UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2005
Commission File Number 0-120152
HEALTHCARE SERVICES GROUP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2018365
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification number)
3220 Tillman Drive-Suite 300, Bensalem, Pennsylvania 19020
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: 215-639-4274
Total of 16 Pages
INDEX
DESCRIPTION PAGE
----------- -----
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 2
FINANCIAL STATEMENTS:
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS 3
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS 4
NOTES TO FINANCIAL STATEMENTS 5 - 9
SUPPLEMENTAL SCHEDULE:
SCHEDULE OF ASSETS (HELD AT END OF YEAR) 10
SIGNATURES 11
CERTIFICATIONS 12-15
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Plan Administrator:
HEALTHCARE SERVICES GROUP, INC. RETIREMENT SAVINGS PLAN
We have audited the accompanying statements of net assets available for benefits
of Healthcare Services Group, Inc. Retirement Savings Plan (the "Plan") as of
December 31, 2005 and 2004, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Plan is not required to have,
nor were we engaged to perform an audit of its internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Plan's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2005 and 2004, and the changes in net assets available for benefits
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at the end of year) as of December 31, 2005 is presented for the purpose of
additional analysis and is not a required part of the basic financial
statements, but is supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. This supplemental schedule has been
subjected to the auditing procedures applied in our audit of the basic 2005
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
GRANT THORNTON LLP
Edison, New Jersey
June 23, 2006
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HEALTHCARE SERVICES GROUP, INC.
RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31,
2005 2004
---------- ----------
Assets
Investments at fair value $1,551,867 $1,338,767
Non-interest bearing cash -- 9
Receivables
Participant contributions 7,401 7,695
---------- ----------
Net Assets Available for Benefits $1,559,268 $1,346,471
========== ==========
The accompanying notes are an integral part of these statements.
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HEALTHCARE SERVICES GROUP, INC.
RETIREMENT SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31,
2005 2004
---------- ----------
Additions:
Participant contributions $ 222,229 $ 278,988
Rollover contributions -- 27,169
Investment income:
Interest 56 11
Dividends 39,924 14,197
Other (163) --
Net appreciation in fair value of investments 96,536 85,561
---------- ----------
136,353 99,769
---------- ----------
Total Additions 358,581 405,926
Deductions:
Benefit payments (145,785) (90,737)
NET INCREASE 212,797 315,189
Net assets available for benefits, beginning of year 1,346,471 1,031,282
---------- ----------
Net assets available for benefits, end of year $1,559,268 $1,346,471
========== ==========
The accompanying notes are an integral part of these statements.
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HEALTHCARE SERVICES GROUP, INC.
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
NOTE A.-DESCRIPTION OF PLAN
The following description of the Healthcare Services Group, Inc. Retirement
Savings Plan (the "Plan") provides only general information. Participants
should refer to the Plan agreement for a more complete description of the
Plan's provisions.
1. General
The Plan commenced October 1, 1999 and is subject to the provisions of
the Employee Retirement Income Security Act of 1974 ("ERISA"). The
Plan is a defined contribution plan covering all non-highly
compensated salaried employees who have one year of service (1,000
hours) and have attained the age of twenty-one or older with the
exception employees whose employment is governed by a collective
bargaining agreement.
2. Contributions
Each year, participants may contribute up to 15% of their pretax
annual compensation as defined in the Plan. There are no
employer-matching contributions as defined in the Plan. A participant
may elect to commence salary reductions as of the first day of the
month coinciding with the date the employee satisfied the eligibility
requirements.
Participants may also rollover to the plan amounts representing
distributions from other qualified defined benefit or defined
contribution plans. Participants direct the investment of their
contributions into various options offered by the Plan.
Contributions are subject to certain limitations.
3. Participant Accounts
Each participant's account is credited with the participant's
contribution and allocations of Plan earnings. Allocations are
determined by the participant. The benefit to which a participant is
entitled is the benefit that can be provided from the participant's
vested account.
4. Vesting
Participants are vested immediately in their contributions plus actual
earnings thereon.
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HEALTHCARE SERVICES GROUP, INC.
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2005 AND 2004
NOTE A. (CONTINUED)
5. Administrative Expenses
All administrative expenses were paid by the plan sponsor, Healthcare
Services Group, Inc.
6. Benefit Payments
On termination of service due to death or retirement, a participant
may elect to receive either a lump-sum amount equal to the value of
the participant's vested interest in his or her account or monthly,
quarterly, semi-monthly or annual installments. No disability
benefits, other than those payable upon termination of employment, are
provided in the Plan. For termination of service for other reasons, a
participant may receive the value of the vested interest in his or her
account as a lump sum distribution.
