
<PAGE>   1
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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, 1997

         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                                95-4100309
         (STATE OR OTHER JURISDICTION OF                (I.R.S. EMPLOYER
         INCORPORATION OR ORGANIZATION)                 IDENTIFICATION NO.)

         5111 ROGERS AVENUE, SUITE 40-A
            FORT SMITH, ARKANSAS                            72919-0155
    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                (ZIP CODE)


       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (501) 452-6712


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, 1997 -- 98,484,157

--------------------------------------------------------------------------------
================================================================================



<PAGE>   2

                           BEVERLY ENTERPRISES, INC.

                                   FORM 10-Q

                                 JUNE 30, 1997

                               TABLE OF CONTENTS


<TABLE>
<CAPTION>
PART I -- FINANCIAL INFORMATION                                                   PAGE
                                                                                  ----
<S>                                                                               <C>
         Item 1.  Financial Statements (Unaudited)
                         Condensed Consolidated Balance Sheets ..................  2
                         Condensed Consolidated Statements of Income ............  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 .........................  7

PART II -- OTHER INFORMATION

         Item 1.  Legal Proceedings ............................................. 13
         Item 4.  Submission of Matters to a Vote of Security Holders ........... 13
         Item 6.  Exhibits and Reports on Form 8-K .............................. 14
</TABLE>



                                       1

<PAGE>   3

                                     PART I

                           BEVERLY ENTERPRISES, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS

                      JUNE 30, 1997 AND DECEMBER 31, 1996

                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                          JUNE 30,       DECEMBER 31,
                                                                                            1997             1996
                                                                                         -----------      -----------
                                                                                         (UNAUDITED)         (NOTE)
<S>                                                                                      <C>              <C>        
                                                               ASSETS
Current assets:
   Cash and cash equivalents .......................................................     $    71,756      $    69,761
   Accounts receivable-patient, less allowance for doubtful accounts:
     1997-$34,755; 1996-$25,618 ....................................................         502,511          491,063
   Accounts receivable-nonpatient, less allowance for doubtful accounts:
     1997-$580; 1996-$401 ..........................................................          10,429           13,480
   Notes receivable ................................................................           9,260           10,746
   Operating supplies ..............................................................          55,713           55,348
   Deferred income taxes ...........................................................          23,547           14,543
   Prepaid expenses and other ......................................................          43,738           42,304
                                                                                         -----------      -----------
      Total current assets .........................................................         716,954          697,245
Property and equipment, net of accumulated depreciation and amortization:
    1997-$635,982; 1996-$643,085 ...................................................       1,188,197        1,248,785
Other assets:
   Notes receivable, less allowance for doubtful notes:
      1997-$5,674; 1996-$4,951 .....................................................          28,958           37,306
   Designated and restricted funds .................................................          74,182           75,848
   Goodwill, net ...................................................................         375,221          356,197
   Other, net ......................................................................         107,454          109,701
                                                                                         -----------      -----------
      Total other assets ...........................................................         585,815          579,052
                                                                                         -----------      -----------
                                                                                         $ 2,490,966      $ 2,525,082
                                                                                         ===========      ===========
                                                LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable ................................................................     $    96,854      $    99,121
   Accrued wages and related liabilities ...........................................         128,892          131,072
   Accrued interest ................................................................          17,683           16,969
   Other accrued liabilities .......................................................         107,660           93,042
   Current portion of long-term obligations ........................................          35,669           38,826
                                                                                         -----------      -----------
      Total current liabilities ....................................................         386,758          379,030
Long-term obligations ..............................................................       1,018,551        1,106,256
Deferred income taxes payable ......................................................          98,769           83,610
Other liabilities and deferred items ...............................................          96,171           95,091
Commitments and contingencies
Stockholders' equity:
   Preferred stock, shares authorized: 25,000,000 ..................................              --               --
   Common stock, shares issued: 1997-104,712,723; 1996-104,432,848 .................          10,471           10,443
   Additional paid-in capital ......................................................         777,172          774,672
   Retained earnings ...............................................................         173,390          133,957
   Treasury stock, at cost: 1997-6,274,108;  1996-5,423,408 ........................         (70,316)         (57,977)
                                                                                         -----------      -----------
      Total stockholders' equity ...................................................         890,717          861,095
                                                                                         -----------      -----------
                                                                                         $ 2,490,966      $ 2,525,082
                                                                                         ===========      ===========
</TABLE>

NOTE: The balance sheet at December 31, 1996 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.


                                       2

<PAGE>   4

                           BEVERLY ENTERPRISES, INC.

                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME

         THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1997 AND 1996

                                  (UNAUDITED)

                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED             SIX MONTHS ENDED
                                                              JUNE 30,                     JUNE 30,
                                                     -------------------------     -------------------------
                                                        1997           1996           1997           1996
                                                     ----------     ----------     ----------     ----------

<S>                                                  <C>            <C>            <C>            <C>       
Net operating revenues ............................  $  817,503     $  798,333     $1,634,219     $1,609,380
Interest income ...................................       3,161          3,475          6,726          6,935
                                                     ----------     ----------     ----------     ----------
       Total revenues .............................     820,664        801,808      1,640,945      1,616,315
Costs and expenses:
   Operating and administrative:
     Wages and related ............................     448,074        444,527        897,856        894,522
     Other ........................................     287,944        280,006        577,874        573,490
   Interest .......................................      21,971         22,983         44,687         46,128
   Depreciation and amortization ..................      27,725         25,967         54,806         51,023
                                                     ----------     ----------     ----------     ----------
       Total costs and expenses ...................     785,714        773,483      1,575,223      1,565,163
                                                     ----------     ----------     ----------     ----------

