10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                    

Commission file number: 0-12015

HEALTHCARE SERVICES GROUP, INC.

(Exact name of registrant as specified in its charter)

Pennsylvania	23-2018365
(State or other jurisdiction of incorporated or organization)	(IRS Employer Identification No.)
3220 Tillman Drive, Suite 300, Bensalem, PA	19020
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:

(215) 639-4274

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES  þ    NO  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES  þ    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	þ	Accelerated filer	¨	Non-accelerated filer	¨	Smaller reporting company	¨
				(Do not check if a smaller  reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES  ¨    NO  þ

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Common Stock, $.01 par value: 70,268,000 shares outstanding as of April 22, 2014.

1

Healthcare Services Group, Inc.

Quarterly Report on Form 10-Q

For the Period Ended March 31, 2014

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION	4
Item 1.	Financial Statements (Unaudited)	4
	Consolidated Balance Sheets as of March 31, 2014 and December 31, 2013	4
	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2014 and 2013	5
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013	6
	Consolidated Statement of Stockholders' Equity for the Three Months Ended March 31, 2014	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
PART II	OTHER INFORMATION	32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	32
Signatures		33

2

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report and documents incorporated by reference into this report 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; from having several significant clients who each individually contributed at least 3% with one as high as 7% of our total consolidated revenues for the three months ended March 31, 2014; risks associated with our acquisition of Platinum Health Services, LLC; 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; and the risk factors described in Part I of our Form 10-K for the fiscal year ended December 31, 2013 under “Government Regulation of Clients,” “Competition” and “Service Agreements/Collections,” and under Item IA “Risk Factors” in our Form 10-K for the fiscal year ended December 31, 2013.

These factors, in addition to delays in payments from clients and/or clients in bankruptcy or clients for which we are in litigation to collect payment, 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.

3

PART I — FINANCIAL INFORMATION.

Item 1. Financial Statements (Unaudited).

Healthcare Services Group, Inc.

Consolidated Balance Sheets

	(Unaudited)
	March 31, 2014			December 31, 2013
ASSETS:
Current assets:
Cash and cash equivalents	$	71,692,000		$	64,155,000
Marketable securities, at fair value	11,647,000			11,445,000
Accounts and notes receivable, less allowance for doubtful accounts of $3,981,000 in 2014 and $3,919,000 in 2013	195,146,000			189,107,000
Inventories and supplies	32,756,000			32,447,000
Deferred income taxes	—			2,339,000
Prepaid income taxes	1,007,000			—
Prepaid expenses and other	11,805,000			9,699,000
Total current assets	324,053,000			309,192,000
Property and equipment:
Laundry and linen equipment installations	2,472,000			2,516,000
Housekeeping and office equipment and furniture	30,427,000			29,182,000
Autos and trucks	305,000			305,000
	33,204,000			32,003,000
Less accumulated depreciation	21,377,000			20,699,000
	11,827,000			11,304,000
Goodwill	40,183,000			40,183,000
Other intangible assets, less accumulated amortization of $13,737,000 in 2014 and $12,909,000 in 2013	22,544,000			23,372,000
Notes receivable — long term portion, net of discount	5,847,000			5,779,000
Deferred compensation funding, at fair value	22,998,000			22,200,000
Deferred income taxes — long term portion	13,649,000			13,274,000
Other noncurrent assets	38,000			38,000
Total assets	$	441,139,000		$	425,342,000
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	47,985,000		$	43,682,000
Accrued payroll, accrued and withheld payroll taxes	45,554,000			37,162,000
Other accrued expenses	3,283,000			8,528,000
Income taxes payable	—			1,878,000
Deferred income taxes	1,111,000			—
Accrued insurance claims	7,861,000			7,853,000
Total current liabilities	105,794,000			99,103,000
Accrued insurance claims — long term portion	18,343,000			18,325,000
Deferred compensation liability	23,211,000			22,771,000
Commitments and contingencies
STOCKHOLDERS’ EQUITY:
Common stock, $.01 par value; 100,000,000 shares authorized; 72,049,000 shares issued and outstanding in 2014 and 71,868,000 shares in 2013	720,000			719,000
Additional paid-in capital	174,074,000			168,329,000
Retained earnings	130,026,000			127,464,000
Accumulated other comprehensive income, net of taxes	50,000			49,000
Common stock in treasury, at cost, 1,828,000 shares in 2014 and 1,892,000 shares in 2013	(11,079,000		)	(11,418,000		)
Total stockholders’ equity	293,791,000			285,143,000
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	441,139,000		$	425,342,000

See accompanying notes.

4

Healthcare Services Group, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)

	For the Three Months Ended March 31,
	2014		2013
Revenues	$	312,165,000	$	273,904,000
Operating costs and expenses:
Costs of services provided	267,371,000		235,191,000
Selling, general and administrative	22,046,000		20,790,000
Other income:
Investment and interest	381,000		1,034,000
Income before income taxes	23,129,000		18,957,000
Income taxes	8,490,000		4,003,000
Net income	$	14,639,000	$	14,954,000
Per share data:
Basic earnings per common share	$	0.21	$	0.22
Diluted earnings per common share	$	0.21	$	0.22
Weighted average number of common shares outstanding:
Basic	70,321,000		68,463,000
Diluted	71,072,000		69,361,000
Comprehensive income:
Net income	$	14,639,000	$	14,954,000
Other comprehensive income:
Unrealized gain on available for sale marketable securities, net of taxes	1,000		23,000
Total comprehensive income	$	14,640,000	$	14,977,000

See accompanying notes.

5

Healthcare Services Group, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	For the Three Months Ended March 31,
	2014			2013
Cash flows from operating activities:
Net income	$	14,639,000		$	14,954,000
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	1,757,000			1,352,000
Bad debt provision	750,000			450,000
Deferred income benefits	3,075,000			305,000
Stock-based compensation expense	762,000			583,000
Amortization of premium on marketable securities	88,000			154,000
Unrealized gain on deferred compensation fund investments	(264,000		)	(789,000		)
Changes in operating assets and liabilities:
Accounts and notes receivable	(6,855,000		)	(10,695,000		)
Prepaid income taxes	(1,007,000		)	(1,628,000		)
Inventories and supplies	(309,000		)	79,000
Prepaid expenses and other assets	(2,106,000		)	(1,182,000		)
Deferred compensation funding	(798,000		)	(1,423,000		)
Accounts payable and other accrued expenses	(469,000		)	7,670,000
Accrued payroll, accrued and withheld payroll taxes	9,679,000			(15,282,000		)
Accrued insurance claims	26,000			19,000
Deferred compensation liability	1,230,000			2,312,000
Income taxes payable	(1,878,000		)	(1,906,000		)
Net cash provided by (used in) operating activities	18,320,000			(5,027,000		)
Cash flows from investing activities:
Disposals of fixed assets	60,000			164,000
Additions to property and equipment	(1,513,000		)	(968,000		)
Purchases of marketable securities	(1,228,000		)	(1,537,000		)
Sales of marketable securities	939,000			185,000
Net cash used in investing activities	(1,742,000		)	(2,156,000		)
Cash flows from financing activities:
Dividends paid	(12,077,000		)	(11,415,000		)
Reissuance of treasury stock pursuant to Dividend Reinvestment Plan	—			27,000
Tax benefit from equity compensation plans	477,000			709,000
Proceeds from the exercise of stock options	2,559,000			3,640,000
Net cash used in financing activities	(9,041,000		)	(7,039,000		)
Net change in cash and cash equivalents	7,537,000			(14,222,000		)
Cash and cash equivalents at beginning of the period	64,155,000			68,949,000
Cash and cash equivalents at end of the period	$	71,692,000		$	54,727,000
Supplementary Cash Flow Information:
Cash paid for interest	$	13,000		$	—
Cash paid for income taxes, net of refunds	$	7,821,000		$	6,523,000
Issuance of Common Stock in 2014 and 2013, respectively, pursuant to Employee Stock Purchase Plan	$	1,851,000		$	1,842,000

See accompanying notes.

6

Healthcare Services Group, Inc.

Consolidated Statement of Stockholders’ Equity

(Unaudited)

	For the Three Months Ended March 31, 2014
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income, net of taxes		Retained Earnings			Treasury Stock			Stockholders’ Equity
	Shares	Amount
Balance — December 31, 2013	71,868,000	$	719,000	$	168,329,000	$	49,000	$	127,464,000		$	(11,418,000	)	$	285,143,000
Comprehensive income:
Net income for the period								14,639,000						14,639,000
Unrealized gain on available for sale marketable securities, net of taxes						1,000								1,000
Comprehensive income														14,640,000
Exercise of stock options, net of shares tendered for payment	181,000	1,000		2,558,000										2,559,000
Tax benefit from equity compensation plans				477,000										477,000
Share-based compensation expense — stock options and restricted stock				672,000										672,000
Treasury shares issued for Deferred Compensation Plan funding and redemptions				522,000							4,000			526,000
Shares issued pursuant to Employee Stock Purchase Plan				1,457,000							394,000			1,851,000
Cash dividends								(12,077,000		)				(12,077,000		)
Shares issued pursuant to Dividend Reinvestment Plan				59,000							(59,000		)	—
Balance — March 31, 2014	72,049,000	$	720,000	$	174,074,000	$	50,000	$	130,026,000		$	(11,079,000	)	$	293,791,000

See accompanying notes.

7

Healthcare Services Group, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1— Description of Business and Significant Accounting Policies

Unaudited Interim Financial Data

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") for interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, these consolidated financial statements do not include all of the information and footnotes necessary for a complete presentation of financial position, results of operations and cash flows. However, in our opinion, all adjustments which are of a normal recurring nature and necessary for a fair presentation have been reflected in these consolidated financial statements. The balance sheet shown in this report as of December 31, 2013 has been derived from, and does not include, all the disclosures contained in the financial statements for the year ended December 31, 2013. The financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013. The results of operations for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for any future period.

Nature of Operations

We provide management, administrative and operating expertise and services to the housekeeping, laundry, linen, facility maintenance and dietary service departments of the health care industry, including nursing homes, retirement complexes, rehabilitation centers and hospitals located throughout the United States. Although we do not directly participate in any government reimbursement programs, our clients’ reimbursements are subject to government regulation. Therefore, they are directly affected by any legislation relating to Medicare and Medicaid reimbursement programs.

We provide our services primarily pursuant to full service agreements with our clients. In such agreements, we are responsible for the day-to-day management of the managers and hourly employees located at our clients’ facilities. We also provide services on the basis of a management-only agreement for a very limited number of clients. Our agreements with clients typically provide for a one year service term, cancelable by either party upon 30 to 90 days’ notice after the initial 90-day period.

We are organized into two reportable segments: housekeeping, laundry, linen and other services (“Housekeeping”), and dietary department services (“Dietary”).

Housekeeping consists of the managing of the client’s housekeeping department which is principally responsible for the cleaning, disinfecting and sanitizing of patient rooms and common areas of a client’s facility, as well as the laundering and processing of the personal clothing belonging to the facility’s patients. Also within the scope of this segment’s service is the responsibility for laundering and processing of the bed linens, uniforms and other assorted linen items utilized by a client facility.

Dietary consists of managing the client’s dietary department which is principally responsible for food purchasing, meal preparation and providing dietitian consulting professional services, which includes the development of a menu that meets the patient’s dietary needs. We began Dietary operations in 1997.

As of March 31, 2014, we operate three wholly-owned subsidiaries, Huntingdon Holdings, Inc. (“Huntingdon”), Healthcare Staff Leasing Solutions, LLC (“Staff Leasing”) and HCSG Insurance Corp. Huntingdon invests our cash and cash equivalents and manages our portfolio of available-for-sale marketable securities. Staff Leasing offers professional employer organization (“PEO”) services to potential clients in the health care industry. As of March 31, 2014, we have PEO service contracts in several states. During the three months ended March 31, 2014 and 2013, operating results from our PEO service contracts were not material and were included in our Housekeeping segment. Formed in 2014, HCSG Insurance Corp. is a captive insurance company domiciled in the State of New Jersey and provides the Company with certain insurance-related services.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Healthcare Services Group, Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

8

Cash and Cash Equivalents

Cash and cash equivalents are held in U.S. financial institutions or in custodial accounts with U.S. financial institutions. Cash and cash equivalents are defined as short-term, highly liquid investments with a maturity of three months or less at time of purchase that are readily convertible into cash and have insignificant interest rate risk.

Inventories and Supplies

Inventories and supplies include housekeeping, linen and laundry supplies, as well as food provisions and supplies. Inventories and supplies are stated at cost to approximate a first-in, first-out (FIFO) basis. Linen supplies are amortized on a straight-line basis over their estimated useful life of 24 months.

Revenue Recognition

Revenues from our service agreements with clients are recognized as services are performed.

As a distributor of laundry equipment, we occasionally sell laundry installations to certain clients. The sales in most cases represent the construction and installation of a turn-key operation and are for payment terms ranging from 24 to 60 months. Our accounting policy for these sales is to recognize the gross profit over the life of the payments associated with our financing of the transactions. During the three months ended March 31, 2014 and 2013, laundry installation sales were not material.

Income Taxes

We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current period. We accrue for probable tax obligations as required by facts and circumstances in the various regulatory environments. In addition, deferred tax assets and liabilities are recognized for expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. If appropriate, we would record a valuation allowance to reduce deferred tax assets to an amount for which realization is more likely than not.

In accordance with U.S. GAAP, we account for uncertain income tax positions reflected within our financial statements based on a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

Earnings per Common Share

Basic earnings per common share are computed by dividing income available to common shareholders by the weighted-average common shares outstanding for the period. Diluted earnings per common share reflect the weighted-average common shares outstanding and dilutive common shares, such as those issuable upon exercise of stock options.

Share-Based Compensation

U.S. GAAP addresses the accounting for share-based compensation, specifically, the measurement and recognition of compensation expense, based on estimated fair values, for all share-based awards made to employees and directors, including stock options and participation in the Company’s employee stock purchase plan. We estimate the fair value of share-based awards on the date of grant using the Black-Scholes option valuation model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the Company’s consolidated statements of income over the requisite service periods. We use the straight-line single option method of expensing share-based awards in our consolidated financial statements of income. Because share-based compensation expense is based on awards that are ultimately expected to vest, share-based compensation expense will be reduced to account for estimated forfeitures. Forfeitures are to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

9

Use of Estimates in Financial Statements

In preparing financial statements in conformity with U.S. GAAP, we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates are used for, but not limited to, our allowance for doubtful accounts, accrued insurance claims, asset valuations and review for potential impairment, and deferred taxes. The estimates are based upon various factors including current and historical trends, as well as other pertinent industry and regulatory authority information. We regularly evaluate this information to determine if it is necessary to update the basis for our estimates and to compensate for known changes.

Concentrations of Credit Risk

Financial instruments, as defined by U.S. GAAP, which potentially subject us to concentrations of credit risk, consist principally of cash and cash equivalents, marketable securities, deferred compensation funding and accounts and notes receivable. We define our marketable securities as fixed income investments which are highly liquid investments that can be readily purchased or sold using established markets. At March 31, 2014 and December 31, 2013, substantially all of our cash and cash equivalents, and marketable securities were held in one large financial institution located in the United States.

Our clients are concentrated in the health care industry, primarily providers of long-term care. Many of our clients’ revenues are highly contingent on Medicare, Medicaid and third party payors’ reimbursement funding rates. Congress has enacted a number of major laws during the past decade that have significantly altered, or threatened to alter, overall government reimbursement for nursing home services. These changes and lack of substantive reimbursement funding rate reform legislation, as well as other 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, could result in significant additional bad debts in the future.

Note 2—Acquisition

On July 12, 2013, the Company acquired substantially all of the operating assets of Platinum Health Services, LLC, a Delaware limited liability company and Platinum Health Services PEO, LLC, a Delaware limited liability company (collectively “Platinum”) pursuant to an Asset Purchase Agreement dated July 11, 2013. Platinum was a privately-held provider of professional housekeeping, laundry and maintenance services to long-term and post-acute care facilities and operated within the United States. The acquisition has been included within the consolidated results of operations and financial condition from the date of the acquisition.

The total purchase consideration was $46,832,000, which consisted of a cash payment of $5,000,000, the issuance of 1,215,000 shares of the Company's common stock with a fair value of $30,062,000 and contingent consideration with a fair value of $11,770,000 as of March 31, 2014. Upon the achievement of certain financial and retention targets, the Platinum stockholders will be eligible for contingent consideration paid by the future issuance of the Company's common stock.

The purchase consideration of the acquisition has been preliminarily allocated to the assets acquired and liabilities assumed based on estimated fair values. The preliminary allocation is as follows:

Fair value of assets acquired, net of liabilities assumed	$	2,604,000
Goodwill	23,228,000
Intangible assets	21,000,000
Net assets acquired	$	46,832,000

Goodwill, which is expected to be amortized for tax purposes, represents the excess of the purchase price over the fair value of the net assets acquired, and is primarily attributable to the assembled workforce of the acquired business. Goodwill was allocated to our Housekeeping reportable operating segment. Intangible assets consist of customer relationships of $21,000,000 and has been assigned an estimated useful life of 10 years.

10

Note 3—Changes in Accumulated Other Comprehensive Income by Component

U.S. GAAP establishes standards for presenting information about significant items reclassified out of accumulated other comprehensive income by component. As of March 31, 2014 and December 31, 2013, respectively, we generated other comprehensive income from one component. This component relates to the unrealized gains and losses from our available for sale marketable securities during a given reporting period.

The following table provides a summary of changes in accumulated other comprehensive income for the three months ended March 31, 2014:

	Unrealized Gains and Losses on Available for Sale Securities (1)
Accumulated other comprehensive income — December 31, 2013	$	49,000
Other comprehensive income before reclassifications	2,000
Amounts reclassified from accumulated other comprehensive income (2)(3)	(1,000		)
Net current period change in other comprehensive income	1,000
Accumulated other comprehensive income — March 31, 2014	$	50,000

(1) All amounts are net of tax.

(2) Realized gains and losses are recorded pre-tax in the other income - investment and interest caption on our consolidated statements of comprehensive income.

(3) For the three months ended March 31, 2014, the Company recorded $1,000 of realized gains from the sale of available for sale securities. Refer to Note 5 herein for further information.

Note 4—Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of net assets acquired of businesses and is not amortized. Goodwill is evaluated for impairment on an annual basis, or more frequently if impairment indicators arise, using a fair-value-based test that compares the fair value of the reporting unit to its carrying value.

Goodwill by reportable operating segment, as described in Note 10 herein, was approximately $38,122,000 and $2,061,000 for Housekeeping and Dietary as of March 31, 2014 and December 31, 2013, respectively.

The cost of intangible assets is based on fair values at the date of acquisition. Intangible assets with determinable lives are amortized on a straight-line basis over their estimated useful life (between 7 and 10 years).

The following table sets forth the amounts of our identifiable intangible assets subject to amortization, which were acquired in acquisitions.

	March 31, 2014		December 31, 2013
Customer relationships	$	35,481,000	$	35,481,000
Non-compete agreements	800,000		800,000
Total other intangibles, gross	36,281,000		36,281,000
Less accumulated amortization	13,737,000		12,909,000
Other intangibles, net	$	22,544,000	$	23,372,000

The customer relationships and non-compete agreements have a weighted-average amortization period of eight years.

