BEVERLY ENTERPRISES INC /DE/, 10-Q, 1996-05-15

BEVERLY ENTERPRISES INC /DE/
10-Q, 1996-05-15
SKILLED NURSING CARE FACILITIES

Previous: SUMMIT TAX EXEMPT L P III, 10-Q, 1996-05-15

Next: PROCYON CORP, 10QSB, 1996-05-15

<PAGE> 1
================================================================================
- --------------------------------------------------------------------------------

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 MARCH 31, 1996

----- 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 APRIL 30, 1996 -- 100,051,266

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

<PAGE> 2
BEVERLY ENTERPRISES, INC.

FORM 10-Q

MARCH 31, 1996

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 ........................................... 10
Item 6. Exhibits and Reports on Form 8-K ............................ 10
</TABLE>

1
<PAGE> 3
PART I

BEVERLY ENTERPRISES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31, 1996 AND DECEMBER 31, 1995

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- -----------
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................................... $ 50,054 $ 56,303
Accounts receivable - patient, less allowance for doubtful accounts:
1996--$26,809; 1995--$22,860 .............................................. 523,727 514,820
Accounts receivable - nonpatient, less allowance for doubtful accounts:
1996--$684; 1995--$497 .................................................... 11,810 15,995
Notes receivable ............................................................ 5,752 7,460
Operating supplies .......................................................... 57,270 59,109
Deferred income taxes ....................................................... 24,056 24,892
Prepaid expenses and other .................................................. 37,412 38,013
----------- -----------
Total current assets ..................................................... 710,081 716,592
Property and equipment, net of accumulated depreciation and amortization:
1996--$596,692; 1995--$581,025 ............................................. 1,196,926 1,189,985
Other assets:
Notes receivable, less allowance for doubtful notes:
1996--$4,931; 1995--$4,953 ............................................... 40,999 41,915
Designated and restricted funds ............................................. 58,941 57,082
Goodwill, net ............................................................... 384,146 380,681
Operating and leasehold rights and licenses, net ............................ 17,679 18,086
Other, net .................................................................. 101,674 102,120
----------- -----------
Total other assets ....................................................... 603,439 599,884
----------- -----------
$ 2,510,446 $ 2,506,461
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................................ $ 130,191 $ 155,385
Short-term borrowings ....................................................... 29,000 78,000
Accrued wages and related liabilities ....................................... 153,187 134,391
Accrued interest ............................................................ 13,812 10,261
Other accrued liabilities ................................................... 84,136 88,869
Current portion of long-term obligations .................................... 37,447 84,639
Income taxes payable ........................................................ 1,607 --
----------- -----------
Total current liabilities ................................................ 449,380 551,545
Long-term obligations .......................................................... 1,083,775 988,909
Deferred income taxes payable .................................................. 57,156 54,687
Other liabilities and deferred items ........................................... 84,525 90,987
Commitments and contingencies
Stockholders' equity:
Common stock, shares issued: 1996--103,893,435; 1995--102,618,241 .......... 10,389 10,262
Additional paid-in capital .................................................. 768,003 766,549
Retained earnings ........................................................... 97,353 83,657
Treasury stock, at cost: 3,972,208 shares .................................. (40,135) (40,135)
----------- -----------
Total stockholders' equity ............................................... 835,610 820,333
----------- -----------
$ 2,510,446 $ 2,506,461
=========== ===========
</TABLE>

NOTE: The balance sheet at December 31, 1995 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 MONTHS ENDED MARCH 31, 1996 AND 1995

(UNAUDITED)

(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Net operating revenues ........................... $ 811,047 $ 795,619
Interest income .................................. 3,460 3,500
--------- ---------
Total revenues ............................. 814,507 799,119
Costs and expenses:
Operating and administrative:
Wages and related ........................... 449,995 417,433
Other ....................................... 293,484 308,541
Interest ....................................... 23,145 20,549
Depreciation and amortization .................. 25,056 25,904
--------- ---------
Total costs and expenses ................... 791,680 772,427
--------- ---------
Income before provision for income taxes ......... 22,827 26,692
Provision for income taxes ....................... 9,131 10,143
--------- ---------
Net income ....................................... $ 13,696 $ 16,549
========= =========

Net income applicable to common shares ........... $ 13,696 $ 14,486
========= =========

Net income per share of common stock ............. $ 0.14 $ 0.17
========= =========

Shares used to compute net income per share ...... 99,978 87,304
========= =========
</TABLE>

Net income per share of common stock for the three months ended March 31,
1996 and 1995 were computed by dividing net income applicable to common shares
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
stock options, calculated using the treasury stock method. For the three months
ended March 31, 1995, net income applicable to common shares was computed by
deducting preferred stock dividends from net income. During the fourth quarter
of 1995, the Company exchanged its cumulative convertible exchangeable
preferred stock into 5 1/2% convertible subordinated debentures.

See accompanying notes.

3
<PAGE> 5
BEVERLY ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 1996 AND 1995

(UNAUDITED)

(IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................................... $ 13,696 $ 16,549
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ......................................................... 25,056 25,904
Provision for reserves and discounts on patient, notes and other receivables, net ..... 6,550 2,455
Amortization of deferred financing costs .............................................. 1,893 1,078
Gains on dispositions of facilities and other assets, net ............................. (2,212) --
Deferred taxes ........................................................................ 3,264 1,070
Net decrease in insurance related accounts ............................................ (7,131) (1,962)
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable - patient ..................................................... (16,211) (43,172)
Operating supplies ................................................................ 1,610 794
Prepaid expenses and other receivables ............................................ (1,162) (1,612)
Accounts payable and other accrued expenses ....................................... (5,166) 12,857
Income taxes payable .............................................................. 10,509 6,694
Other, net ........................................................................ (440) (221)
---------- ----------
Total adjustments .............................................................. 16,560 3,885
---------- ----------
Net cash provided by operating activities ...................................... 30,256 20,434
Cash flows from investing activities:
Proceeds from dispositions of facilities and other assets ................................ 6,692 1,032
Payments for acquisitions, net of cash acquired .......................................... (10,630) (12,117)
Collections on notes receivable and REMIC investment ..................................... 3,425 6,421
Capital expenditures ..................................................................... (43,497) (28,040)
Construction and development in progress, net ............................................ 14,291 (555)
Other, net ............................................................................... (4,016) (9,187)
---------- ----------
Net cash used for investing activities ......................................... (33,735) (42,446)
Cash flows from financing activities:
Revolver borrowings ...................................................................... 284,000 114,000
Repayments of Revolver borrowings ........................................................ (333,000) (109,000)
Proceeds from issuance of long-term obligations .......................................... 180,000 --
Repayments of long-term obligations ...................................................... (128,673) (11,196)
Proceeds from exercise of stock options .................................................. 361 264
Deferred financing costs ................................................................. (5,242) (241)
Dividends paid on preferred stock ........................................................ (688) (2,063)
Proceeds from designated funds, net ...................................................... 472 287
---------- ----------
Net cash used for financing activities ......................................... (2,770) (7,949)
---------- ----------
Net decrease in cash and cash equivalents ...................................................... (6,249) (29,961)
Cash and cash equivalents at beginning of period ............................................... 56,303 67,964
---------- ----------
Cash and cash equivalents at end of period ..................................................... $ 50,054 $ 38,003
========== ==========

Supplemental schedule of cash flow information:
Cash paid (received) during the period for:
Interest (net of amounts capitalized) .................................................... $ 17,701 $ 19,148
Income tax payments (refunds), net ....................................................... (4,642) 2,379
</TABLE>

See accompanying notes.

4
<PAGE> 6
BEVERLY ENTERPRISES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 1996

(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 months ended
March 31, 1996 and 1995 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 1995
Annual Report on Form 10-K filed with the Securities and Exchange Commission.
The results of operations for the three months ended March 31, 1996 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 1996
presentation.

