HEALTHCARE SERVICES GROUP, INC.
REPORTS RESULTS FOR THE THREE MONTHS ENDED
MARCH 31, 2006 AND DECLARES FIRST QUARTER 2006 CASH DIVIDEND
o NET INCOME UP 36% ON AN 4% INCREASE IN REVENUES
o QUARTERLY CASH DIVIDEND RAISED 10% OVER 2005 FOURTH QUARTER CASH
DIVIDEND AND 57% OVER 2005 FIRST QUARTER CASH DIVIDEND
Bensalem, PA - April 18, 2006, Healthcare Services Group, Inc. (NASDAQ-HCSG)
reported that revenues for the three months ended March 31, 2006 increased by 4
% to $118,918,000 compared to $114,695,000 for the same 2005 period. Net income
increased 36% for the three months ended March 31, 2006 to $5,791,000 or $.21
per basic and $.20 per diluted common share, compared to the 2005 first quarter
net income of $4,263,000 or $.16 per basic and $.15 per diluted common share.
Additionally, the Company's Board of Directors has declared a first
quarter 2006 cash dividend of $.11 per common share payable on May 10, 2006 to
shareholders of record at the close of business April 28, 2006. The first
quarter 2006 cash dividend represents a 10% increase over the cash dividend
declared for the 2005 fourth quarter and is the twelfth consecutive regular
quarterly cash dividend payment, as well as the eleventh consecutive increase
since our initiation of regular quarterly cash dividend payments in 2003.
1st Quarter Earnings Release Page 2
April 18, 2006
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
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
revenues in the three month period ended March 31, 2006 (the client has
completed its previously announced merger on March 14, 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 the risk factors described in our Form 10-K filed with the
Securities and Exchange Commission for the year ended December 31, 2005 in Part
I thereof under "Government Regulation of Clients", "Competition", "Service
Agreements/Collections" and "Risk Factors". 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
Earnings Release April 18, 2006
Page 3
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 be
adversely affected if unexpected increases in the costs of labor and labor
related costs, materials, supplies and equipment used in performing 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.
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)
March 31, 2006 December 31, 2005
--------------- -----------------
Cash and cash equivalents $ 97,396,000 $ 91,005,000
Accounts receivable, net 62,777,000 59,197,000
Other current assets 16,383,000 15,414,000
--------------- ---------------
Total current assets 176,556,000 165,616,000
Property and equipment, net 4,726,000 4,744,000
Notes receivable- long term, net 4,329,000 4,555,000
Deferred compensation funding 6,151,000 5,626,000
Other assets 8,071,000 7,889,000
--------------- ---------------
Total Assets $ 199,833,000 $ 188,430,000
=============== ===============
Accrued insurance claims- current $ 4,445,000 $ 4,405,000
Other current liabilities 24,290,000 18,676,000
--------------- ---------------
Total current liabilities 28,735,000 23,081,000
Accrued insurance claims- long term 10,372,000 10,277,000
Deferred compensation liability 7,693,000 6,909,000
Stockholders' equity 153,033,000 148,163,000
--------------- ---------------
Total Liabilities and Stockholders' Equity $ 199,833,000 $ 188,430,000
=============== ===============
HEALTHCARE SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended
March 31,
2006 2005
-------------- -------------
Revenues $ 118,918,000 $ 114,695,000
Operating costs and expenses:
Cost of services provided 102,182,000 99,770,000
Selling, general and administrative 8,891,000 8,429,000
Other income:
Investment and interest 1,347,000 380,000
------------- -------------
Income before income taxes 9,192,000 6,876,000
Income taxes 3,401,000 2,613,000
------------- -------------
Net income $ 5,791,000 $ 4,263,000
============= =============
Basic earnings per common share $ .21 $ .16
============= =============
Diluted earnings per common share $ .20 $ .15
============= =============
Cash dividends per common share $ .10 $ .06
============= =============
Basic weighted average number of
common shares outstanding 27,320,000 26,622,000
============= =============
Diluted weighted average number of
common shares outstanding 28,620,000 28,036,000
============= =============