Income before provision for income taxes ..........      34,950         28,325         65,722         51,152
Provision for income taxes ........................      13,980         11,330         26,289         20,461
                                                     ----------     ----------     ----------     ----------
Net income ........................................  $   20,970     $   16,995     $   39,433     $   30,691
                                                     ==========     ==========     ==========     ==========

Net income per share of common stock:
   Primary:
     Net income per share of common stock .........  $      .21     $      .17     $      .40     $      .31
                                                     ==========     ==========     ==========     ==========
     Shares used to compute net income per share ..      99,048        100,079         99,230        100,028
                                                     ==========     ==========     ==========     ==========

   Fully diluted:
     Net income per share of common stock .........  $      .20     $      .16     $      .38     $      .30
                                                     ==========     ==========     ==========     ==========
     Shares used to compute net income per share ..     110,640        111,341        110,865        111,299
                                                     ==========     ==========     ==========     ==========
</TABLE>


     Primary earnings per share for the three-month and six-month periods ended
June 30, 1997 and 1996 were computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period and the
weighted average number of shares issuable upon exercise of common stock
equivalents (principally stock options), calculated using the treasury stock
method. Fully diluted earnings per share for the three-month and six-month
periods ended June 30, 1997 and 1996 were computed as above and assumed
conversion of the Company's 5 1/2% convertible subordinated debentures.
Conversion of the Company's 7 5/8% convertible subordinated debentures and zero
coupon notes would have an anti-dilutive effect and, therefore, were not
assumed.

     In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share,"
which is required to be adopted in financial statements for periods ending
after December 15, 1997. At that time, the Company will be required to change
the method currently used to compute earnings per share and to restate all
prior periods. Under the new requirements, primary earnings per share will be
renamed basic earnings per share and will exclude the dilutive effect of stock
options. The impact is not expected to result in a change in the Company's
primary earnings per share or fully diluted earnings per share (which will be
renamed dilutive earnings per share) for the three-month and six-month periods
ended June 30, 1997 and 1996.


                            See accompanying notes.



                                       3

<PAGE>   5

                           BEVERLY ENTERPRISES, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                    SIX MONTHS ENDED JUNE 30, 1997 AND 1996

                                  (UNAUDITED)

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                   1997           1996
                                                                                                 ---------      ---------
<S>                                                                                              <C>            <C>      
Cash flows from operating activities:
       Net income .............................................................................  $  39,433      $  30,691
       Adjustments to reconcile net income to net cash provided by
         operating activities:
          Depreciation and amortization .......................................................     54,806         51,023
          Provision for reserves and discounts on patient, notes and other receivables, net ...     19,818         11,549
          Amortization of deferred financing costs ............................................      1,336          2,726
          Gains on dispositions of facilities and other assets, net ...........................    (20,842)        (2,890)
          Deferred taxes ......................................................................      6,632          8,271
          Net increase (decrease) in insurance related accounts ...............................        383         (8,204)
          Changes in operating assets and liabilities, net of acquisitions and dispositions:
              Accounts receivable - patient ...................................................    (33,960)       (22,809)
              Operating supplies ..............................................................     (2,036)         2,247
              Prepaid expenses and other receivables ..........................................       (727)        (1,752)
              Accounts payable and other accrued expenses .....................................        829        (19,662)
              Income taxes payable ............................................................     (4,309)         6,199
              Other, net ......................................................................        154           (359)
                                                                                                 ---------      ---------
                 Total adjustments ............................................................     22,084         26,339
                                                                                                 ---------      ---------
                 Net cash provided by operating activities ....................................     61,517         57,030
Cash flows from investing activities:
       Payments for acquisitions, net of cash acquired ........................................    (45,373)       (25,721)
       Proceeds from dispositions of facilities and other assets ..............................    143,409         12,579
       Collections on notes receivable and REMIC investment ...................................     18,441          6,005
       Capital expenditures ...................................................................    (70,317)       (61,392)
       Other, net .............................................................................     (3,263)        (4,820)
                                                                                                 ---------      ---------
                 Net cash provided by (used for) investing activities .........................     42,897        (73,349)
Cash flows from financing activities:
       Revolver borrowings ....................................................................    772,000        601,000
       Repayments of Revolver borrowings ......................................................   (838,000)      (624,000)
       Proceeds from issuance of long-term obligations ........................................      3,534        180,000
       Repayments of long-term obligations ....................................................    (28,242)      (136,834)
       Purchase of common stock for treasury ..................................................    (14,736)        (6,238)
       Proceeds from exercise of stock options ................................................      2,546          2,426
       Deferred financing costs ...............................................................       (354)        (5,893)
       Dividends paid on preferred stock ......................................................         --           (688)
       Proceeds from designated funds, net ....................................................        833          1,676
                                                                                                 ---------      ---------
                 Net cash provided by (used for) financing activities .........................   (102,419)        11,449
                                                                                                 ---------      ---------
Net increase (decrease) in cash and cash equivalents ..........................................      1,995         (4,870)
Cash and cash equivalents at beginning of period ..............................................     69,761         56,303
                                                                                                 ---------      ---------
Cash and cash equivalents at end of period ....................................................  $  71,756      $  51,433
                                                                                                 =========      =========

Supplemental schedule of cash flow information: 
    Cash paid during the period for:
       Interest (net of amounts capitalized) ..................................................  $  42,637      $  37,026
       Income taxes (net of refunds) ..........................................................     23,966          5,991
</TABLE>



                            See accompanying notes.