(ii) The provisions for income taxes for the three months ended March 31,
1996 and 1995 were based on estimated annual effective tax rates of 40% and
38%, respectively. The Company's estimated annual effective tax rates for 1996
and 1995 are different than the federal statutory rate primarily due to the
impact of state income taxes and amortization of nondeductible goodwill. The
Company's estimated annual effective tax rate increased to 40% in 1996
primarily as a result of amortization of nondeductible goodwill. The
provisions for income taxes consist of the following for the three months
ended March 31 (in thousands):

<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Federal:
Current .................................. $ 4,553 $ 7,114
Deferred ................................. 2,765 894

State:
Current .................................. 1,314 1,959
Deferred ................................. 499 176
-------- --------

$ 9,131 $ 10,143
======== ========
</TABLE>

(iii) During the three months ended March 31, 1996, the Company purchased
two previously leased nursing facilities (284 beds) and certain other assets
for approximately $10,700,000 cash. Also during such period, the Company sold
or terminated the leases on 37 nursing facilities (2,062 beds) for cash
proceeds of approximately $9,800,000 (approximately $3,300,000 of which was
included in accounts receivable-nonpatient at March 31, 1996 and was received
in April 1996). The Company recognized net pre-tax gains during the first
quarter of 1996 of approximately $2,200,000 as a result of these dispositions.
The operations of these facilities were immaterial to the Company's financial
position and results of operations.

(iv) In February 1996, the Company completed the sale of $180,000,000 of
9% Senior Notes due February 15, 2006 (the "Senior Notes") through a public
offering (the "Senior Notes offering") for net cash proceeds of approximately
$174,850,000. The Company used approximately $87,500,000 of such net proceeds
to prepay certain scheduled maturities under its 1994 Term Loan, approximately
$28,000,000 to prepay certain scheduled maturities under its 1992

5
<PAGE> 7
BEVERLY ENTERPRISES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1996

(UNAUDITED)

Term Loan, approximately $8,750,000 to prepay certain scheduled maturities
under its Nippon Term Loan, and the remaining net proceeds to repay Revolver
borrowings and for general corporate purposes. The Senior Notes are unsecured
obligations, guaranteed by substantially all of the Company's present and
future subsidiaries, and impose on the Company certain restrictive covenants.

In May 1996, the Company filed a Registration Statement covering
$200,000,000 of debt securities, shares of preferred stock, shares of Common
Stock and warrants to purchase Common Stock which may be offered, separately or
together, in separate series in amounts, at prices and on terms to be
determined at the time of sale. The net proceeds from the offerings are
anticipated to be used for general corporate purposes, which may include, but
are not limited to, working capital, capital expenditures, repayments of
indebtedness and acquisitions.

(v) 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.

(vi) 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") and distributed certain of its
wholly-owned subsidiaries to Beverly Delaware in an effort to better focus
management's attention on specific services delivered by the Company within the
long-term healthcare arena. Such subsidiaries included, among others, Pharmacy
Corporation of America, American Transitional Hospitals, Inc. and Beverly
Indemnity, Ltd. Beverly Delaware (the parent) provides financial, administrative
and legal services to these subsidiaries, including BHRS, for which it charges
management fees.

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 THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1995
------------------ ------------------
<S> <C> <C>
Total revenues .................... $680,273 $702,738
Total costs and expenses .......... 658,740 681,832
Net income ........................ 12,920 12,652
</TABLE>

<TABLE>
<CAPTION>
AS OF AS OF
MARCH 31, 1996 DECEMBER 31, 1995
-------------- -----------------
<S> <C> <C>
Current assets ................ $ 423,640 $ 421,641
Long-term assets .............. 1,366,019 1,365,413
Current liabilities ........... 262,694 367,074
Long-term liabilities ......... 799,956 709,515
</TABLE>

6
<PAGE> 8
BEVERLY ENTERPRISES, INC.

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

MARCH 31, 1996

(UNAUDITED)

GENERAL

Healthcare system reform and concerns over rising Medicare and Medicaid
costs continue to be high priorities for the federal and certain state
governments. Although no comprehensive healthcare, Medicare or Medicaid reform
legislation has yet been implemented, pressures to contain costs and the active
discussion and issues raised by the Clinton Administration, Congress and
various other groups have impacted the healthcare delivery system. In November
1995, Congress passed the Seven Year Balanced Budget Reconciliation Act of 1995
(the "1995 Balanced Budget Act") providing for, among other things, the
reshaping of the Medicare and Medicaid programs. In December 1995, President
Clinton vetoed the 1995 Balanced Budget Act and proposed alternative Medicare
and Medicaid legislation. Each of the legislative proposals offered by the
President and Congress provide for significant reductions in the overall rate
of Medicare and Medicaid spending growth. There is active discussion concerning
this proposed legislation and the form of any final legislation signed into law
could differ significantly from current proposals. The impact of currently
proposed legislation on the Company is not readily determinable. However, in
their currently proposed form, such legislation could have a material adverse
effect on the Company's future financial position, results of operations and
cash flows.

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.

OPERATING RESULTS

FIRST QUARTER 1996 COMPARED TO FIRST QUARTER 1995

Net income was $13,696,000 for the first quarter of 1996, as compared to
net income of $16,549,000 for the same period in 1995. Income before provision
for income taxes was $22,827,000 for the first quarter of 1996, as compared to
$26,692,000 for the same period in 1995. The Company's estimated annual
effective tax rate increased to 40% in 1996, compared to 38% in 1995, primarily
as a result of amortization of nondeductible goodwill.

Net operating revenues and operating and administrative costs increased
approximately $15,400,000 and $17,500,000, respectively, for the first quarter
of 1996, as compared to the same period in 1995. These increases consist of the
following: increases in net operating revenues and operating and
administrative costs for facilities which the Company operated during each of
the quarters ended March 31, 1996 and 1995 ("same facility operations") of
approximately $5,900,000 and $14,100,000, respectively; increases in net
operating revenues and operating and administrative costs of approximately
$37,100,000 and $31,200,000, respectively, related to the expanded operations
of American Transitional Hospitals, Inc. and the acquisition of Pharmacy
Management Services, Inc. in mid-1995; and

7
<PAGE> 9
BEVERLY ENTERPRISES, INC.

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

MARCH 31, 1996

(UNAUDITED)

decreases in net operating revenues and operating and administrative costs of
approximately $27,600,000 and $27,800,000, respectively, due to the disposition
of, or lease terminations on, 37 facilities in 1996 and 29 facilities in 1995.

The increase in net operating revenues for same facility operations for
the first quarter of 1996, as compared to the same period in 1995, was due to
the following: approximately $37,300,000 due primarily to increases in Medicare
room and board rates, and to a lesser extent, private and Medicaid room and
board rates; and approximately $5,600,000 due to one additional calendar day
for the first quarter of 1996, as compared to the same period in 1995. These
increases in net operating revenues were partially offset by approximately
$21,700,000 due to decreases in ancillary revenues primarily due to the
Company's continuing efforts to bring therapists on staff as opposed to
contracting for their services; approximately $8,600,000 due to a decrease in
same facility occupancy to 87.8% for the first quarter of 1996, as compared to
89.3% for the same period in 1995; approximately $3,600,000 due to decreases in
pharmacy-related revenues primarily related to changes in pricing and service
levels at Pharmacy Corporation of America; and approximately $3,100,000 due to
various other items.

The increase in operating and administrative costs for same facility
operations for the first quarter of 1996, as compared to the same period in
1995, was due to the following: approximately $34,500,000 of increased wages
and related expenses (excluding pharmacy) principally due to the hiring of
therapists on staff as opposed to contracting for their services, higher wages
and greater benefits required to attract and retain qualified personnel and
increased staffing levels in the Company's nursing facilities to cover
increased patient acuity; approximately $3,600,000 due to increases in nursing
supplies and other variable costs; and approximately $4,000,000 due primarily
to increases in pharmacy-related costs and various other items. These
increases in operating and administrative costs were partially offset by
approximately $28,000,000 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 increased approximately $2,600,000 as compared to the
same period in 1995 primarily due to the exchange of Preferred Stock into
5 1/2% Convertible Subordinated Debentures in November 1995, write-off of
unamortized deferred financing costs associated with certain debt that was
repaid with the net cash proceeds from the issuance of Senior Notes (as
discussed below), as well as the issuance and assumption of approximately
$65,000,000 of long-term obligations during 1995 in conjunction with certain
acquisitions, partially offset by a reduction of approximately $52,800,000 of
long-term obligations due to the disposition of certain facilities.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1996, the Company had approximately $50,100,000 in cash and
cash equivalents and net working capital of approximately $260,700,000. The
Company anticipates that approximately $29,100,000 of its existing cash at
March 31, 1996, 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
$89,600,000 of unused commitments under its Revolver/Letter of Credit Facility
as of March 31, 1996.

