Healthcare Services Group, Inc. Reports Results for the Three Months Ended March 31, 2010

April 13, 2010

BENSALEM, PA, Apr 13, 2010 (MARKETWIRE via COMTEX News Network) -- Healthcare Services Group, Inc. (NASDAQ: HCSG) reported that revenues for the three months ended March 31, 2010 increased 15% to $183,801,000 compared to $160,409,000 for the same 2009 period. Net income for the three months ended March 31, 2010 was $7,428,000 or $.17 per basic and per diluted common share, compared to the 2009 first quarter net income of $7,736,000 or $.18 per basic and per diluted common share.

Additionally, our Board of Directors declared a regular quarterly cash dividend of $.22 per common share, payable on May 14, 2010 to shareholders of record at the close of business April 23, 2010. This represents a 5% increase over the dividend declared for the 2009 fourth quarter and a 22% increase over the dividend declared for the same 2009 period payment. It is the 28th consecutive regular quarterly cash dividend payment, as well as the 27th consecutive increase since our initiation of regular quarterly cash dividend payments in 2003.

The Company will host a conference call on Wednesday, April 14, 2010 at 8:30 AM Eastern Time to discuss its results for the three month period ended March 31, 2010. The call in numbers will be 800-766-6630 and 416-695-6616.

Cautionary Statement Regarding Forward-Looking Statements

This release 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 11% of revenues in the three month period ended March 31, 2010; risks associated with our acquisition of Contract Environmental Services, 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, 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, 2009 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 has affected through the enactment of a number of major laws during the past decade, most recently the March 2010 enactment of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. Currently, the U.S. Congress is considering changes or revising legislation to reform health care in the United States which, among other initiatives, may impose cost containment measures impacting our clients. These laws and proposed 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.
                                                  March 31,   December 31,
                                                    2010          2009
                                                ------------- -------------
Cash and cash equivalents                       $  28,648,000 $  31,301,000
Marketable securities, net                         43,901,000    52,648,000
Accounts receivable, net                          105,065,000   104,356,000
Other current assets                               23,747,000    23,865,000
  Total current assets                            201,361,000   212,170,000
Property and equipment, net                         4,574,000     4,391,000
Notes receivable- long term, net                    5,080,000     4,623,000
Goodwill, net                                      16,955,000    17,087,000
Other Intangible Assets, net                        8,665,000     8,862,000
Deferred compensation funding                      11,553,000    10,783,000
Other assets                                        8,549,000     7,976,000
                                                ------------- -------------
Total Assets                                    $ 256,737,000 $ 265,892,000
                                                ============= =============
Accrued insurance claims- current               $   5,161,000 $   4,844,000
Other current liabilities                          17,801,000    29,873,000
                                                ------------- -------------
  Total current liabilities                        22,962,000    34,717,000
Accrued insurance claims- long term                12,042,000    11,302,000
Deferred compensation liability                    11,680,000    11,099,000
Stockholders' equity                              210,053,000   208,774,000
                                                ------------- -------------
Total Liabilities and Stockholders' Equity      $ 256,737,000 $ 265,892,000
                                                ============= =============
                      HEALTHCARE SERVICES GROUP, INC.
                                                For the Three Months Ended
                                                        March 31,
                                                    2010          2009
                                                ------------- -------------
Revenues                                        $ 183,801,000 $ 160,409,000
Operating costs and expenses:
   Cost of services provided                      158,573,000   137,892,000
   Selling, general and administrative             13,901,000    10,876,000
                                                ------------- -------------
Income from operations                             11,327,000    11,641,000
Other income:
    Investment and interest                           750,000       937,000
                                                ------------- -------------
Income before income taxes                         12,077,000    12,578,000
Income taxes                                        4,649,000     4,842,000
                                                ------------- -------------
Net income                                      $   7,428,000 $   7,736,000
                                                ============= =============
Basic earnings per common share                 $         .17 $         .18
                                                ============= =============
Diluted earnings per common share               $         .17 $         .18
                                                ============= =============
Cash dividends per common share                 $         .21 $         .17
                                                ============= =============
Basic weighted average number of common shares
 outstanding                                       43,899,000    43,457,000
                                                ============= =============
Diluted weighted average number of common shares
 outstanding                                       44,659,000    44,073,000
                                                ============= =============

Company Contacts:
Daniel P. McCartney
Chairman and Chief Executive Officer

Thomas Cook

SOURCE: Healthcare Services Group, Inc.

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