July 14, 2009

Healthcare Services Group, Inc. Reports Results for the Three and Six Months Ended June 30, 2009 and Declares Increased Second Quarter 2009 Cash Dividend

BENSALEM, PA, Jul 14, 2009 (MARKETWIRE via COMTEX News Network) -- Healthcare Services Group, Inc. (NASDAQ: HCSG) reported that revenues for the three months ended June 30, 2009 increased 16% to $170,896,000 compared to $147,918,000 for the same 2008 period. Net income for the three months ended June 30, 2009 increased over 12% to $7,815,000 or $.18 per basic and per diluted common share, compared to the 2008 second quarter net income of $6,953,000 or $.16 per basic and per diluted common share.

Revenues for the six months ended June 30, 2009 increased over 12% to $331,305,000 compared to $295,177,000 for the same 2008 period. Net income for the six months ended June 30, 2009 increased 13% to $15,551,000 or $.36 per basic and $.35 per diluted common share compared to the 2008 six month period net income of $13,810,000 or $.32 per basic and $.31 per diluted common share.

The Board of Directors has declared a second quarter 2009 regular quarterly cash dividend of $.19 per common share, payable on August 7, 2009 to shareholders of record at the close of business July 24, 2009. This represents a 6% increase over the dividend declared for the 2009 first quarter and a 27% increase over the 2008 same period payment. It is the 25th consecutive regular quarterly cash dividend payment, as well as the 24th consecutive increase since our initiation of regular quarterly cash dividend payments in 2003.

The Company will host a conference call on July 15, 2009 at 8:30 AM Eastern Time to discuss its results for the three and six month periods ended June 30, 2009. The call in numbers are 866-293-8970 and 913-312-0720 (passcode #1036466).

Cautionary Statement Regarding Forward-Looking Statements

This release and any schedules incorporated by reference into this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended, are not historical facts but rather based on current expectations, estimates and projections about our business and industry, our beliefs and assumptions. Words such as "believes," "anticipates," "plans," "expects," "will," "goal," and similar expressions are intended to identify forward-looking statements. The inclusion of forward-looking statements should not be regarded as a representation by us that any of our plans will be achieved. 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 forward-looking information is also subject to various risks and uncertainties. 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 13% of revenues in the six month period ended June 30, 2009; risks associated with our acquisition of Contract Environmental Services, Inc., including integration risks and costs, or such business not achieving expected financial results or synergies or failure to otherwise perform as expected; 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, our workforce and services provided, 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, 2008 in Part I under "Government Regulation of Clients," "Competition," "Service Agreements/Collections," and under Item IA "Risk Factors." Many of our clients' revenues are highly contingent on Medicare and Medicaid reimbursement funding rates, which Congress has affected through the enactment of a number of major laws during the past decade. These laws have significantly altered, or threatened to alter, overall government reimbursement funding rates and mechanisms. The overall effect of these laws and trends in the long-term care industry have affected and could adversely affect the liquidity of our clients, resulting in their inability to make payments to us on agreed upon payment terms. 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 our 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)
                                                June 30,      December 31,
                                                  2009            2008
                                            --------------- ---------------
Cash and cash equivalents                   $    24,539,000 $    37,501,000
Marketable securities, net                       52,651,000      49,414,000
Accounts receivable, net                        105,689,000      96,558,000
Other current assets                             22,552,000      23,142,000
                                            --------------- ---------------
  Total current assets                          205,431,000     206,615,000
Property and equipment, net                       4,111,000       3,929,000
Notes receivable- long term, net                  6,466,000       3,201,000
Goodwill, net                                    17,054,000      15,020,000
Other Intangible Assets, net                      9,776,000       5,033,000
Deferred compensation funding                     9,157,000       8,287,000
Other assets                                      7,117,000       6,476,000
                                            --------------- ---------------
Total Assets                                $   259,112,000 $   248,561,000
                                            =============== ===============
Accrued insurance claims- current           $     4,385,000 $     3,943,000
Other current liabilities                        26,475,000      25,099,000
                                            --------------- ---------------
  Total current liabilities                      30,860,000      29,042,000
Accrued insurance claims- long term              10,233,000       9,201,000
Deferred compensation liability                   9,319,000       8,636,000
Stockholders' equity                            208,700,000     201,682,000
                                            --------------- ---------------
Total Liabilities and Stockholders' Equity  $   259,112,000 $   248,561,000
                                            =============== ===============
                                CONDENSED
                    CONSOLIDATED STATEMENTS OF INCOME
                                (Unaudited)
                                                For the Three Months Ended
                                                         June 30,
                                                    2009          2008
                                                ------------- -------------
Revenues                                        $ 170,896,000 $ 147,918,000
Operating costs and expenses:
   Cost of services provided                      145,830,000   127,074,000
   Selling, general and administrative             13,516,000    10,124,000
                                                ------------- -------------
Income from operations                             11,550,000    10,720,000
Other income:
   Investment and interest income                   1,157,000       585,000
                                                ------------- -------------
Income before income taxes                         12,707,000    11,305,000
Income taxes                                        4,892,000     4,352,000
                                                ------------- -------------
Net income                                      $   7,815,000 $   6,953,000
                                                ============= =============
Basic earnings per common share                 $         .18 $         .16
                                                ============= =============
Diluted earnings per common share               $         .18 $         .16
                                                ============= =============
Cash dividends per common share                 $         .18 $         .14
                                                ============= =============
Basic weighted average number of common shares
 outstanding                                       43,537,000    43,080,000
                                                ============= =============
Diluted weighted average number of common
 shares outstanding                                44,262,000    43,962,000
                                                ============= =============
                      HEALTHCARE SERVICES GROUP, INC.
                    CONSOLIDATED STATEMENTS OF INCOME
                                (Unaudited)
                                                 For the Six Months Ended
                                                         June 30,
                                                    2009          2008
                                                ------------- -------------
Revenues                                        $ 331,305,000 $ 295,177,000
Operating costs and expenses:
   Cost of services provided                      283,722,000   252,928,000
   Selling, general and administrative             24,392,000    20,703,000
                                                ------------- -------------
Income from operations                             23,191,000    21,546,000
Other income:
   Investment and interest income                   2,094,000       909,000
                                                ------------- -------------
Income before income taxes                         25,285,000    22,455,000
Income taxes                                        9,734,000     8,645,000
                                                ------------- -------------
Net income                                      $  15,551,000 $  13,810,000
                                                ============= =============
Basic earnings per common share                 $         .36 $         .32
                                                ============= =============
Diluted earnings per common share               $         .35 $         .31
                                                ============= =============
Cash dividends per common share                 $         .35 $         .27
                                                ============= =============
Basic weighted average number of common shares
 outstanding                                       43,497,000    43,048,000
                                                ============= =============
Diluted weighted average number of common
 shares outstanding                                44,168,000    44,088,000
                                                ============= =============

Company  Contacts:
Daniel P. McCartney
Chairman and Chief Executive Officer
215-639-4274

Thomas Cook
President
215-639-4274


SOURCE: Healthcare Services Group, Inc.


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