8
<PAGE> 10
BEVERLY ENTERPRISES, INC.

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

MARCH 31, 1996

(UNAUDITED)

Net cash provided by operating activities for the first quarter of 1996
was approximately $30,300,000, an increase of approximately $9,800,000 from the
prior year. Net cash used for investing and financing activities were
approximately $33,700,000 and $2,800,000, respectively, for the first quarter
of 1996. The Company primarily used cash generated from operations to fund
capital expenditures, construction and development costs totaling approximately
$29,200,000. The Company received net cash proceeds of approximately
$174,850,000 from the issuance of Senior Notes (as discussed below) and
approximately $6,700,000 from the dispositions of facilities and other assets
which were primarily used to repay approximately $128,700,000 of long-term
obligations, to fund acquisitions of approximately $10,600,000, and to repay
Revolver borrowings.

In February 1996, the Company completed the sale of $180,000,000 of 9%
Senior Notes due February 15, 2006 (the "Senior Notes") through a public
offering (the"Senior Notes offering") for net cash proceeds of approximately
$174,850,000. The Company used approximately $87,500,000 of such net proceeds
to prepay certain scheduled maturities under its 1994 Term Loan, approximately
$28,000,000 to prepay certain scheduled maturities under its 1992 Term Loan,
approximately $8,750,000 to prepay certain scheduled maturities under its
Nippon Term Loan, and the remaining net proceeds to repay Revolver borrowings
and for general corporate purposes. The Senior Notes are unsecured obligations,
guaranteed by substantially all of the Company's present and future
subsidiaries, and impose on the Company certain restrictive covenants.

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
$37,400,000, to make normal recurring capital additions and improvements for
the twelve months ending March 31, 1996 of approximately $170,000,000, to make
selective acquisitions, including the purchase of previously leased facilities,
and to meet working capital requirements.

As of March 31, 1996, the Company had total indebtedness of approximately
$1,121,200,000 (excluding $29,000,000 of Revolver borrowings) and total
stockholders' equity of approximately $835,600,000. 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."

9
<PAGE> 11
PART II

BEVERLY ENTERPRISES, INC.

OTHER INFORMATION

MARCH 31, 1996

(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 6(a). EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.1* Form of Agreement between Beverly Enterprises, Inc. and Robert D.
Woltil
10.2 Ninth Amendment dated as of April 22, 1996 to the Nippon Credit
Agreement
11.1 Computation of Net Income Per Share
27.1 Financial Data Schedule for the three months ended March 31, 1996
</TABLE>

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

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

The Company filed a Current Report on Form 8-K, dated January 30, 1996,
which reported under Item 5 the Company's financial results for the fourth
quarter and full year ended December 31, 1995.

10
<PAGE> 12
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: May 15, 1996 By: /s/ SCOTT M. TABAKIN
------------------------------------
Scott M. Tabakin
Senior Vice President, Controller,
Chief Accounting Officer and
Acting Chief Financial Officer

11
<PAGE> 13
INDEX TO EXHBITS

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

<PAGE> 1
EXHIBIT 10.1

AGREEMENT

DATE: FEBRUARY 22, 1996

PARTIES: First Party: BEVERLY ENTERPRISES, INC., a Delaware
corporation, and its consolidated
subsidiaries, hereinafter collectively
referred to as "Company"; and

Second Party: ROBERT D. WOLTIL, hereinafter referred to as
"WOLTIL"

AGREEMENT:

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which
is hereby acknowledged, the parties hereto do agree between themselves as
follows:

Section 1. DEFINITIONS.

(a) As used herein, "WOLTIL" shall mean Robert D. Woltil,
his successors-in-interest, predecessors-in-interest, assigns, administrators
and executors.

(b) As used herein, the term the "Company" shall mean
Beverly Enterprises, Inc., its affiliates, subsidiaries, divisions, agents,
assigns, pension plans, compensation plans, other benefit plans, predecessors-
in-interest, successors-in-interest, and any officer, director, employee, agent
or other representative of any of the foregoing.

Section 2. RESIGNATION.

(a) WOLTIL hereby tenders his resignation from the office
of Executive Vice President of the Company and President of Pharmacy
Corporation of America ("PCA") effective January 17, 1996. WOLTIL further
tenders his resignation as an employee of the Company effective February 17,
1996. The

-1-
<PAGE> 2

Company hereby accepts such resignations effective on such dates. All duties
and obligations of WOLTIL in those positions are ended as of those dates, and
all obligations of the Company to WOLTIL with respect to those positions or
otherwise are terminated as of those dates, except as otherwise provided
herein.

(b) The Parties enter into this Agreement to resolve and
finalize any disputes which have arisen or may arise between them concerning
WOLTIL's employment with the Company, and the termination thereof. Nothing in
this Agreement and no action taken pursuant to this Agreement constitutes or is
intended to constitute any admission or finding of fact or allegation,
admission of liability or fault, or assessment of liability with respect to any
claim which has been brought or which may be brought by either party concerning
WOLTIL's employment with the Company, or the termination thereof. This
Agreement and the Company's actions performed pursuant hereto shall not be
deemed to be or construed as an admission of any allegation of WOLTIL'S, nor
shall they constitute any admission of any fact, liability or fault as to any
claim or proceeding which has been, is now being or may be pursued by any
person, agency or entity, including without limitation, WOLTIL or any other
past or present employee of the Company. This Agreement shall not be used and
is not intended to be used as evidence in any action or proceeding for any
other purpose other than as evidence of the Parties' compromise of their
disputes and discharge of their claims.

Section 3. PAYMENTS. The Company agrees to pay WOLTIL the
following sums in consideration of his voluntary resignation:

-2-
<PAGE> 3
(a) Vacation. The sum of Twenty-three Thousand Six
Hundred Fifty-three and 84/100 Dollars ($23,653.84), which shall be subject to
all normal withholding taxes, in full payment for four (4) weeks of vacation
pay due to WOLTIL, which shall be payable on the date that this Agreement is
fully-executed by the Parties and becomes effective;

(b) Severance Payments. WOLTIL will receive a severance
payment equal to the sum of: (1) fifty-two (52) weeks of pay in the aggregate
sum of Three Hundred Seven Thousand Five Hundred and No/100 Dollars
($307,500.00); and (2) 40% of base salary as a target bonus amount, which is
One Hundred Twenty-three Thousand and No/100 Dollars ($123,000.00); for a total
severance payment of Four Hundred Thirty Thousand Five Hundred and No/100
Dollars ($430,500.00), payable in full on the date that this Agreement is
fully executed by the Parties and becomes effective. Lump sum federal and
state withholding taxes will be withheld.

Section 4. BONUS AND CAR ALLOWANCE. It is understood and agreed
between the Parties hereto that WOLTIL shall not be entitled to any bonus from
the Company for 1995 or 1996 performance. It is further understood and
agreed between the parties hereto that WOLTIL's car allowance, if any, shall
terminate effective February 17, 1996.

Section 5 MEDICAL COVERAGE. WOLTIL's COBRA period for coverage
under the Beverly Medical Plan, Executive Medical Plan and Management Dental
Plan shall commence as of February 17, 1996 and will continue for forty-two
(42) months. The cost of coverage for the first twenty-four months shall be
paid for at the sole cost and expense of the Company. The premiums paid by the
Company for this coverage are taxable to WOLTIL, who shall be solely

-3-
<PAGE> 4

responsible for any such tax. If WOLTIL becomes eligible for another group
health plan prior to the expiration of the forty-two (42) months of COBRA,
then, after the first twenty-four (24) months of COBRA, the coverage will be
terminated according to COBRA law. If coverage continues for the first
twenty-four (24) months, then WOLTIL will be notified by the Company on or after
February 17, 1998 as to what the cost will be for COBRA conversion for
continued coverage for WOLTIL and his spouse and eligible dependents under its
Beverly Medical Plan, Executive Medical Plan and Management Dental Plan. If
coverage is desired by WOLTIL for the additional eighteen (18) months of the
COBRA conversion period, all costs and expenses for continued COBRA coverage
shall be paid by WOLTIL.