                                       4

<PAGE>   6

                           BEVERLY ENTERPRISES, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                 JUNE 30, 1997

                                  (UNAUDITED)

   (i) The condensed consolidated financial statements included herein have
been prepared by the Company, without audit, and include all adjustments of a
normal recurring nature which are, in the opinion of management, necessary for
a fair presentation of the results of operations for the three-month and
six-month periods ended June 30, 1997 and 1996 pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although 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 in conjunction with the
Company's consolidated financial statements and the notes thereto included in
the Company's 1996 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, 1997 are not necessarily indicative of the
results for a full year. Unless the context indicates otherwise, the Company
means Beverly Enterprises, Inc. and its consolidated subsidiaries.

   The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

   Certain prior year amounts have been reclassified to conform with the 1997
presentation.

   (ii) The provisions for income taxes for the three-month and six-month
periods ended June 30, 1997 and 1996 were based on an estimated annual
effective tax rate of 40%. The Company's estimated annual effective tax rates
for 1997 and 1996 are different than the federal statutory rate primarily due
to the impact of state income taxes and amortization of nondeductible goodwill.
The provisions for income taxes consist of the following for the three-month
and six-month periods ended June 30 (in thousands):

<TABLE>
<CAPTION>
                    THREE MONTHS ENDED           SIX MONTHS ENDED
                          JUNE 30,                   JUNE 30,
                  ----------------------     ----------------------
                    1997          1996         1997          1996
                  --------      --------     --------      --------
<S>               <C>           <C>          <C>           <C>     
Federal:
     Current ...  $ 10,009      $  4,946     $ 15,307      $  9,499
     Deferred ..     2,075         4,074        6,915         6,839

State:
     Current ...     3,079         1,377        4,350         2,691
     Deferred ..    (1,183)          933         (283)        1,432
                  --------      --------     --------      --------
                  $ 13,980      $ 11,330     $ 26,289      $ 20,461
                  ========      ========     ========      ========
</TABLE>

   (iii) During the six months ended June 30, 1997, the Company purchased six
previously leased nursing facilities (758 beds) and certain other assets
including, among other things, 14 institutional pharmacies and 17 outpatient
therapy clinics, for approximately $44,700,000 cash and approximately
$3,800,000 closing and other costs. Also during such period, the Company sold
or terminated the leases on 59 nursing facilities (7,244 beds) and certain
other assets for cash proceeds of approximately $143,700,000. The Company 
primarily used the net cash proceeds from the disposition of facilities and 
other assets to repay Revolver borrowings, to repurchase the zero coupon notes 
and to repay various other indebtedness. The operations of these facilities 
were immaterial to the Company's financial position and results of operations.

   In April 1997, the Company entered into a definitive agreement with Capstone
Pharmacy Services, Inc. ("Capstone") to combine Pharmacy Corporation of America
("PCA"), a wholly-owned subsidiary of the Company, with Capstone (the "Merger")
to create one of the nation's largest independent institutional pharmacy
companies. The Company will receive approximately $275,000,000 of cash as
partial repayment for PCA's intercompany debt, with any remaining intercompany



                                       5

<PAGE>   7



                           BEVERLY ENTERPRISES, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 JUNE 30, 1997

                                  (UNAUDITED)

balance contributed to PCA's capital. The Company intends to use the
$275,000,000 to repay Revolver borrowings, to pay off the 7 5/8% convertible
subordinated debentures, to pay off the 8 3/4% Senior Notes, to repay certain
other notes and mortgages and for general corporate purposes. Pursuant to the
Merger Agreement, at the effective time of the Merger (the "Effective Time")
each share of the Company's Common Stock issued and outstanding immediately
prior to the Effective Time (other than fractional shares) will be converted
into the right to receive that number of newly issued shares of Capstone common
stock equal to the quotient, expressed to four decimal places, of (a)
50,000,000 divided by (b) the number of shares of the Company's Common Stock
outstanding immediately prior to the Effective Time. The Merger, which is
subject to approvals by the shareholders of both the Company and Capstone,
completion of the Distribution (as discussed below), and approvals by various
government agencies, is expected to close by year-end.

   In connection with the restructuring, the Company will transfer all of its
non-PCA assets and liabilities to New Beverly Holdings, Inc. ("New Beverly"), 
in exchange for the issuance of New Beverly common stock. The Company will then
distribute (the "Distribution") such New Beverly common stock to the then 
current shareholders of the Company's Common Stock on a one-for-one basis. In
connection with the Distribution, the Company will be required to restructure,
repay or otherwise renegotiate substantially all of its outstanding debt
instruments and renegotiate or make certain payments under various employment
agreements with officers of the Company. The Company estimates that the costs
of such undertakings will approximate $10,200,000 as it relates to
restructuring, repaying or renegotiating debt instruments and approximately
$14,000,000 as it relates to renegotiating or paying certain amounts under
various employment agreements. It is expected that such amounts, along with
other transaction costs will be funded with a portion of the $275,000,000 
proceeds to be received as a partial repayment of PCA's intercompany debt, 
as discussed above.

