Healthcare Services Group, Inc. Reports Results for the Three and
Six Months Ended June 30, 2005 and 2005 Second Quarter Cash Dividend
-- Second Quarter Net Income Up 30% Over 2004 Second Quarter -- Six Month
Period Net Income Up 29% Over 2004 Six Month Period -- Quarterly Cash Dividend
Raised 14% Over Prior Quarter Payment
BENSALEM, Pa., July 19 /PRNewswire-FirstCall/ -- Healthcare Services Group,
Inc. (NASDAQ:HCSG) reported that revenues for the three months ended June 30,
2005 increased 5% to $116,048,000 compared to $110,489,000 for the same 2004
period. Net income increased 30% for the three months ended June 30, 2005 to
$4,584,000 or $.17 per basic and $.16 per diluted common share, compared to the
2004 second quarter net income of $3,530,000 or $.13 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 six months ended June 30, 2005 increased 6% to $230,743,000
compared to $217,111,000 for the same 2004 period. Net income for the six
months ended June 30, 2005 increased by 29% to $8,847,000 or $.33 per basic and
$.31 per diluted common share compared to the 2004 six-month period net income
of $6,849,000 or $.26 per basic and $.25 per diluted common share.
Our Board of Directors has declared a quarterly cash dividend of $.08 per
common share, payable on August 12, 2005 to shareholders of record at the close
of business July 29, 2005. This represents a 14% increase over the dividend
declared for the 2005 first quarter and is the ninth consecutive quarterly
dividend payment, as well as the eighth 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 six-month period revenues (such client's Board of
Directors voted to conduct an auction to sell the company, which is anticipated
to 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 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 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)
June 30, December 31,
2005 2004 Cash and cash equivalents $82,533,000 $74,847,000
Accounts receivable, net 59,458,000 55,725,000
Deferred income taxes 709,000 574,000
Other current assets 15,532,000 14,125,000
Total current assets 158,232,000 145,271,000 Property and equipment, net 4,786,000 4,804,000
Notes receivable - long term, net 3,853,000 5,557,000
Deferred compensation funding 4,838,000 4,062,000
Deferred income taxes - long term 6,167,000 5,563,000
Other assets 1,708,000 1,707,000 $179,584,000 $166,964,000
Accrued insurance claims - current $4,670,000 $4,169,000
Other current liabilities 15,023,000 16,090,000
Total current liabilities 19,693,000 20,259,000 Accrued insurance claims - long term 10,896,000 10,227,000
Deferred compensation liability 6,023,000 5,018,000
Stockholders' equity 142,972,000 131,460,000 $179,584,000 $166,964,000 HEALTHCARE SERVICES GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) For the Three Months Ended
June 30,
2005 2004 Revenues $116,048,000 $110,489,000
Operating costs and expenses:
Cost of services provided 101,385,000 97,340,000
Selling, general and
administrative 8,109,000 7,761,000
Other income:
Investment and interest income 839,000 306,000 Income before income taxes 7,393,000 5,694,000
Income taxes 2,809,000 2,164,000 Net income $4,584,000 $3,530,000 Basic earnings per common share $.17 $.13 Diluted earnings per common share $.16 $.13 Cash dividends per common share $.07 $.04 Basic weighted average number of
common shares outstanding 26,878,000 26,255,000 Diluted weighted average number of
common shares outstanding 28,404,000 27,701,000 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 Six Months Ended
June 30,
2005 2004 Revenues $230,743,000 $217,111,000
Operating costs and expenses:
Cost of services provided 201,155,000 190,789,000
Selling, general and
administrative 16,538,000 15,775,000
Other income:
Investment and interest income 1,219,000 500,000 Income before income taxes 14,269,000 11,047,000
Income taxes 5,422,000 4,198,000 Net income $8,847,000 $6,849,000 Basic earnings per common share $.33 $.26 Diluted earnings per common share $.31 $.25 Cash dividends per common share $.13 $.07 Basic weighted average number of
common shares outstanding 26,750,000 26,226,000 Diluted weighted average number of
common shares outstanding 28,221,000 27,679,000 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
DATASOURCE: Healthcare Services Group, Inc.
CONTACT: Daniel P. McCartney, Chairman and Chief Executive Officer, or Thomas Cook, President and Chief Operating Officer, both of Healthcare Services Group, +1-215-639-4274 Web site: http://www.hcsgcorp.com/
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