11

The following table sets forth the estimated amortization expense for intangibles subject to amortization for the following five fiscal years:

Period/Year	Customer Relationships		Non-Compete Agreements		Total
April 1 to December 31, 2014	$	2,409,000	$	42,000	$	2,451,000
2015	3,211,000		—		3,211,000
2016	2,668,000		—		2,668,000
2017	2,397,000		—		2,397,000
2018	2,298,000		—		2,298,000
2019	2,100,000		—		2,100,000
Thereafter	7,419,000		—		7,419,000

Amortization expense for the three months ended March 31, 2014 and 2013 was $828,000 and $542,000, respectively.

Note 5—Fair Value Measurements

We, in accordance with U.S. GAAP, define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We have not elected the fair value option for our available for sale marketable securities as we believe these assets are more representative of our investing activities and are viewed as non-operating in nature. These assets are available for future needs of the Company to support our current and projected growth, if required. In accordance with U.S. GAAP, our investments in marketable securities are classified within Level 2 of the fair value hierarchy. These investment securities are valued based upon quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

The Company’s financial instruments consist mainly of cash and cash equivalents, available for sale marketable securities, accounts and notes receivable, prepaid expenses and other, and accounts payable (including income taxes payable and accrued expenses). The carrying value of these financial instruments approximates their fair value because of their short-term nature. The fair value of financial instruments is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties.

The following tables provide fair value measurement information for our marketable securities and deferred compensation fund investment assets as of March 31, 2014 and December 31, 2013:

	As of March 31, 2014
					Fair Value Measurement Using:
	Carrying Amount		Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets:
Marketable securities
Municipal bonds — available for sale	$	11,647,000	$	11,647,000	$	—	$	11,647,000	$	—
Deferred compensation fund
Money Market	$	3,488,000	$	3,488,000	$	—	$	3,488,000	$	—
Balanced and Lifestyle	8,450,000		8,450,000		8,450,000		—		—
Large Cap Growth	4,327,000		4,327,000		4,327,000		—		—
Small Cap Value	2,506,000		2,506,000		2,506,000		—		—
Fixed Income	2,052,000		2,052,000		2,052,000		—		—
International	1,136,000		1,136,000		1,136,000		—		—
Mid Cap Growth	1,039,000		1,039,000		1,039,000		—		—
Deferred compensation fund	$	22,998,000	$	22,998,000	$	19,510,000	$	3,488,000	$	—

12

	As of December 31, 2013
					Fair Value Measurement Using:
	Carrying Amount		Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets:
Marketable securities
Municipal bonds — available for sale	$	11,445,000	$	11,445,000	$	—	$	11,445,000	$	—
Deferred compensation fund
Money Market	$	3,592,000	$	3,592,000	$	—	$	3,592,000	$	—
Balanced and Lifestyle	8,174,000		8,174,000		8,174,000		—		—
Large Cap Growth	4,292,000		4,292,000		4,292,000		—		—
Small Cap Value	2,173,000		2,173,000		2,173,000		—		—
Fixed Income	1,962,000		1,962,000		1,962,000		—		—
International	1,079,000		1,079,000		1,079,000		—		—
Mid Cap Growth	928,000		928,000		928,000		—		—
Deferred compensation fund	$	22,200,000	$	22,200,000	$	18,608,000	$	3,592,000	$	—

The fair value of the municipal bonds is measured using third party pricing service data. The fair value of equity investments in the funded deferred compensation plan are valued (Level 1) based on quoted market prices. The money market fund in the funded deferred compensation plan is valued (Level 2) at the net asset value (“NAV”) of the shares held by the plan at the end of the period. As a practical expedient, fair value of our money market fund is valued at the NAV as determined by the custodian of the fund. The money market fund includes short-term United States dollar denominated money-market instruments. The money market fund can be redeemed at its NAV at its measurement date as there are no significant restrictions on the ability of participants to sell this investment. These assets will be redeemed by the plan participants on an as needed basis.

Unrealized gains and losses from marketable securities are recorded in the other comprehensive income caption in our consolidated statements of comprehensive income. For the three months ended March 31, 2014 and 2013, we recorded unrealized gains from marketable securities of $1,000 and $23,000, respectively.

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Other-than-temporary Impairments
March 31, 2014
Type of security:
Municipal bonds — available for sale	11,565,000		84,000		(2,000		)	11,647,000		—
Total debt securities	$	11,565,000	$	84,000	$	(2,000	)	$	11,647,000	$	—
December 31, 2013
Type of security:
Municipal bonds — available for sale	11,364,000		83,000		(2,000		)	11,445,000		—
Total debt securities	$	11,364,000	$	83,000	$	(2,000	)	$	11,445,000	$	—

For the three months ended March 31, 2014, we received total proceeds, less the amount of interest received, of $871,000 from sales of available for sale municipal bonds. These sales resulted in realized gains of $1,000 recorded in other income – investment and interest caption on our statement of comprehensive income for the three months ended March 31, 2014. The basis for the sale of these securities was a specific identification of each bond sold during this period.

For the three months ended March 31, 2013, there were no proceeds or realized gains related to our available for sale municipal bonds.

13

The following tables include contractual maturities of debt securities held at March 31, 2014 and December 31, 2013, which are classified as marketable securities in the consolidated Balance Sheet.

	Municipal Bonds — Available for Sale
Contractual maturity:	March 31, 2014		December 31, 2013
Maturing in one year or less	$	1,801,000	$	1,846,000
Maturing after one year through three years	6,805,000		7,113,000
Maturing after three years	3,041,000		2,486,000
Total debt securities	$	11,647,000	$	11,445,000

Note 6— Share-Based Compensation

2012 Equity Incentive Plan

On May 29, 2012, the Company's shareholders adopted and approved the 2012 Equity Incentive Plan (the "2012 Plan"), under which current or prospective officers, employees, non-employee directors and advisors can receive share-based awards such as stock options, restricted stock and other stock awards. The 2012 Plan seeks to promote the highest level of performance by providing an economic interest in the long-term success of the Company. As of this date, no further grants were permitted under any previously existing stock plans (the "Pre-existing Plans"). Additionally, all remaining shares available for future grants under the Pre-existing Plans became available for issuance under the 2012 Plan.

The Nominating, Compensation and Stock Option Committee of the Board of Directors is responsible for determining the individuals who will be granted stock awards, the number of stock awards each individual will receive, the price per share (in accordance with the terms of our 2012 Plan), and the exercise period of each stock award.

A summary of stock-based compensation expense for the three months ended March 31, 2014 and 2013 is as follows:

	For the Three Months Ended March 31,
	2014		2013
Stock Options	$	646,000	$	487,000
Restricted Stock	26,000		7,000
Employee Stock Purchase Plan ("ESPP")	90,000		89,000
Total pre-tax stock-based compensation expense charged against income (1)	$	762,000	$	583,000

(1) Stock-based compensation expense is recorded in the selling, general and administrative caption in our consolidated statements of comprehensive income.

We have outstanding stock awards that were granted under the Pre-existing Plans to non-employee directors, officers and employees of the Company and other specified groups, depending on the Pre-existing Plan. No further grants are allowed under the Pre-existing Plans. As of March 31, 2014, 5,065,000 shares of common stock were reserved for issuance under our 2012 Plan, including 2,262,000 shares which are available for future grant. The stock price will not be less than the fair market value of the common stock on the date the award is granted. No stock grant will have a term in excess of ten years. Since 2008, all awards granted become vested and exercisable ratably over a five year period on each yearly anniversary date of the option grant.

A summary of our stock option activity under the 2012 Plan as of December 31, 2013 and changes during the three months ended March 31, 2014 is as follows:

	Stock Options Outstanding
	Number of Shares		Weighted Average Exercise Price
December 31, 2013	2,483,000		$	16.05
Granted	535,000		28.02
Cancelled	(35,000	)	21.39
Exercised	(181,000	)	14.31
March 31, 2014	2,802,000		$	18.38

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The weighted average grant-date fair value of stock options granted during the three months ended March 31, 2014 and 2013 was $8.24 and $6.81 per common share, respectively.

During the three months ended March 31, 2014, the Company granted 14,000 shares of restricted stock with a weighted average grant date fair value of $28.02 per share. During the three months ended March 31, 2013, the Company granted 6,000 shares of restricted stock with a weighted average grant date fair value of $23.50 per share.

A summary of our non-vested stock-based compensation as of December 31, 2013 and changes during the three months ended March 31, 2014 is as follows:

	Number of Non-vested Shares		Weighted Average Grant Date Fair Value
December 31, 2013	1,561,000		$	4.78
Granted	535,000		8.24
Vested	(511,000	)	4.24
Forfeited	(35,000	)	5.94
March 31, 2014	1,550,000		$	6.27

The following table summarizes other information about our outstanding stock options at March 31, 2014.

	Stock Options
Range of exercise prices	$6.07-28.02
Outstanding:
Weighted average remaining contractual life (years)	7.0
Aggregate intrinsic value	$	29,919,000
Exercisable:
Number of shares	1,252,000
Weighted average remaining contractual life (years)	5.1
Aggregate intrinsic value	$	19,455,000
Exercised:
Aggregate intrinsic value	$	2,436,000

Fair Value Estimates

The fair value of stock awards granted in 2014 and 2013 was estimated on the date of grant using the Black-Scholes option valuation model based on the following assumptions:

	March 31, 2014	March 31, 2013
Risk-free interest rate	1.9%	1.5%
Weighted average expected life in years	5.9 years	6.0 years
Expected volatility	36.9%	38.9%
Dividend yield	2.4%	2.8%

Other Information

Other information pertaining to activity of our stock awards during the three months ended March 31, 2014 and 2013 were as follows:

	March 31, 2014		March 31, 2013
Total grant-date fair value of stock awards granted	$	4,268,000	$	3,269,000
Total fair value of stock awards vested during period	$	2,051,000	$	1,897,000
Total unrecognized compensation expense related to non-vested stock awards	$	8,523,000	$	6,349,000

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At March 31, 2014, the unrecognized compensation cost related to stock awards granted but not yet vested, as reported above, was expected to be recognized through the fourth quarter of 2018 for the 2014 grants and the fourth quarter of 2017 for the 2013 grants.

Employee Stock Purchase Plan

Since January 1, 2000, we have an Employee Stock Purchase Plan ("ESPP") for all eligible employees. All full-time and certain part-time employees who have completed two years of continuous service with us are eligible to participate. The ESPP was implemented on January 1, 2000 through five annual offerings and was subsequently extended for an additional eight annual offerings. On April 12, 2011, the Board of Directors extended the ESPP for an additional five offerings through 2016. Annual offerings commence and terminate on the respective year’s first and last calendar day.

Under the ESPP, we are authorized to issue up to 4,050,000 shares of our common stock to our employees. Pursuant to such authorization, we have 2,476,000 shares available for future grant at March 31, 2014.

The stock-based compensation expense associated with our ESPP was estimated on the date of grant using the Black-Scholes option valuation model based on the following assumptions:

	March 31, 2014	March 31, 2013
Risk-free interest rate	0.10%	0.24%
Weighted average expected life in years	1.0 year	1.0 year
Expected volatility	21.9%	27.6%
Dividend yield	2.4%	2.8%

Note 7— Dividends

On March 28, 2014, we paid to shareholders of record on February 21, 2014, a regular quarterly cash dividend of $0.17125 per common share. Such regular quarterly cash dividend payment in the aggregate was $12,077,000.

Additionally, on April 8, 2014, our Board of Directors declared a regular quarterly cash dividend of $0.17250 per common share, which will be paid on June 27, 2014, to shareholders of record as of the close of business on May 23, 2014.

Cash dividends on our outstanding weighted average number of basic common shares for the three months ended March 31, 2014 and 2013 were as follows:

	For the Three Months Ended March 31,
	2014		2013
Cash dividends per common share	$	0.17	$	0.17

Our Board of Directors reviews our dividend policy on a quarterly basis. Although there can be no assurance that we will continue to pay dividends or the amount of the dividend, we expect to continue to pay a regular quarterly cash dividend. In connection with the establishment of our dividend policy, we adopted a Dividend Reinvestment Plan in 2003.

Note 8— Income Taxes

For the three months ended March 31, 2014, our effective tax rate was approximately 37%, an increase from the 21% effective tax rate for the comparable 2013 period. Such differences between the effective tax rates and the applicable U.S. federal statutory rate arise primarily from the effect of state and local income taxes and tax credits available to the Company. The increase in the effective tax rate is primarily due to the impact of tax credits realized in 2013 for 2012 and 2013 as compared to the current period. The Company receives credits related to the Work Opportunity Tax Credit (“WOTC”) program but this program initially expired at December 31, 2011. The WOTC was subsequently renewed, but not until January 2, 2013, as part of The American Taxpayer Relief Act of 2012. Since the WOTC was renewed during the three month period ended March 31, 2013, the total tax effect of additional expected credits for 2012 was included in this period. In addition, the WOTC again expired as of December 31, 2013 and has not yet been renewed. As such, the 2014 estimated annual effective tax rate is expected to be 37% compared to 29% for

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2013. The 2014 estimated tax rate increased due to the expiration of certain tax credits that benefited us in 2013, including the recognition of tax credits for the 2012 tax year during the three month period ended March 31, 2013.

We account for income taxes using the asset and liability method, which results in recognizing income tax expense based on the amount of income taxes payable or refundable for the current year. Additionally, we evaluate regularly the tax positions taken or expected to be taken resulting from financial statement recognition of certain items. Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our financial statements. Our evaluation was performed for the tax years ended December 31, 2010 through 2013 (with regard to U.S. federal income tax returns) and December 31, 2009 through 2013 (with regard to various state and local income tax returns), the tax years which remain subject to examination by major tax jurisdictions as of March 31, 2014.

We may from time to time be assessed interest or penalties by taxing jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. When we have received an assessment for interest and/or penalties, it has been classified in the financial statements as selling, general and administrative expense.

Note 9—Related Party Transactions

A director is a member of a law firm which was retained by us. In each of the three months ended March 31, 2014 and 2013, fees received from us by such firm did not exceed $120,000 in any period. Additionally, such fees did not exceed, in either period, 5% of such firm’s revenues.

Note 10—Segment Information

Reportable Operating Segments

U.S. GAAP establishes standards for reporting information regarding operating segments in annual financial statements. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision-maker, or decision-making group in making decisions on how to allocate resources and assess performance.

We manage and evaluate our operations in two reportable segments: Housekeeping (housekeeping, laundry, linen and other services) and Dietary (dietary department services). Although both segments serve the same client base and share many operational similarities, they are managed separately due to distinct differences in the type of service provided, as well as the specialized expertise required of the professional management personnel responsible for delivering the respective segment’s services. We consider the various services provided within each reportable segment to comprise an identifiable reportable operating segment since such services are rendered pursuant to a single service agreement, specific to that reportable segment, as well as the fact that the delivery of the respective reportable segment’s services are managed by the same management personnel of the particular reportable segment.

The Company’s accounting policies for the segments are generally the same as the Company’s significant accounting policies. Differences between the reportable segments’ operating results and other disclosed data and our consolidated financial statements relate primarily to corporate level transactions and recording of transactions at the reportable segment level which use methods other than generally accepted accounting principles. There are certain inventories and supplies that are primarily expensed when incurred within the operating segments, while they are capitalized for the consolidated financial statements. As discussed, most corporate expense is not allocated to the operating segments, and such expenses include corporate salary and benefit costs, bad debt expense, certain legal costs, information technology costs, depreciation, amortization of finite lived intangibles, share based compensation costs and other corporate specific costs. Additionally, there are allocations for workers' compensation and general liability expense within the operating segments that differ from our actual expense recorded for U.S. GAAP. Additionally, included in the differences between the reportable segments’ operating results and other disclosed data are amounts attributable to Huntingdon, our investment holding company subsidiary. Huntingdon does not transact any business with the reportable segments. Segment amounts disclosed are prior to any elimination entries made in consolidation.

Housekeeping provides services in Canada, although essentially all of its revenues and net income, 99% in both categories, are earned in one geographic area, the United States. Dietary provides services solely in the United States.

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	Housekeeping Services		Dietary Services		Corporate and Eliminations				Total
Three Months Ended March 31, 2014
Revenues	$	204,741,000	$	107,424,000	$	—			$	312,165,000
Income before income taxes	18,752,000		6,780,000		(2,403,000		)	(1)	23,129,000
Three Months Ended March 31, 2013
Revenues	$	187,630,000	$	86,274,000	$	—			$	273,904,000
Income before income taxes	18,806,000		5,124,000		(4,973,000		)	(1)	18,957,000

(1) Represents primarily corporate office cost and related overhead, recording of transactions at the reportable segment level which use methods other than U.S. GAAP, as well as consolidated subsidiaries’ operating expenses that are not allocated to the reportable segments, net of investment and interest income.

Total Revenues from Clients

The following revenues earned from clients differ from segment revenues reported above due to the inclusion of adjustments used for segment reporting purposes by management. We earned total revenues from clients in the following service categories:

	For the Three Months Ended March 31,
	2014		2013
Housekeeping services	$	140,940,000	$	125,593,000
Laundry and linen services	63,270,000		60,898,000
Dietary services	107,424,000		86,274,000
Maintenance services and other	531,000		1,139,000
	$	312,165,000	$	273,904,000

Note 11— Earnings Per Common Share

Basic net earnings per share are computed using the weighted-average number of common shares outstanding. The dilutive effect of potential common shares outstanding is included in diluted net earnings per share. The computations of basic net earnings per share and diluted net earnings per share are as follows:

	Three Months Ended March 31, 2014
	Income (Numerator)		Shares (Denominator)	Per-share Amount
Net income	$	14,639,000
Basic earnings per common share	$	14,639,000	70,321,000	$	0.21
Effect of dilutive securities:
Stock options and restricted stock			751,000	—
Diluted earnings per common share	$	14,639,000	71,072,000	$	0.21
	Three Months Ended March 31, 2013
	Income (Numerator)		Shares (Denominator)	Per-share Amount
Net income	$	14,954,000
Basic earnings per common share	$	14,954,000	68,463,000	$	0.22
Effect of dilutive securities:
Stock options and restricted stock			898,000	—
Diluted earnings per common share	$	14,954,000	69,361,000	$	0.22

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Stock awards to purchase 993,000 shares of common stock having an average exercise price of $25.87 per common share were outstanding during the three months ended March 31, 2014 but not included in the computation of diluted earnings per common share because the exercise prices of the options were greater than the average market price of the common shares, and therefore, would be antidilutive.

Stock awards to purchase 544,000 shares of common stock having an average exercise price of $23.50 per common share were outstanding during the three months ended March 31, 2013 but not included in the computation of diluted earnings per common share because the exercise prices of the options were greater than the average market price of the common shares, and therefore, would be antidilutive.

Note 12—Other Contingencies

We have a $125,000,000 bank line of credit on which we may draw to meet short-term liquidity requirements in excess of internally generated cash flow. Amounts drawn under the line of credit are payable upon demand. At March 31, 2014, there were no borrowings under the line of credit. However, at such date, we had outstanding a $51,520,000  irrevocable standby letter of credit which relates to payment obligations under our insurance programs. As a result of the letter of credit issued, the amount available under the line of credit was reduced by $51,520,000 at March 31, 2014. The line of credit requires us to satisfy one financial covenant. We are in compliance with our financial covenant at March 31, 2014 and expect to continue to remain in compliance with such financial covenant. This line of credit has a five year term and expires on December 18, 2018.