   On July 17, 1997, the Company called its 5 1/2% convertible subordinated
debentures (the "5 1/2% Debentures") for redemption on August 18, 1997. The
Company has obtained a stand-by commitment for the issuance of subordinated
indebtedness, whose net cash proceeds would qualify under the restrictive
covenant contained in an indenture dated as of February 1, 1996, to be used to
redeem the 5 1/2% Debentures. The Company anticipates that if the price of the
Company's Common Stock is more than 3.30% above the conversion price of $13.33
immediately prior to the redemption date, the holders will be likely to convert
their 5 1/2% Debentures to the Company's Common Stock. The right to convert the
5 1/2% Debentures into shares of the Company's Common Stock will expire at the
close of business August 15, 1997. Conversion of all or substantially all of
the 5 1/2% Debentures into the Company's Common Stock prior to the Effective
Time of the Merger would cause an increase in the Company's outstanding Common
Stock of approximately 11,250,000 shares and would result in holders of the
Company's Common Stock receiving a comparatively smaller number of shares of
Capstone common stock in the Merger.

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

   (v) Effective July 31, 1987, Beverly Enterprises, a California corporation
("Beverly California"), became a wholly-owned subsidiary of Beverly
Enterprises, Inc., a Delaware corporation ("Beverly Delaware"). Effective
January 1, 1995, Beverly California changed its name to Beverly Health and
Rehabilitation Services, Inc. ("BHRS"). Beverly Delaware (the parent) provides
financial, administrative and legal services to its subsidiaries, including
BHRS, for which it charges management fees.




                                       6

<PAGE>   8



                           BEVERLY ENTERPRISES, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 JUNE 30, 1997

                                  (UNAUDITED)


   The following summarized unaudited financial information concerning BHRS is
being reported because BHRS's 7 5/8% convertible subordinated debentures due
March 2003 and its zero coupon notes (collectively, the "Debt Securities") are
publicly-held. Beverly Delaware is co-obligor of the Debt Securities. Summary
unaudited financial information for BHRS is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED         SIX MONTHS ENDED
                                                                      JUNE 30,                    JUNE 30,
                                                              ------------------------    -----------------------
                                                                 1997          1996          1997         1996
                                                              ----------    ----------    ----------   ----------
<S>                                                           <C>           <C>           <C>          <C>       
Total revenues............................................    $  668,891    $  664,929    $1,339,244   $1,345,202
Total costs and expenses..................................       629,525       635,114     1,271,880    1,293,854
Net income................................................        23,619        17,889        40,418       30,809
</TABLE>

<TABLE>
<CAPTION>
                                                                                                   AS OF  
                                                                   JUNE 30, 1997              DECEMBER 31, 1996
                                                                  ---------------             -----------------
<S>                                                               <C>                          <C>           
Current assets............................................        $     362,080                $      369,501
Long-term assets..........................................            1,318,214                     1,404,292
Current liabilities.......................................              204,962                       184,887
Long-term liabilities.....................................              641,584                       795,593
</TABLE>





                                       7

<PAGE>   9



                           BEVERLY ENTERPRISES, INC.

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

                                 JUNE 30, 1997

                                  (UNAUDITED)


GENERAL

    Healthcare system reform and concerns over rising Medicare and Medicaid
costs continue to be high priorities for both federal and state governments.
Although no comprehensive healthcare, Medicare or Medicaid reform legislation
has yet been implemented, pressures to contain costs and the active discussions
between the Clinton Administration, Congress and various other groups have
impacted the healthcare delivery system. Many states are experimenting with
alternatives to traditional Medicaid delivery systems through federal waiver
programs, and efforts to provide these services more efficiently will continue
to be a priority. In August 1996, Congress passed the Health Insurance
Portability and Accountability Act of 1996 which, among other things, provides
favorable changes in the tax treatment of long-term care insurance and allows
inclusion of long-term care insurance in medical savings accounts. Although the
Company believes this legislation will have a favorable impact on the long-term
care industry, the full effect is not readily determinable. There can be no
assurances made as to the ultimate impact of this, or future healthcare reform
legislation, on the Company's consolidated financial position, results of
operations or cash flows. However, future federal budget legislation and
regulatory changes may negatively impact the Company.

    During the first quarter of 1997, proposed rules were issued by the Health
Care Financing Administration of the Department of Health and Human Services
which, if implemented in their proposed form, would establish guidelines for
maximum reimbursement to skilled nursing facilities for contracted speech and
occupational therapy services, based on equivalent salary amounts for on-staff
therapists. In addition, these proposed rules would revise the salary
equivalency rules already in effect for physical therapy services. The full
effect of the new rules is not readily determinable as the details of the
proposal have not yet been finalized; however, the Company does not expect this
to have a material adverse effect on its consolidated results of operations or
cash flows.

    The federal government recently increased the minimum wage. This new
legislation is being rolled out in two phases. The initial increase took effect
October 1, 1996, and the final increase is scheduled to take effect September
1, 1997. This new legislation did not result in a material increase in the
Company's wage rates in 1996, and the Company does not anticipate a material
impact on its wage rates in 1997, since a substantial portion of the Company's
associates earn in excess of the new minimum wage levels; however, the Company
believes there may continue to be competitive pressures to increase the wage
levels of associates earning above the new minimum wage. The effect of the new
minimum wage on the Company's future operations is not expected to be material
as the Company believes that a significant portion of such increase will be
reimbursed through Medicare and Medicaid rate increases.

