SOURCE: Healthcare Services Group, Inc.

April 17, 2007 14:00 ET

Healthcare Services Group, Inc. Reports Results for the Three Months Ended March 31, 2007 and Declares First Quarter 2007 Cash Dividend

BENSALEM, PA -- (MARKET WIRE) -- April 17, 2007 --

--  Net income up 31% on an 18% increase in revenues
--  Quarterly cash dividend raised 7% over 2006 fourth quarter cash
    dividend and 36% over 2006 first quarter cash dividend
    
Healthcare Services Group, Inc. (NASDAQ: HCSG) reported that revenues for the three months ended March 31, 2007 increased by over 18% to $140,679,000 compared to $118,918,000 for the same 2006 period. Net income increased over 31% for the three months ended March 31, 2007 to $7,450,000 or $.27 per basic and $.26 per diluted common share, compared to the 2006 first quarter net income of $5,676,000 or $.21 per basic and $.20 per diluted common share.

Additionally, the Company's Board of Directors has declared a first quarter 2007 cash dividend of $.15 per common share payable on May 11, 2007 to shareholders of record at the close of business April 27, 2007. The first quarter 2007 cash dividend represents a 7% increase over the cash dividend declared for the 2006 fourth quarter and is the sixteenth consecutive regular quarterly cash dividend payment, as well as the fifteenth consecutive increase since our initiation of regular quarterly cash dividend payments in 2003.

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 16% of revenues in the 2007 first quarter; risks associated with our acquisition of Summit Services Group, Inc., including integration risks and costs, or such business not achieving expected financial results or synergies or failure to otherwise perform as expected; 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, 2006 Part I thereof under "Government Regulation of Clients," "Competition" and "Service Agreements/Collections," and under Part 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. 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.


                      HEALTHCARE SERVICES GROUP, INC.

                  CONDENSED CONSOLIDATED BALANCE SHEETS
                                (Unaudited)


                                                   March 31,   December 31,
                                                     2007          2006
                                                ------------- -------------
Cash and cash equivalents                       $  78,999,000 $  72,997,000
Accounts receivable, net                           80,691,000    78,086,000
Other current assets                               18,558,000    17,154,000
   Total current assets                           178,248,000   168,237,000

Property and equipment, net                         4,748,000     4,875,000
Notes receivable- long term, net                    8,082,000     7,861,000
Goodwill, net                                      14,570,000    14,543,000
Other Intangible Assets, net                        6,883,000     7,148,000
Deferred compensation funding                       8,356,000     7,385,000
Other assets                                        5,844,000     5,507,000
                                                ------------- -------------

Total Assets                                    $ 226,731,000 $ 215,556,000
                                                ============= =============


Accrued insurance claims- current               $   4,623,000 $   4,647,000
Other current liabilities                          25,431,000    22,963,000
                                                ------------- -------------
   Total current liabilities                       30,054,000    27,610,000

Accrued insurance claims- long term                10,786,000    10,843,000
Deferred compensation liability                    12,497,000    11,626,000
Stockholders' equity                              173,394,000   165,477,000
                                                ------------- -------------

Total Liabilities and Stockholders' Equity      $ 226,731,000 $ 215,556,000
                                                ============= =============





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


                                                For the Three Months Ended
                                                         March 31,
                                                    2007          2006
                                                ------------- -------------
Revenues                                        $ 140,679,000 $ 118,918,000
Operating costs and expenses:
   Cost of services provided                      119,314,000   102,182,000
   Selling, general and administrative             10,511,000     9,074,000
Other income:
   Investment and interest                          1,261,000     1,347,000
                                                ------------- -------------
Income before income taxes                         12,115,000     9,009,000
Income taxes                                        4,665,000     3,333,000
                                                ------------- -------------
Net income                                      $   7,450,000 $   5,676,000
                                                ============= =============

Basic earnings per common share                 $         .27 $         .21
                                                ============= =============

Diluted earnings per common share               $         .26 $         .20
                                                ============= =============

Cash dividends per common share                 $         .14 $         .10
                                                ============= =============

Basic weighted average number of common shares
 outstanding                                       27,771,000    27,320,000
                                                ============= =============

Diluted weighted average number of common
 shares outstanding                                29,108,000    28,620,000
                                                ============= =============

Contact Information

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

    Thomas Cook
    President and Chief Operating Officer
    215-639-4274