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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO ______

COMMISSION FILE NUMBER 1-9550

BEVERLY ENTERPRISES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 62-1691861
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

ONE THOUSAND BEVERLY WAY
FORT SMITH, ARKANSAS 72919
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (501) 201-2000

INDICATE BY CHECK MARK WHETHER REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO
BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT REGISTRANT WAS REQUIRED
TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST 90 DAYS.

YES X NO
--- ---

SHARES OF REGISTRANT'S COMMON STOCK, $.10 PAR VALUE, OUTSTANDING,
EXCLUSIVE OF TREASURY SHARES, AT JULY 31, 2000 -- 101,321,056

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BEVERLY ENTERPRISES, INC.

FORM 10-Q

JUNE 30, 2000

TABLE OF CONTENTS

PART I -- FINANCIAL INFORMATION PAGE

Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets.............................. 2
Condensed Consolidated Statements of Operations.................... 3
Condensed Consolidated Statements of Cash Flows.................... 4
Notes to Condensed Consolidated Financial Statements............... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................. 10

PART II -- OTHER INFORMATION

Item 1. Legal Proceedings..................................................... 16
Item 4. Submission of Matters to a Vote of Security Holders................... 18
Item 5. Other Information .................................................... 18
Item 6. Exhibits and Reports on Form 8-K...................................... 18

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PART I

BEVERLY ENTERPRISES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 30, 2000 AND DECEMBER 31, 1999

(DOLLARS IN THOUSANDS)

JUNE 30, DECEMBER 31,
2000 1999
----------- -----------
(UNAUDITED) (NOTE)

ASSETS
Current assets:
Cash and cash equivalents ........................................................ $ 16,645 $ 24,652
Accounts receivable - patient, less allowance for doubtful accounts:
2000 - $70,641; 1999 - $64,398 ................................................ 342,496 319,097
Accounts receivable - nonpatient, less allowance for doubtful accounts:
2000 - $1,391; 1999 - $1,057 .................................................. 25,387 30,890
Notes receivable, less allowance for doubtful notes: 2000 - $627 ................ 14,193 16,930
Operating supplies ............................................................... 31,094 32,276
Deferred income taxes ............................................................ 51,255 54,932
Prepaid expenses and other ....................................................... 15,774 15,019
----------- -----------
Total current assets ....................................................... 496,844 493,796
Property and equipment, net of accumulated depreciation and amortization:
2000 - $775,265; 1999 - $743,337 ................................................. 1,091,522 1,110,065
Other assets:
Goodwill, net .................................................................... 230,715 229,639
Other, less allowance for doubtful accounts and notes:
2000 - $3,711; 1999 - $5,970 .................................................. 147,699 149,380
----------- -----------
Total other assets ......................................................... 378,414 379,019
----------- -----------
$ 1,966,780 $ 1,982,880
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable ................................................................. $ 82,519 $ 93,168
Accrued wages and related liabilities ............................................ 83,407 92,514
Accrued interest ................................................................. 15,322 14,138
Other accrued liabilities ........................................................ 108,561 154,182
Current portion of long-term debt ................................................ 61,470 34,052
----------- -----------
Total current liabilities .................................................. 351,279 388,054
Long-term debt ...................................................................... 754,781 746,164
Deferred income taxes payable ....................................................... 33,043 28,956
Other liabilities and deferred items ................................................ 175,573 178,582
Commitments and contingencies
Stockholders' equity:
Preferred stock, shares authorized: 25,000,000 .................................. -- --
Common stock, shares issued: 2000 - 110,382,356; 1999 - 110,382,356 ............. 11,038 11,038
Additional paid-in capital ....................................................... 875,505 875,637
Accumulated deficit .............................................................. (124,646) (139,429)
Accumulated other comprehensive income ........................................... 1,264 1,061
Treasury stock, at cost: 2000 - 9,061,300 shares; 1999 - 7,886,800 shares ....... (111,057) (107,183)
----------- -----------
Total stockholders' equity ................................................. 652,104 641,124
----------- -----------
$ 1,966,780 $ 1,982,880
=========== ===========

NOTE: The balance sheet at December 31, 1999 has been derived from the audited
consolidated financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.

See accompanying notes.

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BEVERLY ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999

(UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------

Net operating revenues ................................. $ 655,239 $ 632,751 $ 1,301,341 $ 1,266,352
Interest income ........................................ 649 927 1,474 2,355
----------- ----------- ----------- -----------
Total revenues ............................... 655,888 633,678 1,302,815 1,268,707

Costs and expenses:
Operating and administrative:
Wages and related ............................... 393,841 383,446 783,557 770,576
Provision for insurance and related items ....... 14,648 13,850 35,161 27,352
Other ........................................... 188,707 173,833 370,353 352,737
Interest ........................................... 20,313 17,045 39,931 34,028
Depreciation and amortization ...................... 25,378 24,600 50,714 48,842
Special charges related to settlements of federal
government investigations ........................ -- 200,542 -- 202,447
Year 2000 remediation .............................. -- 4,263 -- 7,249
----------- ----------- ----------- -----------
Total costs and expenses ..................... 642,887 817,579 1,279,716 1,443,231
----------- ----------- ----------- -----------

Income (loss) before provision for (benefit from) income
taxes .............................................. 13,001 (183,901) 23,099 (174,524)
Provision for (benefit from) income taxes .............. 4,479 (68,044) 8,316 (64,574)
----------- ----------- ----------- -----------

Net income (loss) ...................................... $ 8,522 $ (115,857) $ 14,783 $ (109,950)
=========== =========== =========== ===========

Income (loss) per share of common stock:
Basic and diluted:
Net income (loss) per share of common stock ..... $ 0.08 $ (1.13) $ 0.15 $ (1.07)
=========== =========== =========== ===========

Shares used to compute basic net income (loss)
per share .................................... 101,321 102,494 101,801 102,487
=========== =========== =========== ===========

Shares used to compute diluted net income (loss)
per share .................................... 101,323 102,494 101,863 102,487
=========== =========== =========== ===========

See accompanying notes.

