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Healthcare Services Group, Inc. Reports Results for the Three and Six Months Ended June 30, 2017 and Announces Increased Second Quarter 2017 Cash Dividend

BENSALEM, Pa., July 11, 2017 (GLOBE NEWSWIRE) -- Healthcare Services Group, Inc. (NASDAQ:HCSG) reported that revenues for the three months ended June 30, 2017 increased approximately 22% to $470.9 million. Net income for the three months ended June 30, 2017 was $22.6 million, or $0.31 per basic and $0.30 per diluted common share, compared to the three months ended June 30, 2016 net income of $18.8 million, or $0.26 per basic and diluted common share.

Revenues for the six months ended June 30, 2017 increased approximately 13% to $875.4 million. Net income for the six months ended June 30, 2017 was $44.6 million, or $0.61 per basic and $0.60 per diluted common share, compared to the six months ended June 30, 2016 net income of $37.4 million, or $0.52 per basic and $0.51 per diluted common share.

In addition, our Board of Directors declared a quarterly cash dividend of $0.18875 per common share, payable on September 22, 2017 to shareholders of record at the close of business on August 18, 2017. This represents the 57th consecutive quarterly cash dividend payment, as well as the 56th consecutive increase since our initiation of quarterly cash dividend payments in 2003.

The Company will host a conference call on Wednesday, July 12, 2017 at 8:30 a.m. Eastern Time to discuss its results for the three and six months ended June 30, 2017. 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, A replay of the earnings call may be accessed through the phone number above through approximately 10:00 p.m. Eastern Time on Wednesday, July 12, 2017. The webcast will also be available on our website for one year following the date of the earnings call.

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, and 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; having one client which accounted for 12.9% of our total consolidated revenues for the six months ended June 30, 2017; credit and collection risks associated with this industry; 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; tax benefits arising from our corporate reorganization and self-funded health insurance program transition; risks associated with the reorganization of our corporate structure; perceived or real risks related to the food industry; and the risk factors described in our Form 10-K  filed with the Securities and Exchange Commission for the year ended December 31, 2016 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, retain and 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 the successful execution of our 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.

(in thousands, except per share data)
    For the Three Months Ended   For the Six Months Ended
    June 30,   June 30,
    2017   2016   2017   2016
Revenues   $ 470,876     $ 386,556     $ 875,366     $ 771,363  
Operating costs and expenses:                
  Cost of services provided   407,322     332,211     752,892     662,255  
  Selling, general and administrative   31,991     25,664     60,201     51,010  
Income from operations   31,563     28,681     62,273     58,098  
Other income:                
 Investment and interest   1,515     1,002     3,084     1,189  
Income before income taxes   33,078     29,683     65,357     59,287  
Income taxes   10,527     10,923     20,789     21,901  
Net income   $ 22,551     $ 18,760     $ 44,568     $ 37,386  
Basic earnings per common share   $ 0.31     $ 0.26     $ 0.61     $ 0.52  
Diluted earnings per common share   $ 0.30     $ 0.26     $ 0.60     $ 0.51  
Cash dividends declared per common share   $ 0.18875     $ 0.18375     $ 0.37625     $ 0.36625  
Basic weighted average number of common shares outstanding   73,276     72,568     73,176     72,466  
Diluted weighted average number of common shares outstanding   74,269     73,316     74,108     73,165  

(in thousands)
    June 30, 2017   December 31, 2016
Cash and cash equivalents   $ 7,058     $ 23,853  
Marketable securities, at fair value   70,082     67,730  
Accounts and notes receivable, net   338,368     271,276  
Other current assets   60,675     51,765  
  Total current assets   476,183     414,624  
Property and equipment, net   13,399     13,455  
Notes receivable - long term   7,526     7,531  
Goodwill   50,473     44,438  
Other intangible assets, net   31,330     14,409  
Deferred compensation funding   26,326     24,119  
Other assets   10,509     9,870  
Total Assets   $ 615,746     $ 528,446  
Accrued insurance claims - current   $ 23,975     $ 23,573  
Other current liabilities   122,960     77,298  
  Total current liabilities   146,935     100,871  
Accrued insurance claims - long term   66,077     64,080  
Deferred compensation liability   26,657     24,653  
Stockholders' equity   376,077     338,842  
Total Liabilities and Stockholders' Equity   $ 615,746     $ 528,446  


Company Contacts:

Theodore Wahl
President and Chief Executive Officer

Matthew J. McKee
Senior Vice President of Strategy


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