Additionally, on March 21, 2014, we entered into a Security Interest, Pledge and Assignment of Deposit Account (the "Pledge") with Wells Fargo Bank, National Association (the “Bank”) as collateral for the Promissory Note (the “Note”) dated March 21, 2014. The Note is a short term non-revolving line of credit between the Company’s third party payroll administrator and the Bank. The Company entered into the Pledge at quarter end due to the timing of payroll funding. On April 1, 2014, the Company's third party payroll administrator satisfied its payment obligation under the Note, and accordingly, the Company's Pledge was fully released and extinguished. The funds previously held as collateral were subsequently used for general operating activities.

We provide our services in 48 states and are subject to numerous local taxing jurisdictions within those states. Consequently, in the ordinary course of business, a jurisdiction may contest our reporting positions with respect to the application of its tax code to our services. A jurisdiction’s conflicting position on the taxability of our services could result in additional tax liabilities.

We have tax matters with various taxing authorities. Because of the uncertainties related to both the probable outcome and amount of probable assessment due, we are unable to make a reasonable estimate of a liability. We do not expect the resolution of any of these matters, taken individually or in the aggregate, to have a material adverse effect on our consolidated financial position or results of operations based on our best estimate of the outcomes of such matters.

We are also subject to various claims and legal actions in the ordinary course of business. Some of these matters include payroll and employee-related matters and examinations by governmental agencies. As we become aware of such claims and legal actions, we provide accruals if the exposures are probable and estimable. If an adverse outcome of such claims and legal actions is reasonably possible, we assess materiality and provide such financial disclosure, as appropriate.

Many states have significant budget deficits. State Medicaid programs are experiencing increased demand, and with lower revenues than projected, they have fewer resources to support their Medicaid programs. In addition, comprehensive health care legislation under the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (together, the “Act”) was signed into law in March 2010. The Act will significantly impact the governmental healthcare programs in which our clients participate, and reimbursements received thereunder from governmental or third-party payors. In July 2011, Centers for Medicare and Medicaid Services (“CMS”) issued a final rule that reduced Medicare payments to nursing centers by 11.1% and changed the reimbursement for the provision of group rehabilitation therapy services to Medicare beneficiaries. This rule was effective as of October 1, 2011. Furthermore, in the coming year, new proposals or additional changes in existing regulations could be made to the Act and/or CMS could propose additional reimbursement reductions which could directly impact the governmental reimbursement programs in which our clients participate. As a result, some state Medicaid programs are reconsidering previously approved increases in nursing home reimbursement or are considering delaying or foregoing those increases. A few states have indicated it is possible they will run out of cash to pay Medicaid providers, including nursing homes. In addition, certain state governors have recently stated that they will reject Federal Medicaid assistance under the Act. Any negative changes in our clients’ reimbursements may negatively impact our results of operations. Although we are currently evaluating the Act’s effect on our client base, we may not know the full effect until such time as these laws are fully implemented and CMS and other agencies issue applicable regulations or guidance.

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In January 2013, the U.S. Congress enacted the American Taxpayer Relief Act of 2012, which delayed automatic spending cuts, including reduced Medicare payments to plans and providers up to 2%. These discretionary spending caps were originally enacted under provisions in the Budget Control Act of 2011, an initiative to reduce the federal deficit through the year 2021, also known as “sequestration.” The sequestration went into effect starting March 2013. In December 2013, the U.S. Congress enacted the Bipartisan Budget Act of 2013, which reduces the impact of the sequestration over the next two years, beginning in fiscal year 2014 and extended the reduction in Medicare payments to plans and providers for two years through the year 2023.

Note 13—Subsequent Events

We evaluated all subsequent events through the date this Form 10-Q is being filed with the SEC. We believe there were no events or transactions occurring during this subsequent reporting period which require recognition or additional disclosure in these financial statements.

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Item 2.  Management’s Discussion and Analysisof Financial Condition and Results ofOperations.

Results of Operations

The following discussion is intended to provide the reader with information that will be helpful in understanding our financial statements including the changes in certain key items in comparing financial statements period to period. We also intend to provide the primary factors that accounted for those changes, as well as a summary of how certain accounting principles affect our financial statements. In addition, we are providing information about the financial results of our two operating segments to further assist in understanding how these segments and their results affect our consolidated results of operations. This discussion should be read in conjunction with our financial statements as of March 31, 2014 and December 31, 2013 and the periods then ended and the notes accompanying those financial statements.

Overview

We provide management, administrative and operating expertise and services to the housekeeping, laundry, linen, facility maintenance and dietary service departments of the health care industry, including nursing homes, retirement complexes, rehabilitation centers and hospitals located throughout the United States. We believe that we are the largest provider of housekeeping and laundry management services to the long-term care industry in the United States, rendering such services to over 3,000 facilities in 48 states as of March 31, 2014. Although we do not directly participate in any government reimbursement programs, our clients’ reimbursements are subject to government regulation. Therefore, our clients are directly affected by any legislation relating to Medicare and Medicaid reimbursement programs.

We provide our services primarily pursuant to full service agreements with our clients. In such agreements, we are responsible for the day to day management of the department managers and hourly employees located at our clients’ facilities. We also provide services on the basis of a management-only agreement for a very limited number of clients. Our agreements with clients typically provide for renewable one year service terms, cancelable by either party upon 30 to 90 days’ notice after the initial 90-day period.

We are organized into two reportable segments; housekeeping, laundry, linen and other services (“Housekeeping”), and dietary department services (“Dietary”). At March 31, 2014, Housekeeping is provided at essentially all of our 3,000 client facilities, generating approximating 66% or $204,741,000 of the total revenues for the three months ended March 31, 2014. Dietary is provided to approximately 800 client facilities at March 31, 2014 and contributed approximately 34% or $107,424,000 of total revenues for the three months ended March 31, 2014.

Housekeeping consists of managing the client’s housekeeping department which is principally responsible for the cleaning, disinfecting and sanitizing of patient rooms and common areas of a client’s facility, as well as laundering and processing of the personal clothing belonging to the facility’s patients. Also within the scope of this segment’s service is the responsibility for laundering and processing the bed linens, uniforms and other assorted linen items utilized by a client facility.

Dietary consists of managing the client’s dietary department which is principally responsible for food purchasing, meal preparation and providing dietitian consulting professional services, which includes the development of a menu that meets the patient’s dietary needs.

As of March 31, 2014, we operate three wholly-owned subsidiaries, Huntingdon Holdings, Inc. (“Huntingdon”), Healthcare Staff Leasing Solutions, LLC (“Staff Leasing”) and HCSG Insurance Corp. Huntingdon invests our cash and cash equivalents and manages our portfolio of available-for-sale marketable securities. Staff Leasing offers professional employer organization (“PEO”) services to potential clients in the health care industry. As of March 31, 2014, we have PEO service contracts in several states. During the three months ended March 31, 2014 and 2013, operating results from our PEO service contracts were not material and were included in our Housekeeping segment. Formed in 2014, HCSG Insurance Corp. is a captive insurance company domiciled in the State of New Jersey and provides the Company with certain insurance-related services.

On July 12, 2013, the Company acquired substantially all of the operating assets of Platinum Health Services, LLC, a Delaware limited liability company and Platinum Health Services PEO, LLC, a Delaware limited liability company (collectively “Platinum”) pursuant to an Asset Purchase Agreement dated July 11, 2013. Platinum was a privately-held provider of professional housekeeping, laundry and maintenance services to long-term and post-acute care facilities and operated solely within the United States. The acquisition has been included within the consolidated results of operations and financial condition from the date of the acquisition.

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Consolidated Operations

The following table sets forth, for the periods indicated, the percentage which certain items bear to consolidated revenues:

	Relation to Consolidated Revenues
	For the Three Months Ended March 31,
	2014		2013
Revenues	100.0	%	100.0	%
Operating costs and expenses:
Costs of services provided	85.7	%	85.9	%
Selling, general and administrative	7.1	%	7.6	%
Investment and interest income	0.1	%	0.4	%
Income before income taxes	7.3	%	6.9	%
Income taxes	2.7	%	1.5	%
Net income	4.6	%	5.4	%

Housekeeping is our largest and core reportable segment, representing approximately 66% of consolidated revenues for the first quarter 2014. Dietary revenues represented approximately 34% of consolidated revenues for the first quarter 2014.

Although there can be no assurance thereof, we believe that for the remainder of 2014, each of Housekeeping's and Dietary’s revenues, as a percentage of consolidated revenues, will remain approximately the same as their respective percentages noted above. Furthermore, we expect the sources of organic growth for the remainder of 2014 for the respective operating segments will be primarily the same as historically experienced. Accordingly, although there can be no assurance thereof, the growth in Dietary is expected to come from our current Housekeeping client base, while growth in Housekeeping will primarily come from obtaining new clients.

Three Months Ended March 31, 2014 and 2013

The following table sets forth the first quarter 2014 income statement key components that we use to evaluate our financial performance on a consolidated and reportable segment basis compared to first quarter 2013 amounts. The differences between the reportable segments’ operating results and other disclosed data and our consolidated financial statements relate primarily to corporate level transactions and recording of transactions at the reportable segment level which use methods other than generally accepted accounting principles.

	Reportable Segments — For the Three Months Ended March 31, 2014
								Housekeeping				Dietary
	Consolidated		% Change		Corporate and Eliminations			Amount		% Change		Amount		% Change
Revenues	$	312,165,000	14.0	%	$	—		$	204,741,000	9.1	%	$	107,424,000	24.5	%
Cost of services provided	267,371,000		13.7		(19,262,000		)	185,989,000		10.2		100,644,000		24.0
Selling, general and administrative	22,046,000		6.0		22,046,000			—		—		—		—
Investment and interest income	381,000		(63.2	)	381,000			—		—		—		—
Income before income taxes	$	23,129,000	22.0	%	$	(2,403,000	)	$	18,752,000	(0.3	)%	$	6,780,000	32.3	%

	Reportable Segments — For the Three Months Ended March 31, 2013
	Consolidated		Corporate and Eliminations			Housekeeping		Dietary
Revenues	$	273,904,000	$	—		$	187,630,000	$	86,274,000
Cost of services provided	235,191,000		(14,783,000		)	168,824,000		81,150,000
Selling, general and administrative	20,790,000		20,790,000			—		—
Investment and interest income	1,034,000		1,034,000			—		—
Income before income taxes	$	18,957,000	$	(4,973,000	)	$	18,806,000	$	5,124,000

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Revenues

Consolidated

Consolidated revenues increased 14.0% to $312,165,000 in the first quarter 2014 compared to $273,904,000 in the first quarter 2013 as a result of the factors discussed below under Reportable Segments.

Reportable Segments

Housekeeping’s 9.1% net growth in reportable segment revenues resulted primarily from an increase in revenues attributable to service agreements entered into with new clients.

Dietary’s 24.5% net growth in reportable segment revenues is primarily a result of providing this service to a greater number of existing Housekeeping clients.

Costs of services provided

Consolidated

Consolidated costs of services increased 13.7% to $267,371,000 in the first quarter 2014 compared to $235,191,000 in the first quarter 2013. The increase in costs of services is a direct result of growth in our consolidated revenues. Certain significant components within our costs of services are subject to fluctuation with the changes in our business and client base. The increase in such components during 2014 compared to 2013 include labor and other labor related costs, housekeeping and dietary supplies, workers' compensation and general liability insurance and our bad debt provision. Historically, these significant components have accounted for approximately 97% of consolidated costs of services.

As a percentage of consolidated revenues, cost of services decreasedto 85.7% in the first quarter 2014 from 85.9% in the first quarter 2013. The following table provides a comparison of the primary cost of services provided-key indicators that we manage on a consolidated basis in evaluating our financial performance.

	For the Three Months Ended March 31,
Cost of Services Provided-Key Indicators as % of Consolidated Revenue	2014 %	2013 %	% Change
Bad debt provision	0.2	0.2	—
Workers’ compensation and general liability insurance	3.1	3.1	—

The bad debt provision remained consistent and is primarily due to our assessment of the collectability of our receivables.

The workers’ compensation and general liability insurance expense remained consistent during the three months ended March 31, 2014 and 2013.

Reportable Segments

Cost of services provided for Housekeeping, as a percentage of Housekeeping revenues for the first quarter 2014, increased to 90.8% from 90.0% in the first quarter 2013. Cost of services provided for Dietary, as a percentage of Dietary revenues for the first quarter 2014, decreased slightly to 93.7% from 94.1% in the first quarter 2013.

The following table provides a comparison of the primary cost of services provided-key indicators, as a percentage of the respective segment’s revenues that we manage on a reportable segment basis in evaluating our financial performance:

	For the Three Months Ended March 31,
Cost of Services Provided-Key Indicators as % of Segment Revenue	2014 %	2013 %	% Change
Housekeeping labor and other labor costs	80.3	80.0	0.3
Housekeeping supplies	8.0	8.1	(0.1)
Dietary labor and other labor costs	50.4	52.4	(2.0)
Dietary supplies	40.6	39.5	1.1

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Housekeeping labor and other labor costs, as a percentage of Housekeeping revenues, increased due to inefficiencies recognized in managing labor at the facility level. The decrease in Housekeeping supplies, as a percentage of Housekeeping revenues, is primarily due to more favorable vendor pricing programs obtained through further consolidation of housekeeping supply vendors and increased efficiencies in managing these costs at the facility level.

Dietary labor and other labor costs, as a percentage of Dietary revenues, decreased due to increased efficiencies in managing these costs at the facility level. The increase in Dietary supplies, as a percentage of Dietary revenues, is a result of the inefficient management of these costs, offset by more favorable vendor pricing programs obtained through further consolidation of dietary supply vendors.

Consolidated Selling, General and Administrative Expense

	For the Three Months Ended March 31,
	2014		2013		$ Change		% Change
Selling, general and administrative expense w/o deferred compensation change (a)	$	21,769,000	$	19,892,000	1,877,000		9.4	%
Deferred compensation fund gain	277,000		898,000		(621,000	)	(69.2	)%
Consolidated selling, general and administrative expense (b)	$	22,046,000	$	20,790,000	1,256,000		6.0	%

(a) Selling, general and administrative expense excluding the change in the market value of the deferred compensation fund.

(b) Consolidated selling, general and administrative expense reported for the period presented.

Although our growth in consolidated revenues was 14.0% for the first quarter 2014, selling, general and administrative expenses excluding the change in market value of the deferred compensation fund increased 9.4% or $1,877,000 compared to the first quarter 2013. Consequently, for the first quarter 2014, selling, general and administrative expenses (excluding the impact of deferred compensation fund), as a percentage of consolidated revenues, decreased to 7.0% compared to 7.3% for the first quarter 2013.

For the first quarter 2014, the portion of our consolidated selling, general and administrative expense attributable to deferred compensation decreased $621,000 compared to the first quarter 2013. The decrease in the deferred compensation is a result of lower market value fluctuations on the balance of investments held in our deferred compensation fund as noted below in Consolidated Investment and Interest Income. Consolidated selling, general and administrative expenses increased $1,256,000 or 6.0%.

Consolidated Investment and Interest Income

Investment and interest income, as a percentage of consolidated revenues, decreased to 0.1% for the first quarter 2014 compared to 0.4% for the first quarter 2013. We recognized a smaller increase in the market value of the investments held in our deferred compensation fund compared to a larger increase in the market value in the prior year.

Income before Income Taxes

Consolidated

As a result of the discussion above related to revenues and expenses, consolidated income before income taxes for the first quarter 2014 increased to 7.3%, as a percentage of consolidated revenues, compared to 6.9% for the first quarter 2013.

Reportable Segments

Housekeeping’s decrease in income before income taxes is primarily attributable to the key indicators discussed above, specifically

the increase in housekeeping labor and labor related costs, partially offset by the increase in reportable segment revenues, as well as the decrease in housekeeping supplies as a percentage of revenue.

Dietary’s increase in income before income taxes is primarily attributable to the key indicators discussed above, specifically the increase in reportable segment revenues and decrease in labor and labor related costs as a percentage of revenue, partially offset by the increase in the cost of dietary supplies.

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Consolidated Income Taxes

For the first quarter 2014, our effective tax rate was approximately 37%, an increase from the approximately 21% effective tax rate for the comparable 2013 period. Such differences between the effective tax rates and the applicable U.S. federal statutory rate arise primarily from the effect of state and local income taxes and tax credits available to the Company. The increase in the effective tax rate is primarily due to the unavailability of tax credits in 2014 compared to the increase in expected tax credits realized in 2013.

Consolidated Net Income

As a result of the matters discussed above, consolidated net income as a percentage of revenue for the first quarter 2014 decreased to 4.6% compared to 5.4% in the first quarter 2013.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting standards generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

We consider the policies discussed below to be critical to an understanding of our financial statements because their application places the most significant demands on our judgment. Therefore, it should be noted that financial reporting results rely on estimating the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies and estimates are described in the following paragraphs. For these estimates, we caution that future events rarely develop as forecasted, and the best estimates routinely require adjustment. Any such adjustments or revisions to estimates could result in material differences to previously reported amounts.

The policies discussed are not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting standards generally accepted in the United States, with no need for our judgment in their application. There are also areas in which our judgment in selecting another available alternative would not produce a materially different result. See our audited consolidated financial statements and notes thereto which are included in our Annual Report on Form 10-K for the year ended December 31, 2013, which contain accounting policies and other disclosures required by accounting principles generally accepted in the United States.

Allowance for Doubtful Accounts

The Allowance for Doubtful Accounts (the “Allowance”) is established as losses are estimated to have occurred through a provision for bad debts charged to earnings. The Allowance is evaluated based on our periodic review of accounts and notes receivable and is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

We have had varying collection experience with respect to our accounts and notes receivable. When contractual terms are not met, we generally encounter difficulty in collecting amounts due from certain of our clients. Therefore, we have sometimes been required to extend the period of payment for certain clients beyond contractual terms. These clients include those who have terminated service agreements and slow payers experiencing financial difficulties. In making credit evaluations, in addition to analyzing and anticipating, where possible, the specific cases described above, we consider the general collection risks associated with trends in the long-term care industry. We also establish credit limits, perform ongoing credit evaluations, and monitor accounts to minimize the risk of loss.

In accordance with the risk of extending credit, we regularly evaluate our accounts and notes receivable for impairment or loss of value and when appropriate, will provide in our Allowance for such receivables. We generally follow a policy of reserving for receivables due from clients in bankruptcy, clients with which we are in litigation for collection and other slow paying clients. The reserve is based upon our estimates of ultimate collectability. Correspondingly, once our recovery of a receivable is determined through litigation, bankruptcy proceedings or negotiation to be less than the recorded amount on our balance sheet, we will charge-off the applicable amount to the Allowance.

Our methodology for the Allowance is based upon a risk-based evaluation of accounts and notes receivable associated with a client’s ability to make payments. Such Allowance generally consists of an initial amount established based upon criteria generally applied if and when a client account files bankruptcy, is placed for collection/litigation and/or is considered to be pending collection/litigation. The initial Allowance is adjusted either higher or lower when additional information is available to permit a more accurate estimate of the collectability of an account.

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Summarized below for the three months ended March 31, 2014 and year ended December 31, 2013 are the aggregate account balances for the three Allowance criteria noted above, net write-offs of client accounts, bad debt provision and allowance for doubtful accounts.