    The Company's future operating performance will continue to be affected by
the issues facing the long-term healthcare industry as a whole, including the
maintenance of occupancy, its ability to continue to expand higher margin
businesses, the availability of nursing, therapy and other personnel, the
adequacy of funding of governmental reimbursement programs, the demand for
nursing home care and the nature of any healthcare reform measures that may be
taken by the federal government, as discussed above, as well as by any state
governments. The Company's ability to control costs, including its wages and
related expenses which continue to rise and represent the largest component of
the Company's operating and administrative expenses, will also significantly
impact its future operating results.

    As a general matter, increases in the Company's operating costs result in
higher patient rates under Medicaid programs in subsequent periods. However,
the Company's results of operations will continue to be affected by the time
lag in most states between increases in reimbursable costs and the receipt of
related reimbursement rate increases. Medicaid rate increases, adjusted for
inflation, are generally based upon changes in costs for a full calendar year
period. The time lag before such costs are reflected in permitted rates varies
from state to state, with a substantial portion of the increases taking effect
up to 18 months after the related cost increases.





                                       8

<PAGE>   10



                           BEVERLY ENTERPRISES, INC.

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

                                 JUNE 30, 1997

                                  (UNAUDITED)


OPERATING RESULTS

SECOND QUARTER 1997 COMPARED TO SECOND QUARTER 1996

    Net income was $20,970,000 for the second quarter of 1997, as compared to
net income of $16,995,000 for the same period in 1996. Income before provision
for income taxes was $34,950,000 for the second quarter of 1997, as compared to
$28,325,000 for the same period in 1996. The Company had an estimated annual
effective tax rate of 40% in 1997 and 1996. The Company's estimated annual
effective tax rates for 1997 and 1996 were different than the federal statutory
rate primarily due to the impact of state income taxes and amortization of
nondeductible goodwill.

    Net operating revenues and operating and administrative costs increased
approximately $19,200,000 and $11,500,000, respectively, for the second quarter
of 1997, as compared to the same period in 1996. These increases consist of the
following: increases in net operating revenues and operating and administrative
costs of approximately $41,600,000 and $32,400,000, respectively, for
facilities which the Company operated during each of the quarters ended June
30, 1997 and 1996 ("same facility operations"); increases in net operating
revenues and operating and administrative costs of approximately $21,800,000
and $18,900,000, respectively, related to the acquisitions of eight nursing
facilities in 1996, as well as certain pharmacy, hospice and outpatient therapy
businesses acquired in 1996 and 1997; partially offset by decreases in net
operating revenues and operating and administrative costs of approximately
$44,200,000 and $39,800,000, respectively, due to the disposition of, or lease
terminations on, 59 nursing facilities in 1997 and 83 nursing facilities and
the Company's MedView Services unit ("MedView") in 1996.

    The increase in net operating revenues for same facility operations for the
second quarter of 1997, as compared to the same period in 1996, was due to the
following: approximately $25,900,000 due primarily to increases in room and
board rates; approximately $14,100,000 due to increases in pharmacy-related
revenues; and approximately $5,100,000 due primarily to increases in ancillary
revenues and various other items. These increases in net operating revenues
were partially offset by approximately $3,500,000 due to a decrease in same
facility occupancy to 89.2% for the second quarter of 1997, as compared to
89.8% for the same period in 1996.

    The increase in operating and administrative costs for same facility
operations for the second quarter of 1997, as compared to the same period in
1996, was due to the following: approximately $17,000,000 due to increased
wages and related expenses (excluding pharmacy) principally due to higher wages
and greater benefits required to attract and retain qualified personnel, the
hiring of therapists on staff as opposed to contracting for their services and
increased staffing levels in the Company's nursing facilities to cover
increased patient acuity; approximately $10,400,000 due to increases in
pharmacy-related costs; and approximately $10,300,000 due to various other
items. These increases in operating and administrative costs were partially
offset by approximately $5,300,000 due to a decrease in contracted therapy
expenses as a result of hiring therapists on staff as opposed to contracting
for their services.

    Interest expense decreased approximately $1,000,000 as compared to the same
period in 1996 primarily due to repayments of the term loan and revolver
borrowings under the Company's 1994 Credit Agreement, the term loan under the
Company's 1992 Credit Facility and the Nippon Term Loan during late 1996 with
the proceeds from a new credit facility. The increase in depreciation and
amortization expense of approximately $1,800,000 as compared to the same period
in 1996, was affected by the following: approximately $3,300,000 increase
primarily due to capital additions and improvements, as well as, acquisitions;
partially offset by a decrease of approximately $1,500,000 related to the
disposition of, or lease terminations on, certain nursing facilities and
MedView.

SIX MONTHS 1997 COMPARED TO SIX MONTHS 1996

    Net income was $39,433,000 for the six months ended June 30, 1997, as
compared to net income of $30,691,000 for the same period in 1996. Income
before provision for income taxes was $65,722,000 for the six months ended June
30, 1997, as compared to $51,152,000 for the same period in 1996.

