HEALTHCARE SERVICES GROUP, INC.
REPORTS RESULTS FOR THE THREE MONTHS AND YEAR ENDED
DECEMBER 31, 2004
o Quarterly net income up 45% over 2003 quarter on 12% increase in revenues
o Annual net income up 35% on a 17% increase in revenues
o Quarterly cash dividend raised 13% over 2004 third quarter payment and 80%
over 2003 fourth quarter payment
Bensalem, PA - February 15, 2005, Healthcare Services Group, Inc. (NASDAQ-HCSG)
reported that revenues for the three months ended December 31, 2004 increased
12% to $113,133,000 compared to $101,503,000 for the same 2003 period. Net
income for the three months ended December 31, 2004 increased 45% to $4,127,000
or $.24 per basic and $.22 per diluted common share, compared to 2003 fourth
quarter net income of $2,850,000 or $.17 per basic and $.16 per diluted common
share, representing increases of 41% and 38%, respectively, in basic and diluted
earnings per common share.
The Company also reported that revenues for the year ended December 31,
2004 increased by 17% to $442,568,000 compared to $379,718,000 for the same 2003
period. Net income increased over 35% for year ended December 31, 2004 to
$14,699,000 or $.84 per basic and $.80 per diluted common share compared to the
year ended December 31, 2003 net income of $10,860,000 or $.64 per basic and
$.61 per diluted common share, representing increases of 31% in both basic and
diluted earnings per common share.
On January 19, 2005, the Company announced a 2004 fourth quarter cash
dividend of $.09 per common share payable on February 11, 2005 to shareholders
of record at the close of business January 28, 2005. This dividend represents a
13% increase over the dividend declared for the third quarter and is the seventh
consecutive quarterly dividend payment, as well as the sixth consecutive
increase since we initiated a quarterly cash dividend in 2003.
2004 Earnings Release Page 2 of 6
February 15, 2005
FORWARD LOOKING STATEMENTS/RISK FACTORS
Certain matters discussed may 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 the Company providing its
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 revenues in 2004; our claims'
experience related to workers' compensation and general liability insurance; the
effects of changes in, or interpretations of laws and regulations governing the
industry, including state and local regulations pertaining to the taxability of
our services; and risk factors described in our most recent Form 10-K filed with
the Securities and Exchange Commission in Part I thereof under "Government
Regulation of Clients", "Competition" and "Service Agreements/Collections". Many
of our clients' revenues are highly reliant 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 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 Earnings Release Page 3 of 6
February 15, 2005 continue to result in significant additional bad debts in the
near future. Additionally, our operating results would also be adversely
affected if unexpected increases in costs of labor and labor related costs,
materials, supplies and equipment used in performing our services could not be
passed on to our clients.
2004 Earnings Release Page 3 of 6
February 15, 2005
In addition, we believe that to further improve our future financial
performance we must continue to obtain service agreements with new clients,
provide new services to existing clients, achieve modest price increases on
current service agreements with existing clients and maintain internal cost
reduction strategies at our various operational levels. Furthermore, we believe
that our ability to sustain the internal development of managerial personnel is
an important factor impacting future operating results and successfully
executing projected growth strategies.
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:
/s/ Daniel P. McCartney /s/ Thomas Cook
- ------------------------------------ -------------------------------------
Daniel P. McCartney Thomas Cook
Chairman and Chief Executive Officer President and Chief Operating Officer
215-639-4274 215-639-4274
2004 Earnings Release Page 4 of 6
February 15, 2005
HEALTHCARE SERVICES GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, 2004 December 31, 2003
------------------ -----------------
Cash and cash equivalents $ 74,847,000 $ 64,181,000
Accounts receivable, net 55,725,000 58,145,000
Other current assets 14,699,000 14,443,000
-------------- --------------
Total current assets 145,271,000 136,769,000
Property and equipment, net 4,804,000 4,612,000
Notes receivable-long term, net 5,557,000 7,904,000
Deferred compensation funding 4,062,000 2,848,000
Other assets 7,270,000 6,195,000
-------------- --------------
$ 166,964,000 $ 158,328,000
============== ==============
Accrued insurance claims-current $ 4,169,000 $ 2,979,000
Other current liabilities 16,090,000 21,717,000
-------------- --------------
Total current liabilities 20,259,000 24,696,000
Accrued insurance claims-long term 10,227,000 8,937,000
Deferred compensation liability 5,018,000 3,497,000
Stockholders' equity 131,460,000 121,198,000
-------------- --------------
$ 166,964,000 $ 158,328,000
============== ==============
2004 Earnings Release Page 5 of 6
February 15, 2005
HEALTHCARE SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended
December 31,
2004 2003
--------------- --------------
Revenues $ 113,133,000 $ 101,503,000
Operating costs and expenses:
Cost of services provided 99,287,000 89,935,000
Selling, general and administrative 7,780,000 7,759,000
Other income:
Interest income 588,000 692,000
--------------- --------------
Income before income taxes 6,654,000 4,501,000
Income taxes 2,527,000 1,651,000
--------------- --------------
Net income $ 4,127,000 $ 2,850,000
=============== ==============
Basic earnings per common share $ .24 $ .17
=============== ==============
Diluted earnings per common share $ .22 $ .16
=============== ==============
Cash dividends per common share $ .08 $ .05
=============== ==============
Basic weighted average number of
common shares outstanding 17,560,000 17,258,000
=============== ==============
Diluted weighted average number of
common shares outstanding 18,505,000 18,168,000
=============== ==============
2004 Earnings Release Page 6 of 6
February 15, 2005
HEALTHCARE SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Year Ended
December 31,
2004 2003
-------------- --------------
Revenues $ 442,568,000 $ 379,718,000
Operating costs and expenses:
Cost of services provided 388,719,000 334,609,000
Selling, general and administrative 31,523,000 29,045,000
Other income:
Interest income 1,380,000 1,451,000
-------------- --------------
Income before income taxes 23,706,000 17,515,000
Income taxes 9,007,000 6,655,000
-------------- --------------
Net income $ 14,699,000 $ 10,860,000
============== ==============
Basic earnings per common share $ .84 $ .64
============== ==============
Diluted earnings per common share $ .80 $ .61
============== ==============
Cash dividends per common share $ .26 $ .09
============== ==============
Weighted average number of common
shares outstanding for basic EPS 17,481,000 17,049,000
============== ==============
Weighted average number of common
shares outstanding for diluted EPS 18,440,000 17,788,000
============== ==============