HEALTHCARE SERVICES GROUP, INC.
REPORTS RESULTS FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2005 AND 2005 THIRD QUARTER CASH DIVIDEND
o THIRD QUARTER NET INCOME UP 28% OVER 2004 THIRD QUARTER
o NINE MONTH PERIOD NET INCOME UP 29% OVER 2004 NINE MONTH PERIOD
o QUARTERLY CASH DIVIDEND RAISED 13% OVER PRIOR QUARTER PAYMENT
Bensalem, PA - October 18, 2005, Healthcare Services Group, Inc. (NASDAQ-HCSG)
reported that revenues for the three months ended September 30, 2005 increased
5% to $117,684,000 compared to $112,324,000 for the same 2004 period. Net income
increased 28% for the three months ended September 30, 2005 to $4,774,000 or
$.18 per basic and $.17 per diluted common share, compared to the 2004 third
quarter net income of $3,724,000 or $.14 per basic and per diluted common share.
The earnings per common share data ( as well as the cash dividend data described
below) has been adjusted to reflect the three-for-two stock split paid in the
form of a 50% stock dividend on May 2, 2005.
Revenues for the nine months ended September 30, 2005 increased 6% to
$348,426,000 compared to $329,435,000 for the same 2004 period. Net income for
the nine months ended September 30, 2005 increased by 29% to $13,620,000 or $.51
per basic and $.48 per diluted common share compared to the 2004 nine month
period net income of $10,572,000 or $.40 per basic and $.38 per diluted common
share.
Our Board of Directors has declared a quarterly cash dividend of $.09
per common share, payable on November 14, 2005 to shareholders of record at the
close of business on October 31, 2005. This represents a 13% increase over the
dividend declared for the 2005 second quarter and is the tenth consecutive
quarterly dividend payment, as well as the ninth consecutive increase since our
initiation of quarterly cash dividend payments in 2003.
Earnings Release October 18, 2005
Page 2
FORWARD LOOKING STATEMENTS/RISK FACTORS
This report includes 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 19% of
2005 nine month period revenues ( such client's Board of Directors is pursuing a
sale of the company which should be completed by year-end); 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 Form 10-K filed with the
Securities and Exchange Commission for the year ended December 31, 2004 and 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 Medicare 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
Earnings Release October 18, 2005
Page 3
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 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 clients.
In addition, we believe that to improve our financial performance we
must continue to obtain service agreements with new clients, provide new
services to existing clients, achieve modest price increases on current service
agreements with existing clients and maintain internal cost reduction strategies
at our various operational levels. Furthermore, we believe that our ability to
sustain the internal development of managerial personnel is an important factor
impacting future operating results and successfully executing projected growth
strategies.
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, 2005 December 31, 2004
------------------ -----------------
Cash and cash equivalents $ 91,703,000 $ 74,847,000
Accounts receivable, net 59,315,000 55,725,000
Deferred income taxes 669,000 574,000
Other current assets 15,149,000 14,125,000
------------ ------------
Total current assets 166,836,000 145,271,000
Property and equipment, net 4,818,000 4,804,000
Notes receivable- long term, net 4,084,000 5,557,000
Deferred compensation funding 5,125,000 4,062,000
Deferred income taxes- long term 6,084,000 5,563,000
Other assets 1,708,000 1,707,000
------------ ------------
$188,655,000 $166,964,000
============ ============
Accrued insurance claims- current $ 4,487,000 $ 4,169,000
Other current liabilities 24,049,000 16,090,000
------------ ------------
Total current liabilities 28,536,000 20,259,000
Accrued insurance claims- long term 10,471,000 10,227,000
Deferred compensation liability 6,375,000 5,018,000
Stockholders' equity 143,273,000 131,460,000
------------ ------------
$188,655,000 $166,964,000
============ ============
HEALTHCARE SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Nine Months Ended
September 30,
2005 2004
------------ ------------
Revenues $348,426,000 $329,435,000
Operating costs and expenses:
Cost of services provided 304,039,000 289,433,000
Selling, general and administrative 24,562,000 23,742,000
Other income:
Investment and interest income 2,142,000 792,000
------------ ------------
Income before income taxes 21,967,000 17,052,000
Income taxes 8,347,000 6,480,000
------------ ------------
Net income $ 13,620,000 $ 10,572,000
============ ============
Basic earnings per common share $ .51 $ .40
============ ============
Diluted earnings per common share $ .48 $ .38
============ ============
Cash dividends per common share $ .21 $ .12
============ ============
Basic weighted average number of
common shares outstanding 26,861,000 26,180,000
============ ============
Diluted weighted average number of
common shares outstanding 28,286,000 27,625,000
============ ============
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 May 2, 2005
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended
September 30,
2005 2004
------------ ------------
Revenues $117,684,000 $112,324,000
Operating costs and expenses:
Cost of services provided 102,884,000 98,644,000
Selling, general and administrative 8,024,000 7,967,000
Other income:
Investment and interest income 923,000 293,000
------------ ------------
Income before income taxes 7,699,000 6,006,000
Income taxes 2,925,000 2,282,000
------------ ------------
Net income $ 4,774,000 $ 3,724,000
============ ============
Basic earnings per common share $ .18 $ .14
============ ============
Diluted earnings per common share $ .17 $ .14
============ ============
Cash dividends per common share $ .08 $ .05
============ ============
Basic weighted average number of
common shares outstanding 27,079,000 26,090,000
============ ============
Diluted weighted average number of
common shares outstanding 28,414,000 27,520,000
============ ============
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 May 2, 2005