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BEVERLY ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2000 AND 1999

(UNAUDITED)

(IN THOUSANDS)

2000 1999
--------- ---------

Cash flows from operating activities:
Net income (loss) ..................................................................... $ 14,783 $(109,950)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization ....................................................... 50,714 48,842
Provision for reserves on patient, notes and other receivables, net ................. 20,360 11,176
Amortization of deferred financing costs ............................................ 1,281 1,066
Special charges related to settlements of federal government investigations ......... -- 202,447
Losses (gains) on dispositions of facilities and other assets, net .................. (2,354) 2,563
Deferred taxes ...................................................................... 7,623 (66,929)
Net increase in insurance related accounts .......................................... 1,962 3,086
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable - patient ..................................................... (45,504) (28,178)
Operating supplies ................................................................ 938 (388)
Prepaid expenses and other receivables ............................................ (1,979) 953
Accounts payable and other accrued expenses ....................................... (54,627) (7,049)
Income taxes payable .............................................................. (708) 23,745
Other, net ........................................................................ (3,594) (5,696)
--------- ---------
Total adjustments ............................................................... (25,888) 185,638
--------- ---------
Net cash provided by (used for) operating activities ............................ (11,105) 75,688
Cash flows from investing activities:
Proceeds from dispositions of facilities and other assets ........................... 10,206 39,308
Payments for acquisitions, net of cash acquired ..................................... (1,619) (4,160)
Capital expenditures ................................................................ (40,763) (51,439)
Collections on notes receivable ..................................................... 5,589 10,982
Other, net .......................................................................... (2,341) (13,807)
--------- ---------
Net cash used for investing activities ......................................... (28,928) (19,116)
Cash flows from financing activities:
Revolver borrowings ................................................................. 873,000 678,000
Repayments of Revolver borrowings ................................................... (814,000) (799,000)
Proceeds from issuance of long-term debt ............................................ -- 125,820
Repayments of long-term debt ........................................................ (23,140) (69,315)
Purchase of common stock for treasury ............................................... (3,874) --
Proceeds from exercise of stock options ............................................. -- 129
Deferred financing costs ............................................................ (132) (1,293)
Proceeds from designated funds, net ................................................. 172 (22)
--------- ---------
Net cash provided by (used for) financing activities ............................ 32,026 (65,681)
--------- ---------
Net decrease in cash and cash equivalents ................................................ (8,007) (9,109)
Cash and cash equivalents at beginning of period ......................................... 24,652 17,278
--------- ---------
Cash and cash equivalents at end of period ............................................... $ 16,645 $ 8,169
========= =========

Supplemental schedule of cash flow information:
Cash paid (received) during the period for:
Interest, net of amounts capitalized ................................................ $ 37,466 $ 31,753
Income tax payments (refunds), net .................................................. 1,401 (21,390)

See accompanying notes.

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BEVERLY ENTERPRISES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2000

(UNAUDITED)

(1) The condensed consolidated financial statements have been prepared by
the Company, without audit. In management's opinion, they include all normal
recurring adjustments necessary for a fair presentation of the results of
operations for the three-month and six-month periods ended June 30, 2000 and
1999 in accordance with the rules and regulations of the Securities and Exchange
Commission. Although certain information and footnote disclosures required by
generally accepted accounting principles have been condensed or omitted, the
Company believes that the disclosures in these condensed consolidated financial
statements are adequate to make the information presented not misleading. These
condensed consolidated financial statements should be read along with the
Company's 1999 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results of operations for the three-month and six-month periods
ended June 30, 2000 are not necessarily indicative of the results for a full
year. Unless otherwise stated, the Company means Beverly Enterprises, Inc. and
its consolidated subsidiaries.

Generally accepted accounting principles require management to make
estimates and assumptions when preparing financial statements that affect: (1)
the reported amounts of assets and liabilities at the date of the financial
statements; and (2) the reported amounts of revenues and expenses during the
reporting period. They also require management to make estimates and assumptions
regarding any contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.

Approximately 74% and 71% of the Company's net operating revenues for the
six months ended June 30, 2000 and 1999, respectively, were derived from funds
under the Medicare and Medicaid programs. The Company accrues for revenues when
services are provided at standard charges adjusted to amounts estimated to be
received under governmental programs and other third-party contractual
arrangements. These revenues are reported at their estimated net realizable
amounts and are subject to audit and retroactive adjustment. Retroactive
adjustments are considered in the recognition of revenues on an estimated basis
in the period the related services are rendered, and such amounts are adjusted
in future periods as adjustments become known or as cost reporting years are no
longer subject to audits, reviews or investigations. Due to the complexity of
the laws and regulations governing the Medicare and Medicaid programs, there is
at least a reasonable possibility that recorded estimates will change by a
material amount in the near term.