Period Ended	Aggregate Account Balances of Clients in Bankruptcy or in/or Pending Collection/Litigation		Net Write-offs of Client Accounts		Bad Debt Provision		Allowance for Doubtful Accounts
March 31, 2014	$	9,156,000	$	688,000	$	750,000	$	3,981,000
December 31, 2013	$	6,047,000	$	2,041,000	$	1,990,000	$	3,919,000

At March 31, 2014, we identified accounts totaling $9,156,000 that require an Allowance based on potential impairment or loss of value. An Allowance totaling $3,981,000 was provided for these accounts at such date. Actual collections of these accounts could differ from that which we currently estimate. If our actual collection experience is 5% less than our estimate, the related increase to our Allowance would decrease net income by approximately $163,000.

Notwithstanding our efforts to minimize credit risk exposure, our clients could be adversely affected if future industry trends, as more fully discussed under Liquidity and Capital Resources below, and as further described in our Annual Report on Form 10-K for the year ended December 31, 2013 in Part I, Item 1A under “Risk Factors”, and Part I, Item 1 “Government Regulation of Clients” and “Service Agreements/Collections”, change in such a manner as to negatively impact the cash flows of our clients. If our clients experience a negative impact in their cash flows, it would have a material adverse effect on our results of operations and financial condition.

Accrued Insurance Claims

We currently have a Paid Loss Retrospective Insurance Plan for general liability and workers’ compensation insurance, which comprise approximately 18% of our liabilities at March 31, 2014. Under our insurance plans for general liability and workers' compensation, predetermined loss limits are arranged with our insurance company to limit both our per occurrence cash outlay and annual insurance plan cost. Our accounting for this plan is affected by various uncertainties because we must make assumptions and apply judgment to estimate the ultimate cost to settle reported claims and claims incurred but not reported as of the balance sheet date. We address these uncertainties by regularly evaluating our claims’ pay-out experience, present value factor and other factors related to the nature of specific claims in arriving at the basis for our accrued insurance claims estimate. Our evaluations are based primarily on current information derived from reviewing our claims experience and industry trends. In the event that our claims experience and/or industry trends result in an unfavorable change resulting from, among other factors, the severity levels of reported claims and medical cost inflation, as compared to historical claim trends, it would have an adverse effect on our results of operations and financial condition. Under these plans, predetermined loss limits are arranged with an insurance company to limit both our per-occurrence cash outlay and annual insurance plan cost.

For workers’ compensation, we record a reserve based on the present value of estimated future cost of claims and related expenses that have been reported but not settled, including an estimate of claims incurred but not reported that are developed as a result of a review of our historical data and open claims. The present value of the payout is determined by applying an 8% discount factor against the estimated value of the claims over the estimated remaining pay-out period. Reducing the discount factor by 1% would reduce net income by approximately $71,000. Additionally, reducing the estimated payout period by six months would result in an approximate $137,000 reduction in net income.

For general liability, we record a reserve for the estimated ultimate amounts to be paid for known claims. The estimated ultimate reserve amount recorded is derived from the estimated claim reserves provided by our insurance carrier reduced by an historical experience factor.

Asset Valuations and Review for Potential Impairment

We review our fixed assets, deferred income taxes, goodwill and other intangible assets at least annually or whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. This review requires that we make assumptions regarding the value of these assets and the changes in circumstances that would affect the carrying value of these assets. If such analysis indicates that a possible impairment may exist, we are then required to estimate the fair value of the asset and, as deemed appropriate, expense all or a portion of the asset. The determination of fair value includes numerous uncertainties, such as the

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impact of competition on future value. We believe that we have made reasonable estimates and judgments in determining whether our long-term assets have been impaired; however, if there is a material change in the assumptions used in our determination of fair value or if there is a material change in economic conditions or circumstances influencing fair value, we could be required to recognize certain impairment charges in the future. As a result of our most recent reviews, no changes in asset values were required.

Income Taxes

Deferred income taxes are recognized for the tax consequences related to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for tax purposes at each year-end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is established when necessary based on the weight of available evidence, if it is considered more likely than not that all or some portion of the deferred tax assets will not be realized. Income tax expense is the sum of current income tax plus the change in deferred tax assets and liabilities.

We are subject to Federal income taxes and numerous state and local income taxes. The determination of the income tax provision is an inherently complex process, requiring management to interpret continually changing regulations and to make certain significant judgments. Our assumptions, judgments and estimates relative to the amount of deferred income taxes take into account scheduled reversals of deferred tax liabilities, recent financial operations, estimates of the amount of future taxable income and available tax planning strategies. Actual operating results in future years could render our current assumptions, judgments and estimates inaccurate. No assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in the Company’s historical income tax provisions and accruals. The Company adjusts these items in light of changing facts and circumstances. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences could have a material effect on the income tax provisions or benefits in the periods in which such determinations are made.

Liquidity and Capital Resources

At March 31, 2014, we had cash and cash equivalents and marketable securities of $83,339,000 and working capital of $218,259,000 compared to December 31, 2013 cash, cash equivalents and marketable securities of $75,600,000 and working capital of $210,089,000. We view our cash and cash equivalents and marketable securities as our principal measure of liquidity. Our current ratio remained constant with a 3.1 to 1 ratio at March 31, 2014 and December 31, 2013. The increase in working capital resulted primarily from increases in our cash and cash equivalents, marketable securities, accounts and notes receivable, inventories and supplies, prepaid income taxes, prepaid expenses and other, and decreases in our other accrued expenses and income taxes payable balances, primarily resulting from the timing of such payments at March 31, 2014 as compared with December 31, 2013. This increase was partially negatively impacted by the decrease in our deferred income taxes, and increases in our accounts payable, accrued payroll and payroll taxes and accrued insurance claims. On an historical basis, our operations have generally produced consistent cash flow and have required limited capital resources. We believe our current and near term cash flow positions will enable us to fund our anticipated growth.

Operating Activities

The net cash provided by our operating activities was $18,320,000 for the three months ended March 31, 2014. The principal sources of net cash flows from operating activities for the three months ended March 31, 2014 was net income, adjusted for non-cash charges to operations for bad debt provisions, stock-based compensation, depreciation and amortization, deferred income taxes and unrealized gains and losses, which totaled $20,807,000. Additionally, operating activities' cash flows decreased by $13,422,000 as a result of the increases in accounts and notes receivable, prepaid income taxes, inventories and supplies, prepaid expenses and other assets, deferred compensation funding and the decreases in accounts payable and other accrued expenses and income taxes payable. These operating cash outflows were partially offset by the cash inflows of $10,935,000 related to the increases in accrued payroll and payroll taxes, accrued insurance claims and deferred compensation liability.

Investing Activities

The net cash used in our investing activities for the three months ended March 31, 2014 was $1,742,000. The principal uses of net cash flows from investing activities was $289,000 of net purchases of marketable securities and $1,513,000 for the purchase of housekeeping equipment, computer software and equipment, and laundry equipment installations. See “Capital Expenditures” below.

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Financing Activities

On March 28, 2014, we paid to shareholders of record on February 21, 2014, a regular quarterly cash dividend of $0.17125 per common share. Such regular quarterly cash dividend payment in the aggregate was $12,077,000.

Additionally, on April 8, 2014, our Board of Directors declared a regular quarterly cash dividend of $0.17250 per common share, which will be paid on June 27, 2014, to shareholders of record as of the close of business on May 23, 2014.

The dividends paid to shareholders during the three months ended March 31, 2014 were funded by the existing cash, cash equivalents and marketable securities held by the Company. At March 31, 2014 and December 31, 2013, we had $83,339,000 and $75,600,000, respectively, in cash, cash equivalents and marketable securities. Our Board of Directors reviews our dividend policy on a quarterly basis. Although there can be no assurance that we will continue to pay dividends or the amount of the dividend, we expect to continue to pay a regular quarterly cash dividend. In connection with the establishment of our dividend policy, we adopted a Dividend Reinvestment Plan in 2003.

During the three months ended March 31, 2014, we received proceeds of $2,559,000 from the exercise of stock options by employees and directors. Additionally, as a result of deductions derived from the stock option exercises, we recognized an income tax benefit of $477,000.

Line of Credit

We have a $125,000,000 bank line of credit on which we may draw to meet short-term liquidity requirements in excess of internally generated cash flow. Amounts drawn under the line of credit are payable upon demand. At March 31, 2014, there were no borrowings under the line of credit. However, at such date, we had outstanding a $51,520,000 irrevocable standby letter of credit which relates to payment obligations under our insurance programs. As a result of the letter of credit issued, the amount available under the line of credit was reduced by $51,520,000 at March 31, 2014.

The line of credit requires us to satisfy one financial covenant. Such covenant and its respective status at March 31, 2014 was as follows:

Covenant Description and Requirement	Status at March 31, 2014
Funded debt(1) to EBITDA(2) ratio: less than 3.00 to 1.00	0.93

(1) All indebtedness for borrowed money, including but not limited to capitalized lease obligations, reimbursement obligations in respect of letters of credit and guaranties of any such indebtedness.

(2) On a trailing four quarters basis, net income plus interest expense plus income tax expense plus depreciation plus amortization.

As noted above, we complied with our financial covenant at March 31, 2014 and expect to continue to remain in compliance with such financial covenant. This line of credit has a five year term and expires on December 18, 2018.

Pledged Assets and Collateral

On March 21, 2014, we entered into a Security Interest, Pledge and Assignment of Deposit Account (the "Pledge") with Wells Fargo Bank, National Association (the “Bank”) as collateral for the Promissory Note (the “Note”) dated March 21, 2014. The Note is a short term non-revolving line of credit between the Company’s third party payroll administrator and the Bank. The Company entered into the Pledge at quarter end due to the timing of payroll funding. On April 1, 2014, the Company's third party payroll administrator satisfied its payment obligation under the Note, and accordingly, the Company's Pledge was fully released and extinguished. The funds previously held as collateral were subsequently used for general operating activities.

Accounts and Notes Receivable

We expend considerable effort to collect the amounts due for our services on the terms agreed upon with our clients. Many of our clients participate in programs funded by federal and state governmental agencies which historically have encountered delays in making payments to its program participants. Congress has enacted a number of laws during the past decade that have significantly altered, or may alter, overall government reimbursement for nursing home services. Because our clients’ revenues are generally dependent on Medicare and Medicaid 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

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in and could continue to result in significant additional bad debts in the near future. Whenever possible, when a client falls behind in making agreed-upon payments, we convert the unpaid accounts receivable to interest bearing promissory notes. The promissory notes receivable provide a means by which to further evidence the amounts owed and provide a definitive repayment plan and therefore may ultimately enhance our ability to collect the amounts due. At March 31, 2014 and December 31, 2013, we had $17,824,000 and $16,116,000, net of reserves, respectively, of such promissory notes outstanding. Additionally, we consider restructuring service agreements from full service to management-only service in the case of certain clients experiencing financial difficulties. We believe that such restructurings may provide us with a means to maintain a relationship with the client while at the same time minimizing collection exposure.

Many states have significant budget deficits. State Medicaid programs are experiencing increased demand, and with lower revenues than projected, they have fewer resources to support their Medicaid programs. In addition, comprehensive health care legislation under the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (together, the “Act”) was signed into law in March 2010. The Act will significantly impact the governmental healthcare programs in which our clients participate, and reimbursements received thereunder from governmental or third-party payors. In July 2011, Centers for Medicare and Medicaid Services (“CMS”) issued a final rule that reduced Medicare payments to nursing centers by 11.1% and changed the reimbursement for the provision of group rehabilitation therapy services to Medicare beneficiaries. This new rule was effective as of October 1, 2011. Furthermore, in the coming year and beyond, new proposals or additional changes in existing regulations could be made to the Act which could directly impact the governmental reimbursement programs in which our clients participate. As a result, some state Medicaid programs are reconsidering previously approved increases in nursing home reimbursement or are considering delaying or foregoing those increases. A few states have indicated it is possible they will run out of cash to pay Medicaid providers, including nursing homes. Any negative changes in our clients’ reimbursements may negatively impact our results of operations. Although we are currently evaluating the Act’s effect on our client base, we may not know the full effect until such time as these laws are fully implemented and CMS and other agencies issue applicable regulations or guidance. Additionally, even if federal or state legislation is enacted that provides additional funding to Medicaid providers, given the volatility of the economic environment, it is difficult to predict the impact of this legislation on our clients’ liquidity and their ability to make payments to us as agreed.

In January 2013, the U.S. Congress enacted the American Taxpayer Relief Act of 2012, which delayed automatic spending cuts of $1.2 trillion, including reduced Medicare payments to plans and providers up to 2%. These discretionary spending caps were originally enacted under provisions in the Budget Control Act of 2011, an initiative to reduce the federal deficit through the year 2021, also known as “sequestration.” The sequestration went into effect starting March 2013. In December 2013, the U.S. Congress enacted the Bipartisan Budget Act of 2013, which reduces the impact of the sequestration over the next two years, beginning in fiscal year 2014 and extended the reduction in Medicare payments to plans and providers for two years through the year 2023.

We have had varying collection experience with respect to our accounts and notes receivable. When contractual terms are not met, we generally encounter difficulty in collecting amounts due from certain of our clients. Therefore, we have sometimes been required to extend the period of payment for certain clients beyond contractual terms. These clients include those who have terminated service agreements and slow payers experiencing financial difficulties. In order to provide for these collection problems and the general risk associated with the granting of credit terms, we have recorded bad debt provisions (in an Allowance for Doubtful Accounts) of $750,000 and $450,000 for the three months ended March 31, 2014 and 2013, respectively. As a percentage of total revenues, these provisions represent approximately 0.2% for such respective periods. In making our credit evaluations, in addition to analyzing and anticipating, where possible, the specific cases described above, we consider the general collection risk associated with trends in the long-term care industry. We also establish credit limits, perform ongoing credit evaluation and monitor accounts to minimize the risk of loss. Notwithstanding our efforts to minimize credit risk exposure, our clients could be adversely affected if future industry trends change in such a manner as to negatively impact their cash flows. If our clients experience a negative impact in their cash flows, it would have a material adverse effect on our results of operations and financial condition.

Insurance Programs

We self-insure or carry a high deductible, and therefore retain a substantial portion of the risk associated with the expected losses under our general liability and workers compensation programs. Under our insurance plans for general liability and workers’ compensation, predetermined loss limits are arranged with our insurance company to limit both our per occurrence cash outlay and annual insurance plan cost.

For workers’ compensation, we record a reserve based on the present value of future payments, including an estimate of claims incurred but not reported, that are developed as a result of a review of our historical data and open claims. The present value of the payout is determined by applying an 8% discount factor against the estimated value of the claims over the estimated remaining pay-out period.

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For general liability, we record a reserve for the estimated ultimate amounts to be paid for known claims. The estimated ultimate reserve amount recorded is derived from the estimated claim reserves provided by our insurance carrier reduced by an historical experience factor.

We regularly evaluate our claims’ pay-out experience, present value factor and other factors related to the nature of specific claims in arriving at the basis for our accrued insurance claims’ estimate. Our evaluation is based primarily on current information derived from reviewing our claims experience and industry trends. In the event that our claims experience and/or industry trends result in an unfavorable change, it would have an adverse effect on our consolidated results of operations, financial condition and cash flows.

Capital Expenditures

The level of capital expenditures is generally dependent on the number of new clients obtained. Such capital expenditures primarily consist of housekeeping equipment purchases, laundry and linen equipment installations, and computer hardware and software. Although we have no specific material commitments for capital expenditures through the end of calendar year 2014, we estimate that for the remainder of 2014 we will have capital expenditures of approximately $2,000,000 to $4,000,000 in connection with housekeeping equipment purchases and laundry and linen equipment installations in our clients’ facilities, as well as expenditures relating to internal data processing hardware and software requirements. We believe that our cash from operations, existing cash and cash equivalents balance and credit line will be adequate for the foreseeable future to satisfy the needs of our operations and to fund our anticipated growth. However, should these sources not be sufficient, we would, if necessary, seek to obtain necessary working capital from such sources as long-term debt or equity financing.

Material Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements, other than our irrevocable standby letter of credit and pledge previously discussed.

Effects of Inflation

Although there can be no assurance thereof, we believe that in most instances we will be able to recover increases in costs attributable to inflation by passing through such cost increases to our clients.

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Item 3.  Quantitative and QualitativeDisclosures About Market Risk.

At March 31, 2014, we had $83,339,000 in cash, cash equivalents and marketable securities. In accordance with U.S. GAAP, the fair value of all of our cash equivalents and marketable securities is determined based on "Level 1" or “Level 2” inputs, which consist of quoted prices whose value is based upon quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. We place our cash investments in instruments that meet credit quality standards, as specified in our investment policy guidelines.

Investments in both fixed rate and floating rate investments carry a degree of interest rate risk. Fixed rate securities may have their market value adversely impacted due to an increase in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates or if there is a decline in the fair value of our investments.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports under the Securities Exchange Act of 1934 (the “Exchange Act”), such as this Form 10-Q, is reported in accordance with Securities and Exchange Commission (“SEC”) rules. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Based on their evaluation as of March 31, 2014, pursuant to Exchange Act Rule 13a-15(b), our management, including our Chief Executive Officer and Chief Financial Officer, believe our disclosure controls and procedures (as defined in Exchange Act 13a-15(e) are effective.

In connection with the evaluation pursuant to Exchange Act Rule 13a-15(d) of our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) by our management, including our Chief Executive Officer and Chief Financial Officer, no changes during the quarter ended March 31, 2014, were identified that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Certifications

Certifications of the Principal Executive Officer and Principal Financial Officer regarding, among other items, disclosure controls and procedures are included as exhibits to this Form 10-Q.

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PART II — OTHER INFORMATION.

Item 1. Legal Proceedings.

In the normal course of business, the Company is involved in various administrative and legal proceedings, including labor and employment, contracts, personal injury, and insurance matters. The Company believes it is not a party to, nor are any of its properties the subject of, any pending legal proceeding or governmental examination that would have a material adverse effect on the Company's consolidated financial condition or liquidity. However, in light of the uncertainties involved in such proceedings, the ultimate outcome of a particular matter could become material to the Company’s results of operations for a particular period depending on, among other factors, the size of the loss or liability imposed and the level of the Company’s operating income for that period.

Item 1A. Risk Factors.

There has been no material change in the risk factors set forth in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2013.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

On January 3, 2014, certain executive officers and directors were granted stock options to purchase 101,000 shares, in the aggregate, at an exercise price equal to the then current fair market value of $28.02 per share. Additionally, certain executive officers were also granted 12,000 shares of restricted stock with a weighted average grant date fair value of $28.02.

Item 6. Exhibits.