A Participant who has attained the age of 59 1/2 years may elect to
receive a distribution of all or a portion of the vested amounts then
credited to the Participant's account. The Participant will still
continue to be eligible to participate in the Plan.
A Participant may elect to receive an advance distribution for
hardship under certain conditions as defined in the Plan and as
subject to the evaluation of the Plan Administrator based on whether
certain conditions have been satisfied.
NOTE B.-SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation
of the accompanying financial statements follows:
1. Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and changes therein, and
disclosures of contingent assets and liabilities. Actual results could
differ from those estimates.
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HEALTHCARE SERVICES GROUP, INC.
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2005 AND 2004
NOTE B. (CONTINUED)
2. Investment Valuation and Income Recognition
The Plan's investments are stated at fair value, which approximates
market value, as reported to the Plan by PNC Bank. Quoted market
prices are used to value investments. Shares of mutual funds are
valued at the net asset value of shares held by the Plan at year-end.
Purchases and sales of securities are recorded on a trade-date basis.
3. Benefit Payments
Participants' withdrawals are recorded when paid.
NOTE C.-INVESTMENTS
The following presents investments that represent 5 percent or more of the
Plan's net assets as of:
December 31,
---------------------
2005 2004
---------- --------
Fidelity Advisor Equity Growth Fund $ * $ 70,646
Fidelity Advisor Equity Income Fund 137,023 103,712
Growth Fund of America 119,469 *
Janus Adviser Forty Fund 138,841 98,315
Janus Adviser Lg Cap Growth Fund 83,452 88,090
Healthcare Services Group, Inc. common stock 133,574 129,183
Black Rock Money Market Fund (PNC; Note E) 475,145 437,510
---------- --------
$1,087,504 $927,456
========== ========
* Balance did not represent at least 5% of Net Plan Assets
During 2005 and 2004, the Plan's investments (including realized and
unrealized gains and losses) appreciated in value by $96,536 and $85,561,
respectively as follows:
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HEALTHCARE SERVICES GROUP, INC.
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2005 AND 2004
NOTE C. (CONTINUED)
December 31,
-----------------
2005 2004
------- -------
Mutual Funds $21,843 $51,538
Healthcare Services Group, Inc. common stock 63,328 31,073
Money Market Fund (PNC; Note E) 11,365 2,950
------- -------
$96,536 $85,561
======= =======
NOTE D.-PLAN TERMINATION
Although it has not expressed intent to do so, the Company has the right
under the Plan to terminate the Plan at any time subject to the provisions
of the Employee Retirement Income Security Act of 1974 ("ERISA").
NOTE E.-RELATED PARTY-IN-INTEREST TRANSACTIONS
Certain Plan investments are shares of a money market fund managed by PNC
Financial Services Group ("PNC"). PNC is the trustee as defined by the Plan
and, therefore, these transactions qualify as party-in-interest
transactions.
In addition, certain plan investments are shares of the Healthcare Services
Group, Inc. common stock. Healthcare Services Group, Inc. is the Plan
sponsor as defined by the Plan and, therefore, these transactions qualify
as party-in-interest transactions. The Plan held 6,449.7252 and 6,198.7968
shares of Healthcare Services Group, Inc. common stock with a quoted market
value of $133,574 and $129,183 at December 31, 2005 and 2004, respectively.
-8-
HEALTHCARE SERVICES GROUP, INC.
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2005 AND 2004
NOTE F.-TAX STATUS OF PLAN
The Internal Revenue Service has determined and informed the Company by a
letter dated March 7, 2001, that the Plan and related trust are designed in
accordance with applicable sections of the Internal Revenue Code ("IRC").
The Plan has been amended since receiving the determination letter.
However, an amendment required by IRS regulations has not been adopted as
of December 31, 2005. The Plan has applied to the IRS under the Voluntary
Correction Program to remedy this violation. Except for the violation noted
above, the Plan administrator believes that the Plan is currently designed
and being operated in compliance with the applicable requirements of the
Internal Revenue Code. Therefore, no provision for income taxes has been
included in the Plan's financial statements.
NOTE G.-RISKS AND UNCERTAINTIES
The Plan invests in various investment securities. Investment securities
are exposed to various risks such as interest rate, market and credit
risks. Due to the level of risk associated with certain investment
securities, it is at least reasonably possible that changes in the values
of investment securities will occur in the near term and that such changes
could materially affect participants' account balances and the amounts
reported in the statement of net assets available for benefits.
-9-
HEALTHCARE SERVICES GROUP, INC.