The following table sets forth the calculation of basic and diluted
earnings per share for the three-month and six-month periods ended June 30 (in
thousands):

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- -----------------------
2000 1999 2000 1999
--------- ------------ --------- ---------

NUMERATOR:
Numerator for basic and diluted income (loss) per share
from continuing operations ........................... $ 8,522 $ (115,857) $ 14,783 $(109,950)
========= ============ ========= =========

DENOMINATOR:
Denominator for basic income (loss) per share - weighted
average shares ....................................... 101,321 102,494 101,801 102,487
Effect of dilutive securities:
Employee stock options ............................... 2 -- 62 --
--------- ------------ --------- ---------

Denominator for diluted income (loss) per share -
weighted average shares and assumed conversions ...... 101,323 102,494 101,863 102,487
========= ============ ========= =========
Basic and diluted income (loss) per share .............. $ 0.08 $ (1.13) $ 0.15 $ (1.07)
========= ============ ========= =========

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BEVERLY ENTERPRISES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2000

(UNAUDITED)

Comprehensive income (loss) includes net income (loss), as well as charges
and credits to stockholders' equity not included in net income (loss). The
components of comprehensive income (loss), net of income taxes, consist of the
following for the three-month and six-month periods ended June 30 (in
thousands):

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
2000 1999 2000 1999
--------- --------- --------- ---------

Net income (loss) ................................. $ 8,522 $(115,857) $ 14,783 $(109,950)
Net unrealized gains (losses) on available-for-sale
securities, net of income taxes ................. 502 399 203 (48)
--------- --------- --------- ---------
Comprehensive income (loss) ....................... $ 9,024 $(115,458) $ 14,986 $(109,998)
========= ========= ========= =========

Accumulated other comprehensive income, net of income taxes, is comprised
of net unrealized gains on available-for-sale securities of $1,264,000 and
$1,061,000 at June 30, 2000 and December 31, 1999, respectively.

(2) The provision for (benefit from) income taxes for the three-month and
six-month periods ended June 30, 2000 and 1999 were based on estimated annual
effective tax rates of 36% and 37%, respectively. The Company's estimated annual
effective tax rates for 2000 and 1999 were different than the federal statutory
rate primarily due to the impact of state income taxes, amortization of
nondeductible goodwill and the benefit of certain tax credits. The Company's net
deferred tax assets at June 30, 2000 will be realized primarily through the
reversal of temporary taxable differences and future taxable income.
Accordingly, the Company does not believe that a deferred tax valuation
allowance is necessary at June 30, 2000. The provision for (benefit from) income
taxes consists of the following for the three-month and six-month periods ended
June 30 (in thousands):

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
2000 1999 2000 1999
-------- -------- -------- --------

Federal:
Current ........ $ 128 $ (792) $ 216 $ --
Deferred ....... 3,337 (61,237) 6,286 (59,212)
State:
Current ........ 295 1,918 477 2,355
Deferred ....... 719 (7,933) 1,337 (7,717)
-------- -------- -------- --------
$ 4,479 $(68,044) $ 8,316 $(64,574)
======== ======== ======== ========

(3) During the six months ended June 30, 2000, the Company acquired seven
nursing facilities (1,210 beds) and certain other assets for cash of
approximately $1,400,000, closing and other costs of approximately $1,500,000
and write-off of notes receivable of approximately $900,000. The acquisitions of
such facilities and other assets were accounted for as purchases. Also during
such period, the Company sold, closed or terminated the leases on 19 nursing
facilities (1,826 beds) and certain other assets for cash proceeds of
approximately $10,100,000. The Company did not operate three of these nursing
facilities (297 beds) which were leased to another nursing home operator in a
prior year transaction. The Company recognized net pre-tax gains, which were
included in net operating revenues during the six months ended June 30, 2000, of
approximately $2,400,000 as a result of these dispositions. The operations of
these facilities and certain other assets were immaterial to the Company's
consolidated financial position and results of operations.

(4) During the six months ended June 30, 2000, the Company repurchased
approximately 1,200,000 shares of its outstanding Common Stock under a stock
repurchase program at a cost of approximately $3,900,000. The repurchases were
financed primarily through borrowings under the Company's Revolver/Letter of
Credit Facility. Had the Company repurchased these additional shares prior to
January 1, 2000, the impact on the Company's results of operations for the
three-month and six-month periods ended June 30, 2000 would have been
immaterial.

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BEVERLY ENTERPRISES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2000

(UNAUDITED)

(5) On February 3, 2000, the Company entered into a series of separate
agreements with the U.S. Department of Justice and the Office of Inspector
General (the "OIG") of the Department of Health and Human Services, which
settled the federal government's investigations of the Company relating to its
allocation to the Medicare program of certain nursing labor costs in its skilled
nursing facilities from 1990 to 1998 (the "Allocation Investigations").

The agreements consist of: (1) a Plea Agreement; (2) a Civil Settlement
Agreement; (3) a Corporate Integrity Agreement; and (4) an agreement concerning
the disposition of 10 nursing facilities. Under the Plea Agreement, a subsidiary
of the Company pled guilty to one count of mail fraud and 10 counts of making
false statements to Medicare and paid a criminal fine of $5,000,000 during the
first quarter of 2000. The Company disposed of one of these nursing facilities
during the second quarter of 2000 and expects to dispose of the remainder by
year-end.

Under the separate Civil Settlement Agreement, the Company paid the federal
government $25,000,000 during the first quarter of 2000 and will reimburse the
federal government $145,000,000 through withholdings from the Company's biweekly
Medicare periodic interim payments in equal installments over eight years. The
Company's cash flow was negatively impacted by approximately $7,700,000 during
the six months ended June 30, 2000, and it is anticipated that cash flows from
operations will decline approximately $18,100,000 per year as a result of the
reduction in Medicare periodic interim payments. In addition, the Company agreed
to resubmit certain Medicare filings to reflect reduced labor costs.

The Company also entered into a Corporate Integrity Agreement with the OIG,
which requires the Company to monitor on an ongoing basis its compliance with
the requirements of the federal healthcare programs. Such agreement addresses
the Company's obligations to ensure that it complies with the requirements for
participation in the federal healthcare programs, and includes the Company's
functional and training obligations, audit and review requirements,
recordkeeping and reporting requirements, as well as penalties for
breach/noncompliance of the agreement.

