Full Press Release Details
HEALTHCARE SERVICES GROUP, INC.
REPORTS RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2009,
DECLARES INCREASED FIRST QUARTER 2009 CASH DIVIDEND AND
ANNOUNCES ASSET PURCHASE AGREEMENT WITH CONTRACT
ENVIRONMENTAL SERVICES, INC.
Bensalem, PA April 14, 2009, Healthcare Services Group, Inc. (NASDAQ-HCSG) reported that
revenues for the three months ended March 31, 2009 increased 9% to $160,409,000 compared to
$147,259,000 for the same 2008 period. Net income increased 13% for the three months ended March
31, 2009 to $7,736,000 or $.18 per basic and per diluted common share, compared to the 2008 first
quarter net income of $6,857,000 or $.16 per basic and per diluted common share.
The Board of Directors has declared a first quarter 2009 regular quarterly cash dividend of
$.18 per common share, payable on May 15, 2009 to shareholders of record at the close of business
April 24, 2009. This represents a 6% increase over the dividend declared for the 2009 first quarter
and a 29% increase over the 2008 same period payment. It is the 24th consecutive regular quarterly
cash dividend payment, as well as the 23rd consecutive increase since our initiation of regular
quarterly cash dividend payments in 2003.
On April 13, 2009, we entered into a definitive asset purchase agreement with Contract
Environmental Services, Inc. to acquire substantially all of its assets. The transaction is
anticipated to close on or about May 1, 2009, subject to the satisfaction of customary closing
conditions. The proposed purchase price consists of: (i) the issuance of approximately 65,000
shares of our common stock, (ii) the future issuance of approximately 265,000 shares contingent
upon the achievement of certain financial targets,(iii) a cash payment of approximately $5,000,000,
and (iv) our assumption of approximately $5,500,000 of certain debt obligations of the sellers.
| 1st Quarter 2009 Earnings Release | April 14, 2009 | |
| Page 2 |
Contract Environmental Services, Inc is a provider of professional housekeeping, laundry and
food services to long-term care and related facilities. Although there can be no assurance thereof,
Healthcare expects the transaction to add more than $40,000,000 to its annualized revenues, as well
as being accretive to future earnings per share.
The Company will host a conference call on April 15, 2009 at 8:30 AM Eastern Time to discuss
its results for the three month period ended March 31, 2009. The call in number is 877-718-5106.
Cautionary Statement Regarding Forward-Looking Statements
This report and documents 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 14% of
revenues in the three month period ended
| 1st Quarter 2009 Earnings Release | April 14, 2009 | |
| Page 3 |
March 31, 2009-(see note 5, Major Client in the accompanying Notes to Consolidated Financial
Statements); risks associated with our pending acquisition of Contract Environmental Services, 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,
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. In addition, the current economic crises could adversely affect such funding. 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.
| 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
| March 31, 2009 | December 31, 2008 | |||||||
| Cash and cash equivalents | $ | 44,476,000 | $ | 37,501,000 | ||||
| Marketable securities, net | 51,946,000 | 49,414,000 | ||||||
| Accounts receivable, net | 98,213,000 | 96,558,000 | ||||||
| Other current assets | 20,684,000 | 23,142,000 | ||||||
| Total current assets | 215,319,000 | 206,615,000 | ||||||
| Property and equipment, net | 3,906,000 | 3,929,000 | ||||||
| Notes receivable- long term, net | 5,605,000 | 3,201,000 | ||||||
| Goodwill , net | 15,020,000 | 15,020,000 | ||||||
| Other Intangible Assets, net | 4,769,000 | 5,033,000 | ||||||
| Deferred compensation funding | 8,254,000 | 8,287,000 | ||||||
| Other assets | 6,822,000 | 6,476,000 | ||||||
| Total Assets | $ | 259,695,000 | $ | 248,561,000 | ||||
| Accrued insurance claims- current | $ | 4,183,000 | $ | 3,943,000 | ||||
| Other current liabilities | 34,136,000 | 25,099,000 | ||||||
| Total current liabilities | 38,319,000 | 29,042,000 | ||||||
| Accrued insurance claims- long term | 9,761,000 | 9,201,000 | ||||||
| Deferred compensation liability | 8,334,000 | 8,636,000 | ||||||
| Stockholders equity | 203,281,000 | 201,682,000 | ||||||
| Total Liabilities and Stockholders Equity | $ | 259,695,000 | $ | 248,561,000 |
HEALTHCARE SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2009 | 2008 | |||||||
| Revenues | $ | 160,409,000 | $ | 147,259,000 | ||||
| Operating costs and expenses: | ||||||||
| Cost of services provided | 137,892,000 | 125,854,000 | ||||||
| Selling, general and administrative | 10,876,000 | 10,579,000 | ||||||
| Income from operations | 11,641,000 | 10,826,000 | ||||||
| Other income: | ||||||||
| Investment and interest | 937,000 | 324,000 | ||||||
| Income before income taxes | 12,578,000 | 11,150,000 | ||||||
| Income taxes | 4,842,000 | 4,293,000 | ||||||
| Net income | $ | 7,736,000 | $ | 6,857,000 | ||||
| Basic earnings per common share | $ | .18 | $ | .16 | ||||
| Diluted earnings per common share | $ | .18 | $ | .16 | ||||
| Cash dividends per common share | $ | .17 | $ | .13 | ||||
| Basic weighted average number of common shares outstanding | 43,457,000 | 43,016,000 | ||||||
| Diluted weighted average number of common shares outstanding | 44,073,000 | 44,213,000 |