Healthcare Services Group, Inc. Reports Results for the Three Months and Year Ended December 31, 2011

Tue Feb 7, 2012 4:12pm EST

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

  BENSALEM, PA, Feb 07 (MARKET WIRE) -- 
Healthcare Services Group, Inc. (NASDAQ: HCSG) reported that revenues for
the three months ended December 31, 2011 increased approximately 24% to
$250,239,000 compared to $202,087,000 for the same 2010 period. Net
income for the three months ended December 31, 2011 increased
approximately 16% to $10,565,000 or $.16 per basic and per diluted common
share, compared to the 2010 fourth quarter net income of $9,123,000 or
$.14 per basic and per diluted common share. 

    The Company also reported that revenues for the year ended December 31,
2011 increased approximately 15% to $889,065,000 compared to $773,956,000
for the same 2010 period. Net income for the year ended December 31, 2011
increased approximately 11% to $38,156,000 or $.57 per basic and $.56 per
diluted common share compared to the year ended December 31, 2010 net
income of $34,441,000 or $.52 per basic and $.51 per diluted common
share. 

    Additionally, our Board of Directors had previously declared on January
24, 2012 a regular quarterly cash dividend of $.16125 per common share,
payable on March 16, 2012 to shareholders of record at the close of
business on February 24, 2012. This represents our 35th consecutive
regular quarterly cash dividend payment, as well as the 34th consecutive
increase since our initiation of regular quarterly cash dividend payments
in 2003.

    The Company also announced that it will make a presentation on February
8, 2012 regarding the Company at the "UBS Annual Global Healthcare
Services Conference" at the Grand Hyatt in New York City. This
presentation will also be audio webcast at www.ibb.ubs.com.

    The Company will host a conference call today at 4:30 PM Eastern Time to
discuss its results for the three and twelve month periods ended December
31, 2011. The call in number will be 888-337-8169. Passcode #3743187

    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
year ended December 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 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. 
                                           CONSOLIDATED STATEMENTS OF INCOME
                                                      (Unaudited)

                                              For the Three Months Ended
                                                     December 31,
                                                2011              2010
                                          ----------------  ----------------
Revenues                                  $    250,239,000  $    202,087,000
Operating costs and expenses:
  Cost of services provided                    217,190,000       172,952,000
  Selling, general and administrative           18,671,000        15,771,000
                                          ----------------  ----------------
Income from operations                          14,378,000        13,364,000

Other income:
  Investment and interest income                 1,189,000         1,073,000
                                          ----------------  ----------------
Income before income taxes                      15,567,000        14,437,000
Income taxes                                     5,002,000         5,314,000
                                          ----------------  ----------------
Net income                                $     10,565,000  $      9,123,000
                                          ================  ================

Basic earnings per common share           $            .16  $            .14
                                          ================  ================

Diluted earnings per common share         $            .16  $            .14
                                          ================  ================

Cash dividends per common share           $            .16  $           .155
                                          ================  ================

Basic weighted average number of common
 shares outstanding                             66,812,000        66,074,000
                                          ================  ================

Diluted weighted average number of common
 shares outstanding                             67,705,000        67,232,000
                                          ================  ================

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

                                                  For the Year Ended
                                                     December 31,
                                                2011              2010
                                          ----------------  ----------------
Revenues                                  $    889,065,000  $    773,956,000
Operating costs and expenses:
  Cost of services provided                    766,958,000       665,149,000
  Selling, general and administrative           65,306,000        57,310,000
                                          ----------------  ----------------
                                                56,801,000        51,497,000

Other income:
  Investment and interest income                 1,011,000         2,622,000
                                          ----------------  ----------------
Income before income taxes                      57,812,000        54,119,000
Income taxes                                    19,656,000        19,678,000
                                          ----------------  ----------------
Net income                                $     38,156,000  $     34,441,000
                                          ================  ================

Basic earnings per Common Share           $            .57  $            .52
                                          ================  ================

Diluted earnings per Common Share         $            .56  $            .51
                                          ================  ================

Cash dividends per common share           $            .63  $            .60
                                          ================  ================

Basic weighted average number of common
 shares outstanding                             66,637,000        65,917,000
                                          ================  ================

Diluted weighted average number of common
 shares outstanding                             67,585,000        67,008,000
                                          ================  ================

                                            HEALTHCARE SERVICES GROUP, INC. 
                                            CONDENSED CONSOLIDATED BALANCE
                                                        SHEETS
                                                      (Unaudited)

                                            December 31,      December 31,
                                                2011              2010
                                          ----------------  ----------------
Cash and cash equivalents                 $     38,639,000  $     39,692,000
Marketable securities, net                      31,337,000        43,437,000
Accounts receivable, net                       130,744,000       108,426,000
Other current assets                            31,401,000        30,220,000
                                          ----------------  ----------------
  Total current assets                         232,121,000       221,775,000

Property and equipment, net                      9,763,000         6,656,000
Notes receivable- long term, net                 1,483,000         5,055,000
Goodwill, net                                   16,955,000        16,955,000
Other Intangible Assets, net                     7,372,000         7,262,000
Deferred compensation funding                   13,780,000        12,080,000
Other assets                                     8,221,000         8,151,000
                                          ----------------  ----------------

Total Assets                              $    289,695,000  $    277,934,000
                                          ================  ================

Accrued insurance claims- current         $      5,296,000  $      5,076,000
Other current liabilities                       40,091,000        35,455,000
                                          ----------------  ----------------
  Total current liabilities                     45,387,000        40,531,000

Accrued insurance claims- long term             12,358,000        11,845,000
Deferred compensation liability                 14,224,000        12,479,000
Stockholders' equity                           217,726,000       213,079,000
                                          ----------------  ----------------

Total Liabilities and Stockholders'
 Equity                                   $    289,695,000  $    277,934,000
                                          ================  ================


    


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

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