Beverly Enterprises 8-K Results of Operations and Financial Condition

Exhibit 99.1

NEWS RELEASE

Investor	James M. Griffith	News Media	Blair C. Jackson
Contact:	Senior Vice President	Contact:	Vice President
	Investor Relations		Corporate Communications
	(479) 201-5514		(479) 201-5263

Beverly Second-Quarter Results
Reflect Strong Operating Performance;
Debt Refinancing Costs Contribute to 24¢ Per Share Loss;
2004 EBITDA Guidance Raised to
$180 Million to $185 Million

(FORT SMITH, ARKANSAS, August 9, 2004) — Beverly Enterprises, Inc. (NYSE: BEV) today announced that continuing operations recorded a net loss of $15.2 million (14 cents per share diluted) in the second quarter of 2004 — including $40.3 million in previously disclosed costs related to a debt refinancing. Excluding these costs, continuing operations achieved net income of $25 million or 23 cents per share diluted.

Discontinued operations — including 24 Skilled Nursing facilities and 10 outpatient care clinics classified as “assets held for sale,” as well as 11 under-performing Arkansas facilities sold in June — reported a net loss of $10.7 million. In total, Beverly recorded a net loss of $25.9 million or 24 cents per share diluted for the 2004 second quarter.

For the second quarter of 2003, Beverly reported net income from continuing operations totaling $5 million (5 cents per share diluted). For the year-ago period, discontinued operations accounted for net income of $12.5 million (11 cents per share

diluted), including a net gain of $12.8 million primarily due to the disposition of 23 under-performing facilities.

Revenue for the 2004 second quarter totaled $492.9 million, up more than 10 percent from $446.2 million in the year-earlier period. (Both periods have been adjusted to exclude discontinued operations.)

“The strong results for continuing operations reflect revenue increases and EBITDA gains (earnings before interest, taxes, depreciation and amortization) from the year-earlier period in each of our three principal business units — as well as continued cost-reduction efforts and the strategic disposition of under-performing facilities,” said William R. Floyd, Chairman and Chief Executive Officer. “In addition to achieving improved operating results during the quarter, we also eliminated $70 million of off-balance sheet debt, we lowered nursing patient receivables by $20 million, and we completed a refinancing that lowers overall interest costs. In fact, during the past year, we’ve taken actions that have reduced our weighted average interest rate by 290 basis points. As a result of our strong second-quarter performance, we are raising our 2004 targeted EBITDA range from continuing operations to between $180 million and $185 million.”

Skilled Nursing: Continued Gains in Rates, Occupancy and Patient Mix

On a continuing operations basis for the second quarter, revenue gains for Skilled Nursing reflect an 8.9 percent increase in the overall per diem rate and a 30 basis-point improvement in Medicare patients as a percentage of total patient days. Continued efficiency improvements in labor cost management, together with revenue gains and asset dispositions, led to a 19 percent increase in EBITDA and a 70 basis-point improvement in EBITDA margins in this segment.

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The Medicare mix rose 30 basis points to 12.2 percent, the 18th consecutive quarter of year-over-year increases. Compared with the 2003 second quarter, Medicare average per diem rates rose 9.7 percent, Medicaid rates increased 7.9 percent (6.4 percent net of the cost of provider taxes) and private/managed care rates were up 6.1 percent.

Under a business strategy implemented in early 2003 to divest under-performing or non-strategic Skilled Nursing facilities, Beverly sold or closed 14 facilities during the quarter. Beverly has sold or closed 107 facilities during the past 18 months.

Aegis Therapies, AseraCare Hospice: Double-Digit Profitable Growth

Beverly’s principal eldercare service businesses — Aegis Therapies and AseraCare Hospice — each achieved double-digit revenue growth, expanded their operating base and increased EBITDA, compared with the year-earlier period.

Aegis revenues from third-party clients were up 54 percent from the 2003 second quarter. This reflects the net addition of 28 new customers (all skilled nursing facilities) during the 2004 second quarter and continued business expansion among existing customers. Aegis now provides speech, occupational and physical therapy to 575 outside customers and to Beverly’s 356 skilled nursing facilities.

AseraCare Hospice revenues increased 32 percent from the year-earlier period, reflecting a 31 percent increase in average daily census (excludes results of the Hospice USA acquisition, which was completed July 30). Four new locations have become operational to-date during 2004, and eleven additional locations are under development.