WOLTIL shall be solely responsible for presenting any claims
incurred by himself or any eligible dependent in accordance with the provisions
of the Beverly Medical Plan, Executive Medical Plan and the Management Dental
Plan.

Section 6. LIFE AND DISABILITY INSURANCE. The Executive Life
Insurance Plan, Basic Group Term Life Insurance Plan, the Long Term Disability
Insurance Plan and the Group Universal Life program will be handled as follows:

(a) Executive Life Insurance on WOLTIL will be deemed to
be One Hundred Percent (100%) vested on January 17, 1996 and as such will
remain in force for the duration of WOLTIL'S life. The premium thereon shall be
paid by the Company. The face amount of the life insurance policy to be
provided by the Company shall be Three Hundred Thousand Dollars ($300,000). The
economic value on this benefit is taxable to WOLTIL, who shall be solely
responsible for any such tax.

-4-
<PAGE> 5
(b) The Company's Basic Group Term Life Insurance
coverage on WOLTIL's life in the amount of Two Hundred Ninety-three Thousand
Dollars ($293,000) insuring WOLTIL's life, may be converted at the sole cost
and expense of WOLTIL in accordance with the provisions of the existing policy
within thirty-one (31) days of February 17, 1996, or coverage will terminate as
of said date. It is Woltil's sole responsibility to submit the appropriate
conversion forms to the carrier.

(c) The Long Term Disability coverage may be converted to
an individual policy within thirty-one days of February 17, 1996 or the
coverage will terminate as of said date in accordance with the provisions of
the existing policy. It is Woltil's sole responsibility to submit the
appropriate conversion forms to the carrier. Woltil will be reimbursed for one
year of coverage that is approved by the carrier from February 17, 1996 upon
submission to the Company of a bill from the carrier or a cancelled check to the
carrier. The reimbursement for the long term disability coverage will be
taxable to WOLTIL, who shall be solely responsible for any such tax.

(d) The Group Universal Life Insurance coverage is
portable and Woltil will be billed by the carrier at the address he has on file
with the carrier. The Company will have no further responsibility in regards to
the Group Universal Life Insurance coverage after February 17, 1996 except to
forward any premiums withheld from WOLTIL'S pay to date.

Section 7. EMPLOYEE STOCK PURCHASE PLAN. WOLTIL will continue to
participate in the Employee Stock Purchase Plan through February 17, 1996
according to the provisions of the plan and the Company will forward WOLTIL'S
contributions and related Company match as it normally would to Merrill Lynch.

-5-
<PAGE> 6
WOLTIL will continue to maintain sole discretion in managing his account
balance and the Company will have no further responsibility regarding his
account after the final payroll deductions and Company match have been
forwarded to WOLTIL'S account. If WOLTIL elects to maintain the account after
February 17, 1996, he will be notified by Merrill Lynch as to the cost of
maintaining his account. The fees related to maintaining the Merrill Lynch
account will be the sole responsibility of WOLTIL.

Section 8. OPTIONS AND RESTRICTED STOCK. WOLTIL understands and
agrees that all issued option grants and restricted stock awarded to him under
any of the Company's stock option plans (i.e., the Company's Amended and
Restated 1981 Beverly Incentive Stock Option Plan, or the Amended and Restated
1981 and 1985 Non-qualified Stock Option Plans, or the Amended and Restated
Beverly Enterprises, Inc. 1993 Long-Term Incentive Stock Plan, all of such plans
together hereinafter referred to as the "Stock Plans") shall be fully vested on
and after February 17, 1996, and must be exercised, if at all, no later than
ninety (90) days following February 17, 1996. To the extent WOLTIL does not
exercise any of the stock options or other benefits issued pursuant to the
Stock Plans (the "Stock Options") within said ninety (90) day period, the Stock
Options shall be and are hereby cancelled effective as of the close of business
on May 18, 1996 and all right, title and interest in and to said stock options
in WOLTIL's name as of such date shall be and hereby is declared null and void
and cancelled. WOLTIL was granted the following stock options which have not
been exercised by WOLTIL or cancelled:

-6-
<PAGE> 7
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
GRANT DATE OF TYPE SHARES PRICE OF VESTED AS VESTED VESTED CANCELLED
NUMBER GRANT OR UNITS GRANT - $ OF 2/17/96 AND AND NOT
GRANTED PURSUANT EXERCISED EXERCISED
TO
CONTRACT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
050064 5/20/92 RSP 3,000 $-0- 3,000 1,800 1,200 -0-
- ------------------------------------------------------------------------------------------------------------------
090286 5/20/92 NQ 7,000 $7.875 7,000 -0- 7,000 -0-
- ------------------------------------------------------------------------------------------------------------------
050070 7/15/93 RSP 24,000 $-0- 24,000 9,600 14,400 -0-
- ------------------------------------------------------------------------------------------------------------------
051002 7/15/93 RSP 6,000 $-0- 6,000 2,400 3,600 -0-
- ------------------------------------------------------------------------------------------------------------------
090293 7/15/93 NQ 25,000 $13.125 25,000 -0- 25,000 -0-
- ------------------------------------------------------------------------------------------------------------------
091002 7/15/93 NQ 6,000 $13.125 6,000 -0- 6,000 -0-
- ------------------------------------------------------------------------------------------------------------------
006705 12/9/93 ISO 15,000 $12.50 15,000 -0- 15,000 -0-
- ------------------------------------------------------------------------------------------------------------------
091010 12/9/93 NQ 35,000 $12.50 35,000 -0- 35,000 -0-
- ------------------------------------------------------------------------------------------------------------------
060004 2/15/94 PH/NQ 2,750 $14.00 2,750 -0- 2,750 -0-
- ------------------------------------------------------------------------------------------------------------------
006739 12/8/94 ISO 12,000 $14.00 12,000 -0- 12,000 -0-
- ------------------------------------------------------------------------------------------------------------------
091042 12/8/94 NQ 18,000 $14.00 18,000 -0- 18,000 -0-
- ------------------------------------------------------------------------------------------------------------------
060035 2/15/95 PH/NQ 2,951 $13.75 2,951 -0- 2,951 -0-
- ------------------------------------------------------------------------------------------------------------------
075022 2/15/95 OU/NQ 1,181 $-0- 1,181 -0- 1,181 -0-
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

LEGENDS

o ISO = Incentive Stock Option
o RSP = Restricted Stock Plan
o NQ = Nonqualified Stock Option
o PH = Phantom Stock Option
o OU = Other Units

Section 9. DEFERRED COMPENSATION. All benefits related to the Deferred
Compensation Plan were paid to WOLTIL in 1991; therefore, the Company has no
further obligation to WOLTIL related to this plan.

Section 10. RELOCATION. If, on or before February 17, 1997, WOLTIL gives
written notice to the Company that he desires to relocate within the
Continental United States, the Company will reimburse WOLTIL for any reasonable
relocation expenses (in accordance with the general relocation

-7-
<PAGE> 8
policy for Executives of PCA as then in effect, or at WOLTIL's election as in
effect on January 17, 1996, in connection with such relocation).

Section 11. EXECUTIVE RETIREMENT PLAN. For the plan year 1996, the Company
will make a contribution to the Company's Executive Retirement Plan on behalf
of WOLTIL that it would have made if WOLTIL had not terminated his employment
and as specified by the plan. In no event, shall the Company's match for 1996
be less than the percentage contribution it made for WOLTIL for the 1995 plan
year nor will it exceed or be less than the percentage contribution made by the
Company on behalf of the other participating employees for the 1996 plan year.
It will be WOLTIL'S sole responsibility to submit a written election to
participate and deliver same to the Company by July 1, 1996 and to make
arrangements with the Company to forward such contributions to the Company. The
Company will continue to be responsible for forwarding the funds to WOLTIL'S
account in accordance with the plan. The Company shall determine if it will make
a Company contribution for the 1996 plan year in accordance with the provisions
of the plan.

