Healthcare Services Group, Inc. Reports Results for the Three and Nine Months Ended September 30, 2011 and Declares

Tue Oct 11, 2011 4:16pm EDT

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

  BENSALEM, PA, Oct 11 (MARKET WIRE) -- 
Healthcare Services Group, Inc. (NASDAQ: HCSG) reported that revenues for
the three months ended September 30, 2011 increased over 12% to
$218,929,000 compared to $195,114,000 for the same 2010 period. Net
income for the three months ended September 30, 2011 increased 9% to
$9,996,000 or $.15 per basic and per diluted common share, compared to
the 2010 third quarter net income of $9,169,000 or $.14 per basic and per
diluted common share. 

    Revenues for the nine months ended September 30, 2011 increased
approximately 12% to $638,826,000 compared to $571,868,000 for the same
2010 period. Net income for the nine months ended September 30, 2011
increased 9% to $27,591,000 or $.41 per basic and per diluted common
share compared to the 2010 nine month period net income of $25,318,000 or
$.38 per basic and per diluted common share. 

    Additionally, our Board of Directors declared a regular quarterly cash
dividend of $.16 per common share, payable on November 18, 2011 to
shareholders of record at the close of business on October 28, 2011. This
represents the 34th consecutive regular quarterly cash dividend payment,
as well as the 33rd consecutive increase since our initiation of regular
quarterly cash dividend payments in 2003.

    The Company will host a conference call on Wednesday, October 12, 2011 at
8:30 AM Eastern Time to discuss its results for the three and nine month
periods ended September 30, 2011. The call in number will be
888-329-8889. Passcode #5435900.

    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 9% of revenues in the
nine month period ended September 30, 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 and related agencies have
affected through the enactment of a number of major laws and regulations
during the past decade, including the March 2010 enactment of the Patient
Protection and Affordable Care Act and the Health Care and Education
Reconciliation Act of 2010. Most recently, on July 29, 2011, the United
States Center for Medicare Services issued final rulings which, among
other things, will reduce Medicare payments to nursing centers by 11.1%
and change the reimbursement for the provision of group rehabilitation
therapy services to Medicare beneficiaries. 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 health care facilities.

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

                                                  For the Three Months Ended
                                                        September 30,
                                                     2011           2010
                                                 ------------  -------------

Revenues                                         $218,929,000  $ 195,114,000
Operating costs and expenses:
  Cost of services provided                       188,041,000    168,384,000
  Selling, general and administrative              14,344,000     14,488,000
                                                 ------------  -------------

Income from operations                             16,544,000     12,242,000
Other income (loss):
  Investment and interest income (loss)            (1,355,000)     1,182,000
                                                 ------------  -------------

Income before income taxes                         15,189,000     13,424,000
Income taxes                                        5,193,000      4,255,000
                                                 ------------  -------------

Net income                                       $  9,996,000  $   9,169,000
                                                 ============  =============

Basic earnings per common share                  $        .15  $         .14
                                                 ============  =============

Diluted earnings per common share                $        .15  $         .14
                                                 ============  =============

Cash dividends per common share                  $        .16  $         .15
                                                 ============  =============

Basic weighted average number of common shares
 outstanding                                       66,710,000     66,039,000
                                                 ============  =============

Diluted weighted average number of common shares
 outstanding                                       67,530,000     67,079,000
                                                 ============  =============


    


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

                                                  For the Nine Months Ended 
                                                        September 30,
                                                     2011           2010
                                                -------------  -------------

Revenues                                        $ 638,826,000  $ 571,868,000
                                                -------------  -------------
Operating costs and expenses:
  Cost of services provided                       549,768,000    492,196,000
  Selling, general and administrative              46,635,000     41,539,000
                                                -------------  -------------

Income from operations                             42,423,000     38,133,000
Other income:
  Investment and interest income                     (178,000)     1,549,000
                                                -------------  -------------

Income before income taxes                         42,245,000     39,682,000
Income taxes                                       14,654,000     14,364,000
                                                -------------  -------------

Net income                                      $  27,591,000  $  25,318,000
                                                =============  =============

Basic earnings per common share                 $         .41  $         .38
                                                =============  =============

Diluted earnings per common share               $         .41  $         .38
                                                =============  =============

Cash dividends per common share                 $         .47  $         .44
                                                =============  =============

Basic weighted average number of common shares
 outstanding                                       66,544,000     65,946,000
                                                =============  =============

Diluted weighted average number of common
 shares outstanding                                67,510,000     67,016,000
                                                =============  =============


    


                       HEALTHCARE SERVICES GROUP, INC.

                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (Unaudited)

                                                 September 30,  December 31,
                                                      2011          2010
                                                 ------------- -------------

Cash and cash equivalents                        $  27,128,000 $  39,692,000
Marketable securities, net                          41,174,000    43,437,000
Accounts receivable, net                           117,247,000   108,426,000
Other current assets                                30,138,000    30,220,000
                                                 ------------- -------------
Total current assets                               215,687,000   221,775,000

Property and equipment, net                          9,373,000     6,656,000
Notes receivable- long term, net                     2,488,000     5,055,000
Goodwill, net                                       16,955,000    16,955,000
Other Intangible Assets, net                         7,914,000     7,262,000
Deferred compensation funding                       12,387,000    12,080,000
Other assets                                         8,511,000     8,151,000
                                                 ------------- -------------

Total Assets                                     $ 273,315,000 $ 277,934,000
                                                 ============= =============

Accrued insurance claims- current                $   5,863,000 $   5,076,000
Other current liabilities                           23,889,000    35,455,000
                                                 ------------- -------------
Total current liabilities                           29,752,000    40,531,000

Accrued insurance claims- long term                 13,681,000    11,845,000
Deferred compensation liability                     12,786,000    12,479,000
Stockholders' equity                               217,096,000   213,079,000
                                                 ------------- -------------

Total Liabilities and Stockholders' Equity       $ 273,315,000 $ 277,934,000
                                                 ============= =============


    


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

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