On July 6, 1999, an amended complaint was filed by the plaintiffs in a
previously disclosed purported class action lawsuit pending against the Company
and certain of its officers in the United States District Court for the Eastern
District of Arkansas (the "Class Action"). Plaintiffs filed a second amended
complaint on September 9, 1999 which asserted claims under Section 10(b)
(including Rule 10b-5 promulgated thereunder) and under Section 20 of the
Securities Exchange Act of 1934 arising from practices that were the subject of
the Allocation Investigations. The defendants filed a motion to dismiss that
complaint on October 8, 1999. Oral argument on this motion was held on April 6,
2000. Due to the preliminary state of the Class Action and the fact the second
amended complaint does not allege damages with any specificity, the Company is
unable at this time to assess the probable outcome of the Class Action or the
materiality of the risk of loss. However, the Company believes that it acted
lawfully with respect to plaintiff investors and will vigorously defend the
Class Action. However, there can be no assurances that the Company will not
experience an adverse effect on its consolidated financial position, results of
operations or cash flows as a result of these proceedings.

In addition, since July 29, 1999, eight derivative lawsuits have been filed
in the federal and state courts of Arkansas, California and Delaware
(collectively, the "Derivative Actions"). The Derivative Actions each name the
Company's directors as defendants, as well as the Company as a nominal
defendant. Some actions also name as defendants certain of the Company's
officers. The Derivative Actions each allege breach of fiduciary duties to the
Company and its stockholders arising primarily out of the Company's alleged
exposure to loss due to the Class Action and the Allocation Investigations. Due
to the preliminary state of the Derivative Actions and the fact the complaints
do not allege damages with any specificity, the Company is unable at this time
to assess the probable outcome of the Derivative Actions or the materiality of
the risk of loss. However, the Company believes that it acted lawfully with
respect to the allegations of the Derivative Actions and will vigorously defend
the Derivative Actions. However, there can be no assurances that the Company
will not experience an adverse effect on its consolidated financial position,
results of operations or cash flows as a result of these proceedings.

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BEVERLY ENTERPRISES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2000

(UNAUDITED)

There are various other lawsuits and regulatory actions pending against the
Company arising in the normal course of business, some of which seek punitive
damages that are generally not covered by insurance. The Company does not
believe that the ultimate resolution of such other matters will have a material
adverse effect on the Company's consolidated financial position or results of
operations.

(6) Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" provides disclosure
guidelines for segments of a company based on a management approach to defining
operating segments.

The following table summarizes certain information for each of the
Company's operating segments (in thousands):

BEVERLY
BEVERLY CARE
HEALTHCARE ALLIANCE ALL OTHER(1) TOTALS
---------- -------- ------------ ------

Three months ended June 30, 2000

Revenues from external customers ...... $ 601,750 $ 51,615 $ 1,874 $ 655,239
Intercompany revenues ................. -- 33,641 3,015 36,656
Interest income ....................... 51 31 567 649
Interest expense ...................... 6,765 72 13,476 20,313
Depreciation and amortization ......... 19,874 3,971 1,533 25,378
Pre-tax income (loss) ................. 20,191 2,015 (9,205) 13,001
Total assets .......................... 1,514,683 325,954 126,143 1,966,780
Capital expenditures .................. 16,581 2,381 1,819 20,781

Three months ended June 30, 1999

Revenues from external customers ...... $ 567,092 $ 64,638 $ 1,021 $ 632,751
Intercompany revenues ................. -- 34,951 2,939 37,890
Interest income ....................... 37 15 875 927
Interest expense ...................... 6,701 120 10,224 17,045
Depreciation and amortization ......... 19,742 3,354 1,504 24,600
Pre-tax income (loss) ................. 27,874 9,701 (221,476) (183,901)
Total assets .......................... 1,532,574 326,242 131,998 1,990,814
Capital expenditures .................. 20,855 2,717 2,694 26,266

Six months ended June 30, 2000

Revenues from external customers ...... $ 1,195,113 $ 102,552 $ 3,676 $ 1,301,341
Intercompany revenues ................. -- 69,146 5,895 75,041
Interest income ....................... 98 61 1,315 1,474
Interest expense ...................... 13,648 157 26,126 39,931
Depreciation and amortization ......... 39,771 7,667 3,276 50,714
Pre-tax income (loss) ................. 42,595 6,166 (25,662) 23,099
Total assets .......................... 1,514,683 325,954 126,143 1,966,780
Capital expenditures .................. 31,777 4,564 4,422 40,763

Six months ended June 30, 1999

Revenues from external customers ...... $ 1,135,285 $ 129,209 $ 1,858 $ 1,266,352
Intercompany revenues ................. -- 70,928 5,616 76,544
Interest income ....................... 108 30 2,217 2,355
Interest expense ...................... 13,313 227 20,488 34,028
Depreciation and amortization ......... 39,483 6,405 2,954 48,842
Pre-tax income (loss) ................. 58,067 11,969 (244,560) (174,524)
Total assets .......................... 1,532,574 326,242 131,998 1,990,814
Capital expenditures .................. 39,501 6,282 5,656 51,439

- ----------
(1) All Other consists of the operations of the Company's corporate
headquarters and related overhead, as well as certain non-operating
revenues and expenses and unusual items.

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BEVERLY ENTERPRISES, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

JUNE 30, 2000

(UNAUDITED)

GENERAL

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, and other information provided by the
Company from time to time, contains certain "forward-looking" statements as that
term is defined by the Private Securities Litigation Reform Act of 1995. All
statements regarding the Company's expected future financial position, results
of operations and cash flows, continued performance improvements, ability to
service and refinance its debt obligations, ability to finance growth
opportunities, ability to respond to changes in government regulations, and
similar statements including, without limitation, those containing words such as
"believes," "anticipates," "expects," "intends," "estimates," "plans," and other
similar expressions are forward-looking statements.

