Healthcare Services Group, Inc. Reports Results for the Three and Nine Months Ended September 30, 2015 and Increases Third Quarter 2015 Cash Dividend

BENSALEM, Pa., Oct. 13, 2015 (GLOBE NEWSWIRE) — Healthcare Services Group, Inc. (NASDAQ:HCSG) reported that revenues for the three months ended September 30, 2015 increased approximately 13% to $360,165,000 compared to the same 2014 period. Net income for the three months ended September 30, 2015 was $17,086,000 or $0.24 per basic and per diluted common share. Revenues for the nine months ended September 30, 2015 increased approximately 13% to $1,070,767,000 compared to the same 2014 period. Net income for the nine months ended September 30, 2015 was $48,890,000 or $0.68 per basic and per diluted common share.

Additionally, our Board of Directors declared a quarterly cash dividend of $0.18 per common share, payable on December 18, 2015 to shareholders of record at the close of business on November 20, 2015. This represents the 50th consecutive quarterly cash dividend payment, as well as the 49th consecutive increase since our initiation of quarterly cash dividend payments in 2003.

The Company will host a conference call on Wednesday, October 14, 2015 at 8:30 a.m. Eastern Time to discuss its results for the three and nine months ended September 30, 2015. The call may be accessed via phone at 800-893-5360. The call will be simultaneously webcast under the “Events & Presentations” section of the investor relations page on our website, www.hcsg.com. A replay of the webcast will also be available on our website through approximately 10:00 p.m. Eastern Time on Wednesday, October 14th.

The Company also announced that it will participate in several conferences, including the Stifel Healthcare Conference on November 17th at The New York Palace Hotel in New York City and the Oppenheimer 26th Annual Healthcare Conference to be held December 8th – December 9th at The Westin New York Grand Central in New York City.

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; having several significant clients who each individually contributed at least 3% with one as high as 8% of our total consolidated revenues for the three and nine months ended September 30, 2015; 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 other labor related matters such as minimum wage increases; continued receipt of tax benefits arising from our corporate reorganization and self-funded health insurance program transition; risks associated with the reorganization of our corporate structure; and the risk factors described in our Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2014 in Part I thereof under ”Government Regulation of Clients,” ”Competition” and ”Service Agreements/Collections,” and under Item IA “Risk Factors”.

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.

Company Contacts:        
         
Daniel P. McCartney   Theodore Wahl   Matthew J. McKee
Chairman   President and Chief Executive Officer   Vice President of Strategy
         
215-639-4274        
investor-relations@hcsgcorp.com        

HEALTHCARE SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
       
  For the Three Months Ended   For the Nine Months Ended
  September 30,   September 30,
  2015   2014   2015   2014
Revenues $ 360,165,000     $ 320,099,000     $ 1,070,767,000     $ 951,559,000  
Operating costs and expenses:              
  Cost of services provided 308,645,000     315,757,000     916,798,000     858,943,000  
  Selling, general and administrative 23,445,000     39,375,000     75,332,000     83,661,000  
Income (loss) from operations 28,075,000     (35,033,000 )   78,637,000     8,955,000  
Other income (expense):              
  Investment and interest (1,334,000 )   (50,000 )   (585,000 )   1,134,000  
Income (loss) before income taxes 26,741,000     (35,083,000 )   78,052,000     10,089,000  
Income tax provision (benefit) 9,655,000     (12,901,000 )   29,162,000     3,711,000  
               
Net income (loss) $ 17,086,000     $ (22,182,000 )   $ 48,890,000     $ 6,378,000  
               
Basic earnings (loss) per common share $ 0.24     $ (0.31 )   $ 0.68     $ 0.09  
               
Diluted earnings (loss) per common share $ 0.24     $ (0.31 )   $ 0.68     $ 0.09  
               
Cash dividends per common share $ 0.18     $ 0.17     $ 0.53     $ 0.52  
               
Basic weighted average number of common shares outstanding 72,009,000     70,671,000     71,714,000     70,479,000  
               
Diluted weighted average number of common shares outstanding 72,691,000     70,671,000     72,381,000     71,213,000  

HEALTHCARE SERVICES GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
       
  September 30, 2015   December 31, 2014
Cash and cash equivalents $ 44,369,000     $ 75,280,000  
Marketable securities, at fair value 59,199,000     11,799,000  
Accounts and notes receivable, net 209,626,000     198,128,000  
Other current assets 48,782,000     49,621,000  
  Total current assets 361,976,000     334,828,000  
       
Property and equipment, net 13,251,000     12,772,000  
Notes receivable – long term 2,626,000     5,179,000  
Goodwill 44,438,000     44,438,000  
Other intangible assets, net 17,918,000     20,349,000  
Deferred compensation funding 23,905,000     24,742,000  
Other assets 10,684,000     27,271,000  
       
Total Assets $ 474,798,000     $ 469,579,000  
       
Accrued insurance claims – current $ 19,115,000     $ 17,748,000  
Other current liabilities 73,728,000     100,211,000  
  Total current liabilities 92,843,000     117,959,000  
       
Accrued insurance claims – long term 60,531,000     50,514,000  
Deferred compensation liability 24,306,000     25,276,000  
Stockholders’ equity 297,118,000     275,830,000  
       
Total Liabilities and Stockholders’ Equity $ 474,798,000     $ 469,579,000