                                       9

<PAGE>   11



                           BEVERLY ENTERPRISES, INC.

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

                                 JUNE 30, 1997

                                  (UNAUDITED)


    Net operating revenues and operating and administrative costs increased
approximately $24,800,000 and $7,700,000, respectively, for the six months
ended June 30, 1997, as compared to the same period in 1996. These increases
consist of the following: increases in net operating revenues and operating and
administrative costs of approximately $72,800,000 and $51,900,000,
respectively, for facilities which the Company operated during each of the
six-month periods ended June 30, 1997 and 1996 ("same facility operations");
increases in net operating revenues and operating and administrative costs of
approximately $42,200,000 and $37,300,000, respectively, related to the
acquisitions of eight nursing facilities in 1996, as well as certain pharmacy,
hospice and outpatient therapy businesses acquired in 1996 and 1997; partially
offset by decreases in net operating revenues and operating and administrative
costs of approximately $90,200,000 and $81,500,000, respectively, due to the
disposition of, or lease terminations on, 59 nursing facilities in 1997 and 83
nursing facilities and MedView in 1996.

    The increase in net operating revenues for same facility operations for the
six months ended June 30, 1997, as compared to the same period in 1996, was due
to the following: approximately $56,800,000 due primarily to increases in room
and board rates; approximately $23,400,000 due to increases in pharmacy-related
revenues; and approximately $4,500,000 due primarily to increases in ancillary
revenues and various other items. These increases in net operating revenues
were partially offset by approximately $6,600,000 due to a decrease in same
facility occupancy to 89.4% for the six months ended June 30, 1997, as compared
to 90.0% for the same period in 1996; and approximately $5,300,000 due to one
less calendar day for the six months ended June 30, 1997, as compared to the
same period in 1996.

    The increase in operating and administrative costs for same facility
operations for the six months ended June 30, 1997, as compared to the same
period in 1996, was due to the following: approximately $31,900,000 due to
increased wages and related expenses (excluding pharmacy) principally due to
higher wages and greater benefits required to attract and retain qualified
personnel, the hiring of therapists on staff as opposed to contracting for
their services and increased staffing levels in the Company's nursing
facilities to cover increased patient acuity; approximately $17,000,000 due to
increases in pharmacy-related costs; approximately $3,200,000 due to increases
in nursing supplies and other variable costs; and approximately $15,500,000 due
to various other items. These increases in operating and administrative costs
were partially offset by approximately $15,700,000 due to a decrease in
contracted therapy expenses as a result of hiring therapists on staff as
opposed to contracting for their services.

    Interest expense decreased approximately $1,400,000 as compared to the same
period in 1996 primarily due to repayments of the term loan and revolver
borrowings under the Company's 1994 Credit Agreement, the term loan under the
Company's 1992 Credit Facility and the Nippon Term Loan during late 1996 with
the proceeds from a new credit facility. The increase in depreciation and
amortization expense of approximately $3,800,000 as compared to the same period
in 1996, was affected by the following: approximately $6,300,000 increase
primarily due to capital additions and improvements, as well as, acquisitions;
partially offset by a decrease of approximately $2,500,000 related to the
disposition of, or lease terminations on, certain nursing facilities and
MedView.

    In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share," which is
required to be adopted in financial statements for periods ending after
December 15, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements, primary earnings per share will be renamed
basic earnings per share and will exclude the dilutive effect of stock options.
The impact is not expected to result in a change in the Company's primary
earnings per share or fully diluted earnings per share (which will be renamed
dilutive earnings per share) for the three-month and six-month periods ended
June 30, 1997 and 1996.

LIQUIDITY AND CAPITAL RESOURCES

    At June 30, 1997, the Company had approximately $71,800,000 in cash and
cash equivalents and net working capital of approximately $330,200,000. The
Company anticipates that approximately $42,700,000 of its existing cash at June
30, 1997,



                                       10

<PAGE>   12



                           BEVERLY ENTERPRISES, INC.

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

                                 JUNE 30, 1997

                                  (UNAUDITED)


while not legally restricted, will be utilized to fund certain workers'
compensation and general liability claims, and the Company does not expect to
use such cash for other purposes. The Company had approximately $249,200,000 of
unused commitments under its Revolver/Letter of Credit Facility as of June 30,
1997.

    Net cash provided by operating activities for the six months ended June 30,
1997 was approximately $61,500,000, an increase of approximately $4,500,000
from the prior year. Net cash provided by investing activities and net cash
used for financing activities were approximately $42,900,000 and $102,400,000,
respectively, for the six months ended June 30, 1997. The Company primarily
used cash generated from operations to fund capital expenditures totaling
approximately $70,300,000. The Company received net cash proceeds of
approximately $143,400,000 from the dispositions of facilities and other assets
and approximately $18,400,000 from collections on notes receivable and the
Company's REMIC investment. Such net cash proceeds were used to fund
acquisitions of approximately $45,400,000, to repay approximately $28,200,000
of long-term obligations, to repurchase shares of Common Stock, and to repay
Revolver borrowings.