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 those projected or contemplated in the forward-looking
statements as a result of, but not limited to, the following factors:

(1) national and local economic conditions, including their effect on
the availability and cost of labor and materials;

(2) the effect of government regulations and changes in regulations
governing the healthcare industry, including the Company's
compliance with such regulations;

(3) changes in Medicare and Medicaid payment levels and methodologies
and the application of such methodologies by the government and
its fiscal intermediaries;

(4) liabilities and other claims asserted against the Company,
including patient care liabilities, as well as the resolution of
the Class Action and Derivative Lawsuits (see "Part II, Item 1.
Legal Proceedings");

(5) the ability to attract and retain qualified personnel;

(6) the availability and terms of capital to fund acquisitions and
capital improvements;

(7) the competitive environment in which the Company operates;

(8) the ability to maintain and increase census levels; and

(9) demographic changes.

Investors should also refer to Item 1. Business - Governmental Regulation
and Reimbursement, - Competition and - Employees in the Company's 1999 Annual
Report on Form 10-K for a discussion of various governmental regulations and
other operating factors relating to the healthcare industry and various risk
factors inherent in them. Given these risks and uncertainties, the Company can
give no assurances that these forward-looking statements will, in fact,
transpire and, therefore, cautions investors not to place undue reliance on
them.

GOVERNMENTAL REGULATION AND REIMBURSEMENT

On April 10, 2000, the Health Care Financing Administration ("HCFA") of the
Department of Health and Human Services ("HHS") published a proposed rule, which
set forth updates to the payment rates used under the Medicare prospective
payment system ("PPS") for skilled nursing facilities to be effective October 1,
2000. After a 60-day comment period, and further research into the anticipated
effects of the proposed changes, on July 31, 2000, HCFA issued a final rule.
Such final rule indefinitely postpones any refinements to the Resource
Utilization Grouping-III ("RUG-III") system, and provides for the continuance of
Medicare payment relief set forth in the Balanced Budget Refinement Act of 1999,
including the 4% increase in the federal adjusted per diem rates for all 44 RUG
categories, and the 20% upward adjustment in the federal adjusted per diem rate
for 15 RUG categories.

PATIENT CARE LIABILITIES

General liability and professional liability costs for the long-term care
industry, especially in the state of Florida, have become increasingly expensive
and unpredictable. The Company and most of its competitors are experiencing
substantial increases in both the number of claims and lawsuits, as well as the
size of the typical claim and lawsuit. This phenomenon is most evident in the
state of Florida, where well-intended patient rights' statutes tend to be
exploited by plaintiffs' attorneys, since the statutes allow for actual damages,
punitive damages and plaintiff attorney fees to be included in any proven
violation. The Company is taking an active role in lobbying efforts to reform
tort laws in the state of Florida. There is significant media and legislative
attention currently being placed on these issues, and the Company is hopeful
that there will be certain reforms made in the current statutes. However, there
can be no assurances that legislative changes will be made, or that any such
changes will have a positive impact on the current trend. The Company believes
that adequate provision has been made in the financial statements for
liabilities that may arise out of patient care services. Such provisions are
made based upon the results of independent actuarial valuations and other
information available, including management's best judgements and estimates.
However, such provision and liability have been difficult to predict and have
been escalating in recent periods. There can be no assurance that such provision
and liability will not require material adjustment in future periods.

10
11

BEVERLY ENTERPRISES, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

JUNE 30, 2000

(UNAUDITED)

OPERATING RESULTS

SECOND QUARTER 2000 COMPARED TO SECOND QUARTER 1999

RESULTS OF OPERATIONS

Net income for the second quarter of 2000 was $8,522,000, compared to a net
loss of $115,857,000 for the same period in 1999. Net loss for the second
quarter of 1999 included special pre-tax charges of approximately $200,500,000
related to the settlements of, and investigation costs related to, the
Allocation Investigations (See "Part II, Item 1. Legal Proceedings"). The
Company had estimated annual effective tax rates of 36% and 37% in 2000 and
1999, respectively. The Company's estimated annual effective tax rates for 2000
and 1999 were different than the federal statutory rate primarily due to the
impact of state income taxes, amortization of nondeductible goodwill and the
benefit of certain tax credits. The Company's net deferred tax assets at June
30, 2000 will be realized primarily through the reversal of temporary taxable
differences and future taxable income. Accordingly, the Company does not believe
that a deferred tax valuation allowance is necessary at June 30, 2000.

NET OPERATING REVENUES

The Company reported net operating revenues of $655,239,000 during the
second quarter of 2000 compared to $632,751,000 for the same period in 1999.
Approximately 92% and 90% of the Company's total net operating revenues for the
quarters ended June 30, 2000 and 1999, respectively, were derived from services
provided by the Company's Beverly Healthcare segment. The increase in net
operating revenues of approximately $22,500,000 for the second quarter of 2000,
as compared to the same period in 1999, consists of the following: an increase
of approximately $21,800,000 due to facilities which the Company operated during
each of the quarters ended June 30, 2000 and 1999 ("same facility operations");
an increase of approximately $10,300,000 due to acquisitions; partially offset
by a decrease of approximately $9,600,000 due to dispositions.