The following exhibits are filed as part of this Report:

Exhibit Number	Description
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1	Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.
EX-101	XBRL Instance Document
EX-101	XBRL Taxonomy Extension Schema Document
EX-101	XBRL Taxonomy Calculation Linkbase Document
EX-101	XBRL Taxonomy Extension Definition Linkbase Document
EX-101	XBRL Taxonomy Labels Linkbase Document
EX-101	XBRL Taxonomy Presentation Linkbase Document

32

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant had duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		HEALTHCARE SERVICES GROUP, INC.
Date:	April 24, 2014	/s/ Daniel P. McCartney
		Daniel P. McCartney
		Chief Executive Officer
		(Principal Executive Officer)
Date:	April 24, 2014	/s/ John C. Shea
		John C. Shea
		Chief Financial Officer
		(Principal Financial Officer)

33

EX-31.1

Exhibit 31.1

Certification of the Chief Executive Officer

Pursuant to Rules 13a-14(a) and 15d-14(a)

Under the Securities Exchange Act, as Amended

I, Daniel P. McCartney, 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 period 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 the 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:	April 24, 2014	/s/ Daniel P. McCartney
		Daniel P. McCartney
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification of the Chief Financial Officer

Pursuant to Rules 13a-14(a) and 15d-14(a)

Under the Securities Exchange Act, as Amended

I, John C. Shea, 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 period 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 the 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:	April 24, 2014	/s/ John C. Shea
		John C. Shea
		Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CertificationPursuant to

18 U.S.C. Section 1350,

As AdoptedPursuant to

Section 906 ofthe Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Healthcare Services Group, Inc. (the “Company”) for the quarter ended March 31, 2014 as filed with the Securities and Exchange commission on the date hereof (the “Form 10-Q”), Daniel P. McCartney, the Chief Executive Officer of the Company, and John C. Shea, the Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of their knowledge:

(1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d), of the Securities Exchange Act of 1934, as amended; and

(2) That information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Daniel P. McCartney	/s/ John C. Shea
Daniel P. McCartney	John C. Shea
Chief Executive Officer	Chief Financial Officer
(Principal Executive Officer)	(Principal Financial Officer)
April 24, 2014	April 24, 2014

XML

Fair Value Measurements (Marketable Debt Securities) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Amortized Cost	$ 11,565	$ 11,364
Gross Unrealized Gains	84	83
Gross Unrealized Losses	(2)	(2)
Estimated Fair Value	11,647	11,445
Other-than-temporary Impairments	0	0
Municipal bonds - available for sale [Member]
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Amortized Cost	11,565	11,364
Gross Unrealized Gains	84	83
Gross Unrealized Losses	(2)	(2)
Estimated Fair Value	11,647	11,445
Other-than-temporary Impairments	$ 0	$ 0

XML

Earnings Per Common Share (Computation Of Basic And Diluted Net Earnings Per Share) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Earnings Per Share [Abstract]
Net income	$ 14,639	$ 14,954
Basic earnings per common share, Income (Numerator)	14,639	14,954
Basic earnings per common share, Shares (Denominator)	70,321	68,463
Basic earnings per common share (dollars per share)	$ 0.21	$ 0.22
Effect of dilutive securities, Options, Shares	751	898
Effect of dilutive securities, Options, (dollars per share)	$ 0.00	$ 0.00
Diluted earnings per common share, Income (Numerator)	$ 14,639	$ 14,954
Diluted earnings per common share, Shares (Denominator)	71,072	69,361
Diluted earnings per common share (dollars per share)	$ 0.21	$ 0.22
Options outstanding to purchase common stock excluded from computation of diluted earnings per common share, Shares	993	544
Antidilutive securities excluded from earnings per share, average exercise price (dollars per share)	$ 25.87	$ 23.50

XML

Share-Based Compensation (Assumptions For Employee Stock Purchase Plan) (Details)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	1.90%	1.50%
Weighted average expected life in years	5 years 10 months 24 days	6 years
Expected volatility	36.90%	38.90%
Dividend yield	2.40%	2.80%
Employee Stock Purchase Plan (ESPP) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	0.10%	0.24%
Weighted average expected life in years	1 year	1 year
Expected volatility	21.90%	27.60%
Dividend yield	2.40%	2.80%

XML

Other Contingencies (Details) (USD $)	1 Months Ended	3 Months Ended		1 Months Ended
	Jul. 31, 2011	Mar. 31, 2014 financial_covenant state	Mar. 31, 2014 Standby Letter Of Credit [Member]	Jan. 31, 2013 Maximum [Member]
Short-term Debt [Line Items]
Bank line of credit		$ 125,000,000
Borrowings under line of credit		0
Irrevocable standby letter of credit, outstanding			51,520,000
Reduction of bank line of credit		$ 51,520,000
Number of financial covenants		1
Credit line, term		5 years
Line of credit expiration date		Dec. 18, 2018
Number of states in which entity operates		48
Percentage of reduction to Medicare payments to nursing centers	11.10%
Percentage of reduction of Medicare payments to plans and providers				2.00%

XML

Share-Based Compensation (Assumption For Fair Value Of Options Granted) (Details)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Risk-free interest rate	1.90%	1.50%
Weighted average expected life in years	5 years 10 months 24 days	6 years
Expected volatility	36.90%	38.90%
Dividend yield	2.40%	2.80%

XML

Changes in Accumulated Other Comprehensive Income by Component (Narrative) (Details) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Realized gains from the sale of available for sale securities	$ 1

XML

Share-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Stock-based Compensation Expense

A summary of stock-based compensation expense for the three months ended March 31, 2014 and 2013 is as follows:

	For the Three Months Ended March 31,
	2014		2013
Stock Options	$	646,000	$	487,000
Restricted Stock	26,000		7,000
Employee Stock Purchase Plan ("ESPP")	90,000		89,000
Total pre-tax stock-based compensation expense charged against income (1)	$	762,000	$	583,000

(1) Stock-based compensation expense is recorded in the selling, general and administrative caption in our consolidated statements of comprehensive income.

Summary Of Other Information Of Stock Option Plans

Other information pertaining to activity of our stock awards during the three months ended March 31, 2014 and 2013 were as follows:

	March 31, 2014		March 31, 2013
Total grant-date fair value of stock awards granted	$	4,268,000	$	3,269,000
Total fair value of stock awards vested during period	$	2,051,000	$	1,897,000
Total unrecognized compensation expense related to non-vested stock awards	$	8,523,000	$	6,349,000

A summary of our stock option activity under the 2012 Plan as of December 31, 2013 and changes during the three months ended March 31, 2014 is as follows:

	Stock Options Outstanding
	Number of Shares		Weighted Average Exercise Price
December 31, 2013	2,483,000		$	16.05
Granted	535,000		28.02
Cancelled	(35,000	)	21.39
Exercised	(181,000	)	14.31
March 31, 2014	2,802,000		$	18.38

Schedule of Nonvested Share Activity

A summary of our non-vested stock-based compensation as of December 31, 2013 and changes during the three months ended March 31, 2014 is as follows:

	Number of Non-vested Shares		Weighted Average Grant Date Fair Value
December 31, 2013	1,561,000		$	4.78
Granted	535,000		8.24
Vested	(511,000	)	4.24
Forfeited	(35,000	)	5.94
March 31, 2014	1,550,000		$	6.27

Summarized Information Of Stock Options Outstanding

The following table summarizes other information about our outstanding stock options at March 31, 2014.

	Stock Options
Range of exercise prices	$6.07-28.02
Outstanding:
Weighted average remaining contractual life (years)	7.0
Aggregate intrinsic value	$	29,919,000
Exercisable:
Number of shares	1,252,000
Weighted average remaining contractual life (years)	5.1
Aggregate intrinsic value	$	19,455,000
Exercised:
Aggregate intrinsic value	$	2,436,000

Assumption For Fair Value Of Options Granted

The fair value of stock awards granted in 2014 and 2013 was estimated on the date of grant using the Black-Scholes option valuation model based on the following assumptions:

	March 31, 2014	March 31, 2013
Risk-free interest rate	1.9%	1.5%
Weighted average expected life in years	5.9 years	6.0 years
Expected volatility	36.9%	38.9%
Dividend yield	2.4%	2.8%

Schedule of Share-based Payment Award, Employee Stock Purchase Plan, Valuation Assumptions

The stock-based compensation expense associated with our ESPP was estimated on the date of grant using the Black-Scholes option valuation model based on the following assumptions:

	March 31, 2014	March 31, 2013
Risk-free interest rate	0.10%	0.24%
Weighted average expected life in years	1.0 year	1.0 year
Expected volatility	21.9%	27.6%
Dividend yield	2.4%	2.8%

XML

Income Taxes (Details)	3 Months Ended		12 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013	Dec. 31, 2014 Forecast [Member]
Income Tax [Line Items]
Effective tax rate	37.00%	21.00%	29.00%	37.00%

XML

Stock-Based Compensation (Summary Of Stock-Based Compensation Expense) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014		Mar. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total pre-tax stock-based compensation expense charged against income	$ 762	[1]	$ 583	[1]
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total pre-tax stock-based compensation expense charged against income	646		487
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total pre-tax stock-based compensation expense charged against income	26		7
Employee Stock Purchase Plan (ESPP) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total pre-tax stock-based compensation expense charged against income	$ 90		$ 89

[1] Stock-based compensation expense is recorded in the selling, general and administrative caption in our consolidated statements of comprehensive income.

XML

Fair Value Measurements (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014		Mar. 31, 2013
Fair Value Disclosures [Abstract]
Unrealized gain on available for sale marketable securities, net of taxes	$ 1	[1]	$ 23
Proceeds from available for sale municipal bonds	871
Realized gain on other income, investment and interest	$ 1

[1] All amounts are net of tax.

XML

Segment Information (Schedule Of Information Of Reportable Segments) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014 segment		Mar. 31, 2013
Segment Reporting Information [Line Items]
Number of reportable segments	2
Percentage of revenue and income earned in one geographic segment	99.00%
Revenues	$ 312,165		$ 273,904
Income before income taxes	23,129		18,957
Housekeeping Services [Member]
Segment Reporting Information [Line Items]
Revenues	204,741		187,630
Income before income taxes	18,752		18,806
Dietary Services [Member]
Segment Reporting Information [Line Items]
Revenues	107,424		86,274
Income before income taxes	6,780		5,124
Corporate And Eliminations [Member]
Segment Reporting Information [Line Items]
Revenues	0		0
Income before income taxes	$ (2,403)	[1]	$ (4,973)	[1]

[1] Represents primarily corporate office cost and related overhead, recording of transactions at the reportable segment level which use methods other than U.S. GAAP, as well as consolidated subsidiaries’ operating expenses that are not allocated to the reportable segments, net of investment and interest income.

XML

Share-Based Compensation (Summary Of Other Information Of Stock Awards) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Total grant-date fair value of stock options granted	$ 4,268	$ 3,269
Total fair value of options vested during period	2,051	1,897
Total unrecognized compensation expense related to non-vested stock awards	$ 8,523	$ 6,349

XML

Changes in Accumulated Other Comprehensive Income by Component

3 Months Ended

Mar. 31, 2014

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Changes in Accumulated Other Comprehensive Income by Component

Changes in Accumulated Other Comprehensive Income by Component

U.S. GAAP establishes standards for presenting information about significant items reclassified out of accumulated other comprehensive income by component. As of March 31, 2014 and December 31, 2013, respectively, we generated other comprehensive income from one component. This component relates to the unrealized gains and losses from our available for sale marketable securities during a given reporting period.

The following table provides a summary of changes in accumulated other comprehensive income for the three months ended March 31, 2014:

	Unrealized Gains and Losses on Available for Sale Securities (1)
Accumulated other comprehensive income — December 31, 2013	$	49,000
Other comprehensive income before reclassifications	2,000
Amounts reclassified from accumulated other comprehensive income (2)(3)	(1,000		)
Net current period change in other comprehensive income	1,000
Accumulated other comprehensive income — March 31, 2014	$	50,000

(1) All amounts are net of tax.

(2) Realized gains and losses are recorded pre-tax in the other income - investment and interest caption on our consolidated statements of comprehensive income.

(3) For the three months ended March 31, 2014, the Company recorded $1,000 of realized gains from the sale of available for sale securities. Refer to Note 5 herein for further information.

XML

Share-Based Compensation (Summary Of Stock Award Activity) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Number of Shares
Number of Shares, December 31, 2013	2,483
Granted, Number of Shares	535
Cancelled, Number of Shares	(35)
Exercised, Number of Shares	(181)
Number of Shares, March 31, 2014	2,802
Weighted Average Exercise Price
Weighted Average price, December 31, 2013 (in dollars per share)	$ 16.05
Granted, Weighted Average price (in dollars per share)	$ 28.02
Cancelled, Weighted Average price (in dollars per share)	$ 21.39
Exercised, Weighted Average price (in dollars per share)	$ 14.31
Weighted Average price, March 31, 2014 (in dollars per share)	$ 18.38

XML

Description of Business and Significant Accounting Policies (Details)	3 Months Ended
	Mar. 31, 2014 segment subsidiary
Property, Plant and Equipment [Line Items]
Terms of service agreement	Our agreements with clients typically provide for a one year service term, cancelable by either party upon 30 to 90 days’ notice after the initial 90-day period.
Service term	1 year
Initial period of service term	90 days
Number of reportable segments	2
Number of subsidiaries	3
Amortization period of inventories and supplies	24 months
Minimum [Member]
Property, Plant and Equipment [Line Items]
Days to notify cancellation of service	30 days
Property and equipment payment terms	24 months
Maximum [Member]
Property, Plant and Equipment [Line Items]
Days to notify cancellation of service	90 days
Property and equipment payment terms	60 months

XML

Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Computation Of Basic And Diluted Net Earnings Per Share

The computations of basic net earnings per share and diluted net earnings per share are as follows:

	Three Months Ended March 31, 2014
	Income (Numerator)		Shares (Denominator)	Per-share Amount
Net income	$	14,639,000
Basic earnings per common share	$	14,639,000	70,321,000	$	0.21
Effect of dilutive securities:
Stock options and restricted stock			751,000	—
Diluted earnings per common share	$	14,639,000	71,072,000	$	0.21
	Three Months Ended March 31, 2013
	Income (Numerator)		Shares (Denominator)	Per-share Amount
Net income	$	14,954,000
Basic earnings per common share	$	14,954,000	68,463,000	$	0.22
Effect of dilutive securities:
Stock options and restricted stock			898,000	—
Diluted earnings per common share	$	14,954,000	69,361,000	$	0.22

XML

Share-Based Compensation (Summary of Nonvested Share Activity) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Number of Non-vested Shares
December 31, 2013 (in shares)	1,561
Granted (in shares)	535
Vested (in shares)	(511)
Forfeited (in shares)	(35)
March 31, 2014 (in shares)	1,550
Weighted Average Grant Date Fair Value
December 31, 2013 (in dollars per share)	$ 4.78
Granted (in dollars per share)	$ 8.24
Vested (in dollars per share)	$ 4.24
Forfeited (in dollars per share)	$ 5.94
March 31, 2014 (in dollars per share)	$ 6.27

XML

Acquisition (Narrative) (Details) (Platinum Health Services, LLC [Member], USD $) In Thousands, unless otherwise specified	0 Months Ended
	Mar. 31, 2014	Jul. 12, 2013
Business Acquisition [Line Items]
Total purchase consideration		$ 46,832
Cash payments to acquire business		5,000
Equity interest issued to acquiree (number of shares)		1,215
Equity interest issued to acquiree (fair value)		30,062
Contingent consideration, fair value	11,770
Acquired finite-lived intangible assets		21,000
Customer Relationships [Member]
Business Acquisition [Line Items]
Acquired finite-lived intangible assets		$ 21,000
Weighted average useful life of acquired finite-lived intangible assets		10 years

XML

Acquisition (Schedule of Assets Acquired and Liabilities Assumed) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013	Jul. 12, 2013 Platinum Health Services, LLC [Member]
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Fair value of assets acquired, net of liabilities assumed			$ 2,604
Goodwill	40,183	40,183	23,228
Intangible assets			21,000
Net assets acquired			$ 46,832

XML

Acquisition

3 Months Ended

Mar. 31, 2014

Business Combinations [Abstract]

Acquisition

Acquisition

On July 12, 2013, the Company acquired substantially all of the operating assets of Platinum Health Services, LLC, a Delaware limited liability company and Platinum Health Services PEO, LLC, a Delaware limited liability company (collectively “Platinum”) pursuant to an Asset Purchase Agreement dated July 11, 2013. Platinum was a privately-held provider of professional housekeeping, laundry and maintenance services to long-term and post-acute care facilities and operated within the United States. The acquisition has been included within the consolidated results of operations and financial condition from the date of the acquisition.

The total purchase consideration was $46,832,000, which consisted of a cash payment of $5,000,000, the issuance of 1,215,000 shares of the Company's common stock with a fair value of $30,062,000 and contingent consideration with a fair value of $11,770,000 as of March 31, 2014. Upon the achievement of certain financial and retention targets, the Platinum stockholders will be eligible for contingent consideration paid by the future issuance of the Company's common stock.

The purchase consideration of the acquisition has been preliminarily allocated to the assets acquired and liabilities assumed based on estimated fair values. The preliminary allocation is as follows:

Fair value of assets acquired, net of liabilities assumed	$	2,604,000
Goodwill	23,228,000
Intangible assets	21,000,000
Net assets acquired	$	46,832,000

Goodwill, which is expected to be amortized for tax purposes, represents the excess of the purchase price over the fair value of the net assets acquired, and is primarily attributable to the assembled workforce of the acquired business. Goodwill was allocated to our Housekeeping reportable operating segment. Intangible assets consist of customer relationships of $21,000,000 and has been assigned an estimated useful life of 10 years.

XML

Changes in Accumulated Other Comprehensive Income by Component (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014		Mar. 31, 2013
Accumulated Other Comprehensive Income, Net of Tax [Roll Forward]
Accumulated other comprehensive income — December 31, 2013	$ 49	[1]
Other comprehensive income before reclassifications	2	[1]
Amounts reclassified from accumulated other comprehensive income	(1)	[1],[2],[3]
Net current period change in other comprehensive income	1	[1]	23
Accumulated other comprehensive income — March 31, 2014	$ 50	[1]

[1] All amounts are net of tax.

[2] For the three months ended March 31, 2014, the Company recorded $1,000 of realized gains from the sale of available for sale securities. Refer to Note 5 herein for further information.

[3] Realized gains and losses are recorded pre-tax in the other income - investment and interest caption on our consolidated statements of comprehensive income.

XML

Fair Value Measurements (Contractual Maturities Of Available For Sale Investments) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Fair Value Disclosures [Abstract]
Maturing in one year or less	$ 1,801	$ 1,846
Maturing after one year through three years	6,805	7,113
Maturing after three years	3,041	2,486
Total debt securities	$ 11,647	$ 11,445

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Segment Information (Revenues By Client Services) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Revenue from External Customer [Line Items]
Revenues	$ 312,165	$ 273,904
Housekeeping Services [Member]
Revenue from External Customer [Line Items]
Revenues	140,940	125,593
Laundry and Linen Services [Member]
Revenue from External Customer [Line Items]
Revenues	63,270	60,898
Dietary Services [Member]
Revenue from External Customer [Line Items]
Revenues	107,424	86,274
Maintenance Services and Other [Member]
Revenue from External Customer [Line Items]
Revenues	$ 531	$ 1,139

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014		Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 71,692		$ 64,155
Marketable securities, at fair value	11,647		11,445
Accounts and notes receivable, less allowance for doubtful accounts of $3,981,000 in 2014 and $3,919,000 in 2013	195,146		189,107
Inventories and supplies	32,756		32,447
Deferred income taxes	0		2,339
Prepaid income taxes	1,007		0
Prepaid expenses and other	11,805		9,699
Total current assets	324,053		309,192
Property and equipment:
Laundry and linen equipment installations	2,472		2,516
Housekeeping and office equipment and furniture	30,427		29,182
Autos and trucks	305		305
Property and equipment, gross	33,204		32,003
Less accumulated depreciation	21,377		20,699
Property and equipment, net	11,827		11,304
Goodwill	40,183		40,183
Other intangible assets, less accumulated amortization of $13,737,000 in 2014 and $12,909,000 in 2013	22,544		23,372
Notes receivable — long term portion, net of discount	5,847		5,779
Deferred compensation funding, at fair value	22,998		22,200
Deferred income taxes — long term portion	13,649		13,274
Other noncurrent assets	38		38
Total assets	441,139		425,342
Current liabilities:
Accounts payable	47,985		43,682
Accrued payroll, accrued and withheld payroll taxes	45,554		37,162
Other accrued expenses	3,283		8,528
Income taxes payable	0		1,878
Deferred income taxes	1,111		0
Accrued insurance claims	7,861		7,853
Total current liabilities	105,794		99,103
Accrued insurance claims — long term portion	18,343		18,325
Deferred compensation liability	23,211		22,771
Commitments and contingencies
STOCKHOLDERS’ EQUITY:
Common stock, $.01 par value; 100,000,000 shares authorized; 72,049,000 shares issued and outstanding in 2014 and 71,868,000 shares in 2013	720		719
Additional paid-in capital	174,074		168,329
Retained earnings	130,026		127,464
Accumulated other comprehensive income, net of taxes	50	[1]	49	[1]
Common stock in treasury, at cost, 1,828,000 shares in 2014 and 1,892,000 shares in 2013	(11,079)		(11,418)
Total stockholders’ equity	293,791		285,143
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 441,139		$ 425,342

[1] All amounts are net of tax.

