with accounting standards generally accepted in the United States (“U.S.
Investing Activities Our principal uses of cash for investing activities are the purchases of marketable securities and capital expenditures such as housekeeping and food service equipment, computer software and equipment, and furniture and fixtures (see “Capital Expenditures” below for additional information). Such uses of cash are offset by proceeds from sales of marketable securities.
Such activity, along with the timing of cash payments, are the primary drivers of the period-over-period changes in net cash provided by operating activities. Investing Activities Our principal uses of cash for investing activities are capital expenditures such as housekeeping and food service equipment, computer software and equipment and furniture and fixtures (see “Capital Expenditures” below for additional information).
Excluding the change in the deferred compensation plan described above, consolidated selling, general and administrative expense decreased $16.9 million or 10.2% for the year ended December 31, 2022 compared to the corresponding period in 2021.
Excluding the change in the deferred compensation plan described above, consolidated selling, general and administrative expense increased $10.6 million or 7.1% for the year ended December 31, 2023 compared to the corresponding period in 2022. The increase was driven by increases in professional fees and travel-related expenses, impacted by inflationary measures.
The following table provides a comparison of key indicators we consider when managing the consolidated costs of services provided: Year Ended December 31, Costs of Services Provided - Key Indicators as a % of Consolidated Revenue 2022 2021 Change Bad debt provision 1.9% 0.6% 1.3% Self-insurance costs 1.9% 3.0% (1.1)% The increase to bad debt provision includes a change in the credit risk profile of one customer that entered into receivership during 2022.
The following table provides a comparison of key indicators we consider when managing the consolidated costs of services provided: Year Ended December 31, Costs of Services Provided - Key Indicators as a % of Consolidated Revenue 2023 2022 Change Bad debt provision 2.1% 1.9% 0.2% Self-insurance costs 1.8% 1.9% (0.1)% Reportable Segments Costs of services provided for Housekeeping, as a percentage of Housekeeping revenues, increased to 92.0% for the year ended December 31, 2023 from 90.8% in the corresponding period in 2022.
Year Ended December 31, 2022 2021 % Change (in thousands) Revenues Housekeeping $ 795,687 $ 821,329 (3.1) % Dietary 894,489 820,630 9.0 % Consolidated $ 1,690,176 $ 1,641,959 2.9 % Costs of services provided Housekeeping $ 722,591 $ 741,949 (2.6) % Dietary 865,424 774,872 11.7 % Corporate and eliminations (91,679) (101,739) (9.9) % Consolidated $ 1,496,336 $ 1,415,082 5.7 % Selling, general and administrative expense Corporate and eliminations $ 140,344 $ 173,108 (18.9) % Investment and other income, net Corporate $ (5,427) $ 9,439 (157.5) % Interest expense Corporate $ (2,987) $ (1,385) 115.7 % Income (loss) before income taxes Housekeeping $ 73,096 $ 79,380 (7.9) % Dietary 29,065 45,758 (36.5) % Corporate and eliminations (57,079) (63,315) (9.8) % Consolidated $ 45,082 $ 61,823 (27.1) % Income taxes Corporate $ 10,452 $ 15,960 (34.5) % 20 Table of Contents Revenues Consolidated Consolidated revenues increased 2.9% to $1.7 billion for the year ended December 31, 2022 compared to the corresponding period in 2021 as a result of the factors discussed below under Reportable Segments.
Year Ended December 31, 2023 2022 % Change (in thousands) Revenues Housekeeping $ 766,651 $ 795,687 (3.6) % Dietary 904,738 894,489 1.1 % Consolidated $ 1,671,389 $ 1,690,176 (1.1) % Costs of services provided Housekeeping $ 705,340 $ 722,591 (2.4) % Dietary 861,191 865,424 (0.5) % Corporate and eliminations (109,888) (91,150) 20.6 % Consolidated $ 1,456,643 $ 1,496,865 (2.7) % Selling, general and administrative expense Corporate and eliminations $ 166,772 $ 140,344 18.8 % Investment and other income, net Corporate $ 12,938 $ (5,427) (338.4) % Interest expense Corporate $ (7,856) $ (2,987) 163.0 % Income (loss) before income taxes Housekeeping $ 61,311 $ 73,096 (16.1) % Dietary 43,547 29,065 49.8 % Corporate and eliminations (51,802) (57,608) (10.1) % Consolidated $ 53,056 $ 44,553 19.1 % Income taxes Corporate $ 14,670 $ 10,310 42.3 % 21 Table of Contents Revenues Consolidated Consolidated revenues decreased 1.1% to $1.7 billion for the year ended December 31, 2023 compared to the corresponding period in 2022 as a result of the factors discussed below under Reportable Segments.
Line of Credit At December 31, 2022, we had a $300 million bank line of credit on which to draw for general corporate purposes.
As of December 31, 2023, the Company had no other material minimum purchase or capital expenditure commitments pertaining to our daily operations or existing financing arrangements. Line of Credit At December 31, 2023, we had a $300 million bank line of credit on which to draw for general corporate purposes.
