HEALTHCARE SERVICES GROUP, INC.
REPORTS RESULTS FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2004 AND DIVIDEND INCREASE
o QUARTERLY NET INCOME UP 33% OVER 2003 QUARTER ON 17% INCREASE IN REVENUES
o NINE MONTH PERIOD NET INCOME UP 32% ON AN 18% INCREASE IN REVENUES
o QUARTERLY CASH DIVIDEND RAISED 14% OVER 2004 SECOND QUARTER PAYMENT AND 60%
OVER 2003 THIRD QUARTER PAYMENT
Bensalem, PA - October 19, 2004, Healthcare Services Group, Inc. (NASDAQ-HCSG)
reported that revenues for the three months ended September 30, 2004 increased
by over 17% to $112,324,000 compared to $95,878,000 for the same 2003 period.
Net income increased 33% for the three months ended September 30, 2004 to
$3,724,000 or $.21 per basic and $.20 per diluted common share, compared to the
2003 third quarter net income of $2,803,000 or $.16 per basic and diluted common
share. The earnings per common share data has been adjusted to reflect the
three-for-two stock split paid in the form of a 50% stock dividend on March 1,
2004.
Revenues for the nine months ended September 30, 2004 increased by over
18% to $329,435,000 compared to $278,215,000 for the same 2003 period. Net
income for the nine months ended September 30, 2004 increased by 32% to
$10,572,000 or $.61 per basic and $.57 per diluted common share compared to the
2003 nine month period net income of $8,010,000 or $.47 per basic and $.45 per
diluted common share.
Our Board of Directors has declared a quarterly dividend of $.08 per
common share, payable on November 12, 2004 to shareholders of record at the
close of business October 29, 2004. This represents a 14% increase over the
dividend declared for the 2004 second quarter and is the sixth consecutive
quarterly dividend payment, as well as the fifth consecutive increase since the
Company initiated a quarterly dividend payment on September 29, 2003.
Earnings Release October 19, 2004
Page 2
FORWARD LOOKING STATEMENTS/RISK FACTORS
Certain matters discussed include forward-looking statements that are subject to
risks and uncertainties that could cause actual results or objectives to differ
materially from those projected. We undertake no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. Such risks and uncertainties include,
but are not limited to, risks arising from our providing services exclusively to
the health care industry, primarily providers of long-term care; credit and
collection risks associated with this industry; one client accounting for
approximately 20% of 2004 nine month period revenues; our claims' experience
related to workers' compensation and general liability insurance; the effects of
changes in laws and regulations governing the industry and risk factors
described in our Form 10-K filed with the Securities and Exchange Commission for
the year ended December 31, 2003 in Part I thereof under "Government Regulation
of Clients", "Competition" and "Service Agreements/Collections". Many of our
clients' revenues are highly contingent on Medicare and Medicaid reimbursement
funding rates, which have been and continue to be adversely affected by the
change in Medicare payments under the 1997 enactment of the Prospective Payment
System. That change, and the lack of substantive reimbursement funding rate
reform legislation, as well as other trends in the long-term care industry have
resulted in certain of our clients filing for bankruptcy protection. Others may
follow. Any decisions by the government to discontinue or adversely modify
legislation related to reimbursement funding rates will have a material adverse
affect on our clients. These factors, in addition to delays in payments from
clients, have resulted in and could continue to result in significant additional
bad debts in the near future. Additionally, our operating results would also be
adversely affected
Earnings Release October 19, 2004
Page 3
if unexpected increases in the costs of labor and labor related costs,
materials, supplies and equipment used in performing our services could not be
passed on to our clients.
In addition, we believe that to improve our financial performance we
must continue to obtain service agreements with new clients, provide new
services to existing clients, achieve modest price increases on current service
agreements with existing clients and maintain internal cost reduction strategies
at the various operational levels of the Company. Furthermore, we believe that
its ability to sustain the internal development of managerial personnel is an
important factor impacting future operating results and successfully executing
projected growth strategies.
Healthcare Services Group, Inc. is the largest national provider of
professional housekeeping, laundry and food services to long-term care and
related facilities.
Company Contacts:
Daniel P. McCartney Thomas Cook
Chairman and Chief Executive Officer President and Chief Operating Officer
215-639-4274 215-639-4274
HEALTHCARE SERVICES GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, 2004 December 31, 2003
------------------ -----------------
Cash and cash equivalents $ 71,190,000 $ 64,181,000
Accounts receivable, net 57,293,000 58,145,000
Other current assets 16,878,000 15,785,000
-------------- --------------
Total current assets 145,361,000 138,111,000
Property and equipment, net 4,836,000 4,612,000
Notes receivable- long term, net 4,683,000 7,904,000
Deferred compensation funding 3,550,000 2,847,000
Other assets 6,185,000 4,854,000
-------------- --------------
$ 164,615,000 $ 158,328,000
============== ==============
Accrued insurance claims- current $ 3,982,000 $ 2,979,000
Other current liabilities 18,836,000 21,717,000
-------------- --------------
Total current liabilities 22,818,000 24,696,000
Accrued insurance claims- long term 9,335,000 8,937,000
Deferred compensation liability 4,531,000 3,497,000
Stockholders' equity 127,931,000 121,198,000
-------------- --------------
$ 164,615,000 $ 158,328,000
============== ==============
HEALTHCARE SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended
September 30,
2004 2003
------------- ------------
Revenues $ 112,324,000 $ 95,878,000
Operating costs and expenses:
Cost of services provided 98,644,000 84,348,000
Selling, general and administrative 7,967,000 7,413,000
Other income:
Investment and interest income 293,000 369,000
------------- ------------
Income before income taxes 6,006,000 4,486,000
Income taxes 2,282,000 1,683,000
------------- ------------
Net income $ 3,724,000 $ 2,803,000
============= ============
Basic earnings per common share $ .21 $ .16
============= ============
Diluted earnings per common share $ .20 $ .16
============= ============
Cash dividends per common share $ .07 $ .04
============= ============
Basic weighted average number of
common shares outstanding 17,393,200 17,109,626
============= ============
Diluted weighted average number of
common shares outstanding 18,346,738 17,894,141
============= ============
Common shares and per share data adjusted to reflect the three-for-two stock
split paid in the form of a 50% stock dividend on March 1, 2004
HEALTHCARE SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Nine Months Ended
September 30,
2004 2003
------------- --------------
Revenues $ 329,435,000 $ 278,215,000
Operating costs and expenses:
Cost of services provided 289,432,000 244,675,000
Selling, general and administrative 23,743,000 21,285,000
Other income:
Investment and interest income 792,000 759,000
------------- --------------
Income before income taxes 17,052,000 13,014,000
Income taxes 6,480,000 5,004,000
------------- --------------
Net income $ 10,572,000 $ 8,010,000
============= ==============
Basic earnings per common share $ .61 $ .47
============= ==============
Diluted earnings per common share $ .57 $ .45
============= ==============
Cash dividends per common share $ .18 $ .04
============= ==============
Basic weighted average number of
common shares outstanding 17,453,185 16,978,541
============= ==============
Diluted weighted average number of
common shares outstanding 18,416,779 17,661,516
============= ==============
Common shares and per share data adjusted to reflect the three-for-two stock
split paid in the form of a 50% stock dividend on March 1, 2004