HEALTHCARE SERVICES GROUP, INC.
REPORTS RECORD RESULTS FOR THE THREE MONTHS AND YEAR ENDED
DECEMBER 31, 2005
o QUARTERLY NET INCOME UP 33% OVER 2004 QUARTER ON 4% INCREASE IN
REVENUES
o ANNUAL NET INCOME UP 30% ON A 5% INCREASE IN REVENUES
o QUARTERLY CASH DIVIDEND RAISED 11% OVER 2005 THIRD QUARTER CASH
DIVIDEND AND 67% OVER 2004 FOURTH QUARTER CASH DIVIDEND
Bensalem, PA - February 14, 2006, Healthcare Services Group, Inc. (NASDAQ-HCSG)
reported that revenues for the three months ended December 31, 2005 increased
over 4% to $117,864,000 compared to $113,133,000 for the same 2004 period. Net
income for the three months ended December 31, 2005 increased 33% to $5,475,000
or $.20 per basic and $.19 per diluted common share, compared to 2004 fourth
quarter net income of $4,127,000 or $.16 per basic and $.15 per diluted common
share, representing increases of 25% and 27%, respectively, in basic and diluted
earnings per common share .
The Company also reported that revenues for the year ended December 31,
2005 increased by over 5% to $466,291,000 compared to $442,568,000 for the 2004
year. Net income increased 30% for the year ended December 31, 2005 to
$19,096,000 or $.71 per basic and $.67 per diluted common share compared to the
year ended December 31, 2004 net income of $14,699,000 or $.56 per basic and
$.53 per diluted common share, representing increases of 27% and 26%,
respectively, in basic and diluted earnings per common share.
On January 24, 2006, the Company's Board of Directors announced a 2005
fourth quarter cash dividend of $.10 per common share which was paid on February
13, 2006 to shareholders of record at the close of business February 3, 2006.
This dividend represents an 11% increase over the dividend declared for the 2005
third quarter and is the eleventh consecutive quarterly dividend payment, as
well as the tenth consecutive increase since our initiation of quarterly cash
dividend payments in 2003.
2005 Earnings Release Page 2 of 6
February 14, 2006
FORWARD LOOKING STATEMENTS/RISK FACTORS
This earnings release 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 revenues in 2005 (such client's Board of Directors have
reached terms for a sale of its company, which sale could be completed in the
first quarter of 2006); 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 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 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 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
Earnings Release Page 3 of 6
February 15, 2005
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 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.
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:
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)
December 31, 2005 December 31, 2004
----------------- -----------------
Cash and cash equivalents $ 91,005,000 $ 74,847,000
Accounts receivable, net 59,197,000 55,725,000
Other current assets 15,414,000 14,699,000
------------ ------------
Total current assets 165,616,000 145,271,000
Property and equipment, net 4,744,000 4,804,000
Notes receivable- long term, net 4,555,000 5,557,000
Deferred compensation funding 5,626,000 4,062,000
Other assets 7,889,000 7,270,000
------------ ------------
$188,430,000 $166,964,000
============ ============
Accrued insurance claims- current $ 4,405,000 $ 4,169,000
Other current liabilities 18,676,000 16,090,000
------------ ------------
Total current liabilities 23,081,000 20,259,000
Accrued insurance claims- long term 10,277,000 10,227,000
Deferred compensation liability 6,909,000 5,018,000
Stockholders' equity 148,163,000 131,460,000
------------ ------------
$188,430,000 $166,964,000
============ ============
HEALTHCARE SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended
December 31,
-----------------------------
2005 2004
------------ ------------
Revenues $117,864,000 $113,133,000
Operating costs and expenses:
Cost of services provided 102,075,000 99,287,000
Selling, general and administrative 8,014,000 7,780,000
Other income:
Investment and interest 1,056,000 588,000
------------ ------------
Income before income taxes 8,831,000 6,654,000
Income taxes 3,356,000 2,527,000
------------ ------------
Net income $ 5,475,000 $ 4,127,000
============ ============
Basic earnings per common share $ .20 $ .16
============ ============
Diluted earnings per common share $ .19 $ .15
============ ============
Cash dividends per common share $ .09 $ .05
============ ============
Basic weighted average number of
common shares outstanding 27,098,000 26,340,000
============ ============
Diluted weighted average number of
common shares outstanding 28,418,000 27,757,000
============ ============
HEALTHCARE SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Year Ended
December 31,
-----------------------------
2005 2004
------------ ------------
Revenues $466,291,000 $442,568,000
Operating costs and expenses:
Cost of services provided 406,114,000 388,668,000
Selling, general and administrative 32,576,000 31,523,000
Other income:
Investment and interest 3,198,000 1,329,000
------------ ------------
Income before income taxes 30,799,000 23,706,000
Income taxes 11,703,000 9,007,000
------------ ------------
Net income $ 19,096,000 $ 14,699,000
============ ============
Basic earnings per common share $ .71 $ .56
============ ============
Diluted earnings per common share $ .67 $ .53
============ ============
Cash dividends per common share $ .30 $ .17
============ ============
Weighted average number of common
shares outstanding for basic EPS 26,921,000 26,220,000
============ ============
Weighted average number of common
shares outstanding for diluted EPS 28,320,000 27,659,000
============ ============