Healthcare Services Group, Inc. Reports Results for the Three Months Ended March 31, 2011 and Declares Increased First

Tue Apr 12, 2011 4:12pm EDT

* Reuters is not responsible for the content in this press release.

  BENSALEM, PA, Apr 12 (MARKET WIRE) -- 
Healthcare Services Group, Inc. (NASDAQ: HCSG) reported that revenues for
the three months ended March 31, 2011 increased over 13% to $208,390,000
compared to $183,801,000 for the same 2010 period. Net income for the
three months ended March 31, 2011 increased to $7,767,000 or $.12 per
basic and per diluted common share, compared to the 2010 first quarter
net income of $7,428,000 or $.11 per basic and per diluted common share.

    Additionally, our Board of Directors declared a regular quarterly cash
dividend of $.1575 per common share, payable on May 13, 2011 to
shareholders of record at the close of business April 22, 2011. This
represents an increase of 7% over the dividend declared for the same 2010
period payment. It is the 32nd consecutive regular quarterly cash dividend
payment, as well as the 31st consecutive increase since our initiation of
regular quarterly cash dividend payments in 2003.

    The Company will host a conference call on Wednesday, April 13, 2011 at
8:30 AM Eastern Time to discuss its results for the three month period
ended March 31, 2011. The call in numbers will be 800-580-5706 and
913-981-5575. Passcode # 6685660.

    Cautionary Statement Regarding Forward-Looking Statements

    This release and any schedules incorporated by reference into it may
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, which are not
historical facts but rather are 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 10% of revenues in the
three month period ended March 31, 2011; 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, 2010 in Part I thereof under
"Government Regulation of Clients," "Competition" and "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, most recently
the March 2010 enactment of the Patient Protection and Affordable Care
Act and the Health Care and Education Reconciliation Act of 2010.
Currently, the U.S. Congress is considering further changes or revising
legislation relating to health care in the United States which, among
other initiatives, may impose cost containment measures impacting our
clients. These laws and proposed laws and forthcoming regulations have
significantly altered, or threaten to alter, overall government
reimbursement funding rates and mechanisms. The overall effect of these
laws and trends in the long-term care industry has 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 dietary services to long-term care
and related facilities.

                      HEALTHCARE SERVICES GROUP, INC.

                  CONDENSED CONSOLIDATED BALANCE SHEETS
                                (Unaudited)

                                                  March 31,   December 31,
                                                    2011          2010
                                                ------------- -------------
Cash and cash equivalents                       $  36,692,000 $  39,692,000
Marketable securities, net                         41,199,000    43,437,000
Accounts receivable, net                          111,364,000   108,426,000
Other current assets                               27,369,000    30,220,000
  Total current assets                            216,624,000   221,775,000

Property and equipment, net                         7,592,000     6,656,000
Notes receivable- long term, net                    4,931,000     5,055,000
Goodwill, net                                     16,955,000    16,955,000
Other Intangible Assets, net                        6,794,000     7,262,000
Deferred compensation funding                      12,948,000    12,080,000
Other assets                                        8,467,000     8,151,000
                                                ------------- -------------

Total Assets                                    $ 274,311,000 $ 277,934,000
                                                ============= =============

Accrued insurance claims- current               $   5,634,000 $   5,076,000
Other current liabilities                          28,819,000    35,455,000
                                                ------------- -------------
  Total current liabilities                        34,453,000    40,531,000

Accrued insurance claims- long term                13,147,000    11,845,000
Deferred compensation liability                    13,094,000    12,479,000
Stockholders' equity                              213,617,000   213,079,000
                                                ------------- -------------

Total Liabilities and Stockholders' Equity      $ 274,311,000 $ 277,934,000
                                                ============= =============

                      HEALTHCARE SERVICES GROUP, INC.
                    CONSOLIDATED STATEMENTS OF INCOME
                                (Unaudited)

                                                For the Three Months Ended
                                                         March 31,
                                                    2011          2010
                                                ------------- -------------
Revenues                                        $ 208,390,000 $ 183,801,000
Operating costs and expenses:
   Cost of services provided                      179,985,000   158,573,000
   Selling, general and administrative             16,780,000    13,901,000
                                                ------------- -------------
Income from operations                             11,625,000    11,327,000
Other income:
   Investment and interest                            714,000       750,000
                                                ------------- -------------
Income before income taxes                         12,339,000    12,077,000
Income taxes                                        4,572,000     4,649,000
                                                ------------- -------------

Net income                                      $   7,767,000 $   7,428,000
                                                ============= =============

Basic earnings per common share                 $         .12 $         .11
                                                ============= =============

Diluted earnings per common share               $         .12 $         .11
                                                ============= =============

Cash dividends per common share                 $         .16 $         .14
                                                ============= =============

Basic weighted average number of common shares
 outstanding                                       66,401,000    65,849,000
                                                ============= =============

Diluted weighted average number of common shares
 outstanding                                       67,454,000    66,989,000
                                                ============= =============

    


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

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