The increase in net operating revenues of approximately $21,800,000 from
same facility operations for the second quarter of 2000, as compared to the same
period in 1999, was due to the following: approximately $28,500,000 primarily
due to an increase in Medicaid, Medicare and private rates; and approximately
$3,400,000 due to various other items; partially offset by a decrease of
approximately $8,700,000 due to lower revenues from home care and outpatient
rehabilitation services; and approximately $1,400,000 decrease due to a decline
in same facility occupancy to 87.3% for the second quarter of 2000, as compared
to 87.5% for the same period in 1999.

The increase in net operating revenues of approximately $10,300,000 for the
second quarter of 2000, as compared to the same period in 1999, resulting from
acquisitions which occurred during the six months ended June 30, 2000 and the
year ended December 31, 1999 are as follows. During the six months ended June
30, 2000, the Company acquired seven nursing facilities (1,210 beds) and certain
other assets. During 1999, the Company purchased three outpatient therapy
clinics, two home care centers, two nursing facilities (284 beds), one
previously leased nursing facility (190 beds) and certain other assets. The
acquisitions of these facilities and other assets were accounted for as
purchases. The operations of the acquired facilities and other assets were
immaterial to the Company's consolidated financial position and results of
operations.

11
12

BEVERLY ENTERPRISES, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

JUNE 30, 2000

(UNAUDITED)

The decrease in net operating revenues of approximately $9,600,000 for the
second quarter of 2000, as compared to the same period in 1999, resulting from
dispositions that occurred during the six months ended June 30, 2000 and the
year ended December 31, 1999 are as follows. During the six months ended June
30, 2000, the Company sold, closed or terminated the leases on 19 nursing
facilities (1,826 beds) and certain other assets. The Company did not operate
three of these nursing facilities (297 beds) which were leased to another
nursing home operator in a prior year transaction. The Company recognized net
pre-tax gains, which were included in net operating revenues during the six
months ended June 30, 2000, of approximately $2,400,000 as a result of these
dispositions. During 1999, the Company sold or terminated the leases on 12
nursing facilities (1,291 beds), one assisted living center (10 units), 17 home
care centers and certain other assets. The Company did not operate two of these
nursing facilities (166 beds) which were leased to other nursing home operators
in prior year transactions. The Company recognized net pre-tax losses, which
were included in net operating revenues during the year ended December 31, 1999,
of approximately $4,000,000 as a result of these dispositions. The operations of
the disposed facilities and other assets were immaterial to the Company's
consolidated financial position and results of operations.

OPERATING AND ADMINISTRATIVE EXPENSES

The Company reported operating and administrative expenses of $597,196,000
during the second quarter of 2000 compared to $571,129,000 for the same period
in 1999. The increase of approximately $26,100,000 consists of the following: an
increase of approximately $25,400,000 due to same facility operations; an
increase of approximately $10,700,000 due to acquisitions; partially offset by a
decrease of approximately $10,000,000 due to dispositions. (See "Net Operating
Revenues" for a discussion of acquisitions and dispositions).

The increase in operating and administrative expenses of approximately
$25,400,000 from same facility operations for the second quarter of 2000, as
compared to the same period in 1999, was primarily due to an increase of
approximately $11,700,000 in wages and related expenses primarily due to
increased use of registry personnel.

INTEREST EXPENSE, NET

Interest income decreased to $649,000 for the second quarter of 2000, as
compared to $927,000 for the same period in 1999 primarily due to the payoff of
various notes receivable. Interest expense increased to $20,313,000 for the
second quarter of 2000, as compared to $17,045,000 for the same period in 1999
primarily due to imputed interest on the civil settlement of approximately
$2,300,000 and an increase in Revolver borrowings resulting from the $30,000,000
civil and criminal settlements paid late in the first quarter of 2000.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense increased to $25,378,000 for the
second quarter of 2000, as compared to $24,600,000 for the same period in 1999.
Such increase was affected by approximately $1,200,000 increase due to capital
additions and improvements, as well as acquisitions; partially offset by a
decrease of approximately $400,000 due to dispositions of, or lease terminations
on, certain facilities.

SIX MONTHS 2000 COMPARED TO SIX MONTHS 1999

RESULTS OF OPERATIONS

Net income was $14,783,000 for the six months ended June 30, 2000, compared
to a net loss of $109,950,000 for the same period in 1999. Net loss for the six
months ended June 30, 1999 included special pre-tax charges of approximately
$202,400,000 related to the settlements of, and investigation costs related to,
the Allocation Investigations (See "Part II, Item 1. Legal Proceedings").

12
13
BEVERLY ENTERPRISES, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

JUNE 30, 2000

(UNAUDITED)

NET OPERATING REVENUES

The Company reported net operating revenues of $1,301,341,000 during the
six months ended June 30, 2000 compared to $1,266,352,000 for the same period in
1999. Approximately 92% and 90% of the Company's total net operating revenues
for the six months ended June 30, 2000 and 1999, respectively, were derived from
services provided by the Company's Beverly Healthcare segment. The increase in
net operating revenues of approximately $35,000,000 for the six months ended
June 30, 2000, as compared to the same period in 1999, consists of the
following: an increase of approximately $29,400,000 due to facilities which the
Company operated during each of the six months ended June 30, 2000 and 1999
("same facility operations"); an increase of approximately $22,300,000 due to
acquisitions; partially offset by a decrease of approximately $16,700,000 due to
dispositions. (See above for a discussion of acquisitions and dispositions).

The increase in net operating revenues of approximately $29,400,000 from
same facility operations for the six months ended June 30, 2000, as compared to
the same period in 1999, was due to the following: approximately $44,000,000
primarily due to an increase in Medicaid, Medicare and private rates;
approximately $6,100,000 due to one additional calendar day during the six
months ended June 30, 2000, as compared to the same period in 1999; and
approximately $700,000 increase due to various other items; partially offset by
a decrease of approximately $17,500,000 due to lower revenues from home care and
outpatient rehabilitation services; and approximately $3,900,000 decrease due to
a decline in same facility occupancy to 87.5% for the six months ended June 30,
2000, as compared to 88.2% for the same period in 1999.