Section 12. CONFIDENTIALITY. The Company and WOLTIL each agree to keep the
terms of this Agreement confidential and that neither of them nor any of their
respective employees, agents, officers, representatives, heirs or assigns will
publicize the terms of this Agreement in any way, nor will they issue,
distribute, or make available any bulletin or written statement of any kind
concerning the subject matter of this Agreement or WOLTIL's termination except,
however, as required by legal process or to their tax advisors or heirs, or as
they both may otherwise agree in writing.

-8-
<PAGE> 9
Section 13. NON-SOLICITATION AND NON-COMPETITION AGREEMENT.

(a) WOLTIL shall not during the period from January 17, 1996 through
January 17, 1997, or at any time thereafter, make, use for his own purposes or
divulge to any person, firm or corporation (except under the authority of the
Company or if ordered to do so by a court of competent jurisdiction) any
information or fact relating to the management, business (including prospective
business), finances, its customers or the terms of any of the contracts of the
Company which has heretofore or may hereafter come to the knowledge of WOLTIL
which is not freely available to the public.

(b) WOLTIL hereby covenants with the Company that he will not for any
reason whatsoever and whether directly or indirectly, either alone or jointly
with any person, firm or corporation and whether as principal, servant or
agent:

(i) During the thirteen month period commencing on January 17,
1996 and terminating on February 17, 1997, solicit or endeavor to entice
away, offer employment to or employ, or offer or conclude any contract for
services with any person who is employed by the Company as of the date of
this Agreement;

(ii) At any time, in any way defame the Company or disparage its
business capabilities, products, plans or management to any customer,
potential customer, vendor, supplier, contractor, subcontractor of the
Company so as to affect adversely the goodwill or business of the Company;
and

(iii) At any time, use to the detriment of the Company any
confidential information of a technical, trade, financial or other character
which constitutes a legally protectable trade secret

-9-
<PAGE> 10

and which WOLTIL has acquired or may acquire in the course of or as a result
of his employment by the Company.

(c) During the thirteen (13) months commencing on January 17, 1996 and
terminating on February 17, 1997 (the "non-compete period"), WOLTIL shall not,
without the prior written consent of the Company, directly or indirectly work
for, engage in, or have any interest in, provide services to or manage or
operate any person, firm, corporation, partnership or business (whether as
director, officer, employee, agent, representative, partner, security holder,
consultant or otherwise) that engages in any of the health care businesses in
which the Company is engaged as of February 17, 1996. Provided, however, WOLTIL
shall be permitted to acquire a stock interest in such a corporation provided
such stock is publicly traded and the stock so acquired is not more than one
percent of the outstanding shares of such corporation, and, provided further,
that WOLTIL may engage in a business that is a non-competitive supplier to the
Company or that is a customer of Company products or services. In addition,
WOLTIL shall not, during the non-compete period, without the prior written
consent of the Company, directly or indirectly, work for, engage in, or have any
interest in, provide services to, manage or operate, in any capacity, Eckerd
Corp. or any institutional pharmacy, including, without limitation, Omnicare,
Inc., Symphony, a subsidiary of Integrated Health Services, or Vitalink Pharmacy
Services, Inc., a subsidiary of ManorCare, Inc. Except as limited in the
immediately preceding sentence, during the non-compete period, WOLTIL shall be
permitted to:

(1) serve as the chief financial officer of a health care
company, even if such company has an institutional pharmacy
business, provided that the services WOLTIL performs

-10-
<PAGE> 11
for the institutional pharmacy business are limited to
those which are consistent with his responsibilities as
chief financial officer;

(2) serve as an investment banker who would provide services to
health care companies; or

(3) serve as a consultant who would provide services to health
care companies.

(d) WOLTIL covenants and agrees that a breach of these subparagraphs
(a), (b) or (c) would immediately and irreparably harm the Company and that a
remedy at law would be inadequate to compensate the Company for its losses by
reason of such breach and therefore that the Company shall, in addition to any
rights and remedies available under this Agreement or WOLTIL's Employment
Contract dated as of December 8, 1995, at law or otherwise, be entitled to an
injunction to be issued by any court of competent jurisdiction enjoining and
restraining WOLTIL from committing any violation of these subparagraphs (a),
(b) or (c).

(e) For purposes of this Section 13 and in consideration of this
Agreement, these non-solicitation and non-competition agreements have been
separately negotiated and bargained for, and constitute a substantial portion
of the consideration for this Agreement.

Section 14. LITIGATION. WOLTIL recognizes that as a key member of the
staff of the Company, WOLTIL has occupied a position of trust and confidence
with respect to information of a secret or confidential nature which is or will
become the property of the Company, including but not limited to information
concerning various claims and lawsuits that have arisen or may arise out of the
Company's operations in which WOLTIL was directly or indirectly involved
(collectively, the "Litigation"). WOLTIL agrees that

-11-
<PAGE> 12

WOLTIL will not at any time for so long as any such information shall remain
confidential or otherwise remain wholly or partially protectable, use, divulge,
furnish, or make accessible such information to anyone outside of the Company,
the Company's agents or representatives, except as required by legal process.

For purposes of this Section 14, the term "information of a secret or
confidential nature" shall mean any information of any nature in any form
which at the time or times concerned is not generally known to or which could
not be obtained by persons engaged in a business similar to that conducted or
contemplated by Company and which relates to any one or more of the aspects of
the present or past businesses of the Company. For purposes hereof any such
confidential information which is disclosed to any third party by a present or
past employee or representative of the Company not authorized to make such
disclosures shall be deemed to remain confidential and protected. WOLTIL
further agrees that WOLTIL shall continue to reasonably cooperate with the
Company and its attorneys concerning all aspects of the Litigation, including
but not limited to making himself available for a reasonable period of time for
reviews, conferences, meetings, depositions, and testimony until such time as
the Litigation has been finally resolved to the Company's satisfaction.

For purposes of this Section 14, WOLTIL acknowledges that the Litigation
consists or may consist of several lawsuits of a complex nature such that it is
difficult to estimate the exact number of hours that WOLTIL will be needed to
devote to the Litigation. WOLTIL therefore agrees to make himself available to
the Company in compliance with this Section 14, for reasonable periods of time
as is required for lawsuits of a complexity similar to those comprising (or
which may in the future comprise) the Litigation and will

-12-
<PAGE> 13
reasonably make himself available to the extent his professional schedule
permits. The Company agrees that its attorneys shall work with WOLTIL to insure
that, to the extent possible, the time that WOLTIL shall be required to devote
to the Litigation shall be scheduled in accordance with WOLTIL's preferences.
WOLTIL agrees that he will provide his services (including actual travel time)
required in connection with the Litigation at no cost to the Company for the
first One Hundred Seventy-six (176) hours which are required by the Litigation;
provided, however, the Company shall reimburse WOLTIL for the costs and
expenses reasonably incurred by WOLTIL in connection with the provision of such
services. All services required of WOLTIL in the Litigation in excess of One
Hundred Seventy-six (176) hours shall be compensated to WOLTIL at the rate of
One Hundred Fifty and No/100 Dollars ($150.00) per hour, and, in addition, the
Company shall reimburse WOLTIL for the costs and expenses reasonably incurred
by WOLTIL in connection with the provision of such services.

Section 15. RELEASES. In consideration of the provisions of this Agreement
and for other good and sufficient consideration, receipt whereof is hereby
acknowledged, the Company and WOLTIL do each hereby release and discharge the
other from all actions, causes of action, suits, debts, dues, sums of money,
accounts, reckonings, attorneys' fees, costs, disbursements, bonds, bills,
covenants, contracts, controversies, agreements, promises, and demands
whatsoever, at law or in equity, present and future, known or unknown, in any
manner arising out of the employment relationship between the Company and
WOLTIL, and the termination thereof, including, without limitation, any and all
rights, duties and obligations arising out of or relating to that certain
Employment Contract between WOLTIL and the Company dated as of

-13-
<PAGE> 14
December 8, 1995 and all said actions, causes of action, suits, debts, dues,
sums of money, accounts, reckonings, attorneys' fees, costs, disbursements,
bonds, bills, covenants, contracts, controversies, agreements, promises, and
demands whatsoever, at law or in equity, are hereby satisfied in full,
terminated and forever discharged. No further action whatsoever shall be taken
before any tribunal or forum regarding said actions, causes of action, suits,
debts, dues, sums of money, accounts, reckonings, attorneys' fees, costs,
disbursements, bonds, bills, covenants, contracts, controversies, agreements,
promises, and demands whatsoever, at law or in equity.

