Beverly Sells 20 Facilities as Part of Divestiture Strategy.

Business Editors/Health/Medical Writers

FORT SMITH, Ark.--(BUSINESS WIRE)--June 30, 2003

Beverly Enterprises, Inc. (NYSE: BEV) today announced the all cash sale of 18 skilled nursing facilities and two assisted living centers. These facilities are the first group to be sold under Beverly's previously announced strategy of divesting those nursing homes that account for a disproportionately high share of patient care liability costs.

The facilities were sold for an undisclosed cash sum to Aurora Healthcare LLC (a privately held firm based in Orchard Park, New York), and its affiliates will operate them. JPMorgan acted as exclusive financial advisor to Beverly in this transaction.

Of the net cash proceeds -- after transaction and related costs -- $73.5 million was used to pay facility-related debt and to purchase all remaining assets under Beverly's off-balance sheet lease arrangement. This debt reduction represents more than 10 percent of Beverly's total debt, on and off-balance sheet. The remaining net proceeds will be used for other corporate purposes. Beverly expects to record a gain on the sale in the second quarter of 2003.

"This first group of facilities represents one-third of the projected patient care liability costs of all the properties encompassed by our divestiture strategy," said William R. Floyd, Beverly Chairman and Chief Executive Officer. "They were expected to generate $135 million in revenue during 2003 - less than six percent of our total revenues - but they accounted for 20 percent of our total patient care liability costs projected for this year. Patient care liability costs projected for these facilities for 2003 increased by 88 percent over 2002 levels, and increases would be likely for 2004 and beyond."

Floyd continued: "Except for disproportionately high liability costs, these would be very successful facilities - with occupancy during the first quarter of this year averaging 90 percent. They are well-managed and staffed by dedicated caregivers, and can be very attractive facilities under a legal and operating structure different than what is practicable as part of the Beverly organization."

Excluding the expected gain, the sale will result in a slight dilution of Beverly's pre-tax income in 2003. Using conservative estimates for projected patient care liability cost increases - less than one-third the increases recently experienced - the transaction is expected to be increasingly accretive in 2004 and beyond.

Eight of the nursing facilities that were sold are located in Mississippi, six in Alabama and two each in Tennessee and Georgia. The two assisted living centers are associated with the Georgia nursing facilities. Sales of other groups of facilities under the divestiture strategy will be announced upon the closings of these transactions.

This release is intended to be disclosure through methods reasonably designed to provide broad, non-exclusionary distribution to the public in compliance with the Securities and Exchange Commission's Fair Disclosure Regulation. This release may contain forward-looking statements, including statements related to expected performance in 2003 and beyond, 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, including their effect on the availability and cost of labor, utilities and materials; the effect of government regulations and changes in regulations governing the healthcare industry, including the company's compliance with such regulations; changes in Medicare and Medicaid payment levels and methodologies and the application of such methodologies by the government and its fiscal intermediaries; the effects of adopting new accounting standards; liabilities and other claims asserted against the company, including patient care liabilities, as well as the resolution of lawsuits brought about by the announcement or settlement of federal government investigations and increases in the reserves for patient care liabilities; the ability to predict future reserves related to patient care liabilities; the ability to reduce overhead costs, and improve the effectiveness of our fundamental business processes; the ability to execute our strategic growth initiatives and implement our plan to divest certain of our nursing facilities in a timely manner at fair value; the ability to attract and retain qualified personnel; the availability and terms of capital to fund acquisitions, capital improvements and on-going operations; the competitive environment in which the company operates; the ability to maintain and increase census levels; and demographic changes. 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. and its operating subsidiaries comprise a leading provider of healthcare services to the elderly in the United States. They operate 428 skilled nursing facilities, as well as 26 assisted living centers, and 30 home care and hospice centers. Through AEGIS Therapies, they also offer rehabilitative services on a contract basis to nursing facilities and assisted living centers operated by other care providers.