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Share-Based Compensation (Summarized Information About Stock Awards) (Details) ($6.07 - $28.02 [Member], USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
$6.07 - $28.02 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise price range - lower limit (in dollars per share)	$ 6.07
Exercise price range - lower limit (in dollars per share)	$ 28.02
Weighted average remaining contractual life of stock options outstanding	7 years
Aggregate intrinsic value of outstanding stock options	$ 29,919
Number of stock options exercisable (in shares)	1,252
Weighted average remaining contractual life of stock options exercisable	5 years 1 month 6 days
Aggregate intrinsic value of options exercisable	19,455
Aggregate intrinsic value of stock options exercised	$ 2,436

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Consolidated Statements Of Stockholders' Equity (USD $) In Thousands, unless otherwise specified	Total		Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Other Comprehensive Income, net of taxes [Member]	Retained Earnings [Member]	Treasury Stock [Member]
Balance at Dec. 31, 2013	$ 285,143		$ 719	$ 168,329	$ 49	$ 127,464	$ (11,418)
Balance (in shares) at Dec. 31, 2013			71,868
Comprehensive income:
Net income for the period	14,639					14,639
Unrealized gain on available for sale marketable securities, net of taxes	1	[1]			1
Total comprehensive income	14,640
Exercise of stock options, net of shares tendered for payment	2,559		1	2,558
Exercise of stock options and other stock-based compensation, net of shares tendered for payment (in shares)			181
Tax benefit from equity compensation plans	477			477
Share-based compensation expense — stock options and restricted stock	672			672
Treasury shares issued for Deferred Compensation Plan funding and redemptions	526			522			4
Shares issued pursuant to Employee Stock Purchase Plan	1,851			1,457			394
Cash dividends	(12,077)					(12,077)
Shares issued pursuant to Dividend Reinvestment Plan	0			59			(59)
Balance at Mar. 31, 2014	$ 293,791		$ 720	$ 174,074	$ 50	$ 130,026	$ (11,079)
Balance (in shares) at Mar. 31, 2014			72,049

[1] All amounts are net of tax.

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Goodwill And Other Intangible Assets (Identifiable Intangible Assets Subject To Amortization) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Finite-Lived Intangible Assets [Line Items]
Total other intangibles, gross	$ 36,281	$ 36,281
Less accumulated amortization	13,737	12,909
Other intangibles, net	22,544	23,372
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Total other intangibles, gross	35,481	35,481
Non-compete Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Total other intangibles, gross	$ 800	$ 800

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Changes in Accumulated Other Comprehensive Income by Component (Tables)

3 Months Ended

Mar. 31, 2014

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of Accumulated Other Comprehensive Income

The following table provides a summary of changes in accumulated other comprehensive income for the three months ended March 31, 2014:

	Unrealized Gains and Losses on Available for Sale Securities (1)
Accumulated other comprehensive income — December 31, 2013	$	49,000
Other comprehensive income before reclassifications	2,000
Amounts reclassified from accumulated other comprehensive income (2)(3)	(1,000		)
Net current period change in other comprehensive income	1,000
Accumulated other comprehensive income — March 31, 2014	$	50,000

(1) All amounts are net of tax.

(2) Realized gains and losses are recorded pre-tax in the other income - investment and interest caption on our consolidated statements of comprehensive income.

(3) For the three months ended March 31, 2014, the Company recorded $1,000 of realized gains from the sale of available for sale securities. Refer to Note 5 herein for further information.

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Goodwill And Other Intangible Assets (Estimated Amortization Expense For Intangibles Subject To Amortization) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
April 1 to December 31, 2014	$ 2,451
2015	3,211
2016	2,668
2017	2,397
2018	2,298
2019	2,100
Thereafter	7,419
Customer Relationships [Member]
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
April 1 to December 31, 2014	2,409
2015	3,211
2016	2,668
2017	2,397
2018	2,298
2019	2,100
Thereafter	7,419
Non-compete Agreements [Member]
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
April 1 to December 31, 2014	42
2015	0
2016	0
2017	0
2018	0
2019	0
Thereafter	$ 0

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Fair Value Measurements

The following tables provide fair value measurement information for our marketable securities and deferred compensation fund investment assets as of March 31, 2014 and December 31, 2013:

	As of March 31, 2014
					Fair Value Measurement Using:
	Carrying Amount		Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets:
Marketable securities
Municipal bonds — available for sale	$	11,647,000	$	11,647,000	$	—	$	11,647,000	$	—
Deferred compensation fund
Money Market	$	3,488,000	$	3,488,000	$	—	$	3,488,000	$	—
Balanced and Lifestyle	8,450,000		8,450,000		8,450,000		—		—
Large Cap Growth	4,327,000		4,327,000		4,327,000		—		—
Small Cap Value	2,506,000		2,506,000		2,506,000		—		—
Fixed Income	2,052,000		2,052,000		2,052,000		—		—
International	1,136,000		1,136,000		1,136,000		—		—
Mid Cap Growth	1,039,000		1,039,000		1,039,000		—		—
Deferred compensation fund	$	22,998,000	$	22,998,000	$	19,510,000	$	3,488,000	$	—

	As of December 31, 2013
					Fair Value Measurement Using:
	Carrying Amount		Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets:
Marketable securities
Municipal bonds — available for sale	$	11,445,000	$	11,445,000	$	—	$	11,445,000	$	—
Deferred compensation fund
Money Market	$	3,592,000	$	3,592,000	$	—	$	3,592,000	$	—
Balanced and Lifestyle	8,174,000		8,174,000		8,174,000		—		—
Large Cap Growth	4,292,000		4,292,000		4,292,000		—		—
Small Cap Value	2,173,000		2,173,000		2,173,000		—		—
Fixed Income	1,962,000		1,962,000		1,962,000		—		—
International	1,079,000		1,079,000		1,079,000		—		—
Mid Cap Growth	928,000		928,000		928,000		—		—
Deferred compensation fund	$	22,200,000	$	22,200,000	$	18,608,000	$	3,592,000	$	—

Marketable Debt Securities

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Other-than-temporary Impairments
March 31, 2014
Type of security:
Municipal bonds — available for sale	11,565,000		84,000		(2,000		)	11,647,000		—
Total debt securities	$	11,565,000	$	84,000	$	(2,000	)	$	11,647,000	$	—
December 31, 2013
Type of security:
Municipal bonds — available for sale	11,364,000		83,000		(2,000		)	11,445,000		—
Total debt securities	$	11,364,000	$	83,000	$	(2,000	)	$	11,445,000	$	—

Contractual Maturities Of Available For Sale Investments

The following tables include contractual maturities of debt securities held at March 31, 2014 and December 31, 2013, which are classified as marketable securities in the consolidated Balance Sheet.

	Municipal Bonds — Available for Sale
Contractual maturity:	March 31, 2014		December 31, 2013
Maturing in one year or less	$	1,801,000	$	1,846,000
Maturing after one year through three years	6,805,000		7,113,000
Maturing after three years	3,041,000		2,486,000
Total debt securities	$	11,647,000	$	11,445,000

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Description of Business and Significant Accounting Policies

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Description of Business and Significant Accounting Policies

Description of Business and Significant Accounting Policies

Unaudited Interim Financial Data

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") for interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, these consolidated financial statements do not include all of the information and footnotes necessary for a complete presentation of financial position, results of operations and cash flows. However, in our opinion, all adjustments which are of a normal recurring nature and necessary for a fair presentation have been reflected in these consolidated financial statements. The balance sheet shown in this report as of December 31, 2013 has been derived from, and does not include, all the disclosures contained in the financial statements for the year ended December 31, 2013. The financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013. The results of operations for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for any future period.

Nature of Operations

We provide management, administrative and operating expertise and services to the housekeeping, laundry, linen, facility maintenance and dietary service departments of the health care industry, including nursing homes, retirement complexes, rehabilitation centers and hospitals located throughout the United States. Although we do not directly participate in any government reimbursement programs, our clients’ reimbursements are subject to government regulation. Therefore, they are directly affected by any legislation relating to Medicare and Medicaid reimbursement programs.

We provide our services primarily pursuant to full service agreements with our clients. In such agreements, we are responsible for the day-to-day management of the managers and hourly employees located at our clients’ facilities. We also provide services on the basis of a management-only agreement for a very limited number of clients. Our agreements with clients typically provide for a one year service term, cancelable by either party upon 30 to 90 days’ notice after the initial 90-day period.

We are organized into two reportable segments: housekeeping, laundry, linen and other services (“Housekeeping”), and dietary department services (“Dietary”).

Housekeeping consists of the managing of the client’s housekeeping department which is principally responsible for the cleaning, disinfecting and sanitizing of patient rooms and common areas of a client’s facility, as well as the laundering and processing of the personal clothing belonging to the facility’s patients. Also within the scope of this segment’s service is the responsibility for laundering and processing of the bed linens, uniforms and other assorted linen items utilized by a client facility.

Dietary consists of managing the client’s dietary department which is principally responsible for food purchasing, meal preparation and providing dietitian consulting professional services, which includes the development of a menu that meets the patient’s dietary needs. We began Dietary operations in 1997.

As of March 31, 2014, we operate three wholly-owned subsidiaries, Huntingdon Holdings, Inc. (“Huntingdon”), Healthcare Staff Leasing Solutions, LLC (“Staff Leasing”) and HCSG Insurance Corp. Huntingdon invests our cash and cash equivalents and manages our portfolio of available-for-sale marketable securities. Staff Leasing offers professional employer organization (“PEO”) services to potential clients in the health care industry. As of March 31, 2014, we have PEO service contracts in several states. During the three months ended March 31, 2014 and 2013, operating results from our PEO service contracts were not material and were included in our Housekeeping segment. Formed in 2014, HCSG Insurance Corp. is a captive insurance company domiciled in the State of New Jersey and provides the Company with certain insurance-related services.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Healthcare Services Group, Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash equivalents are held in U.S. financial institutions or in custodial accounts with U.S. financial institutions. Cash and cash equivalents are defined as short-term, highly liquid investments with a maturity of three months or less at time of purchase that are readily convertible into cash and have insignificant interest rate risk.

Inventories and Supplies

Inventories and supplies include housekeeping, linen and laundry supplies, as well as food provisions and supplies. Inventories and supplies are stated at cost to approximate a first-in, first-out (FIFO) basis. Linen supplies are amortized on a straight-line basis over their estimated useful life of 24 months.

Revenue Recognition

Revenues from our service agreements with clients are recognized as services are performed.

As a distributor of laundry equipment, we occasionally sell laundry installations to certain clients. The sales in most cases represent the construction and installation of a turn-key operation and are for payment terms ranging from 24 to 60 months. Our accounting policy for these sales is to recognize the gross profit over the life of the payments associated with our financing of the transactions. During the three months ended March 31, 2014 and 2013, laundry installation sales were not material.

Income Taxes

We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current period. We accrue for probable tax obligations as required by facts and circumstances in the various regulatory environments. In addition, deferred tax assets and liabilities are recognized for expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. If appropriate, we would record a valuation allowance to reduce deferred tax assets to an amount for which realization is more likely than not.

In accordance with U.S. GAAP, we account for uncertain income tax positions reflected within our financial statements based on a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

Earnings per Common Share

Basic earnings per common share are computed by dividing income available to common shareholders by the weighted-average common shares outstanding for the period. Diluted earnings per common share reflect the weighted-average common shares outstanding and dilutive common shares, such as those issuable upon exercise of stock options.

Share-Based Compensation

U.S. GAAP addresses the accounting for share-based compensation, specifically, the measurement and recognition of compensation expense, based on estimated fair values, for all share-based awards made to employees and directors, including stock options and participation in the Company’s employee stock purchase plan. We estimate the fair value of share-based awards on the date of grant using the Black-Scholes option valuation model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the Company’s consolidated statements of income over the requisite service periods. We use the straight-line single option method of expensing share-based awards in our consolidated financial statements of income. Because share-based compensation expense is based on awards that are ultimately expected to vest, share-based compensation expense will be reduced to account for estimated forfeitures. Forfeitures are to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Use of Estimates in Financial Statements

In preparing financial statements in conformity with U.S. GAAP, we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates are used for, but not limited to, our allowance for doubtful accounts, accrued insurance claims, asset valuations and review for potential impairment, and deferred taxes. The estimates are based upon various factors including current and historical trends, as well as other pertinent industry and regulatory authority information. We regularly evaluate this information to determine if it is necessary to update the basis for our estimates and to compensate for known changes.

Concentrations of Credit Risk

Financial instruments, as defined by U.S. GAAP, which potentially subject us to concentrations of credit risk, consist principally of cash and cash equivalents, marketable securities, deferred compensation funding and accounts and notes receivable. We define our marketable securities as fixed income investments which are highly liquid investments that can be readily purchased or sold using established markets. At March 31, 2014 and December 31, 2013, substantially all of our cash and cash equivalents, and marketable securities were held in one large financial institution located in the United States.

Our clients are concentrated in the health care industry, primarily providers of long-term care. Many of our clients’ revenues are highly contingent on Medicare, Medicaid and third party payors’ reimbursement funding rates. Congress has enacted a number of major laws during the past decade that have significantly altered, or threatened to alter, overall government reimbursement for nursing home services. These changes and lack of substantive reimbursement funding rate reform legislation, as well as other 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, could result in significant additional bad debts in the future.

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Current assets:
Allowance for doubtful accounts	$ 3,981	$ 3,919
Accumulated amortization of other intangible assets	$ 13,737	$ 12,909
STOCKHOLDERS’ EQUITY:
Common stock, par value (dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	72,049,000	71,868,000
Common stock, shares outstanding	72,049,000	71,868,000
Common stock in treasury, shares	1,828,000	1,892,000

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Earnings Per Common Share

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Earnings Per Common Share

Earnings Per Common Share

Basic net earnings per share are computed using the weighted-average number of common shares outstanding. The dilutive effect of potential common shares outstanding is included in diluted net earnings per share. The computations of basic net earnings per share and diluted net earnings per share are as follows:

	Three Months Ended March 31, 2014
	Income (Numerator)		Shares (Denominator)	Per-share Amount
Net income	$	14,639,000
Basic earnings per common share	$	14,639,000	70,321,000	$	0.21
Effect of dilutive securities:
Stock options and restricted stock			751,000	—
Diluted earnings per common share	$	14,639,000	71,072,000	$	0.21
	Three Months Ended March 31, 2013
	Income (Numerator)		Shares (Denominator)	Per-share Amount
Net income	$	14,954,000
Basic earnings per common share	$	14,954,000	68,463,000	$	0.22
Effect of dilutive securities:
Stock options and restricted stock			898,000	—
Diluted earnings per common share	$	14,954,000	69,361,000	$	0.22

Stock awards to purchase 993,000 shares of common stock having an average exercise price of $25.87 per common share were outstanding during the three months ended March 31, 2014 but not included in the computation of diluted earnings per common share because the exercise prices of the options were greater than the average market price of the common shares, and therefore, would be antidilutive.

Stock awards to purchase 544,000 shares of common stock having an average exercise price of $23.50 per common share were outstanding during the three months ended March 31, 2013 but not included in the computation of diluted earnings per common share because the exercise prices of the options were greater than the average market price of the common shares, and therefore, would be antidilutive.

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Document And Entity Information In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Apr. 22, 2014
Document And Entity Information [Abstract]
Entity Registrant Name	HEALTHCARE SERVICES GROUP INC
Entity Central Index Key	0000731012
Document Type	10-Q
Document Period End Date	Mar. 31, 2014
Amendment Flag	false
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		70,268

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Other Contingencies

3 Months Ended

Mar. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Other Contingencies

Other Contingencies

We have a $125,000,000 bank line of credit on which we may draw to meet short-term liquidity requirements in excess of internally generated cash flow. Amounts drawn under the line of credit are payable upon demand. At March 31, 2014, there were no borrowings under the line of credit. However, at such date, we had outstanding a $51,520,000  irrevocable standby letter of credit which relates to payment obligations under our insurance programs. As a result of the letter of credit issued, the amount available under the line of credit was reduced by $51,520,000 at March 31, 2014. The line of credit requires us to satisfy one financial covenant. We are in compliance with our financial covenant at March 31, 2014 and expect to continue to remain in compliance with such financial covenant. This line of credit has a five year term and expires on December 18, 2018.

Additionally, on March 21, 2014, we entered into a Security Interest, Pledge and Assignment of Deposit Account (the "Pledge") with Wells Fargo Bank, National Association (the “Bank”) as collateral for the Promissory Note (the “Note”) dated March 21, 2014. The Note is a short term non-revolving line of credit between the Company’s third party payroll administrator and the Bank. The Company entered into the Pledge at quarter end due to the timing of payroll funding. On April 1, 2014, the Company's third party payroll administrator satisfied its payment obligation under the Note, and accordingly, the Company's Pledge was fully released and extinguished. The funds previously held as collateral were subsequently used for general operating activities.

We provide our services in 48 states and are subject to numerous local taxing jurisdictions within those states. Consequently, in the ordinary course of business, a jurisdiction may contest our reporting positions with respect to the application of its tax code to our services. A jurisdiction’s conflicting position on the taxability of our services could result in additional tax liabilities.

We have tax matters with various taxing authorities. Because of the uncertainties related to both the probable outcome and amount of probable assessment due, we are unable to make a reasonable estimate of a liability. We do not expect the resolution of any of these matters, taken individually or in the aggregate, to have a material adverse effect on our consolidated financial position or results of operations based on our best estimate of the outcomes of such matters.

We are also subject to various claims and legal actions in the ordinary course of business. Some of these matters include payroll and employee-related matters and examinations by governmental agencies. As we become aware of such claims and legal actions, we provide accruals if the exposures are probable and estimable. If an adverse outcome of such claims and legal actions is reasonably possible, we assess materiality and provide such financial disclosure, as appropriate.