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Beverly shareholders may listen to a discussion by senior management of the Company’s performance at 8:30 a.m. EDT today by dialing 1-800-500-0311 or 1-719-457-2698 and entering reservation number 290955. A recording of this conference call will be available from 11:30 a.m. EDT today until midnight Wednesday, August 18. Shareholders may dial 1-888-203-1112 or 1-719-457-0820 and enter reservation number 290955 to access the recording.

The statements in this press release relating to matters that are not historical facts are forward-looking statements based on management’s beliefs and assumptions using currently available information and expectations as of the date hereof, are not guarantees of future performance and involve certain risks and uncertainties including the risks and uncertainties detailed from time to time in Beverly’s filings with the Securities and Exchange Commission. Although Beverly believes that the expectations reflected in such forward-looking statements are reasonable, it cannot give any assurances that these expectations will prove to be correct. Beverly assumes no duty to publicly update or revise such statements, whether as a result of new information, future events or otherwise.

Beverly Enterprises, Inc. and its operating subsidiaries are leading providers of healthcare services to the elderly in the United States. Beverly currently operates 356 skilled nursing facilities, as well as 18 assisted living centers, and 44 hospice centers. Through Aegis Therapies, Beverly also offers rehabilitative services on a contract basis to facilities operated by other care providers.

# # # #

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

	Quarter ended							Year ended
	June 30,							June 30,
	2004				2003			2004				2003
Revenues	$	492,869			$	446,231		$	978,135			$	883,829
Costs and expenses:
Wages and related		279,183		(1)		268,170			555,672		(1)		531,367
Provision for insurance and related items		31,985				29,781			60,974				54,273
Other operating and administrative		130,501				114,292			259,889				230,371
Depreciation and amortization		15,316				14,564			30,323				28,851
Adjustment related to California investigation settlement		—				(925	)		—				(925	)
Asset impairments, workforce reductions and other unusual items		(1,023	)			142			1,801				1,329
Total costs and expenses		455,962				426,024			908,659				845,266
Income before other income (expenses)		36,907				20,207			69,476				38,563
Other income (expenses):
Interest expense		(12,142	)			(15,736	)		(23,946	)			(31,732	)
Costs related to early extinguishment of debt		(40,254	)			—			(40,254	)			—
Interest income		1,320				1,173			2,843				2,384
Net gains (losses) on dispositions		(5	)			591			32				397
Total other expenses, net		(51,081	)			(13,972	)		(61,325	)			(28,951	)
Income (loss) before provision for income taxes and discontinued operations		(14,174	)			6,235			8,151				9,612
Provision for income taxes		1,060				1,201			2,502				2,437
Income (loss) before discontinued operations		(15,234	)			5,034			5,649				7,175
Discontinued operations, net of taxes: for the quarters 2004 - $(78) and 2003 - $0; for the years 2004 - $345 and 2003 - $0		(10,689	)			12,457			(8,133	)			22,504
Net income (loss)	$	(25,923	)		$	17,491		$	(2,484	)		$	29,679
Net income (loss) per share of common stock:
Basic and diluted:
Before discontinued operations	$	(0.14	)		$	0.05		$	0.05			$	0.07
Discontinued operations		(0.10	)			0.11			(0.07	)			0.21
Net income (loss) per share of common stock	$	(0.24	)		$	0.16		$	(0.02	)		$	0.28
Shares used to compute basic net income (loss) per share		107,418				107,156			107,359				105,956
Shares used to compute diluted net income (loss) per share		107,418				107,161			108,437				105,959

⁽¹⁾ Includes a $6.1 million decrease in expense primarily due to an adjustment in reserves related to new employee benefit programs implemented in 2003.

