UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 15, 1996
GREENBRIAR CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 0-8187 75-2399477
------ ------ ----------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
4265 Kellway Circle, Addison, Texas 75244
-----------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 407-8400
<PAGE>
Item 2. Acquisition or Disposition of Assets.
Acquisition of Wedgwood Retirement Inns, Inc.
- ---------------------------------------------
On March 15, 1996, Greenbriar Corporation ("the Company") acquired substantially
all of the assets and liabilities of a number of companies under common control
and managed by Wedgwood Retirement Inns, Inc.
("Wedgwood").
Wedgwood, headquartered in Vancouver, Washington, was one of the first builders
and management companies in the retirement and assisted living industry. It
operates 1,292 units of full-service retirement and assisted living, including
some that provide Alzheimer's care. The residences are located in six states:
Washington, Oregon, California, Idaho, New Mexico and Texas.
As of March, 1996, Wedgwood has three residences under construction, containing
225 assisted living units and Alzheimer's beds. Plans are to begin construction
on four additional facilities this year, expanding into two more states, Georgia
and Florida. A total of nearly 500 new assisted living and Alzheimer's care
units are planned for 1996 construction.
Wedgwood was purchased from 23 individuals, all of whom are unrelated to
Greenbriar.
To structure the Wedgwood acquisition as a tax-free exchange, the Company also
acquired a shopping center in North Carolina from James R. Gilley and members of
his family. The property was valued at its current independently appraised value
of $3,375,000. Consideration given was 675,000 shares of Series D preferred
stock. Greenbriar issued 1,949,950 shares ($14,000,000) of Series E preferred
stock and $220,000 in cash and notes to the Wedgwood shareholders. Both classes
of stock are unregistered, will have no trading market unless converted to
common stock, and will be entitled to one vote per share on all matters to come
before a meeting of stockholders. The Series D preferred stock will bear a
cumulative quarterly dividend of 9.5% per year. The Series E preferred stock
bears no dividend for two years and it is anticipated that Series E shares will
be converted to Greenbriar common stock before that time. With shareholder
approval, expected at a shareholders' meeting during 1996, both series of
preferred stock will become convertible into unregistered shares of Greenbriar
common stock, with the Series E convertible at 1.2 shares for each share of
Greenbriar common stock and Series D convertible at two shares for each share of
Greenbriar common stock. As such, the Series D will be convertible into 337,500
shares and the Series E will be convertible into 1,624,958 shares.
<PAGE>
Item 7. Financial Statements and Exhibits.
The following financial statements and pro forma financial information
regarding Wedgwood are filed with this report.
Index to Financial Statements
-----------------------------
(a) Wedgwood Retirement Inns
The audited financial statements of Wedgwood included with this report
are listed on the contents page included as page F-2 of this report.
(b) Unaudited Pro Forma Financial Statements
The accompanying pro forma consolidated balance sheet as of December
31, 1995 presents the acquisition of Wedgwood by Greenbriar (See Item
2) as though the acquisition had taken place on that date. The
accompanying pro forma consolidated statement of earnings presents
earnings from continuing operations as though the acquisition had
taken place on January 1, 1995.