Many states have significant budget deficits. State Medicaid programs are experiencing increased demand, and with lower revenues than projected, they have fewer resources to support their Medicaid programs. In addition, comprehensive health care legislation under the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (together, the “Act”) was signed into law in March 2010. The Act will significantly impact the governmental healthcare programs in which our clients participate, and reimbursements received thereunder from governmental or third-party payors. In July 2011, Centers for Medicare and Medicaid Services (“CMS”) issued a final rule that reduced Medicare payments to nursing centers by 11.1% and changed the reimbursement for the provision of group rehabilitation therapy services to Medicare beneficiaries. This rule was effective as of October 1, 2011. Furthermore, in the coming year, new proposals or additional changes in existing regulations could be made to the Act and/or CMS could propose additional reimbursement reductions which could directly impact the governmental reimbursement programs in which our clients participate. As a result, some state Medicaid programs are reconsidering previously approved increases in nursing home reimbursement or are considering delaying or foregoing those increases. A few states have indicated it is possible they will run out of cash to pay Medicaid providers, including nursing homes. In addition, certain state governors have recently stated that they will reject Federal Medicaid assistance under the Act. Any negative changes in our clients’ reimbursements may negatively impact our results of operations. Although we are currently evaluating the Act’s effect on our client base, we may not know the full effect until such time as these laws are fully implemented and CMS and other agencies issue applicable regulations or guidance.

In January 2013, the U.S. Congress enacted the American Taxpayer Relief Act of 2012, which delayed automatic spending cuts, including reduced Medicare payments to plans and providers up to 2%. These discretionary spending caps were originally enacted under provisions in the Budget Control Act of 2011, an initiative to reduce the federal deficit through the year 2021, also known as “sequestration.” The sequestration went into effect starting March 2013. In December 2013, the U.S. Congress enacted the Bipartisan Budget Act of 2013, which reduces the impact of the sequestration over the next two years, beginning in fiscal year 2014 and extended the reduction in Medicare payments to plans and providers for two years through the year 2023.

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Consolidated Statements Of Comprehensive Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014		Mar. 31, 2013
Income Statement [Abstract]
Revenues	$ 312,165		$ 273,904
Operating costs and expenses:
Costs of services provided	267,371		235,191
Selling, general and administrative	22,046		20,790
Other income:
Investment and interest	381		1,034
Income before income taxes	23,129		18,957
Income taxes	8,490		4,003
Net income	14,639		14,954
Per share data:
Basic earnings per common share (dollars per share)	$ 0.21		$ 0.22
Diluted earnings per common share (dollars per share)	$ 0.21		$ 0.22
Weighted average number of common shares outstanding:
Basic (shares)	70,321		68,463
Diluted (shares)	71,072		69,361
Comprehensive income:
Net income	14,639		14,954
Other comprehensive income:
Unrealized gain on available for sale marketable securities, net of taxes	1	[1]	23
Total comprehensive income	$ 14,640		$ 14,977

[1] All amounts are net of tax.

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Share-Based Compensation

3 Months Ended

Mar. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-Based Compensation

2012 Equity Incentive Plan

On May 29, 2012, the Company's shareholders adopted and approved the 2012 Equity Incentive Plan (the "2012 Plan"), under which current or prospective officers, employees, non-employee directors and advisors can receive share-based awards such as stock options, restricted stock and other stock awards. The 2012 Plan seeks to promote the highest level of performance by providing an economic interest in the long-term success of the Company. As of this date, no further grants were permitted under any previously existing stock plans (the "Pre-existing Plans"). Additionally, all remaining shares available for future grants under the Pre-existing Plans became available for issuance under the 2012 Plan.

The Nominating, Compensation and Stock Option Committee of the Board of Directors is responsible for determining the individuals who will be granted stock awards, the number of stock awards each individual will receive, the price per share (in accordance with the terms of our 2012 Plan), and the exercise period of each stock award.

A summary of stock-based compensation expense for the three months ended March 31, 2014 and 2013 is as follows:

	For the Three Months Ended March 31,
	2014		2013
Stock Options	$	646,000	$	487,000
Restricted Stock	26,000		7,000
Employee Stock Purchase Plan ("ESPP")	90,000		89,000
Total pre-tax stock-based compensation expense charged against income (1)	$	762,000	$	583,000

(1) Stock-based compensation expense is recorded in the selling, general and administrative caption in our consolidated statements of comprehensive income.

We have outstanding stock awards that were granted under the Pre-existing Plans to non-employee directors, officers and employees of the Company and other specified groups, depending on the Pre-existing Plan. No further grants are allowed under the Pre-existing Plans. As of March 31, 2014, 5,065,000 shares of common stock were reserved for issuance under our 2012 Plan, including 2,262,000 shares which are available for future grant. The stock price will not be less than the fair market value of the common stock on the date the award is granted. No stock grant will have a term in excess of ten years. Since 2008, all awards granted become vested and exercisable ratably over a five year period on each yearly anniversary date of the option grant.

A summary of our stock option activity under the 2012 Plan as of December 31, 2013 and changes during the three months ended March 31, 2014 is as follows:

	Stock Options Outstanding
	Number of Shares		Weighted Average Exercise Price
December 31, 2013	2,483,000		$	16.05
Granted	535,000		28.02
Cancelled	(35,000	)	21.39
Exercised	(181,000	)	14.31
March 31, 2014	2,802,000		$	18.38

The weighted average grant-date fair value of stock options granted during the three months ended March 31, 2014 and 2013 was $8.24 and $6.81 per common share, respectively.

During the three months ended March 31, 2014, the Company granted 14,000 shares of restricted stock with a weighted average grant date fair value of $28.02 per share. During the three months ended March 31, 2013, the Company granted 6,000 shares of restricted stock with a weighted average grant date fair value of $23.50 per share.

A summary of our non-vested stock-based compensation as of December 31, 2013 and changes during the three months ended March 31, 2014 is as follows:

	Number of Non-vested Shares		Weighted Average Grant Date Fair Value
December 31, 2013	1,561,000		$	4.78
Granted	535,000		8.24
Vested	(511,000	)	4.24
Forfeited	(35,000	)	5.94
March 31, 2014	1,550,000		$	6.27

The following table summarizes other information about our outstanding stock options at March 31, 2014.

	Stock Options
Range of exercise prices	$6.07-28.02
Outstanding:
Weighted average remaining contractual life (years)	7.0
Aggregate intrinsic value	$	29,919,000
Exercisable:
Number of shares	1,252,000
Weighted average remaining contractual life (years)	5.1
Aggregate intrinsic value	$	19,455,000
Exercised:
Aggregate intrinsic value	$	2,436,000

Fair Value Estimates

The fair value of stock awards granted in 2014 and 2013 was estimated on the date of grant using the Black-Scholes option valuation model based on the following assumptions:

	March 31, 2014	March 31, 2013
Risk-free interest rate	1.9%	1.5%
Weighted average expected life in years	5.9 years	6.0 years
Expected volatility	36.9%	38.9%
Dividend yield	2.4%	2.8%

Other Information

Other information pertaining to activity of our stock awards during the three months ended March 31, 2014 and 2013 were as follows:

	March 31, 2014		March 31, 2013
Total grant-date fair value of stock awards granted	$	4,268,000	$	3,269,000
Total fair value of stock awards vested during period	$	2,051,000	$	1,897,000
Total unrecognized compensation expense related to non-vested stock awards	$	8,523,000	$	6,349,000

At March 31, 2014, the unrecognized compensation cost related to stock awards granted but not yet vested, as reported above, was expected to be recognized through the fourth quarter of 2018 for the 2014 grants and the fourth quarter of 2017 for the 2013 grants.

Employee Stock Purchase Plan

Since January 1, 2000, we have an Employee Stock Purchase Plan ("ESPP") for all eligible employees. All full-time and certain part-time employees who have completed two years of continuous service with us are eligible to participate. The ESPP was implemented on January 1, 2000 through five annual offerings and was subsequently extended for an additional eight annual offerings. On April 12, 2011, the Board of Directors extended the ESPP for an additional five offerings through 2016. Annual offerings commence and terminate on the respective year’s first and last calendar day.

Under the ESPP, we are authorized to issue up to 4,050,000 shares of our common stock to our employees. Pursuant to such authorization, we have 2,476,000 shares available for future grant at March 31, 2014.

The stock-based compensation expense associated with our ESPP was estimated on the date of grant using the Black-Scholes option valuation model based on the following assumptions:

	March 31, 2014	March 31, 2013
Risk-free interest rate	0.10%	0.24%
Weighted average expected life in years	1.0 year	1.0 year
Expected volatility	21.9%	27.6%
Dividend yield	2.4%	2.8%

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Fair Value Measurements

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

We, in accordance with U.S. GAAP, define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We have not elected the fair value option for our available for sale marketable securities as we believe these assets are more representative of our investing activities and are viewed as non-operating in nature. These assets are available for future needs of the Company to support our current and projected growth, if required. In accordance with U.S. GAAP, our investments in marketable securities are classified within Level 2 of the fair value hierarchy. These investment securities are valued based upon quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

The Company’s financial instruments consist mainly of cash and cash equivalents, available for sale marketable securities, accounts and notes receivable, prepaid expenses and other, and accounts payable (including income taxes payable and accrued expenses). The carrying value of these financial instruments approximates their fair value because of their short-term nature. The fair value of financial instruments is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties.

The following tables provide fair value measurement information for our marketable securities and deferred compensation fund investment assets as of March 31, 2014 and December 31, 2013:

	As of March 31, 2014
					Fair Value Measurement Using:
	Carrying Amount		Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets:
Marketable securities
Municipal bonds — available for sale	$	11,647,000	$	11,647,000	$	—	$	11,647,000	$	—
Deferred compensation fund
Money Market	$	3,488,000	$	3,488,000	$	—	$	3,488,000	$	—
Balanced and Lifestyle	8,450,000		8,450,000		8,450,000		—		—
Large Cap Growth	4,327,000		4,327,000		4,327,000		—		—
Small Cap Value	2,506,000		2,506,000		2,506,000		—		—
Fixed Income	2,052,000		2,052,000		2,052,000		—		—
International	1,136,000		1,136,000		1,136,000		—		—
Mid Cap Growth	1,039,000		1,039,000		1,039,000		—		—
Deferred compensation fund	$	22,998,000	$	22,998,000	$	19,510,000	$	3,488,000	$	—

	As of December 31, 2013
					Fair Value Measurement Using:
	Carrying Amount		Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets:
Marketable securities
Municipal bonds — available for sale	$	11,445,000	$	11,445,000	$	—	$	11,445,000	$	—
Deferred compensation fund
Money Market	$	3,592,000	$	3,592,000	$	—	$	3,592,000	$	—
Balanced and Lifestyle	8,174,000		8,174,000		8,174,000		—		—
Large Cap Growth	4,292,000		4,292,000		4,292,000		—		—
Small Cap Value	2,173,000		2,173,000		2,173,000		—		—
Fixed Income	1,962,000		1,962,000		1,962,000		—		—
International	1,079,000		1,079,000		1,079,000		—		—
Mid Cap Growth	928,000		928,000		928,000		—		—
Deferred compensation fund	$	22,200,000	$	22,200,000	$	18,608,000	$	3,592,000	$	—

The fair value of the municipal bonds is measured using third party pricing service data. The fair value of equity investments in the funded deferred compensation plan are valued (Level 1) based on quoted market prices. The money market fund in the funded deferred compensation plan is valued (Level 2) at the net asset value (“NAV”) of the shares held by the plan at the end of the period. As a practical expedient, fair value of our money market fund is valued at the NAV as determined by the custodian of the fund. The money market fund includes short-term United States dollar denominated money-market instruments. The money market fund can be redeemed at its NAV at its measurement date as there are no significant restrictions on the ability of participants to sell this investment. These assets will be redeemed by the plan participants on an as needed basis.

Unrealized gains and losses from marketable securities are recorded in the other comprehensive income caption in our consolidated statements of comprehensive income. For the three months ended March 31, 2014 and 2013, we recorded unrealized gains from marketable securities of $1,000 and $23,000, respectively.

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Other-than-temporary Impairments
March 31, 2014
Type of security:
Municipal bonds — available for sale	11,565,000		84,000		(2,000		)	11,647,000		—
Total debt securities	$	11,565,000	$	84,000	$	(2,000	)	$	11,647,000	$	—
December 31, 2013
Type of security:
Municipal bonds — available for sale	11,364,000		83,000		(2,000		)	11,445,000		—
Total debt securities	$	11,364,000	$	83,000	$	(2,000	)	$	11,445,000	$	—

For the three months ended March 31, 2014, we received total proceeds, less the amount of interest received, of $871,000 from sales of available for sale municipal bonds. These sales resulted in realized gains of $1,000 recorded in other income – investment and interest caption on our statement of comprehensive income for the three months ended March 31, 2014. The basis for the sale of these securities was a specific identification of each bond sold during this period.

For the three months ended March 31, 2013, there were no proceeds or realized gains related to our available for sale municipal bonds.

The following tables include contractual maturities of debt securities held at March 31, 2014 and December 31, 2013, which are classified as marketable securities in the consolidated Balance Sheet.

	Municipal Bonds — Available for Sale
Contractual maturity:	March 31, 2014		December 31, 2013
Maturing in one year or less	$	1,801,000	$	1,846,000
Maturing after one year through three years	6,805,000		7,113,000
Maturing after three years	3,041,000		2,486,000
Total debt securities	$	11,647,000	$	11,445,000

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Goodwill And Other Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Identifiable Intangible Assets Subject To Amortization

The following table sets forth the amounts of our identifiable intangible assets subject to amortization, which were acquired in acquisitions.

	March 31, 2014		December 31, 2013
Customer relationships	$	35,481,000	$	35,481,000
Non-compete agreements	800,000		800,000
Total other intangibles, gross	36,281,000		36,281,000
Less accumulated amortization	13,737,000		12,909,000
Other intangibles, net	$	22,544,000	$	23,372,000

Estimated Amortization Expense For Intangibles Subject To Amortization

The following table sets forth the estimated amortization expense for intangibles subject to amortization for the following five fiscal years:

Period/Year	Customer Relationships		Non-Compete Agreements		Total
April 1 to December 31, 2014	$	2,409,000	$	42,000	$	2,451,000
2015	3,211,000		—		3,211,000
2016	2,668,000		—		2,668,000
2017	2,397,000		—		2,397,000
2018	2,298,000		—		2,298,000
2019	2,100,000		—		2,100,000
Thereafter	7,419,000		—		7,419,000

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Subsequent Events

3 Months Ended

Mar. 31, 2014

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

We evaluated all subsequent events through the date this Form 10-Q is being filed with the SEC. We believe there were no events or transactions occurring during this subsequent reporting period which require recognition or additional disclosure in these financial statements.

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Related Party Transactions

3 Months Ended

Mar. 31, 2014

Related Party Transaction, Due from (to) Related Party [Abstract]

Related Party Transactions

Related Party Transactions

A director is a member of a law firm which was retained by us. In each of the three months ended March 31, 2014 and 2013, fees received from us by such firm did not exceed $120,000 in any period. Additionally, such fees did not exceed, in either period, 5% of such firm’s revenues.

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Dividends

3 Months Ended

Mar. 31, 2014

Dividends [Abstract]

Dividends

Dividends

On March 28, 2014, we paid to shareholders of record on February 21, 2014, a regular quarterly cash dividend of $0.17125 per common share. Such regular quarterly cash dividend payment in the aggregate was $12,077,000.

Additionally, on April 8, 2014, our Board of Directors declared a regular quarterly cash dividend of $0.17250 per common share, which will be paid on June 27, 2014, to shareholders of record as of the close of business on May 23, 2014.

Cash dividends on our outstanding weighted average number of basic common shares for the three months ended March 31, 2014 and 2013 were as follows:

	For the Three Months Ended March 31,
	2014		2013
Cash dividends per common share	$	0.17	$	0.17

Our Board of Directors reviews our dividend policy on a quarterly basis. Although there can be no assurance that we will continue to pay dividends or the amount of the dividend, we expect to continue to pay a regular quarterly cash dividend. In connection with the establishment of our dividend policy, we adopted a Dividend Reinvestment Plan in 2003.

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Income Taxes

3 Months Ended

Mar. 31, 2014

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For the three months ended March 31, 2014, our effective tax rate was approximately 37%, an increase from the 21% effective tax rate for the comparable 2013 period. Such differences between the effective tax rates and the applicable U.S. federal statutory rate arise primarily from the effect of state and local income taxes and tax credits available to the Company. The increase in the effective tax rate is primarily due to the impact of tax credits realized in 2013 for 2012 and 2013 as compared to the current period. The Company receives credits related to the Work Opportunity Tax Credit (“WOTC”) program but this program initially expired at December 31, 2011. The WOTC was subsequently renewed, but not until January 2, 2013, as part of The American Taxpayer Relief Act of 2012. Since the WOTC was renewed during the three month period ended March 31, 2013, the total tax effect of additional expected credits for 2012 was included in this period. In addition, the WOTC again expired as of December 31, 2013 and has not yet been renewed. As such, the 2014 estimated annual effective tax rate is expected to be 37% compared to 29% for 2013. The 2014 estimated tax rate increased due to the expiration of certain tax credits that benefited us in 2013, including the recognition of tax credits for the 2012 tax year during the three month period ended March 31, 2013.

We account for income taxes using the asset and liability method, which results in recognizing income tax expense based on the amount of income taxes payable or refundable for the current year. Additionally, we evaluate regularly the tax positions taken or expected to be taken resulting from financial statement recognition of certain items. Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our financial statements. Our evaluation was performed for the tax years ended December 31, 2010 through 2013 (with regard to U.S. federal income tax returns) and December 31, 2009 through 2013 (with regard to various state and local income tax returns), the tax years which remain subject to examination by major tax jurisdictions as of March 31, 2014.

We may from time to time be assessed interest or penalties by taxing jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. When we have received an assessment for interest and/or penalties, it has been classified in the financial statements as selling, general and administrative expense.

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Segment Information

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Segment Information

Segment Information

Reportable Operating Segments

U.S. GAAP establishes standards for reporting information regarding operating segments in annual financial statements. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision-maker, or decision-making group in making decisions on how to allocate resources and assess performance.

We manage and evaluate our operations in two reportable segments: Housekeeping (housekeeping, laundry, linen and other services) and Dietary (dietary department services). Although both segments serve the same client base and share many operational similarities, they are managed separately due to distinct differences in the type of service provided, as well as the specialized expertise required of the professional management personnel responsible for delivering the respective segment’s services. We consider the various services provided within each reportable segment to comprise an identifiable reportable operating segment since such services are rendered pursuant to a single service agreement, specific to that reportable segment, as well as the fact that the delivery of the respective reportable segment’s services are managed by the same management personnel of the particular reportable segment.

The Company’s accounting policies for the segments are generally the same as the Company’s significant accounting policies. Differences between the reportable segments’ operating results and other disclosed data and our consolidated financial statements relate primarily to corporate level transactions and recording of transactions at the reportable segment level which use methods other than generally accepted accounting principles. There are certain inventories and supplies that are primarily expensed when incurred within the operating segments, while they are capitalized for the consolidated financial statements. As discussed, most corporate expense is not allocated to the operating segments, and such expenses include corporate salary and benefit costs, bad debt expense, certain legal costs, information technology costs, depreciation, amortization of finite lived intangibles, share based compensation costs and other corporate specific costs. Additionally, there are allocations for workers' compensation and general liability expense within the operating segments that differ from our actual expense recorded for U.S. GAAP. Additionally, included in the differences between the reportable segments’ operating results and other disclosed data are amounts attributable to Huntingdon, our investment holding company subsidiary. Huntingdon does not transact any business with the reportable segments. Segment amounts disclosed are prior to any elimination entries made in consolidation.