WOLTIL and the Company further agree not to file or lodge or bring any
charges, complaints, grievances or other claims in any forum including, but not
limited to judicial, administrative or arbitral forums relating to or arising
out of WOLTIL's employment with the Company or his resignation and severance
therefrom.

WOLTIL affirms that there is no administrative or judicial proceeding
against the Company to which WOLTIL is a party or which has been filed on his
behalf. In the event that there is outstanding any such proceeding, WOLTIL
agrees to cause the immediate withdrawal and dismissal with prejudice of that
proceeding. In the event that any agency, court or other forum does not dismiss
with prejudice such proceeding, WOLTIL agrees that he will not give testimony
or evidence voluntarily against the Company in such proceeding. The prohibition
contained herein shall not apply with respect to information or testimony
provided by WOLTIL pursuant to a subpoena enforced by order of the court.

Section 16. INDEMNIFICATION. The Company will indemnify WOLTIL to the
fullest extent permitted (including payment of expenses in advance of final

-14-
<PAGE> 15
disposition of a proceeding) by the Certificate of Incorporation and By-Laws of
the Company, as in effect at such time or on the effective date of this
Agreement, whichever affords or afforded greater protection to WOLTIL, and
WOLTIL shall be entitled to the protection of any insurance policies the
Company may elect to maintain generally for the benefit of its directors and
officers, against all costs, charges and expenses whatsoever incurred or
sustained by his in connection with any action, suit or proceeding to which he
may be made a party by reason of his being or having been an officer or
employee of the Company or any of its subsidiaries or affiliates or his serving
or having served any other enterprises as an officer or employee at the request
of the Company. The Indemnification Agreement between Beverly Enterprises, Inc.
and WOLTIL dated December 31, 1991 shall remain in full force and effect for
its stated term for the services provided by WOLTIL to the Company during the
period up to and including February 17, 1996.

Section 17. POSITIVE RECOMMENDATION. The Company shall respond, verbally,
to inquiries from a potential employer of WOLTIL with a positive
recommendation, and upon request of either WOLTIL or any such potential
employers, shall provide a positive letter of recommendation, provided WOLTIL
shall inform any such potential employers to direct their inquiries to the
attention of Boyd W. Hendrickson, President and Chief Operating Officer of the
Company. The Company shall use its best efforts to assure that neither its
Chairman or its Chief Operating Officer disparage WOLTIL's business
capabilities or reputation in the financial community from and after the date
hereof. As of the date hereof, WOLTIL is unaware of any action of the Company
which would be a breach hereunder if this Agreement had been in effect.

-15-
<PAGE> 16
Section 18. THE COMPANY'S RIGHT OF SET-OFF. In the event the Company, in
its discretion, believes that WOLTIL has breached any obligation under this
Agreement, in addition to any other legal or equitable remedies it may have,
the Company may suspend making the payments to WOLTIL provided for in this
Agreement and instead shall place such payments in an interest bearing account
to be held in escrow by the Company pending judicial resolution of the issue of
whether WOLTIL has breached this Agreement. Within a reasonable time of
suspending such payments, the Company shall commence an action in any court of
competent jurisdiction within the State of Florida seeking, in addition to
whatever other remedies may be available to it, an order that WOLTIL has
breached any provision of the this Agreement. Upon the entry of a final
judgment to that effect (and after any appeals, if any), then any damages to
the Company resulting from said breach, including but not limited to liquidated
damages, may be set-off by the Company from the amounts it holds in escrow
under this Section. Upon entry of any final judgment that WOLTIL has not
breached any provision of this Agreement (and after any appeals, if any) then
all funds held in escrow, including interest thereon, shall be released to
WOLTIL. As of the date of execution of this Agreement, the Company is unaware
of any action by WOLTIL which, if this Agreement had been in effect, would
constitute a breach hereunder.

Section 19. AUTHORITY OF COMPANY TO ENTER INTO THIS AGREEMENT. The Company
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and qualified to transact business in the
State of Arkansas as a foreign corporation. In addition, the execution and
delivery of this Agreement and the performance by it of its obligations under
this Agreement have been duly authorized by all necessary corporate

-16-
<PAGE> 17
action of the Company and do not violate or conflict with: (a) any provision of
the Company's Articles of Incorporation or By-laws; (b) any law or any order,
writ, injunction, decree, rule, regulation of any Court, administrative agency
or any other governmental authority; or (c) any agreement to which the Company
is a party or by which the Company is bound.

Section 20. EXPERTS. Each of the parties declares that prior to the
execution of this Agreement, it apprised itself of sufficient relevant data,
either through experts or through other sources of its own selection, including
without limitation full legal review by attorneys chosen by each party, in
order that it might intelligently exercise its own judgment in deciding whether
to execute this Agreement.

Section 21. NOTICE. All notices and other communications to be given
pursuant to this Agreement shall be in writing and shall be delivered
telegraphed or mailed by first class registered or certified mail, postage
prepaid and return receipt requested to the other party, as set forth below:

If to WOLTIL: ROBERT D. WOLTIL
316 Crestwood Lane
Largo, FL 34640

If to the COMPANY: Beverly Enterprises, Inc.
Attention: President
5111 Rogers Avenue, Suite 40-A
Fort Smith, AR 72919-0155

Communications which are delivered or telegraphed shall be deemed to have
been given when delivered or telegraphed. Communications which are mailed
shall be deemed to have been given 72 hours after deposit in the U.S. Postal
Service as required in this Section 20.

Section 22. CHOICE OF LAW. The parties agree that the laws of the State of
Florida shall govern the enforcement and construction of the provisions of this
Agreement.

-17-
<PAGE> 18
Section 23. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto, and any and all prior agreements, whether oral
or written, on the subject matter contained herein, are superseded by this
Agreement. This Agreement may only be modified by a later agreement in writing
duly executed by each of the parties hereto. In the event of the commencement
of any litigation for the enforcement of any rights under this Agreement, the
prevailing party in such litigation shall be entitled to receive from the
unsuccessful party, all costs incurred in connection with such litigation,
including a reasonable amount as attorneys' fees.

Section 24. DISCLAIMER. WOLTIL understands and agrees that he:

(a) Has had a full twenty-one (21) days within which to consider this
Agreement before executing it;

(b) Has carefully read and fully understands all of the provisions of
this Agreement;

(d) Knowingly and voluntarily agrees to all of the terms set forth in
this Agreement;

(e) Knowingly and voluntarily intends to be legally bound by the same;

(f) Was advised and hereby is advised in writing to consider the terms
of this Agreement and consult with an attorney of his choice prior to executing
this Agreement;

(g) Has a full seven (7) days following the execution of this Agreement
to revoke this Agreement and has been and hereby is advised in writing that
this Agreement shall not become effective or enforceable until

-18-
<PAGE> 19
the revocation period has expired; and WOLTIL understands that rights or claims
under the Age Discrimination in Employment Act of 1967 (29 U.S.C. Section 621,
et seq.) that may arise after the date this Agreement is executed are not
waived or released.

IN WITNESS WHEREOF, the undersigned, having read the foregoing Agreement,
and understanding all of its terms, execute it voluntarily, on the date first
set forth above, with full knowledge of its significance.

FIRST PARTY
-----------

Beverly Enterprises, Inc.