Management focuses on building efficiencies and managing labor and other costs at the facility level, as well as managing supply chain costs, for new and existing facilities. The increase in dietary supplies spend as a percentage of dietary revenues was driven by increases to our menu costs, which are dependent on commodity pricing factors, during 2022.
Management focuses on building efficiencies and managing labor and other costs at the facility level, as well as managing supply chain costs, for new and existing facilities.
Reportable Segments Housekeeping revenues decreased 3.1% while Dietary revenues increased 9.0% during the year ended December 31, 2022 compared to the corresponding period in 2021. Housekeeping revenues declined due to fewer facilities serviced, while Dietary revenue increased primarily due to negotiated price increases with customers, dining facility additions and growth through a prior year acquisition.
Inclusive of the impact of such changes, Housekeeping revenues decreased 3.6% while Dietary revenues increased 1.1% during the year ended December 31, 2023 compared to the corresponding period in 2022. Housekeeping revenues declined due to fewer facilities serviced year-over-year.
For additional information on risk factors related to the pandemic or other risks that could impact our results, please refer to “Risk Factors” in Part I, Item 1A of this Form 10-K. 17 Table of Contents Overview We provide management, administrative and operating expertise and services to the housekeeping, laundry, linen, facility maintenance and dietary service departments of healthcare facilities, including nursing homes, retirement complexes, rehabilitation centers and hospitals located throughout the United States.
Overview We provide management, administrative and operating expertise and services to the housekeeping, laundry, linen, facility maintenance and dietary service departments of healthcare facilities, including nursing homes, retirement complexes, rehabilitation centers and hospitals located throughout the United States. We provide such services to approximately 2,700 facilities throughout the continental United States as of December 31, 2023.
In connection with the establishment of our dividend policy, we adopted a Dividend Reinvestment Plan in 2003. The primary source of cash from financing activities is the net borrowings under our bank line of credit. We borrow for general corporate purposes as needed throughout the year.
The primary source of cash from financing activities is the net borrowings under our bank line of credit. We borrow for general corporate purposes as needed throughout the year. Contractual Obligations Our future contractual obligations and commitments at December 31, 2023 primarily consist of minimum lease payments on our operating lease agreements as discussed within Note 8 — Leases.
For the year ended December 31, 2022 cash flow from operations included a $11.2 million decrease in net income compared to 2021, a payment of $24.4 million for payroll taxes previously deferred under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), and a $78.7 million increase in outstanding accounts and notes receivable.
For the year ended December 31, 2023 cash flow from operations included a $38.4 million in net income, an increase of $4.1 million compared to 2022, non-cash add-backs to net income of $49.3 million, and a $44.2 million decrease in cash flows from changes in operating assets and liabilities, driven primarily by increased outstanding accounts and notes receivable.
Consolidated Income Taxes Our effective tax rate was 23.2% for the year ended December 31, 2022 compared to 25.8% in 2021.
Consolidated Interest Expense Consolidated interest expense increased to $7.9 million for the year ended December 31, 2023 compared to $3.0 million for the corresponding 2022 period due to increased short-term borrowings during 2023 and increased market interest rates. Consolidated Income Taxes Our effective tax rate was 27.7% for the year ended December 31, 2023 compared to 23.1% in 2022.
We remain authorized to repurchase 0.6 million shares of our Common Stock pursuant to previous Board of Directors’ authorization. During the years ended December 31, 2022 and 2021, we repurchased our Common Stock as part of the dividend reinvestment related to treasury shares held within the Deferred Compensation Plan.
During 2022, we paid regular quarterly cash dividends to shareholders of $63.4 million. We repurchased 1.0 million shares of our common stock for $11.1 million during the year ended December 31, 2023. We remain authorized to repurchase 6.5 million shares of our Common Stock pursuant to the Repurchase Plan.
Additionally, during the year ended December 31, 2022, the Company modified its service agreement with one operator which resulted in the recognition of a $10.0 million reduction to revenues. Such reduction reduced Housekeeping revenues by $2.3 million and Dietary revenues by $7.7 million.
Reportable Segments During the years ended December 31, 2023 and 2022, the Company recognized changes in variable consideration as reductions to revenue of $13.8 million, including $4.1 million in Housekeeping revenues and $9.7 million in Dietary revenues, and $10.0 million, including $2.3 million of Housekeeping revenues and $7.7 million of Dietary revenues, respectively.
Removed
COVID-19 Considerations While the crisis brought on by the COVID-19 pandemic has begun to show signs of abatement (e.g., new case rates remain below prior highs, the mortality rate remains low, and the Centers for Disease Control have relaxed masking requirements within healthcare facilities), our clients, who have been at the epicenter of the COVID-19 pandemic since its outset, must continue to dedicate significant financial and other resources to protect their residents, employees and visitors.
Added
Specifically, Housekeeping labor costs accounted for approximately 82.2% of Housekeeping revenues in 2023 while Dietary labor costs accounted for approximately 59.3% of Dietary revenues in 2023.
