Beverly Enterprises reported a $30.5-million net loss for the year on revenue of $2.1 billion because of skyrocketing labor costs and declining occupancy at its nursing homes.
The nation's largest operator of nursing homes previously said it was expecting a loss for 1987 and would lay off some management staff.
In 1986, the Pasadena-based company recorded net income of $44.9 million on revenue of $2 billion. Last year's results included an extraordinary gain of $2.3 million from the repurchase of debt, while 1986 results included an extraordinary charge of $6.5 million.
Analysts' estimates of the size of the loss varied widely, but many predicted that it would be about $20 million.
In the fourth quarter, Beverly had a net loss of $22.4 million, compared to a net loss of $1.6 million in the same period of 1986. Revenue declined to $499.6 million from $526.4 million.
"The primary problem is labor costs," Beverly Chairman and Chief Executive Robert Van Tuyle said. "We are in a labor-intensive business."
The nationwide nursing shortage, coupled with difficulty in hiring and keeping service workers, forced Beverly to use high-cost temporary employees and to grant hefty wage increases during the second half of the year, Van Tuyle said.
"We feel maybe we were slow to recognize the problem and the severity of it, and then maybe we overreacted," he said. What's more, occupancy levels decreased and Medicaid rates were slow to react to the rising costs, he said.
Beverly has completed its layoffs--a total of 300 across the country, including 50 in Pasadena, Van Tuyle said.
Beverly will lose money in the first quarter and could also be slightly in the red in the second quarter, he said, adding that the company would be profitable in the last two quarters of the year.