RETIREMENT SAVINGS PLAN
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
SCHEDULE H, LINE 4I OF FORM 5500
(a) (b) (c) (e)
Party-In- Identity of Description of Current
Interest Issue Investment Value
--------- ----------------------------------- ----------------- ----------
* Healthcare Services Group Common Stock $ 133,574
AIM High Yield Fund Cl A Mutual Fund 7,650
American Beacon Sm Cap Value Mutual Fund 10,891
American Balanced Fund Mutual Fund 41,557
American Century Sm Cap Value Mutual Fund 13,830
American Century Value Fund Mutual Fund 20,913
Growth Fund of America Mutual Fund 119,469
Income Fund of America Mutual Fund 49,221
BlackRock GNMA Fund Inv A Mutual Fund 5,922
BlackRock Managed Inc Fund Inv A Mutual Fund 14,033
Federated High Income Bond Fund Mutual Fund 21,089
Federated Stock Trust Mutual Fund 48,052
Fidelity Advisor Equity Growth Mutual Fund 74,918
Fidelity Advisor Equity Income Mutual Fund 137,023
* Healthcare Services Stock Liquidity Cash 560
AIM Dynamics Fund Cl A Mutual Fund 12,382
AIM Global Health Care Fund Mutual Fund 26,448
AIM Technology Fund Cl A Mutual Fund 40,056
Janus Adviser Forty Fund Mutual Fund 138,841
Janus Adviser Lg Cap Growth Fund Mutual Fund 83,452
MFS Int'l New Discovery Fund Mutual Fund 51,495
MFS New Endeavor Fund Mutual Fund 3,313
Royce Low Priced Stock Fund Mutual Fund 15,873
Royce Opportunity Fund Mutual Fund 6,160
* BlackRock Money Market (PNC) Money Market Fund 475,145
----------
$1,551,867
==========
-10-
HEALTHCARE SERVICES GROUP, INC.
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2005 AND 2004
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned
thereunto duly authorized.
Healthcare Services Group, Inc. Retirement Savings Plan
Date: June 26, 2006 /s/ James L. DiStefano
---------------------------------
By: James L. DiStefano
Title: Chairman of Plan Committee
-11-
HEALTHCARE SERVICES GROUP, INC.
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2005 AND 2004
CERTIFICATION:
I, Daniel P. McCartney, Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Healthcare
Services Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the periods covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures ( as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting ( as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have;
a) designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this
report is being prepared;
b) designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting
and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
c) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this quarterly
report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation and;
d) disclosed in this report any change in the registrant's
internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's Board of Directors.
a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect
the registrant's ability to record, process, summarize and
report financial information; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting
Date: June 26, 2006 /s/ Daniel P. McCartney
---------------------------------
Daniel P. McCartney
Chief Executive Officer
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HEALTHCARE SERVICES GROUP, INC.
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2005 AND 2004
I, James L. DiStefano, Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Healthcare
Services Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the periods covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures ( as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting ( as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have;
a) designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this
report is being prepared;
b) designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting
and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
c) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered
by this report based on such evaluation and;
d) disclosed in this report any change in the registrant's
internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's Board of Directors.
a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect
the registrant's ability to record, process, summarize and
report financial information; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: June 26, 2006 /s/ James L. DiStefano
---------------------------------
James L. DiStefano
Chief Financial Officer
-13-
HEALTHCARE SERVICES GROUP, INC.
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2005 AND 2004
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Healthcare Services Group, Inc.
Retirement Savings Plan on Form 11-K for the year ended December 31, 2005 as
filed with the Securities and Exchange Commission on the date hereof (the "Form
11-K"), I, Daniel P. McCartney, Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
1. The Form 11-K fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d); and
2. The information contained in the Form 11-K fairly presents, in all material
respects, the financial condition and results of operations of the Plan.
/s/ Daniel P. McCartney
---------------------------------
Daniel P. McCartney
Chief Executive Officer
June 26, 2006
-14-
HEALTHCARE SERVICES GROUP, INC.
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2005 AND 2004
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Healthcare Services Group, Inc.
Retirement Savings Plan on Form 11-K for the year ended December 31, 2005 as
filed with the Securities and Exchange Commission on the date hereof (the "Form
11-K"), I, James L. DiStefano, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
3. The Form 11-K fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d); and
4. The information contained in the Form 11-K fairly presents, in all material
respects, the financial condition and results of operations of the Plan.
/s/ James L. DiStefano
---------------------------------
James L. DiStefano
Chief Financial Officer
June 26, 2006
-15-