BEVERLY ENTERPRISES, INC.
SUPPLEMENTARY INFORMATION

	Quarter ended							Year ended
	June 30,							June 30,
	2004				2003			2004				2003
Number of Nursing Home Facilities:
Owned		265				303			265				303
Leased		91				123			91				123
Total		356		(1)		426			356		(1)		426
Number of Licensed Beds:
Owned		27,410				32,402			27,410				32,402
Leased		10,023				13,632			10,023				13,632
Total		37,433		(1)		46,034			37,433		(1)		46,034
Assisted Living Centers		18				25			18				25
Home Care Centers		26				30			26				30
Outpatient Clinics		10		(1)		10			10		(1)		10
Nursing Patient Days		2,791,000				2,814,000			5,599,000				5,610,000
Nursing Home Occupancy — Continuing Ops (based on operational beds)		88.28	%			87.77	%		88.38	%			87.88	%
Operational beds		34,683				35,186			34,683				35,186
Patient Mix (based on patient days):
Medicaid		70.83	%			70.37	%		70.46	%			70.25	%
Medicare		12.16	%			11.86	%		12.49	%			12.01	%
Private & Other		17.01	%			17.77	%		17.05	%			17.74	%
Sources of Revenue (based on $):
Medicaid		50.67	%			51.64	%		50.18	%			51.53	%
Medicare		27.80	%			26.50	%		28.38	%			26.99	%
Private & Other		21.53	%			21.86	%		21.44	%			21.48	%
Nursing Average per diem rate (including ancillaries)	$	160.03			$	146.90		$	159.03			$	146.87
Hospice Average Daily Census		1,105				843			1,044				818
Aegis Outside Contracts		575				455			575				455
Wages and related expenses as a % of revenues		56.64	%			60.10	%		56.81	%			60.12	%

⁽¹⁾ 24 Nursing Home Facilities and 10 Outpatient Clinics are held for sale as of June 30, 2004.

For all periods presented, amounts have been adjusted to exclude discontinued operations.

BEVERLY ENTERPRISES, INC.
SUPPLEMENTARY INFORMATION
ANALYSIS OF REVENUES

	Quarter ended				Year ended
	June 30,				June 30,
	2004		2003		2004		2003
REVENUES(In thousands)
NURSING FACILITIES:
MEDICAID	$	250,239	$	230,421	$	492,287	$	456,354
MEDICARE		109,919		98,032		225,130		197,962
PRIVATE & OTHER		89,461		88,230		176,528		173,673
SUBTOTAL		449,619		416,683		893,945		827,989
AEGIS THERAPIES		29,868		19,440		57,048		35,400
HOME CARE		12,181		9,047		23,152		17,388
OTHER		1,201		1,061		3,990		3,052
TOTALS	$	492,869	$	446,231	$	978,135	$	883,829
NURSING PATIENT DAYS(In thousands)
MEDICAID		1,977		1,980		3,946		3,941
MEDICARE		339		334		699		674
PRIVATE & OTHER		475		500		954		995
TOTALS		2,791		2,814		5,599		5,610
NURSING PER DIEM RATES(Including Ancillaries)
MEDICAID	$	124.79	$	115.61	$	123.36	$	115.29
MEDICARE — PART A		322.25		293.76		321.96		293.84
PRIVATE & OTHER		157.27		148.20		155.15		148.10
TOTALS(1)	$	160.03	$	146.90	$	159.03	$	146.87

(1) Weighted Average Rates

For all periods presented, amounts have been adjusted to exclude discontinued operations.

BEVERLY ENTERPRISES, INC.
SUPPLEMENTARY INFORMATION
ANALYSIS OF OTHER OPERATING AND ADMINISTRATIVE EXPENSES
(In thousands)

	Quarter ended				Year ended
	June 30,				June 30,
	2004		2003		2004		2003
SUPPLIES	$	28,276	$	26,035		56,832		52,652
FOOD		9,795		10,670		19,444		21,380
UTILITIES		11,990		12,580		28,236		26,734
OTHER CONTROLLABLES		52,679		42,478		102,802		83,767
REAL ESTATE RENTAL		8,106		8,270		15,952		16,592
EQUIPMENT RENTAL		4,460		4,234		8,625		8,352
OTHER NONCONTROLLABLES		15,195		10,025		27,998		20,894
TOTALS	$	130,501	$	114,292	$	259,889	$	230,371

For all periods presented, amounts have been adjusted to exclude discontinued operations.