Housekeeping provides services in Canada, although essentially all of its revenues and net income, 99% in both categories, are earned in one geographic area, the United States. Dietary provides services solely in the United States.

	Housekeeping Services		Dietary Services		Corporate and Eliminations				Total
Three Months Ended March 31, 2014
Revenues	$	204,741,000	$	107,424,000	$	—			$	312,165,000
Income before income taxes	18,752,000		6,780,000		(2,403,000		)	(1)	23,129,000
Three Months Ended March 31, 2013
Revenues	$	187,630,000	$	86,274,000	$	—			$	273,904,000
Income before income taxes	18,806,000		5,124,000		(4,973,000		)	(1)	18,957,000

(1) Represents primarily corporate office cost and related overhead, recording of transactions at the reportable segment level which use methods other than U.S. GAAP, as well as consolidated subsidiaries’ operating expenses that are not allocated to the reportable segments, net of investment and interest income.

Total Revenues from Clients

The following revenues earned from clients differ from segment revenues reported above due to the inclusion of adjustments used for segment reporting purposes by management. We earned total revenues from clients in the following service categories:

	For the Three Months Ended March 31,
	2014		2013
Housekeeping services	$	140,940,000	$	125,593,000
Laundry and linen services	63,270,000		60,898,000
Dietary services	107,424,000		86,274,000
Maintenance services and other	531,000		1,139,000
	$	312,165,000	$	273,904,000

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Goodwill And Other Intangible Assets (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Goodwill [Line Items]
Goodwill	$ 40,183		$ 40,183
Amortization expense	828	542
Customer Relationships [Member]
Goodwill [Line Items]
Weighted-average amortization period of finite-lived intangible assets	8 years
Non-compete Agreements [Member]
Goodwill [Line Items]
Weighted-average amortization period of finite-lived intangible assets	8 years
Minimum [Member]
Goodwill [Line Items]
Weighted average useful life of acquired finite-lived intangible assets	7 years
Maximum [Member]
Goodwill [Line Items]
Weighted average useful life of acquired finite-lived intangible assets	10 years
Housekeeping Segment [Member]
Goodwill [Line Items]
Goodwill	38,122		38,122
Dietary Segment [Member]
Goodwill [Line Items]
Goodwill	$ 2,061		$ 2,061

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Related Party Transactions (Details) (Maximum [Member], USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Maximum [Member]
Related Party Transaction [Line Items]
Fees paid to related party firm, maximum	$ 120,000	$ 120,000
Percentage of fee paid to related party in relation to related party's total revenue, maximum	5.00%	5.00%

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Acquisition (Tables) (Platinum Health Services, LLC [Member])

3 Months Ended

Mar. 31, 2014

Platinum Health Services, LLC [Member]

Business Acquisition [Line Items]

Schedule of Assets Acquired and Liabilities Assumed Based on Estimated Fair Values

The purchase consideration of the acquisition has been preliminarily allocated to the assets acquired and liabilities assumed based on estimated fair values. The preliminary allocation is as follows:

Fair value of assets acquired, net of liabilities assumed	$	2,604,000
Goodwill	23,228,000
Intangible assets	21,000,000
Net assets acquired	$	46,832,000

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Dividends (Tables)

3 Months Ended

Mar. 31, 2014

Dividends [Abstract]

Dividends Paid on outstanding weighted average number of basic common shares

Cash dividends on our outstanding weighted average number of basic common shares for the three months ended March 31, 2014 and 2013 were as follows:

	For the Three Months Ended March 31,
	2014		2013
Cash dividends per common share	$	0.17	$	0.17

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Dividends (Narrative) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	0 Months Ended	3 Months Ended		0 Months Ended
	Mar. 28, 2014	Mar. 31, 2014	Mar. 31, 2013	Apr. 08, 2014 Subsequent Event [Member]
Subsequent Event [Line Items]
Cash dividend paid per common share (in dollars per share)	$ 0.17125
Aggregate cash dividends paid	$ 12,077	$ 12,077	$ 11,415
Dividend declared date				Apr. 08, 2014
Dividend declared per common share (in dollars per share)				$ 0.1725
Dividend payable date				Jun. 27, 2014
Dividend record date				May 23, 2014
Cash dividend per common share based on weighted average number of shares		$ 0.17	$ 0.17

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Share-Based Compensation (Narrative) (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2014 Stock Option Plans [Member]	Mar. 31, 2013 Stock Option Plans [Member]	Mar. 31, 2014 Restricted Stock [Member]	Mar. 31, 2013 Restricted Stock [Member]	Mar. 31, 2014 Employee Stock Purchase Plan (ESPP) [Member]	Apr. 12, 2011 Employee Stock Purchase Plan (ESPP) [Member] offering	Feb. 12, 2004 Employee Stock Purchase Plan (ESPP) [Member] offering	Jan. 01, 2000 Employee Stock Purchase Plan (ESPP) [Member] offering
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for future issuance	5,065,000
Shares available for future grant		2,262,000				2,476,000
Maximum term of grants		10 years
Options vested and exercisable, period		5 years
Weighted average grant-date fair value of stock options granted (in dollars per share)	$ 8.24	$ 8.24	$ 6.81
Restricted stock granted				14,000	6,000
Weighted average grant date fair value of restricted stock granted				$ 28.02	$ 23.50
Number of initial offerings									5
Requisite service period for plan participation eligibility						2 years
Number of additional offerings							5	8
Stock options authorized to issue to employees						4,050,000

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Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Cash flows from operating activities:
Net income	$ 14,639	$ 14,954
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	1,757	1,352
Bad debt provision	750	450
Deferred income benefits	3,075	305
Stock-based compensation expense	762	583
Amortization of premium on marketable securities	88	154
Unrealized gain on deferred compensation fund investments	(264)	(789)
Changes in operating assets and liabilities:
Accounts and notes receivable	(6,855)	(10,695)
Prepaid income taxes	(1,007)	(1,628)
Inventories and supplies	(309)	79
Prepaid expenses and other assets	(2,106)	(1,182)
Deferred compensation funding	(798)	(1,423)
Accounts payable and other accrued expenses	(469)	7,670
Accrued payroll, accrued and withheld payroll taxes	9,679	(15,282)
Accrued insurance claims	26	19
Deferred compensation liability	1,230	2,312
Income taxes payable	(1,878)	(1,906)
Net cash provided by (used in) operating activities	18,320	(5,027)
Cash flows from investing activities:
Disposals of fixed assets	60	164
Additions to property and equipment	(1,513)	(968)
Purchases of marketable securities	(1,228)	(1,537)
Sales of marketable securities	939	185
Net cash used in investing activities	(1,742)	(2,156)
Cash flows from financing activities:
Dividends paid	(12,077)	(11,415)
Reissuance of treasury stock pursuant to Dividend Reinvestment Plan	0	27
Tax benefit from equity compensation plans	477	709
Proceeds from the exercise of stock options	2,559	3,640
Net cash used in financing activities	(9,041)	(7,039)
Net change in cash and cash equivalents	7,537	(14,222)
Cash and cash equivalents at beginning of the period	64,155	68,949
Cash and cash equivalents at end of the period	71,692	54,727
Supplementary Cash Flow Information:
Cash paid for interest	13	0
Cash paid for income taxes, net of refunds	7,821	6,523
Issuance of Common Stock in 2014 and 2013, respectively, pursuant to Employee Stock Purchase Plan	$ 1,851	$ 1,842

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Goodwill And Other Intangible Assets

3 Months Ended

Mar. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill And Other Intangible Assets

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of net assets acquired of businesses and is not amortized. Goodwill is evaluated for impairment on an annual basis, or more frequently if impairment indicators arise, using a fair-value-based test that compares the fair value of the reporting unit to its carrying value.

Goodwill by reportable operating segment, as described in Note 10 herein, was approximately $38,122,000 and $2,061,000 for Housekeeping and Dietary as of March 31, 2014 and December 31, 2013, respectively.

The cost of intangible assets is based on fair values at the date of acquisition. Intangible assets with determinable lives are amortized on a straight-line basis over their estimated useful life (between 7 and 10 years).

The following table sets forth the amounts of our identifiable intangible assets subject to amortization, which were acquired in acquisitions.

	March 31, 2014		December 31, 2013
Customer relationships	$	35,481,000	$	35,481,000
Non-compete agreements	800,000		800,000
Total other intangibles, gross	36,281,000		36,281,000
Less accumulated amortization	13,737,000		12,909,000
Other intangibles, net	$	22,544,000	$	23,372,000

The customer relationships and non-compete agreements have a weighted-average amortization period of eight years.

The following table sets forth the estimated amortization expense for intangibles subject to amortization for the following five fiscal years:

Period/Year	Customer Relationships		Non-Compete Agreements		Total
April 1 to December 31, 2014	$	2,409,000	$	42,000	$	2,451,000
2015	3,211,000		—		3,211,000
2016	2,668,000		—		2,668,000
2017	2,397,000		—		2,397,000
2018	2,298,000		—		2,298,000
2019	2,100,000		—		2,100,000
Thereafter	7,419,000		—		7,419,000

Amortization expense for the three months ended March 31, 2014 and 2013 was $828,000 and $542,000, respectively.

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Schedule Of Information Of Reportable Segments

Housekeeping provides services in Canada, although essentially all of its revenues and net income, 99% in both categories, are earned in one geographic area, the United States. Dietary provides services solely in the United States.

	Housekeeping Services		Dietary Services		Corporate and Eliminations				Total
Three Months Ended March 31, 2014
Revenues	$	204,741,000	$	107,424,000	$	—			$	312,165,000
Income before income taxes	18,752,000		6,780,000		(2,403,000		)	(1)	23,129,000
Three Months Ended March 31, 2013
Revenues	$	187,630,000	$	86,274,000	$	—			$	273,904,000
Income before income taxes	18,806,000		5,124,000		(4,973,000		)	(1)	18,957,000

(1) Represents primarily corporate office cost and related overhead, recording of transactions at the reportable segment level which use methods other than U.S. GAAP, as well as consolidated subsidiaries’ operating expenses that are not allocated to the reportable segments, net of investment and interest income.

Revenues By Client Services

The following revenues earned from clients differ from segment revenues reported above due to the inclusion of adjustments used for segment reporting purposes by management. We earned total revenues from clients in the following service categories:

	For the Three Months Ended March 31,
	2014		2013
Housekeeping services	$	140,940,000	$	125,593,000
Laundry and linen services	63,270,000		60,898,000
Dietary services	107,424,000		86,274,000
Maintenance services and other	531,000		1,139,000
	$	312,165,000	$	273,904,000

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities - Municipal bonds	$ 11,647	$ 11,445
Equity securities - Deferred compensation fund	22,998	22,200
Quoted Prices In Active Markets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	19,510	18,608
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	3,488	3,592
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	0	0
Carrying Amount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	22,998	22,200
Total Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	22,998	22,200
Municipal bonds [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities - Municipal bonds	0	0
Municipal bonds [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities - Municipal bonds	11,647	11,445
Municipal bonds [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities - Municipal bonds	0	0
Municipal bonds [Member] | Carrying Amount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities - Municipal bonds	11,647	11,445
Municipal bonds [Member] | Total Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities - Municipal bonds	11,647	11,445
Money Market [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	0	0
Money Market [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	3,488	3,592
Money Market [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	0	0
Money Market [Member] | Carrying Amount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	3,488	3,592
Money Market [Member] | Total Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	3,488	3,592
Balanced and Lifestyle [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	8,450	8,174
Balanced and Lifestyle [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	0	0
Balanced and Lifestyle [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	0	0
Balanced and Lifestyle [Member] | Carrying Amount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	8,450	8,174
Balanced and Lifestyle [Member] | Total Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	8,450	8,174
Large Cap Growth [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	4,327	4,292
Large Cap Growth [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	0	0
Large Cap Growth [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	0	0
Large Cap Growth [Member] | Carrying Amount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	4,327	4,292
Large Cap Growth [Member] | Total Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	4,327	4,292
Small Cap Value [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	2,506	2,173
Small Cap Value [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	0	0
Small Cap Value [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	0	0
Small Cap Value [Member] | Carrying Amount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	2,506	2,173
Small Cap Value [Member] | Total Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	2,506	2,173
Fixed Income [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	2,052	1,962
Fixed Income [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	0	0
Fixed Income [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	0	0
Fixed Income [Member] | Carrying Amount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	2,052	1,962
Fixed Income [Member] | Total Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	2,052	1,962
International [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	1,136	1,079
International [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	0	0
International [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	0	0
International [Member] | Carrying Amount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	1,136	1,079
International [Member] | Total Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	1,136	1,079
Mid Cap Growth [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	1,039	928
Mid Cap Growth [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	0	0
Mid Cap Growth [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	0	0
Mid Cap Growth [Member] | Carrying Amount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	1,039	928
Mid Cap Growth [Member] | Total Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities - Deferred compensation fund	$ 1,039	$ 928

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Description of Business and Significant Accounting Policies (Policy)

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Unaudited Interim Financial Data

Unaudited Interim Financial Data

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") for interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, these consolidated financial statements do not include all of the information and footnotes necessary for a complete presentation of financial position, results of operations and cash flows. However, in our opinion, all adjustments which are of a normal recurring nature and necessary for a fair presentation have been reflected in these consolidated financial statements. The balance sheet shown in this report as of December 31, 2013 has been derived from, and does not include, all the disclosures contained in the financial statements for the year ended December 31, 2013. The financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013. The results of operations for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for any future period.

Nature Of Operations

Nature of Operations

We provide management, administrative and operating expertise and services to the housekeeping, laundry, linen, facility maintenance and dietary service departments of the health care industry, including nursing homes, retirement complexes, rehabilitation centers and hospitals located throughout the United States. Although we do not directly participate in any government reimbursement programs, our clients’ reimbursements are subject to government regulation. Therefore, they are directly affected by any legislation relating to Medicare and Medicaid reimbursement programs.

We provide our services primarily pursuant to full service agreements with our clients. In such agreements, we are responsible for the day-to-day management of the managers and hourly employees located at our clients’ facilities. We also provide services on the basis of a management-only agreement for a very limited number of clients. Our agreements with clients typically provide for a one year service term, cancelable by either party upon 30 to 90 days’ notice after the initial 90-day period.

We are organized into two reportable segments: housekeeping, laundry, linen and other services (“Housekeeping”), and dietary department services (“Dietary”).

Housekeeping consists of the managing of the client’s housekeeping department which is principally responsible for the cleaning, disinfecting and sanitizing of patient rooms and common areas of a client’s facility, as well as the laundering and processing of the personal clothing belonging to the facility’s patients. Also within the scope of this segment’s service is the responsibility for laundering and processing of the bed linens, uniforms and other assorted linen items utilized by a client facility.

Dietary consists of managing the client’s dietary department which is principally responsible for food purchasing, meal preparation and providing dietitian consulting professional services, which includes the development of a menu that meets the patient’s dietary needs. We began Dietary operations in 1997.

As of March 31, 2014, we operate three wholly-owned subsidiaries, Huntingdon Holdings, Inc. (“Huntingdon”), Healthcare Staff Leasing Solutions, LLC (“Staff Leasing”) and HCSG Insurance Corp. Huntingdon invests our cash and cash equivalents and manages our portfolio of available-for-sale marketable securities. Staff Leasing offers professional employer organization (“PEO”) services to potential clients in the health care industry. As of March 31, 2014, we have PEO service contracts in several states. During the three months ended March 31, 2014 and 2013, operating results from our PEO service contracts were not material and were included in our Housekeeping segment. Formed in 2014, HCSG Insurance Corp. is a captive insurance company domiciled in the State of New Jersey and provides the Company with certain insurance-related services.

Principles Of Consolidation

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Healthcare Services Group, Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents are held in U.S. financial institutions or in custodial accounts with U.S. financial institutions. Cash and cash equivalents are defined as short-term, highly liquid investments with a maturity of three months or less at time of purchase that are readily convertible into cash and have insignificant interest rate risk.

Inventories and Supplies

Inventories and Supplies

Inventories and supplies include housekeeping, linen and laundry supplies, as well as food provisions and supplies. Inventories and supplies are stated at cost to approximate a first-in, first-out (FIFO) basis. Linen supplies are amortized on a straight-line basis over their estimated useful life of 24 months.

Revenue Recognition

Revenue Recognition

Revenues from our service agreements with clients are recognized as services are performed.

As a distributor of laundry equipment, we occasionally sell laundry installations to certain clients. The sales in most cases represent the construction and installation of a turn-key operation and are for payment terms ranging from 24 to 60 months. Our accounting policy for these sales is to recognize the gross profit over the life of the payments associated with our financing of the transactions.

Income Taxes

Income Taxes

We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current period. We accrue for probable tax obligations as required by facts and circumstances in the various regulatory environments. In addition, deferred tax assets and liabilities are recognized for expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. If appropriate, we would record a valuation allowance to reduce deferred tax assets to an amount for which realization is more likely than not.

In accordance with U.S. GAAP, we account for uncertain income tax positions reflected within our financial statements based on a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

Earnings per Common Share

Earnings per Common Share

Basic earnings per common share are computed by dividing income available to common shareholders by the weighted-average common shares outstanding for the period. Diluted earnings per common share reflect the weighted-average common shares outstanding and dilutive common shares, such as those issuable upon exercise of stock options.

Share-Based Compensation

Share-Based Compensation

U.S. GAAP addresses the accounting for share-based compensation, specifically, the measurement and recognition of compensation expense, based on estimated fair values, for all share-based awards made to employees and directors, including stock options and participation in the Company’s employee stock purchase plan. We estimate the fair value of share-based awards on the date of grant using the Black-Scholes option valuation model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the Company’s consolidated statements of income over the requisite service periods. We use the straight-line single option method of expensing share-based awards in our consolidated financial statements of income. Because share-based compensation expense is based on awards that are ultimately expected to vest, share-based compensation expense will be reduced to account for estimated forfeitures. Forfeitures are to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Use of Estimates in Financial Statements

Use of Estimates in Financial Statements

In preparing financial statements in conformity with U.S. GAAP, we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates are used for, but not limited to, our allowance for doubtful accounts, accrued insurance claims, asset valuations and review for potential impairment, and deferred taxes. The estimates are based upon various factors including current and historical trends, as well as other pertinent industry and regulatory authority information. We regularly evaluate this information to determine if it is necessary to update the basis for our estimates and to compensate for known changes.

Concentration of Credit Risk

Concentrations of Credit Risk

Financial instruments, as defined by U.S. GAAP, which potentially subject us to concentrations of credit risk, consist principally of cash and cash equivalents, marketable securities, deferred compensation funding and accounts and notes receivable. We define our marketable securities as fixed income investments which are highly liquid investments that can be readily purchased or sold using established markets. At March 31, 2014 and December 31, 2013, substantially all of our cash and cash equivalents, and marketable securities were held in one large financial institution located in the United States.

Our clients are concentrated in the health care industry, primarily providers of long-term care. Many of our clients’ revenues are highly contingent on Medicare, Medicaid and third party payors’ reimbursement funding rates. Congress has enacted a number of major laws during the past decade that have significantly altered, or threatened to alter, overall government reimbursement for nursing home services. These changes and lack of substantive reimbursement funding rate reform legislation, as well as other 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, could result in significant additional bad debts in the future.