BENSALEM, Pa., Oct. 18 /PRNewswire-FirstCall/ -- Healthcare Services Group, Inc. 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.
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 effect 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 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. HEALTHCARE SERVICES GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, December 31, 2005 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 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 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
Healthcare Services Group, Inc.
CONTACT: Daniel P. McCartney, Chairman and Chief Executive Officer, orThomas Cook, President and Chief Operating Officer, both of HealthcareServices Group, Inc., +1-215-639-4274
Web site: http://www.hcsgcorp.com/