Pro Forma Consolidated Balance Sheet -
December 31, 1995 (Unaudited) F-16
Pro Forma Consolidated Statement of Earnings -
Year Ended December 31, 1995 (Unaudited) F-17
Explanatory Notes to Consolidated Financial Statements F-18
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Greenbriar Corporation
Dated: May 29, 1996 By: /s/ Gene Bertcher
Name: Gene Bertcher
Title: Chief Financial Officer
<PAGE>
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
WEDGWOOD RETIREMENT INNS
DECEMBER 31, 1995, 1994 AND 1993
<PAGE>
C O N T E N T S
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-3
FINANCIAL STATEMENTS
COMBINED BALANCE SHEETS F-4
COMBINED STATEMENTS OF OPERATIONS F-5
COMBINED STATEMENT OF STOCKHOLDERS', MEMBERS',
PARTNERS' AND OWNERS' DEFICIT F-6
COMBINED STATEMENTS OF CASH FLOWS F-7
NOTES TO COMBINED FINANCIAL STATEMENTS F-8
F-2
<PAGE>
GRANT THORNTON
Suite 800
111 S.W. Columbia
Portland, OR 97201-5864
503 222-3562
FAX 503 295-0148
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholders', Members', Partners' and Owners'
Wedgwood Retirement Inns
We have audited the accompanying combined balance sheets of Wedgwood Retirement
Inns as of December 31, 1995 and 1994, and the related combined statements of
operations, stockholders', members ', partners' and owners' deficit, and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in-accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the combined financial position of Wedgwood Retirement
Inns as of December 31, 1995 and 1994, and the combined results of their
operations and their combined cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
Portland, Oregon
March 21, 1996
F-3
<PAGE>
Wedgwood Retirement Inns
COMBINED BALANCE SHEETS
(Amounts in thousands)
December 31,
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 657 $ 885
Accounts receivable
Trade 104 147
Employees and owners 2 -
Other 66 305
Supplies 47 62
Prepaid expenses 139 113
--- ---
Total current assets 1,015 1,512
PROPERTY AND EQUIPMENT
Buildings and improvements 21,933 29,764
Furniture, fixtures and equipment 2,339 3,127
Vehicles 274 333
Construction-in-progress 1,222 352
Land 3,073 3,346
Less accumulated depreciation and amortization (6,698) (7,797)
------ ------
22,143 29,125
RESTRICTED ASSETS
Mortgage escrow deposits 126 204
Reserve for capital improvements 116 782
Certificate of deposit - 400
Held-to-maturity securities 1,131 1,460
----- -----
1,373 2,846
OTHER ASSETS
Property held for sale 2,543 798
Organization and start-up costs, net 72 211
Financing costs, net 1,034 1,572
Other 138 14
--- --
3,787 2,595
----- -----
$ 28,318 $ 36,078
========= =========
LIABILITIES AND STOCKHOLDERS', MEMBERS',
PARTNERS' AND OWNERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 504 $ 948
Accrued expenses 783 671
Deferred revenues and tenant deposits 309 369
Current maturities of long-term obligations 1,146 1,517
----- -----
2,742 3,505
LONG-TERM OBLIGATIONS, less current maturities 17,922 24,396
DEFERRED REVENUE 72 66
FINANCING OBLIGATIONS 10,847 11,800
STOCKHOLDERS', MEMBERS', PARTNERS'
AND OWNERS' DEFICIT (3,265) (3,689)
------ ------
$ 28,318 $ 36,078
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
Wedgwood Retirement Inns
COMBINED STATEMENTS OF OPERATIONS
(Amounts in thousands)
Year ended December 31,
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Revenues
Residential rental $ 10,184 $ 12,018 $ 14,940
Operating expenses
Residential operating expenses 7,542 8,585 10,916
Depreciation and amortization 911 1,216 1,374
General and administrative 605 738 959
--- --- ---
9,058 10,539 13,249
----- ------ ------
Operating income 1,126 1,479 1,691
Other income (expense)
Interest income 26 74 160
Interest expense (1,092) (2,191) (2,843)
Other 70 77 94
-- -- --
NET LOSS $ 130 $ (561) $ (898)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
Wedgwood Retirement Inns
COMBINED STATEMENT OF STOCKHOLDERS', MEMBERS', PARTNERS'
AND OWNERS' DEFICIT
(Amounts in thousands)
Balance at January 1, 1993 $(3,373)
Equity contributed 357
Equity distributed (597)
Net earnings 130
---
Balance at December 31, 1993 (3,483)
Equity contributed 1,358
Equity distributed (579)
Net loss (561)
----
Balance at December 31, 1994 (3,265)
Equity contributed 1,945
Equity distributed (1,471)