OPERATING AND ADMINISTRATIVE EXPENSES

The Company reported operating and administrative expenses of
$1,189,071,000 during the six months ended June 30, 2000 compared to
$1,150,665,000 for the same period in 1999. The increase of approximately
$38,400,000 consists of the following: an increase of approximately $36,600,000
due to same facility operations; an increase of approximately $23,400,000 due to
acquisitions; partially offset by a decrease of approximately $21,600,000 due to
dispositions. (See above for a discussion of acquisitions and dispositions).

The increase in operating and administrative expenses of approximately
$36,600,000 from same facility operations for the six months ended June 30,
2000, as compared to the same period in 1999, was primarily due to the
following: approximately $15,200,000 due to an increase in wages and related
expenses primarily due to increased use of registry personnel; approximately
$7,800,000 due to increases in patient care and other claims; and approximately
$3,400,000 due to an increase in contracted services. The Company's weighted
average wage rate and use of registry personnel increased for the six months
ended June 30, 2000, as compared to the same period in 1999, both of which
emphasize the increased difficulties many of the Company's nursing facilities
are having attracting nursing aides, assistants and other personnel. The Company
is addressing this challenge through several recruiting and retention programs
and training initiatives. No assurance can be given that these programs and
training initiatives will in fact improve or stabilize the Company's ability to
attract these nursing and related personnel.

13
14

BEVERLY ENTERPRISES, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

JUNE 30, 2000

(UNAUDITED)

INTEREST EXPENSE, NET

Interest income decreased to $1,474,000 for the six months ended June 30,
2000, as compared to $2,355,000 for the same period in 1999 primarily due to the
payoff of various notes receivable. Interest expense increased to $39,931,000
for the six months ended June 30, 2000, as compared to $34,028,000 for the same
period in 1999 primarily due to imputed interest on the civil settlement of
approximately $4,600,000 and an increase in Revolver borrowings resulting from
the $30,000,000 civil and criminal settlements paid late in the first quarter of
2000.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense increased to $50,714,000 for the six
months ended June 30, 2000, as compared to $48,842,000 for the same period in
1999. Such increase was affected by approximately $2,600,000 increase due to
capital additions and improvements, as well as acquisitions; partially offset by
a decrease of approximately $700,000 due to dispositions of, or lease
terminations on, certain facilities.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2000, the Company had approximately $16,600,000 in cash and
cash equivalents, approximately $145,600,000 of net working capital and
approximately $168,100,000 of unused commitments under its Revolver/Letter of
Credit Facility.

Net cash used for operating activities for the six months ended June 30,
2000 was approximately $11,100,000. Such amount reflects $30,000,000 in payments
to the federal government for the civil and criminal settlements (See "Part II.
Item 1. Legal Proceedings"), as well as an increase in the Company's patient
accounts receivable during the six months ended June 30, 2000. Net cash used for
investing activities and net cash provided by financing activities were
approximately $28,900,000 and $32,000,000, respectively, for the six months
ended June 30, 2000. The Company received net cash proceeds of approximately
$10,200,000 from dispositions of facilities and other assets and approximately
$5,600,000 from collections on notes receivable. Such net cash proceeds, along
with $59,000,000 of net borrowings under the Revolver/Letter of Credit Facility,
were used to fund capital expenditures totaling approximately $40,800,000, to
repay approximately $23,100,000 of long-term debt, and to repurchase shares of
Common Stock for approximately $3,900,000.

At June 30, 2000, the Company leased 11 nursing facilities, one assisted
living center and its corporate headquarters under an off-balance sheet
financing arrangement subject to operating leases with the creditor. The Company
has the option to purchase the facilities at the end of the initial lease terms
at fair market value. Such financing arrangement was entered into for the
construction of these facilities and had an original commitment of $125,000,000.
In April 2000, the agreement covering this financing arrangement was amended
whereby availability under the original commitment was reduced to $113,500,000,
which equaled the total construction advances made as of such date.

14
15

BEVERLY ENTERPRISES, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

JUNE 30, 2000

(UNAUDITED)

The Company currently anticipates that cash flows from operations and
borrowings under its banking arrangements will be adequate to repay its debts
due within one year of approximately $61,500,000, to make normal recurring
capital additions and improvements of approximately $96,000,000, to make
selective acquisitions, including the purchase of previously leased facilities,
to construct new facilities, and to meet working capital requirements for the
twelve months ending June 30, 2001. If cash flows from operations or
availability under existing banking arrangements fall below expectations, the
Company may be required to delay capital expenditures, dispose of certain
assets, issue additional debt securities, or consider other alternatives to
improve liquidity.

15
16
PART II

BEVERLY ENTERPRISES, INC.

OTHER INFORMATION

JUNE 30, 2000

(UNAUDITED)

ITEM 1. LEGAL PROCEEDINGS

On February 3, 2000, the Company entered into a series of separate agreements
with the U.S. Department of Justice and the Office of Inspector General (the
"OIG") of the Department of Health and Human Services, which settled the federal
government's investigations of the Company relating to its allocation to the
Medicare program of certain nursing labor costs in its skilled nursing
facilities from 1990 to 1998 (the "Allocation Investigations").