    In April 1997, the Company entered into a definitive agreement with
Capstone Pharmacy Services, Inc. ("Capstone") to combine Pharmacy Corporation
of America ("PCA"), a wholly-owned subsidiary of the Company, with Capstone
(the "Merger") to create one of the nation's largest independent institutional
pharmacy companies. The Company will receive approximately $275,000,000 of cash
as partial repayment for PCA's intercompany debt, with any remaining
intercompany balance contributed to PCA's capital. The Company intends to use
the $275,000,000 to repay Revolver borrowings, to pay off the 7 5/8% convertible
subordinated debentures, to pay off the 8 3/4% Senior Notes, to repay certain
other notes and mortgages and for general corporate purposes. Pursuant to the
Merger Agreement, at the effective time of the Merger (the "Effective Time")
each share of the Company's Common Stock issued and outstanding immediately
prior to the Effective Time (other than fractional shares) will be converted
into the right to receive that number of newly issued shares of Capstone common
stock equal to the quotient, expressed to four decimal places, of (a)
50,000,000 divided by (b) the number of shares of the Company's Common Stock
outstanding immediately prior to the Effective Time. The Merger, which is
subject to approvals by the shareholders of both the Company and Capstone,
completion of the Distribution (as discussed below), and approvals by various
government agencies, is expected to close by year-end.

    In connection with the restructuring, the Company will transfer all of its
non-PCA assets and liabilities to New Beverly Holdings, Inc. ("New Beverly"), in
exchange for the issuance of New Beverly common stock. The Company will then
distribute (the "Distribution") such New Beverly common stock to the then 
current shareholders of the Company's Common Stock on a one-for-one basis. In
connection with the Distribution, the Company will be required to restructure,
repay or otherwise renegotiate substantially all of its outstanding debt
instruments and renegotiate or make certain payments under various employment
agreements with officers of the Company. The Company estimates that the costs
of such undertakings will approximate $10,200,000 as it relates to
restructuring, repaying or renegotiating debt instruments and approximately
$14,000,000 as it relates to renegotiating or paying certain amounts under
various employment agreements. It is expected that such amounts, along with
other transaction costs, will be funded with a portion of the $275,000,000 
proceeds to be received as a partial repayment of PCA's intercompany debt, 
as discussed above.

    On July 17, 1997, the Company called its 5 1/2% convertible subordinated
debentures (the "5 1/2% Debentures") for redemption on August 18, 1997. The
Company has obtained a stand-by commitment for the issuance of subordinated
indebtedness, whose net cash proceeds would qualify under the restrictive
covenant contained in an indenture dated as of February 1, 1996, to be used to
redeem the 5 1/2% Debentures. The Company anticipates that if the price of the
Company's Common Stock is more than 3.30% above the conversion price of $13.33
immediately prior to the redemption date, the holders will be likely to convert
their 5 1/2% Debentures to the Company's Common Stock. The right to convert the
5 1/2% Debentures into shares of the Company's Common Stock will expire at the
close of business August 15, 1997. Conversion of all or substantially all of
the 5 1/2% Debentures into the Company's Common Stock prior to the Effective
Time of the Merger would cause an increase in the Company's outstanding Common
Stock of approximately 11,250,000 shares and would result in holders of the
Company's Common Stock receiving a comparatively smaller number of shares of
Capstone common stock in the Merger.


                                       11

<PAGE>   13



                           BEVERLY ENTERPRISES, INC.

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

                                 JUNE 30, 1997

                                  (UNAUDITED)


    The Company believes that its existing cash and cash equivalents, working
capital from operations, borrowings under its banking arrangements, issuance of
certain debt securities and refinancings of certain existing indebtedness will
be adequate to repay its debts due within one year of approximately $35,700,000
(including scheduled sinking fund redemption requirements with respect to the
Company's 7 5/8% convertible subordinated debentures, which may be funded in
whole or in part from time to time through open market purchases of such
debentures), to make normal recurring capital additions and improvements of
approximately $138,000,000, 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, 1998.

    As of June 30, 1997, the Company had total indebtedness of approximately
$1,054,200,000 and total stockholders' equity of approximately $890,700,000.
The ability of the Company to satisfy its long-term obligations will be
dependent upon its future performance, which will be subject to prevailing
economic conditions and to financial, business and other factors beyond the
Company's control, such as federal and state healthcare reform. In addition,
healthcare service providers, such as the Company, operate in an industry that
is currently subject to significant changes from business combinations, new
strategic alliances, legislative reform, increased regulatory oversight,
aggressive marketing practices by competitors and market pressures. In this
environment, the Company is frequently contacted by, and otherwise engages in
discussions with, other healthcare companies and financial advisors regarding
possible strategic alliances, joint ventures, business combinations and other
financial alternatives. The terms of substantially all of the Company's debt
instruments require the Company to repay or refinance indebtedness under such
debt instruments in the event of a change of control. There can be no assurance
that the Company will have the financial resources to repay such indebtedness
upon a change of control. See "-- General."


                                       12

<PAGE>   14

                                    PART II

                           BEVERLY ENTERPRISES, INC.

