EXHIBIT 99.1
[HEALTHCARE SERVICES
GROUP, INC. LOGO]
HEALTHCARE SERVICES GROUP, INC.
REPORTS RESULTS FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2006 AND DECLARES SECOND QUARTER 2006 CASH DIVIDEND
o SECOND QUARTER NET INCOME UP 35% ON 6% INCREASE IN REVENUES OVER 2005
SECOND QUARTER
o SIX MONTH PERIOD NET INCOME UP 36% ON 5% INCREASE IN REVENUES OVER 2005
SIX MONTH PERIOD
o THIRTEENTH CONSECUTIVE QUARTERLY CASH DIVIDEND RAISED 9% OVER PRIOR
QUARTER'S PAYMENT AND 50% INCREASE OVER SAME 2005 PERIOD PAYMENT
Bensalem, PA - July 18, 2006, Healthcare Services Group, Inc. (NASDAQ-HCSG)
reported that revenues for the three months ended June 30, 2006 increased 6% to
$122,840,000 compared to $116,048,000 for the same 2005 period. Net income
increased over 35% for the three months ended June 30, 2006 to $6,203,000 or
$.23 per basic and $.22 per diluted common share, compared to the 2005 second
quarter net income of $4,584,000 or $.17 per basic and $.16 per diluted common
share.
Revenues for the six months ended June 30, 2006 increased 5% to
$241,758,000 compared to $230,743,000 for the same 2005 period. Net income for
the six months ended June 30, 2006 increased by 36% to $11,994,000 or $.44 per
basic and $.42 per diluted common share compared to the 2005 six month period
net income of $8,847,000 or $.33 per basic and $.31 per diluted common share.
Our Board of Directors has declared a regular quarterly cash dividend
of $.12 per common share, payable on August 11, 2006 to shareholders of record
at the close of business July 28, 2006. This represents a 9% increase over the
dividend declared for the 2006 first quarter and a 50% increase over the 2005
same period payment. It is the thirteenth consecutive regular quarterly dividend
payment, as well as the twelfth consecutive increase since our initiation of
regular quarterly cash dividend payments in 2003.
Corporate Office: 3220 Tillman Drive o Glenview Corporate Center o Suite 300 o Bensalem, PA 19020
(215) 639-4274 o (800) 523-2248 o Fax: (215) 639-2152 o http://www.hcsgcorp.com
[HS LOGO]
Earnings Release July 18, 2006
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
2006 six month period revenues ( 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 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" and "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
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
[HS LOGO]
Earnings Release July 18, 2006
Page 3
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
[HS LOGO]
HEALTHCARE SERVICES GROUP, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2006 2005
------------ ------------
Cash and cash equivalents $ 92,318,000 $ 91,005,000
Accounts receivable, net 64,626,000 59,197,000
Other current assets 16,403,000 15,414,000
------------ ------------
Total current assets 173,347,000 165,616,000
Property and equipment, net 4,709,000 4,744,000
Notes receivable-long term, net 5,442,000 4,555,000
Deferred compensation funding 6,239,000 5,626,000
Other assets 8,432,000 7,889,000
------------ ------------
Total Assets $198,169,000 $188,430,000
============ ============
Accrued insurance claims-current $ 4,661,000 $ 4,405,000
Other current liabilities 17,938,000 18,676,000
------------ ------------
Total current liabilities 22,599,000 23,081,000
Accrued insurance claims-long term 10,876,000 10,277,000
Deferred compensation liability 7,866,000 6,909,000
Stockholders' equity 156,828,000 148,163,000
------------ ------------
Total Liabilities and Stockholders' Equity $198,169,000 $188,430,000
============ ============
[HS LOGO]
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended
June 30,
2006 2005
------------ ------------
Revenues $122,840,000 $116,048,000
Operating costs and expenses:
Cost of services provided 105,843,000 101,385,000
Selling, general and administrative 8,123,000 8,109,000
Other income:
Investment and interest income 973,000 839,000
------------ ------------
Income before income taxes 9,847,000 7,393,000
Income taxes 3,644,000 2,809,000
------------ ------------
Net income $ 6,203,000 $ 4,584,000
============ ============
Basic earnings per common share $ .23 $ .17
============ ============
Diluted earnings per common share $ .22 $ .16
============ ============
Cash dividends per common share $ .11 $ .07
============ ============
Basic weighted average number of
common shares outstanding 27,414,000 26,878,000
============ ============
Diluted weighted average number of
common shares outstanding 28,691,000 28,404,000
============ ============
[HS LOGO]
HEALTHCARE SERVICES GROUP, INC
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Six Months Ended
June 30,
2006 2005
------------ ------------
Revenues $241,758,000 $230,743,000
Operating costs and expenses:
Cost of services provided 208,025,000 201,155,000
Selling, general and administrative 17,014,000 16,538,000
Other income:
Investment and interest income 2,320,000 1,219,000
------------ ------------
Income before income taxes 19,039,000 14,269,000
Income taxes 7,045,000 5,422,000
------------ ------------
Net income $ 11,994,000 $ 8,847,000
============ ===========
Basic earnings per common share $ .44 $ .33
============ ===========
Diluted earnings per common share $ .42 $ .31
============ ===========
Cash dividends per common share $ .21 $ .13
============ ===========
Basic weighted average number of
common shares outstanding 27,367,000 26,750,000
============ ===========
Diluted weighted average number of
common shares outstanding 28,656,000 28,221,000
============ ===========