BEVERLY ENTERPRISES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

	June 30,				December 31,
	2004				2003
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	216,463			$	258,815
Accounts receivable, less allowance for doubtful accounts: 2004 - $33,208; 2003 - $31,615		241,169	(a	)		164,635
Notes receivable, less allowance for doubtful notes: 2004 - $2,588; 2003 - $3,336		17,693				13,724
Operating supplies		9,249				10,425
Assets held for sale		15,051				3,498
Investment in Beverly Funding Corporation		—				31,342
Prepaid expenses and other		39,458				33,377
Total current assets		539,083				515,816
Property and equipment, net		645,066				694,220
Other assets:
Goodwill, net		56,473				57,102
Other, less allowance for doubtful accounts and notes: 2004 - $2,780; 2003 - $2,120		82,201				79,283
Total other assets		138,674				136,385
	$	1,322,823			$	1,346,421
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	53,978			$	67,572
Accrued wages and related liabilities		93,915				116,717
Accrued interest		3,395				6,896
General and professional liabilities		63,422				93,736
Federal government settlement obligations		13,728				13,125
Liabilities held for sale		611				672
Other accrued liabilities		106,319				102,289
Current portion of long-term debt		9,388				13,354
Total current liabilities		344,756				414,361
Long-term debt		563,800				552,873
Other liabilities and deferred items		178,503				141,001
Commitments and contingencies
Stockholders’ equity:
Preferred stock, shares authorized: 25,000,000		—				—
Common stock, shares issued: 2004 - 116,241,035; 2003 - 115,594,806		11,624				11,559
Additional paid-in capital		895,947				895,950
Accumulated deficit		(563,309	)			(560,825	)
Treasury stock, at cost: 8,283,316		(108,498	)			(108,498	)
Total stockholders’ equity		235,764				238,186
	$	1,322,823			$	1,346,421

(a) The increase in accounts receivable from December 31, 2003 primarily relates to the Beverly Funding Corporation (“BFC”) transaction. BFC ceased purchasing accounts receivable from Beverly on March 1, 2004 in order to repay its $70 million of medium-term notes.

BEVERLY ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

	Six Months Ended
	June 30,
	2004			2003
Cash flows from operating activities:
Net income (loss)	$	(2,484	)	$	29,679
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities, including discontinued operations:
Depreciation and amortization		31,709			35,811
Provision for reserves on accounts, notes and other receivables, net		8,704			18,380
Amortization of deferred financing costs		1,519			2,422
Costs related to early extinguishments of debt		40,254			—
Asset impairments, workforce reductions and other unusual items		4,707			1,958
(Gains) losses on dispositions of facilities and other assets, net		1,072			(41,109	)
Adjustment related to California investigation settlement		—			(925	)
Insurance related accounts		3,225			17,239
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable		(80,220	)		(30,569	)
Prepaid expenses		5,255			(8,908	)
Accounts payable and other accrued expenses		(30,344	)		(2,509	)
Income taxes		(1,525	)		2,323
Other, net		(3,848	)		(3,346	)
Total adjustments		(19,492	)		(9,233	)
Net cash provided by (used for) operating activities		(21,976	)		20,446
Cash flows from investing activities:
Capital expenditures		(21,913	)		(17,369	)
Proceeds from dispositions of facilities and other assets, net		21,341			134,955
Proceeds from Beverly Funding Corporation investment		28,956			—
Collections on notes receivable		6,871			374
Payments for designated funds, net		(827	)		(5,538	)
Other, net		(20,269	)		(6,139	)
Net cash provided by investing activities		14,159			106,283
Cash flows from financing activities:
Repayments of long-term debt		(204,423	)		(35,876	)
Repayments of off-balance sheet financing		—			(69,456	)
Proceeds from issuance of new debt		211,384			—
Proceeds from exercise of stock options		636			—
Deferred financing and other costs		(42,132	)		(2,308	)
Net cash used for financing activities		(34,535	)		(107,640	)
Net increase (decrease) in cash and cash equivalents		(42,352	)		19,089
Cash and cash equivalents at beginning of period		258,815			115,445
Cash and cash equivalents at end of period	$	216,463		$	134,534
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized	$	26,105		$	31,442
Income tax payments, net		4,372			177

Beverly Enterprises, Inc.

Projected 2004 EBITDA Range for
Continuing Operations
Reconciliation
(In millions)

Projected EBITDA	$	180.0		$	185.0
Depreciation and amortization		61.6			61.6
Costs related to early extinguishment of debt		40.3			40.3
Interest expense		46.2			46.2
Interest income		(5.1	)		(5.1	)
Pre-tax income	$	37.0		$	42.0