Net loss (898)
----
Balance at December 31, 1995 $(3,689)
=======
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
Wedgwood Retirement Inns
COMBINED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year ended December 31,
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities
Net income (loss) $ 130 $ (561) $ (898)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities
Depreciation and amortization 927 1,230 1,214
Write-off of deferred financing costs - 60 179
Amortization of discount on held-to-maturity securities - - (22)
Change in assets and liabilities
Mortgage escrow deposits (69) 66 (78)
Accounts receivable (120) 324 (282)
Supplies (1) (14) (16)
Prepaid expenses and other assets 15 (136) (117)
Accounts payable and accrued expenses (129) (398) 619
Deferred revenues and tenant deposits (7) 236 136
-- --- ---
Net cash provided by operating activities 746 807 735
--- --- ---
Cash flows from investing activities
Reserves for capital improvements (15) (16) (666)
Purchases of property and equipment (977) (6,207) (8,870)
Purchase of securities - (1,131) (1,462)
Proceeds from sale of land - - 15
Purchase of restricted certificate of deposit - - (400)
Proceeds from sale of securities - - 1,155
---- ----- -----
Net cash used in investing activities (992) (7,354) (10,228)
---- ------ -------
Cash flows from financing activities
Proceeds from long-term debt 1,144 14,614 14,547
Principal payments on debt (554) (7,119) (5,241)
Payments for financing costs (81) (653) (746)
Equity contributed 357 356 1,945
Equity distributed (597) (579) (784)
---- ---- ----
Net cash provided by financing activities 269 6,619 9,721
--- ----- -----
NET INCREASE IN CASH 23 72 228
Cash at beginning of period 562 585 657
--- --- ---
Cash at end of period $ 585 $ 657 $ 885
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
Wedgwood Retirement Inns
NOTES TO COMBINED FINANCIAL STATEMENTS
(Amounts in thousands of dollars)
NOTE A - BASIS OF PRESENTATION
The accompanying combined financial statements include the historical assets,
liabilities and operations associated with the entities listed below. The
combined entities are collectively referred to as Wedgwood Retirement Inns (the
Company). All such entities have ownership and management interests in common
with either Wedgwood Retirement Inns, Inc. (WRII) or with the controlling
principals of WRII.
Information relative to the entities included in the combined financial
statements at December 31, 1994 and 1995 and for each of the three years in the
period then ended is as follows:
Entity Legal Form
- ----------------------------------------- -----------------------------
Crown Pointe Development - Corona Partnership
Hermiston Assisted Living, Inc.
(Meadowbrook) S Corporation
King City Retirement Corporation
(dba Pacific Pointe Retirement Inn) S Corporation
Liberty Acquired Brain Injury Habilitation
Services, Inc. (Liberty) S Corporation
Lincolnshire Partners (Lincolnshire) Partnership
Neawanna by the Sea (Neawanna Limited Partnership
Retirement Housing Associates
(dba Villa Del Rey-Merced) Partnership
Villa Del Rey-Visalia Division of Retirement Housing
Associates
The Terrace Retirement, Inc S Corporation
Villa Del Rey-Napa Proprietorship
Villa Del Rey-Roswell, Limited Partnership
(VDR-Roswell) Limited Partnership
Camelot Retirement Community (Camelot) Division of VDR-Roswell
Oak Harbor (dba Summerhill) Division of VDR-Roswell
The Village at Forest Glen (VFG) * Division of VDR-Roswell
Wedgwood Retirement Inns, Inc. S Corporation
*Transferred to partners on January 1, 1995.
The following additional entities are included as of and for the year ended
December 31, 1995:
F-8
<PAGE>
Entity Legal Form
- ---------------------------------------- -------------------------
Lewiston Group LLC (dba Wedgwood Terrace) Limited Liability Company
Rose Garden Estates, LLC Limited Liability Company
Roswell Retirement, Ltd. Co
(dba Villa De La Rosa) Limited Liability Company
Roswell Villa Partners (dba Villa Del Sol) Partnership
Sweetwater Springs Group, LLC Limited Liability Company
Wedgwood Retirement Inns
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE B - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of
the accompanvine combined financial statements follows.