                               OTHER INFORMATION

                                 JUNE 30, 1997

                                  (UNAUDITED)


ITEM 1.  LEGAL PROCEEDINGS

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

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

    On May 29, 1997, the Company held its Annual Meeting of Stockholders in
Fort Smith, Arkansas, for the purposes of electing eight members of the Board
of Directors, approving the Beverly Enterprises, Inc. Non-Employee Director
Deferred Compensation Plan, considering a stockholder proposal concerning
executive compensation, ratifying the appointment of Ernst & Young LLP as
independent auditors for 1997 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:

<TABLE>
<CAPTION>
             DIRECTOR                                            FOR           WITHHELD
            --------------------------                      ---------------   ----------
            <S>                                                <C>           <C>
            Beryl F. Anthony, Jr........................       78,166,381    9,877,320
            David R. Banks..............................       82,101,508    5,942,193
            James R. Greene.............................       78,177,188    9,866,513
            Boyd W. Hendrickson.........................       82,139,527    5,904,174
            Edith E. Holiday............................       78,192,002    9,851,699
            Jon E. M. Jacoby............................       78,175,346    9,868,355
            Risa J. Lavizzo-Mourey, M.D.................       78,198,091    9,845,610
            Marilyn R. Seymann..........................       78,198,546    9,845,155
</TABLE>

      The Beverly Enterprises, Inc. Non-Employee Director Deferred Compensation
Plan was approved at the meeting. The following table sets forth the number of
votes for and against, as well as abstentions as to this matter:

<TABLE>
                  <S>                                                <C>
                  For.............................................   81,159,045
                  Against.........................................    6,483,497
                  Abstentions.....................................      397,433
</TABLE>

      The stockholder proposal concerning executive compensation was not
approved at the meeting. The following table sets forth the number of votes for
and against, as well as abstentions as to this matter:

<TABLE>
                  <S>                                                <C>
                  For.............................................    9,685,932
                  Against.........................................   62,864,976
                  Abstentions.....................................    1,847,235
</TABLE>

      The appointment of Ernst & Young LLP as independent auditors for 1997 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:

<TABLE>
                  <S>                                                <C>
                  For.............................................   87,258,992
                  Against.........................................      559,555
                  Abstentions.....................................      221,428
</TABLE>



                                       13

<PAGE>   15

                           BEVERLY ENTERPRISES, INC.

                         OTHER INFORMATION (CONTINUED)

                                 JUNE 30, 1997

                                  (UNAUDITED)


ITEM 6(a).  EXHIBITS

EXHIBIT
NUMBER                             DESCRIPTION


10.1*      Beverly Enterprises, Inc. Non-Employee Director Deferred 
           Compensation Plan

10.2       Participation Agreement, dated as of March 21, 1997, among Vantage
           Healthcare Corporation, Petersen Health Care, Inc., Beverly Savana
           Cay Manor, Inc., Beverly Enterprises-Georgia, Inc., and Beverly
           Enterprises-California, Inc. as Lessees and Structural Guarantors;
           Beverly Enterprises, Inc. as Representative, Construction Agent and
           Parent Guarantor; BMO Leasing (U.S.), Inc. as Agent Lessor and
           Lessor; The Long-Term Credit Bank of Japan, LTD., Los Angeles Agency
           and Bank of Montreal, as Lenders; The Long-Term Credit Bank of
           Japan, LTD., Los Angeles Agency as Arranger and Administrative Agent
           for the Lenders; and Bank of Montreal as Co-Arranger and Syndication
           Agent with respect to the Lease Financing of Assisted Living and
           Nursing Facilities for Beverly Enterprises, Inc.
11.1       Computation of Net Income Per Share

27.1       Financial Data Schedule for the six months ended June 30, 1997

           *   Exhibit 10.1 is a management contract, compensatory plan,
               contract, or arrangement in which any director or named
               executive officer participates.

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

         The Company filed a Current Report on Form 8-K, dated April 15, 1997,
which reported under Item 5 that the Company signed a definitive agreement with
Capstone Pharmacy Services, Inc. ("Capstone") to combine PCA with Capstone to
create one of the nation's largest independent institutional pharmacy companies
and filed under Item 7 the Merger Agreement, the Distribution Agreement and the
Company's press release dated April 16, 1997.



                                       14

<PAGE>   16


                                   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 14, 1997                      By:  /s/ PAMELA H. DANIELS
                                                 ----------------------------
                                                      Pamela H. Daniels
                                               Vice President, Controller and
                                                  Chief Accounting Officer




<PAGE>   17

                                 Exhibit Index

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                             DESCRIPTION
-------                            -----------
<S>        <C>
10.1*      Beverly Enterprises, Inc. Non-Employee Director Deferred 
           Compensation Plan

10.2       Participation Agreement, dated as of March 21, 1997, among Vantage
           Healthcare Corporation, Petersen Health Care, Inc., Beverly Savana
           Cay Manor, Inc., Beverly Enterprises-Georgia, Inc., and Beverly
           Enterprises-California, Inc. as Lessees and Structural Guarantors;
           Beverly Enterprises, Inc. as Representative, Construction Agent and
           Parent Guarantor; BMO Leasing (U.S.), Inc. as Agent Lessor and
           Lessor; The Long-Term Credit Bank of Japan, LTD., Los Angeles Agency
           and Bank of Montreal, as Lenders; The Long-Term Credit Bank of
           Japan, LTD., Los Angeles Agency as Arranger and Administrative Agent
           for the Lenders; and Bank of Montreal as Co-Arranger and Syndication
           Agent with respect to the Lease Financing of Assisted Living and
           Nursing Facilities for Beverly Enterprises, Inc.
11.1       Computation of Net Income Per Share

27.1       Financial Data Schedule for the six months ended June 30, 1997
</TABLE>

           *   Exhibit 10.1 is a management contract, compensatory plan,
               contract, or arrangement in which any director or named
               executive officer participates.