By: /s/ BOYD W. HENDRICKSON
------------------------------
Boyd W. Hendrickson
President and Chief Operating
Officer

SECOND PARTY
------------

/s/ ROBERT D. WOLTIL
---------------------------------
Robert D. Woltil

-19-

<PAGE> 1

Exhibit 10.2

EXECUTION COPY

NINTH AMENDMENT
TO CREDIT AGREEMENT
AMONG
BEVERLY ENTERPRISES, INC.,
BEVERLY HEALTH AND REHABILITATION SERVICES, INC.,
(FORMERLY KNOWN AS BEVERLY CALIFORNIA CORPORATION)
THE SUBSIDIARY GUARANTORS LISTED HEREIN,
THE LENDERS LISTED HEREIN,
AND
THE NIPPON CREDIT BANK, LTD.
LOS ANGELES AGENCY, AS AGENT

DATED AS OF APRIL 22, 1996

THIS NINTH AMENDMENT dated as of April 22, 1996 (this "AMENDMENT"), is
entered into by and among BEVERLY ENTERPRISES, INC., a Delaware corporation
("BEI"), BEVERLY HEALTH AND REHABILITATION SERVICES, INC. (formerly known as
Beverly California Corporation), a California corporation ("BORROWER"), the
SUBSIDIARY GUARANTORS listed on the signature pages hereof (together with BEI,
the "GUARANTORS"), the LENDERS listed on the signature pages hereof (such
lenders, together with each Person that may or has become a party to the Credit
Agreement (as hereinafter defined) pursuant to subsection 10.8 thereof, are
referred to herein individually as a "LENDER" and collectively as the
"LENDERS"), and THE NIPPON CREDIT BANK, LTD., Los Angeles Agency ("NIPPON"), as
agent for the Lenders (in such capacity, the "AGENT"). This Amendment amends
the Credit Agreement dated as of March 2, 1993 by and among BEI, Borrower,
Agent and Lenders, as amended by that certain First Amendment to Credit
Agreement dated as of May 6, 1994, as further amended by that certain Second
Amendment to Credit Agreement dated as of May 19, 1994, as further amended by
that certain Third Amendment to Credit Agreement dated as of November 1, 1994,
as further amended by that certain Fourth Amendment to Credit Agreement dated
as of November 9, 1994, as further amended by that certain Fifth Amendment to
Credit Agreement dated as of December 30, 1994, as further amended by that
certain Sixth Amendment to Credit Agreement dated as of July 25, 1995, as
further amended by that certain Seventh Amendment to Credit Agreement dated as
of September 29, 1995, and as further amended by that certain Eighth Amendment
to Credit Agreement dated as of February 14, 1996 (as so amended, the "CREDIT
AGREEMENT"), as set forth herein.

RECITALS

WHEREAS, Borrower desires to amend the Credit Agreement in certain
respects;
<PAGE> 2
WHEREAS, Lenders and Agent have agreed to approve such amendments;

WHEREAS, Guarantors desire to reaffirm the effectiveness respectively
of the subsidiary Guaranty Agreement and the BEI Guaranty Agreement;

AGREEMENT

NOW, THEREFORE, in consideration of the terms and conditions herein
contained, BEI, Borrower, Guarantors, Agent and Lenders agree as follows:

1. Definitions, Interpretation. All capitalized terms defined above and
elsewhere in this Amendment shall be used herein as so defined. Unless
otherwise defined herein, all other capitalized terms used herein shall have
the respective meanings given to those terms in the Credit Agreement, as
amended by this Amendment. The rules of construction set forth in Section I of
the Credit Agreement shall, to the extent not inconsistent with the terms of
this Amendment, apply to this Amendment and are hereby incorporated by
reference.

2. Amendment to Credit Agreement. Subject to conditions set forth in
paragraph 4 hereof, the Credit Agreement is hereby amended as follows:

(a) The definition of "Adjusted Eurodollar Rate" appearing Section 1.1
is hereby amended to read in its entirety as follows:

"Adjusted Eurodollar Rate" means for each Interest Period (i) the
arithmetic average (rounded upward, if necessary, to the next higher
1/16 of 1%), as determined by the Agent, of the respective rates per
annum quoted by Barclays Bank PLC, Bankers Trust Company, The Bank of
Tokyo and National Westminster Bank PLC (or any successors of any of
the foregoing) on the "LIBO" page of the Reuters Monitor Money Rate
Service (or any successor publication) on the second Business Day prior
to the commencement of such Interest Period (or, if such rates do not
appear, the rate at which Dollar deposits are offered to NCB in the
London interbank eurodollar currency market on the second Business Day
prior to the commencement of such Interest Period) at or about 11:00
A.M. (London time) for delivery on the first day of such Interest
Period, divided by (ii) a number equal to 1.00 minus the maximum rate
or rates (expressed as a decimal fraction) of reserve requirements in
effect on the day which is two Business Days prior to the beginning of
such Interest Period (including, without limitation, basic,
supplemental, marginal and emergency reserves under any

2
<PAGE> 3
regulations of the Board of Governors of the Federal Reserve System or
other governmental authority having jurisdiction with respect thereto,
as now and from time to time in effect) for Eurocurrency funding
(currently referred to as "Eurocurrency liabilities" in Regulation D of
such Board) which are required to be maintained by a member bank of
such System (such rate to be rounded upward, if necessary, to the next
higher 1/16 of 1%).

3. Representations and Warranties. In order to induce the Agent and the
Lenders to enter into this Amendment, each of BEI and Borrower represents and
warrants to the Agent and the Lenders that:

(a) The representations and warranties of each Loan Party contained in
the Credit Agreement are true, correct and complete in all material respects
on and as of the date hereof to the same extent as though made on and as of
the date hereof except to the extent that such representations and
warranties specifically relate to an earlier date, in which case they are
true, correct and complete in all material respects as of such earlier date;

(b) No event has occurred and is continuing or would result from the
execution of this Amendment that constitutes an Event of Default or
Potential Event of Default;

(c) Each Loan Party has performed in all material respects all
agreements and satisfied all conditions that the Credit Agreement and this
Amendment provide shall be performed by it on or before the date hereof;

(d) The execution, delivery and performance of this Amendment, and the
Credit Agreement as amended by this Amendment, by each Loan Party which is a
party thereto are within the corporate power and authority of each such Loan
Party and, as of the Ninth Amendment Effective Date (as hereinafter
defined), will be duly authorized by all necessary corporate action on the
part of each Loan Party, and this Amendment as of the Ninth Amendment
Effective Date, are duly executed and delivered by each of such Loan Parties
which is a party thereto and will constitute a valid and binding agreement
of each of such Loan Parties, enforceable against such Loan Parties in
accordance with their terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable
principles relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability. The Credit Agreement
constitutes and, as of the Ninth Amendment Effective Date, the Credit
Agreement, as amended by this Amendment, will constitute, a valid and
binding agreement of each applicable Loan Party, enforceable against each
applicable Loan Party in accordance with their respective terms, except as
may be limited by bankruptcy,

3
<PAGE> 4
insolvency, reorganization, moratorium or similar laws or equitable
principles, relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.

(e) The execution and delivery by each applicable Loan Party of this
Amendment, and the performance by each such Loan Party of the Credit
Agreement as amended by this Amendment, do not and will not (i) violate any
provision of any law or any governmental rule or regulation applicable to
any Loan Party, the Certificate or Articles of Incorporation or Bylaws of
any Loan Party or any order, judgment or decree of any court or other agency
of government binding on any Loan Party, (ii) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any instrument that is material, individually or in the aggregate, and
that is binding on such Loan Party, (iii) result in or require the creation
or imposition of any Lien upon any of the properties or assets of any Loan
Party, or (iv) require any approval or consent of any Person under any
instrument that is material, individually or in the aggregate, and that is
binding on such Loan Party.

(f) The execution and delivery by each applicable Loan Party of this
Amendment, and the performance by each such Loan Party of the Credit
Agreement as amended by this Amendment, do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body.

4. Conditions to Effectiveness. Section 2 of this Amendment shall become
effective only upon the satisfaction of all of the following conditions
precedent (the date of satisfaction of such conditions being referred to herein
as the "Ninth Amendment Effective Date"):

(a) On or before the Ninth Amendment Effective Date, Borrower shall
deliver to the Lenders (or to the Agent for the Lenders with sufficient
originally executed copies, as appropriate, for each Lender and its counsel)
the following, each, unless otherwise noted, dated the Ninth Amendment
Effective Date, duly executed and delivered by the parties thereto:

(i) Signature and incumbency certificates of each of BEI, Borrower
and each Subsidiary Guarantor of its respective officers executing this
Amendment certified by such party's respective secretary or assistant
secretary; and

(ii) Executed counterparts of this Amendment.

4
<PAGE> 5
(b) On or before the Ninth Amendment Effective Date, all corporate and
other proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously
found acceptable by the Agent, acting on behalf of the Lenders, and its
counsel shall be satisfactory in form and substance to the Agent and such
counsel, and the Agent and such counsel shall have received all such
counterpart originals or certified copies of such documents as the Agent may
reasonably request.