1. Line of Business
----------------
The Company is involved in operating, managing and owning assisted living,
congregate and Alzheimer's facilities (residences). The principal source of
revenues is residential rental.
2. Cash
-----
For purposes of the combined statements of cash flows, the Company considers
cash to include currency on hand and demand deposits.
3. Concentration of Risk
---------------------
The Company's financial instruments that were exposed to concentrations of
credit risk consist primarily of cash. The Company places its funds with high
credit quality financial institutions and. at times, such funds may be in excess
of the FDIC limit.
4. Property and Equipment
----------------------
Depreciation and amortization are provided for in amounts sufficient to relate
the cost of depreciable assets to operations over their estimated service lives.
Leasehold improvements are amortized over the lives of the respective leases or
the service lives of the improvements, whichever is shorter. Accelerated
depreciation is used for substantially all property and equipment.
Useful lives are as follows:
Buildings and improvements 5 to 28 years
Furniture fixtures and equipment 5 to 7 years
Vehicles 5 years
Property and equipment includes interest costs incurred during the construction
period, as well as development fees and other costs directly related to the
development and construction of the residences. Maintenance and repairs are
charged to income as incurred and significant renewals and betterments are
capitalized. Deductions are made for retirements resulting from the renewals or
betterments. The property is recorded at the lower of historical cost or net or
realizable value.
5. Intangible Assets
-----------------
Costs incurred in connection with the organization of the individual combined
entities have been capitalized and are being amortized over five years on a
straiaht-line basis.
Loan costs incurred in connection with obtaining permanent financing of Company
owned residences have been capitalized and are amortized over the term of the
financing.
F-9
<PAGE>
Wedgwood Retirement Inns
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE B - SUMMARY OF ACCOUNTING POLICIES - Continued
Costs incurred in connection with preopening marketing, employee recruitment and
training, and other start-up expenditures necessary to prepare the residences
for rent have been capitalized. These prerental costs are amortized over 12
months beginnin~ when the residences are available for occupancy.
6. Income Taxes
------------
Income taxes on the net earnings are payable personally by the stockholders,
members, partners and owners and accordingly are not reflected in these
financial statements.
7. Purchase of Withdrawing Partner's Interest
------------------------------------------
When a withdrawing partner is paid or credited more than book value to retire or
sell the partner's equity interest, the partnership treats the transaction as a
purchase and revalues, up to market value, partnership assets.
8. Marketable Securities
---------------------
Effective January 1, 1994, the Company implemented Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities. Following the provisions of that statement, the Company has
classified its investments in marketable securities as held-to-maturity
securities. There was no effect on the Company's income due to the
implementation of the statement.
9. Fair Value of Financial Instruments
-----------------------------------
At December 31, 1995, the estimated fair value of each class of the Company's
financial instruments either approximated carrying values or were not material.
10. Accounting Estimates
---------------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the 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.
F-10
<PAGE>
Wedgwood Retirement Inns
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE C - SUPPLEMENTAL CASH FLOW INFORMATION
Year ended
December 31.
