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Five Star Quality Care Announces Expected Loss From Second Quarter Operations
NEWTON, Mass., Jul 11, 2002 (BUSINESS WIRE) -- Five Star Quality Care, Inc. (AMEX: FVE) today announced that it expects to report a loss for the quarter ended June 30, 2002, of between $0.80 and $0.90 per share, or approximately $6.5 to $7.5 million. Revenues for the quarter are expected to be about $130 million. A large contributing factor to the anticipated loss is increased insurance costs, particularly increased costs of liability, workers compensation and employee health insurance. Also, certain Five Star facilities have not performed as expected, and the second quarter loss is expected to include some non-recurring expenses, including a loss from discontinued operations and a non-cash charge for impairment of assets. Evrett Benton, President and CEO of Five Star, made the following statement at the time of this announcement: "The increase in insurance costs affecting many American businesses is particularly burdensome to healthcare service providers which produce only small profit margins. Moreover, the litigious environment which exists in the nursing home industry has had a serious negative impact upon our insurance costs and caused us to increase our insurance and litigation reserves. "During the past quarter we closed one unprofitable nursing home which generated a loss in the quarter of about $500,000. We may close additional facilities before the end of 2002. We have also decided to focus our expansion effort upon assisted and independent living operations which permit higher operating profit margins. As a result, we reduced our staffing and reassigned several home office and regional employees which resulted in a charge in the second quarter and may result in a further charge before year-end 2002. "Five Star's board of directors and management are committed to dealing with the issues which are adversely affecting our business." More details concerning the financial results for the period ended June 30, 2002, are expected to be announced on or about August 12th. THE FOREGOING ANNOUNCEMENT INCLUDES FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND THE FEDERAL SECURITIES LAWS. THESE FORWARD LOOKING STATEMENTS INCLUDE REFERENCES TO THE EXPECTED FINANCIAL RESULTS FOR THE QUARTER ENDED JUNE 30, 2002. THESE EXPECTED FINANCIAL RESULTS ARE BASED UPON PRELIMINARY CALCULATIONS AND ESTIMATES. THE ACCOUNTS FOR THIS PERIOD HAVE NOT BEEN CLOSED OR REVIEWED BY FIVE STAR'S ACCOUNTANTS. WHEN THE FINAL ACCOUNTS ARE PREPARED, THE RESULTS MAY SHOW A GREATER OR LESSER LOSS THAN THE AMOUNTS STATED ABOVE. SIMILARLY, ANY IMPLICATION IN THE FOREGOING STATEMENT OF IMPROVED FUTURE FINANCIAL RESULTS MAY NOT OCCUR. FIVE STAR MAY BE UNABLE TO INCREASE ITS REVENUES OR DECREASE ITS EXPENSES AND FUTURE FINANCIAL RESULTS MAY BE WORSE THAN THE FINANCIAL RESULTS REALIZED IN THE PERIOD ENDED JUNE 30, 2002.