Full Press Release Details
HEALTHCARE SERVICES GROUP, INC. REPORTS
RESULTS FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2008 AND DECLARES INCREASED
THIRD QUARTER 2008 CASH DIVIDEND
Bensalem, PA October 14, 2008, Healthcare Services Group, Inc. (NASDAQ-HCSG) reported that
revenues for the three months ended September 30, 2008 increased over 4% to $152,978,000 compared
to $146,669,000 for the same 2007 period. Net income for the three months ended September 30, 2008
was $5,522,000 or $.13 per basic and per diluted common share, compared to the 2007 third quarter
net income of $7,299,000 or $.17 per basic and per diluted common share.
Revenues for the nine months ended September 30, 2008 increased 4% to $448,155,000 compared to
$430,743,000 for the same 2007 period. Net income for the nine months ended September 30, 2008 was
$19,331,000 or $.45 per basic and $.44 per diluted common share compared to the 2007 nine month
period net income of $22,274,000 or $.53 per basic and $.51 per diluted common share.
The Board of Directors has declared a third quarter 2008 regular quarterly cash dividend of
$.16 per common share, payable on November 7, 2008 to shareholders of record at the close of
business October 24, 2008. This represents a 7% increase over the dividend declared for the 2008
second quarter and a 33% increase over the 2007 same period payment. It is the 22nd consecutive
regular quarterly cash dividend payment, as well as the 21st consecutive increase since our
initiation of regular quarterly cash dividend payments in 2003.
The Company will host a conference call on October 15, 2008 at 8:30 AM Eastern Time to discuss
its results for the three and nine month periods ended September 30, 2008. The call in number is
| 3rd Quarter 2008 Earnings Release | October 14, 2008 | |
| Page 2 |
Cautionary Statement Regarding Forward-Looking Statements
This report contains 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 15% of
revenues in the nine month period ended September 30, 2008; risks associated with our acquisition
of Summit Services Group, Inc.; 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, 2007, including Part I thereof under ''Government
Regulation of Clients , ''Competition and ''Service Agreements/Collections , and under Part IA
Risk Factors . Many of our clients
| 3rd Quarter 2008 Earnings Release | October 14, 2008 | |
| Page 3 |
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.
| Company Contacts: | ||
| Daniel P. McCartney | Thomas Cook | |
| Chairman and Chief Executive Officer | President | |
| 215-639-4274 | 215-639-4274 |
HEALTHCARE SERVICES GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2008 | December 31, 2007 | |||||||
| Cash and cash equivalents | $ | 93,572,000 | $ | 92,461,000 | ||||
| Accounts receivable, net | 94,689,000 | 82,951,000 | ||||||
| Other current assets | 21,730,000 | 19,686,000 | ||||||
| Total current assets | 209,991,000 | 195,098,000 | ||||||
| Property and equipment, net | 3,984,000 | 4,303,000 | ||||||
| Notes receivable- long term, net | 4,187,000 | 6,058,000 | ||||||
| Goodwill , net | 15,020,000 | 15,020,000 | ||||||
| Other Intangible Assets, net | 5,298,000 | 6,090,000 | ||||||
| Deferred compensation funding | 9,310,000 | 10,361,000 | ||||||
| Other assets | 6,800,000 | 6,438,000 | ||||||
| Total Assets | $ | 254,590,000 | $ | 243,368,000 | ||||
| Accrued insurance claims- current | $ | 4,306,000 | $ | 4,302,000 | ||||
| Other current liabilities | 30,876,000 | 23,579,000 | ||||||
| Total current liabilities | 35,182,000 | 27,881,000 | ||||||
| Accrued insurance claims- long term | 10,047,000 | 10,037,000 | ||||||
| Deferred compensation liability | 9,589,000 | 10,732,000 | ||||||
| Stockholders equity | 199,772,000 | 194,718,000 | ||||||
| Total Liabilities and Stockholders Equity | $ | 254,590,000 | $ | 243,368,000 |
CONSOLIDATED STATEMENTS OF INCOME
| For the Three Months Ended | ||||||||
| September 30, | ||||||||
| 2008 | 2007 | |||||||
| Revenues | $ | 152,978,000 | $ | 146,669,000 | ||||
| Operating costs and expenses: | ||||||||
| Cost of services provided | 134,228,000 | 126,064,000 | ||||||
| Selling, general and administrative | 9,615,000 | 9,865,000 | ||||||
| Income from operations | 9,135,000 | 10,740,000 | ||||||
| Other income: | ||||||||
| Investment and interest income | (157,000 | ) | 1,128,000 | |||||
| Income before income taxes | 8,978,000 | 11,868,000 | ||||||
| Income taxes | 3,456,000 | 4,569,000 | ||||||
| Net income | $ | 5,522,000 | $ | 7,299,000 | ||||
| Basic earnings per common share | $ | .13 | $ | .17 | ||||
| Diluted earnings per common share | $ | .13 | $ | .17 | ||||
| Cash dividends per common share | $ | .15 | $ | .11 | ||||
| Basic weighted average number of common shares outstanding | 43,143,000 | 42,606,000 | ||||||
| Diluted weighted average number of common shares outstanding | 43,980,000 | 43,969,000 |
HEALTHCARE SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2008 | 2007 | |||||||
| Revenues | $ | 448,155,000 | $ | 430,743,000 | ||||
| Operating costs and expenses: | ||||||||
| Cost of services provided | 387,157,000 | 367,480,000 | ||||||
| Selling, general and administrative | 30,318,000 | 30,481,000 | ||||||
| Income from operations | 30,680,000 | 32,782,000 | ||||||
| Other income: | ||||||||
| Investment and interest income | 753,000 | 3,436,000 | ||||||
| Income before income taxes | 31,433,000 | 36,218,000 | ||||||
| Income taxes | 12,102,000 | 13,944,000 | ||||||
| Net income | $ | 19,331,000 | $ | 22,274,000 | ||||
| Basic earnings per common share | $ | .45 | $ | .53 | ||||
| Diluted earnings per common share | $ | .44 | $ | .51 | ||||
| Cash dividends per common share | $ | .42 | $ | .30 | ||||
| Basic weighted average number of common shares outstanding | 43,078,000 | 42,134,000 | ||||||
| Diluted weighted average number of common shares outstanding | 44,050,000 | 43,783,000 |