Beverly Earns 19 Cents Per Share in First Quarter; All Business Units Meet Profit Objectives.

FORT SMITH, Ark.--(BUSINESS WIRE)--April 22, 1997--Beverly Enterprises, Inc. (NYSE: BEV) today announced that net income for the first quarter of 1997 totalled $18,463,000 or 19 cents per share, compared to net income of $13,696,000 or 14 cents per share for the same period in 1996. Revenues for the first quarter of 1997 totalled $820,281,000 compared to $814,507,000 for the year-earlier period.

"We strengthened our operating and financial fundamentals last year, and our initial results in 1997 reflect continuing improvements and accelerating momentum," said David R. Banks, Chairman of the Board and Chief Executive Officer. "Each of our four major business units met or exceeded its operating profit objective, and our overall profit margin was up by more than one percentage point."

At Pharmacy Corporation of America (PCA), revenues and operating profits were significantly higher than the first quarter of 1996, on both actual and same facility bases. PCA's margin (earnings before interest, taxes, depreciation and amortization as a percent of revenues) was up 80 basis points over the year-earlier period, which represented the fifth consecutive quarter of margin improvement for the institutional pharmacy.

On a same-facility basis, PCA's operating profits were up 20 percent on a 12 percent gain in revenues. PCA continued to expand its key business lines, including the high margin IV therapy segment, where revenues were up nearly 40 percent. PCA also expanded geographic coverage through three acquisitions, including one institutional pharmacy in Hawaii that accounts for about 80 percent of the market in that state.

(Beverly announced last week that it had signed a definitive agreement with Capstone Pharmacy Services, Inc. to combine PCA with Capstone to create the nation's largest independent institutional pharmacy company. Beverly will receive $275 million cash as a partial repayment for PCA intercompany debt. Beverly stockholders will receive approximately 44 shares of Capstone stock for each 100 shares of Beverly stock they own -- as a result of Capstone issuing approximately 50 million additional shares -- and thus they cumulatively will own about 57 percent of Capstone. Beverly stockholders will also receive one share of New Beverly Holdings, Inc., a holding company recently organized to own all Beverly non-pharmacy subsidiaries, for each share of Beverly stock they own. The transaction is subject to approvals by both Beverly and Capstone stockholders, as well as to approvals by various government agencies.)

At Beverly Health and Rehabilitation Services, on a same facility basis the core business unit achieved a sharp increase in operating profits on a three percent increase in revenues. Its profit margin rose by nearly 150 basis points. Total operating profits from nursing home operations were up more than 11 percent compared to the first quarter of 1996, even though the business unit operated 39 fewer facilities.

Nursing home admissions were up nearly four percent from the prior year period and revenues per patient day rose nearly 7 percent, although overall occupancy declined 75 basis points. These comparisons reflect the continuing trend toward shorter stays by higher acuity patients. Their more complex treatments generate higher revenue, which translates into higher operating margins. As a result of this strategy, dependency on Medicaid dropped by more than one percentage point.

"Our nursing home operations offer significant potential for growth and increased profitability," Banks noted. "We've been eliminating non-strategic and under-performing facilities in recent years, and we believe we now have a solid foundation upon which we can strengthen our presence in key markets. This year alone we'll build or expand 17 skilled nursing centers that will add more than 800 beds to our capacity. We'll also begin construction of eight other centers that will add another 890 beds by year-end 1998. In addition, we're replacing older facilities with eight new nursing centers containing a total of nearly 900 beds. Because of the underlying strength and cash-generating ability of our core business, we're confident we can achieve our growth objectives without compromising our financial objectives."

Revenues and operating profits at Beverly's American Transitional Hospital (ATH) business unit exceeded internal targets and were significantly higher than in the first quarter of 1996. ATH will open four additional "hospitals-in-hospitals" this year, adding to its current total of 11. The unit in Memphis (TN) will open in May, and a contract has been signed for Little Rock (AR) to open early in the third quarter.

Spectra Rehab Alliance also achieved improved revenues and operating profits on a same-facility basis, compared to the year-earlier period. Its Matrix business unit acquired six outpatient therapy clinics during the first quarter of 1997, bringing the current total to 34. These clinics as a group are exceeding internal financial targets, and significant additional acquisitions are planned for the balance of 1997.

"We've been aggressively developing our complementary businesses," Banks said. "American Transitional Hospitals and Spectra Rehab Alliance are well-positioned in the markets we've already selected, and we believe there's great potential for profitable growth in both these business units."

This news release contains forward-looking statements regarding continued performance improvements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to differ materially from forecasted results. These risks and uncertainties include national and local economic conditions, the effect of government regulation, the competitive environment in which the Company operates, the availability and cost of labor and materials, and a number of substantial conditions to be met in order to close pending transactions. These and other risks and uncertainties that could affect future results are addressed in the Company's filings with the Securities and Exchange Commission, including Forms 10-K and 10-Q.

Beverly Enterprises, Inc. is the leading provider of post-acute healthcare in the United States. It operates 627 skilled nursing and rehabilitation facilities, as well as transitional acute care hospitals, institutional and mail-service pharmacies, outpatient therapy clinics, assisted living facilities, and hospice and home health agencies. Beverly provides medical cost containment through managed care services in a nationwide network spanning 35 states and the District of Columbia. -0-

                   BEVERLY ENTERPRISES, INC.
               CONSOLIDATED STATEMENTS OF INCOME
                          (Unaudited)
            (In thousands, except per share amounts)


                                            Three months ended
                                                 March 31,
                                            1997           1996

Net operating revenues                   $ 816,716       $ 811,047
Interest income                              3,565           3,460
   Total revenues                          820,281         814,507

Costs and expenses:
 Operating and administrative:
  Wages and related                        449,782         449,995
  Other                                    289,930         293,484
 Interest                                   22,716          23,145
 Depreciation and amortization              27,081          25,056
   Total costs and expenses                789,509         791,680

Income before provision for income taxes    30,772          22,827
Provision for income taxes                  12,309           9,131
 Net income                              $  18,463       $  13,696

Net income per share of common stock     $    0.19       $    0.14

Weighted average shares used to compute
 net income per share                       99,411          99,978

CONTACT: Beverly Enterprises, Inc.

Jim Griffith, 501/484-6912