In addition, since July 29, 1999, eight derivative lawsuits have been filed
in the federal and state courts of Arkansas, California and Delaware
(collectively, the "Derivative Actions"). Norman M. Lyons v. David R. Banks, et
al., Case No. OT99-4041, was filed in the Chancery Court of Pulaski County,
Arkansas (4th Division) on or about July 29, 1999 and the parties filed an
Agreed Motion to Stay the proceedings on January 17, 2000; Alfred Badger, Jr. v.
David R. Banks, et al., Case No. OT99-4353, was filed in the Chancery Court of
Pulaski County, Arkansas (1st Division) on or about August 17, 1999 and
voluntarily dismissed on November 30, 1999. On November 1, 1999, the defendants
filed a motion to dismiss the Lyons and Badger actions. James L. Laurita v.

16
17

PART II

BEVERLY ENTERPRISES, INC.

OTHER INFORMATION (CONTINUED)

JUNE 30, 2000

(UNAUDITED)

David R. Banks, et al., Case No. 17348NC, was filed in the Delaware Chancery
Court on or about August 2, 1999; Kenneth Abbey v. David R. Banks, et al., Case
No. 17352NC, was filed in the Delaware Chancery Court on or about August 4,
1999; Alan Friedman v. David R. Banks, et al., Case No. 17355NC, was filed in
the Delaware Chancery Court on or about August 9, 1999. The Laurita, Abbey and
Friedman actions were subsequently consolidated by order of the Delaware
Chancery Court. On or about October 1, 1999, the defendants moved to dismiss the
Laurita, Abbey and Friedman actions. Elles Trading Company v. David R. Banks, et
al., was filed in the Superior Court for San Francisco County, California on or
about August 4, 1999, and removed to federal district court. The plaintiffs
filed a notice of voluntary dismissal on February 3, 2000. Kushner v. David R.
Banks, et al., Case No. LR-C-98-646, was filed in the United States District
Court for the Eastern District of Arkansas (Western Division) on September 30,
1999. Richardson v. David R. Banks, et al., Case No. LR-C-99-826, was filed in
the United States District Court for the Eastern District of Arkansas (Western
Division) on November 4, 1999. The Kushner and Richardson actions were ordered
to be consolidated as In Re Beverly Enterprises, Inc. Derivative Litigation and
by agreed motion, Plaintiffs filed an amended, consolidated complaint on April
21, 2000. Defendants filed a motion to dismiss the consolidated derivative
complaint and a motion to strike portions thereof on July 21, 2000. The
Derivative Actions each name the Company's directors as defendants, as well as
the Company as a nominal defendant. The Badger and Lyons actions also name as
defendants certain of the Company's officers. The Derivative Actions each allege
breach of fiduciary duties to the Company and its stockholders arising primarily
out of the Company's alleged exposure to loss due to the Class Action and the
Allocation Investigations. The Lyons, Badger and Richardson actions also assert
claims for abuse of control and constructive fraud arising from the same
allegations, and the Richardson action also claims unjust enrichment. Due to the
preliminary state of the Derivative Actions and the fact the complaints do not
allege damages with any specificity, the Company is unable at this time to
assess the probable outcome of the Derivative Actions or the materiality of the
risk of loss. However, the Company believes that it acted lawfully with respect
to the allegations of the Derivative Actions and will vigorously defend the
Derivative Actions. However, there can be no assurances that the Company will
not experience an adverse effect on its consolidated financial position, results
of operations or cash flows as a result of these proceedings.

17
18

PART II

BEVERLY ENTERPRISES, INC.

OTHER INFORMATION (CONTINUED)

JUNE 30, 2000

(UNAUDITED)

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On May 25, 2000, the Company held its Annual Meeting of Stockholders in Fort
Smith, Arkansas, for the purposes of electing eight members of the Board of
Directors, ratifying the appointment of Ernst & Young LLP as independent
auditors for 2000 and transacting such other business as may have properly come
before the meeting or any adjournment thereof.

The following table sets forth the directors elected at such meeting and the
number of votes cast for and withheld for each director:

DIRECTOR FOR WITHHELD
-------- --- --------

Beryl F. Anthony, Jr..................................... 94,736,879 836,749
David R. Banks........................................... 94,762,887 810,741
Carolyne K. Davis, R.N., Ph. D........................... 94,727,341 846,287
James R. Greene.......................................... 94,710,323 863,305
Edith E. Holiday......................................... 94,754,110 819,518
Jon E. M. Jacoby......................................... 94,808,319 765,309
Risa J. Lavizzo-Mourey, M.D.............................. 94,833,223 740,405
Marilyn R. Seymann, Ph. D................................ 94,827,100 746,528

The appointment of Ernst & Young LLP as independent auditors for 2000 was
ratified at the meeting. The following table sets forth the number of votes for
and against, as well as abstentions as to this matter:

For......................................................... 95,573,628
Against..................................................... 206,985
Abstentions................................................. 204,898

ITEM 5. OTHER INFORMATION

During July 2000, the Company's Board of Directors elected William R. Floyd
as a director. Mr. Floyd joined the Company in April 2000 as President and Chief
Operating Officer. Prior to joining the Company, he was Chief Executive Officer
of Choice Hotels International, and has held senior management positions with
PepsiCo, Pillsbury and Gillette.

ITEM 6(a). EXHIBITS

EXHIBIT
NUMBER DESCRIPTION
------ -----------

27.1 Financial Data Schedule for the six months ended June 30, 2000

ITEM 6(b). REPORTS ON FORM 8-K

No reports on Form 8-K were filed by the Company during the second quarter
ended June 30, 2000.

18
19

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

BEVERLY ENTERPRISES, INC.
Registrant

Dated: August 2, 2000 By: /s/ PAMELA H. DANIELS
----------------------------------
Pamela H. Daniels
Senior Vice President, Controller
and Chief Accounting Officer

19
20

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

27.1 Financial Data Schedule for the six months ended
June 30, 2000