(c) On or before the Ninth Amendment Effective Date, the Borrower shall
have caused payment to the Agent of all amounts regarding the costs and
expenses reasonably incurred by Agent in connection with this Amendment.

5. Acknowledgment and Agreement of Guarantors. Each Guarantor acknowledges
that it has reviewed the terms and provisions of the Credit Agreement and this
Amendment and consents to the amendment of the Credit Agreement effected
pursuant to this Amendment. Each Guarantor hereby confirms that the Guaranty
Agreement and the Collateral Documents to which it is a party or otherwise
bound and all Collateral encumbered thereby will continue to guaranty or
secure, as the case may be, to the fullest extent possible the payment and
performance of all Obligations, Guarantied Obligations (as defined in the
applicable Guaranty Agreements) and Secured Obligations (as defined in the
Collateral Documents), as the case may be, including, without limitation, the
payment and performance of all obligations of Borrower now or hereafter
existing under or in respect of the Credit Agreement as amended by this
Amendment and the Notes defined therein.

Each Guarantor acknowledges and agrees that any of the Guaranty
Agreements and the Collateral Documents to which it is a party or otherwise
bound shall continue in full force and effect and that all of its obligations
thereunder shall be valid and enforceable and shall not be impaired or limited
by the execution or effectiveness of this Amendment. Each Guarantor represents
and warrants that all representations and warranties contained in the Credit
Agreement as amended by this Amendment and the Guaranty Agreements and the
Collateral Documents to which it is a party or otherwise bound are true,
correct and complete in all material respects on and as of the Ninth Amendment
Effective Date to the same extent as though made on and as of that date except
to the extent that such representations and warranties specifically relate to
an earlier date, in which case they are true, correct and complete in all
material respects as of such earlier date.

Each Guarantor acknowledges and agrees that in addition to all the
other waivers agreed to and made by Guarantor as set forth in the Guaranty
Agreement and the Collateral Documents to which it is a party or otherwise
bound, and pursuant to the

5
<PAGE> 6
provisions of California Civil Code Section 2856, "Guarantor waives all rights
and defenses arising out of an election of remedies by the creditor, even
though that election of remedies, such as a nonjudicial foreclosure with
respect to security for a guaranteed obligation, has destroyed the Guarantor's
rights of subrogation and reimbursement against the principal by the operation
of Section 580d of the Code of Civil Procedure or otherwise."

Each Guarantor acknowledges and agrees that (i) notwithstanding the
conditions to effectiveness set forth in this Amendment, such Guarantor is not
required by the terms of the Credit Agreement or any other Loan Document to
consent to the amendments to the Credit Agreement effected pursuant to this
Amendment or any other Loan Document and (ii) that neither the terms of the
Credit Agreement, any other Loan Document nor this Amendment shall be deemed to
require the consent of any Guarantor to any future amendments to the Credit
Agreement.

6. Effectiveness; Counterparts. This Amendment may be executed in any
number of counterparts, and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. This Amendment (other than the provisions of Section 2) shall
become effective upon the execution of a counterpart hereof by all Lenders and
each of the Loan Parties and receipt of written or telephonic notification of
such execution and authorization of delivery thereof.

7. Fees and Expenses. The Borrower acknowledges that all costs, fees and
expenses as described in subsection 10.4 of the Credit Agreement incurred by
the Agent and its counsel with respect to this Amendment and the documents and
transactions contemplated hereby shall be for the account of the Borrower.

8. Effect of Amendment. It is hereby agreed that, except as specifically
provided herein, this Amendment does not in any way affect or impair the terms
and conditions of the Credit Agreement, and all terms and conditions of the
Credit Agreement are to remain in full force and effect unless otherwise
specifically amended or changed pursuant to the terms and conditions of this
Amendment.

9. Applicable Law. This Amendment and the rights and obligations of the
parties hereto and all other aspects hereof shall be deemed to be made under,
shall be governed by, and shall be construed and enforced in accordance with,
the laws of the State of New York without regard to principles of conflicts of
laws.

<PAGE> 1
BEVERLY ENTERPRISES, INC.

EXHIBIT 11.1

COMPUTATION OF NET INCOME PER SHARE

THREE MONTHS ENDED MARCH 31, 1996 AND 1995

(UNAUDITED)

(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1996 1995
------------ -------------
<S> <C> <C>
PRIMARY:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. $ 13,696 $ 16,549
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- (2,063)
----------- ------------
Net income applicable to common shares . . . . . . . . . . . . . . . . . . . . . . . $ 13,696 $ 14,486
=========== ============
Applicable common shares:
Weighted average outstanding shares during the period . . . . . . . . . . . . . . . 98,739 85,665
Weighted average shares issuable upon exercise of common stock equivalents
outstanding (principally stock options) using the "treasury stock" method . . . . 1,239 1,639
----------- ------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,978 87,304
=========== ============

Net income per share of common stock . . . . . . . . . . . . . . . . . . . . . . . . $ 0.14 $ 0.17
=========== ============
FULLY DILUTED:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,696 $ 16,549
Reduction of interest expense resulting from assumed conversion
of 7 5/8% convertible subordinated debentures . . . . . . . . . . . . . . . . . . . --- (a) --- (a)
Reduction of interest expense resulting from assumed conversion
of 5 1/2% convertible subordinated debentures . . . . . . . . . . . . . . . . . . . 2,063 ---
Reduction of interest expense resulting from assumed conversion
of zero coupon notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- (a) --- (a)
Less applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . (825) ---
----------- ------------
Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,934 $ 16,549

Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- (2,063)
----------- ------------
Adjusted net income applicable to common shares . . . . . . . . . . . . . . . . . . . $ 14,934 $ 14,486
=========== ============

Applicable common shares:
Weighted average outstanding shares during the period . . . . . . . . . . . . . . . 98,739 85,665
Assumed conversion of cumulative convertible exchangeable preferred stock . . . . . --- (b) --- (a)
Weighted average shares issuable upon exercise of common stock equivalents
outstanding (principally stock options) using the "treasury stock" method . . . . 1,239 1,771
Assumed conversion of 7 5/8% convertible subordinated debentures . . . . . . . . . --- (a) --- (a)
Assumed conversion of 5 1/2% convertible subordinated debentures . . . . . . . . . 11,253 ---
Assumed conversion of zero coupon notes . . . . . . . . . . . . . . . . . . . . . . --- (a) --- (a)
----------- ------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,231 87,436
=========== ============

Net income per share of common stock . . . . . . . . . . . . . . . . . . . . . . . . $ 0.13 $ 0.17
=========== ============
</TABLE>

_________________
(a) Conversion would be anti-dilutive and is therefore not assumed in the
computation of earnings per share of common stock.
(b) The cumulative convertible exchangeable preferred stock was exchanged
into 5 1/2% convertible subordinated debentures during the fourth
quarter of 1995.

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN ITS QUARTERLY
REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 50,054
<SECURITIES> 0
<RECEIVABLES> 568,782<F1>
<ALLOWANCES> 27,493<F2>
<INVENTORY> 57,270
<CURRENT-ASSETS> 710,081
<PP&E> 1,793,618
<DEPRECIATION> 596,692
<TOTAL-ASSETS> 2,510,446
<CURRENT-LIABILITIES> 449,380
<BONDS> 1,083,775
<COMMON> 10,389
0
0
<OTHER-SE> 825,221
<TOTAL-LIABILITY-AND-EQUITY> 2,510,446
<SALES> 811,047
<TOTAL-REVENUES> 814,507
<CGS> 0
<TOTAL-COSTS> 743,479
<OTHER-EXPENSES> 25,056
<LOSS-PROVISION> 0<F3>
<INTEREST-EXPENSE> 23,145
<INCOME-PRETAX> 22,827
<INCOME-TAX> 9,131
<INCOME-CONTINUING> 13,696
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,696
<EPS-PRIMARY> .14
<EPS-DILUTED> .13
<FN>
<F1>Excludes $45,930 of long-term notes receivable.
<F2>Excludes $4,931 of allowance for long-term notes receivable.
<F3>Included in Total costs and expenses line.
</FN>

</TABLE>