Removed
Moreover, we, our clients, vendors and business partners remain challenged by the lingering effects of the COVID-19 pandemic and the global economic crisis that has resulted from it.
Added
Our consolidated costs of services provided decreased 2.7% for the year ended December 31, 2023 as compared to 2022 due to a decrease in the number of facilities serviced. 20 Table of Contents Our customers are concentrated in the healthcare industry and are primarily providers of long-term care.
Removed
Significant supply chain disruption, inflation, labor shortages and unprecedented wage growth remain, and nursing home occupancy levels, while increasing from the lowest point in 2020, are still well below the national average target to support a robust recovery of the healthcare sector.
Added
While the number of Dietary facilities serviced declined year-over-year, revenue increased resulting from contractual pass-through of labor and food costs to customer buildings, which was a focus of our 2022 service agreement modification initiative.
Removed
All the while, nursing home workforce participation is at the lowest levels in decades and is the slowest segment in the health care sector to recover toward pre-pandemic levels.
Added
The increase in dietary supplies spend as a percentage of dietary revenues was driven by increases to our menu costs, which are dependent on commodity pricing factors, during 2023. 22 Table of Contents Consolidated Selling, General and Administrative Expense Included in selling, general and administrative expense are gains and losses associated with changes in the value of investments under our deferred compensation liability.
Removed
Housekeeping and Dietary supplies are principally commodity products and are affected by market conditions specific to the respective products.
Added
GAAP, with no need for our judgment in their application. There are also areas in which our judgment in selecting another available alternative would not produce a materially different result.
Removed
Our consolidated costs of services increased 5.7% for the year ended December 31, 2022 as compared to 2021 due to increased labor and product costs driven by economic factors and elevated bad debt due to the aging of receivables and the result of a change in the credit risk profile of one operating group that entered into receivership during the year.
Added
While no purchases of marketable securities were made during the year ended December 31, 2023, we also use cash for such purchases when deemed appropriate in line with capital funding requirements for HCSG Insurance. Such uses of cash are offset by proceeds from sales of marketable securities.
Removed
Such increases were offset by a $9.8 million adjustment to our self-insurance reserves based on our updated actuarial estimates for projected incurred losses on past claims. Such estimates declined in 2022 due to favorable claim experience and loss mitigation efforts. 19 Table of Contents Our customers are concentrated in the healthcare industry and are primarily providers of long-term care.
Added
Prior to 2023, the primary use of cash from financing activities was the payment of dividends. On February 14, 2023, our Board of Directors authorized the Repurchase Plan and suspended the quarterly dividend issued on common stock as part of our overall capital rebalancing strategy. No dividends were issued during the year ended December 31, 2023.
Removed
Revenue for the year ended December 31, 2022 included $1.4 million of COVID-19 supplemental billings, as compared to $5.7 million of COVID-19 supplemental billings for the year ended December 31, 2021, primarily related to employee pay premiums passed through to customers.
Added
In the event that our claims experience and/or industry trends result in an unfavorable change resulting from, among other factors, the severity levels of reported claims and medical cost inflation, as compared to historical claim trends, it would have an adverse effect on our results of operations and financial condition.
Removed
The impact of such receivership resulted in an approximate $7.1 million increase to our bad debt provision. In addition, bad debt provision increased due to the increase in outstanding accounts receivable and aged receivables during the year ended December 31, 2022.
Removed
The decrease in our self-insurance costs as a percentage of consolidated revenue was primarily impacted by a favorable $9.8 million adjustment to our self-insurance liability during 2022 after considering our updated actuarial estimates for projected incurred losses on past claims. Such estimates declined in 2022 due to favorable claim experience and loss mitigation efforts.
Removed
The decrease was primarily driven by decreases in legal and professional fees in 2022 compared to the comparable period due to the resolution of the previously disclosed SEC legal matter in 2021.
Removed
Consolidated Interest Expense Consolidated interest expense increased 115.7% to $3.0 million for the year ended December 31, 2022 compared to $1.4 million for the corresponding 2021 period, primarily due to higher balances outstanding on the Line of Credit throughout the year.
Removed
ASC 326 was adopted by the Company prospectively as of January 1, 2020. In adopting ASC 326, the Company replaced its previous incurred loss impairment model for estimating credit losses on accounts and notes receivables for its reporting of quarterly and annual financial results with an expected loss model prepared in accordance with ASC 326.
Removed
While the incurred loss impairment model had the Company recognize credit losses when it was probable that a loss had been incurred, ASC 326 requires the Company to estimate the lifetime expected credit losses on such instruments and to record an allowance to offset the receivables.
Removed
Accordingly, credit losses under ASC 326 are generally recognized earlier in the life cycle of a receivable than under the Company’s previous incurred loss model.
Removed
General liability and workers’ compensation reserves for claims incurred but not reported are developed by a third party actuary through review of our historical data and open claims.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk. At December 31, 2022, we had $121.5 million in cash, cash equivalents and marketable securities.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk. At December 31, 2023, we had $147.5 million in cash, cash equivalents and marketable securities.

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