--------------------
1993 1994 1995
---- ---- ----
Supplemental cash flow information
Interest paid $ 675 $ 2,167 $2,758
Supplemental data on noncash investing
and financing activities
Businesses acquired
Fair value of assets acquired $ - $ 9,184 $ -
Liabilities assumed - (470) -
Seller debt financing - (5,220) -
------- ------ -------
Total cash and nonseller financing $ - $ 3,494 $ -
======= ======= =======
Equity contributed $ - $(1,002) $ -
Property and equipment acquired - 1,002 -
Debt issued (150) - -
Other 150 - -
On January 1, 1995 the operations of The Village at Forest Glen were transferred
to the individual partners as follows:
Current assets $ 23
Property and equipment 2,521
Other assets 35
Accounts payable and a(pound)crued liabilities (297)
Debt (1,595)
Equity (687)
-------
$ -
=======
NOTE D - ACQUISITIONS AND NEW ENTITIES
VDR-Roswell acquired the operations of Camelot in Harlingen, Texas, Summerhill
in Oak Harbor, Washington and VFG in Beaverton, Oregon during 1994. The
acquisitions were accounted for using the purchase method of accounting and the
results of operations have been included in the Company's combined financial
statements subsequent to the acquisition date. The acquired assets and
liabilities have been recorded at their estimated fair values at the date of
acquisition. The date the facilities were acquired, the allocation of purchase
price to assets and the method of payment are as follows:
Camelot Summerhill VFG
------------- ------------- --------------
Date acquired September 1994 April 1994 September 1994
Purchase Price
Land $1,250 $ 193 $ 148
Buildings 3,100 1,902 2,392
Furniture, fixtures
and equipment 49 38 8
Acquisition agreements 100 - -
Goodwill 1 1 2
------- ------- -------
$4.500 $2,134 $2,550
====== ====== ======
F-11
<PAGE>
Wedgwood Retirement Inns
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE D - ACQUISITIONS AND NEW ENTITIES - Continued
Payment
Cash $ 661 $ 434 $ 699
Seller debt financing 3,625 - 1,595
Other debt financing - 1,700 -
Liabilities 214 - 256
------ ------ ------
$4,500 $ 2,134 $ 2,550
====== ======= =======
During 1994, Liberty was formed and began to acquire three parcels of land in
Ellensburg, Washington. In November 1994, they began construction of a
retirement facility. The construction was completed in July 1995 at which time
operations began.
During 1994, Lincolnshire was formed and entered into a ground lease for
property located in Lincoln City, Oregon and began construction of a retirement
facility. The construction was comoleted in late 1995 and ouerations bezan in
November 1995.
During 1995, Lewiston Group LLC was formed and leased a facility (Wedgwood
Terrace) in Lewiston, Idaho. The facility began operations in November 1995.
During 1995, Rose Garden Estates, LLC was formed and construction was completed
on a facility (Rose Garden Estates) located in Ritzville, Washington. The
facility began operations in December 1995.
During 1995, Roswell Retirtment, Ltd., Co. was formed and began construction of
a facility (Villa de la Rosa) located in Roswell, New Mexico. The facility was
under construction at December 31, 1995 and is anticipated to begin operations
in October 1996
During 1995, Roswell Villa Partners was formed and construction was completed on
a facility (Villa Del Sol) located in Roswell, New Mexico. The facility began
ooerations in December 1995.
During 1995, Sweetwater Springs Group, LLP was formed and began construction of
a facility (Sweetwater Springs) in Lithia Springs, Georgia. At the completion of
the project in August 1996, Sweetwater will lease the facility from the owner
for a minimum of 15 years.
NOTE E - RESTRICTED ASSETS
Mortgage escrow deposits represent amounts in escrow for the payment of
insurance premiums and real property tax assessments. The escrow accounts are
required by mortgage lenders or by the Oregon Housing and Community Services
Department.
The reserve for capital improvements includes $137 of replacement reserves and
$645 of renovation funds in escrow. The replacement reserves represent
restricted amounts on deposit which are to be used for future acquisition of
equipment and building improvements at Pacific Pointe Retirement Inn.
Acquisitions must be approved by the Oregon Housing and Community Services
Department. The renovation funds represent amounts, disbursed from a loan, which
are to be used for the renovation of the congregate facility at Camelot.
F-12
<PAGE>
Wedgwood Retirement Inns
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE E - RESTRICTED ASSETS - Continued
The certificate of deposit is required as collateral for a loan to Camelot.
The Company's held-to-maturity securities consist of mortgage-backed securities
which mature through April 23, 1997. The amortized cost, unrealized gains and
fair value at December 31, 1995 are $1,460, $4 and $1,464, respectively. The
investments are held as collateral for outstanding letters of credit (see note
I).
NOTE F - DEFERRED REVENUES AND TENANT DEPOSITS
Total deferred revenues and tenant deposits are as follows:
1994 1995
---- ----
Prepaid rents $ 35 $ 65
Unit sales deposits 68 16
Tenant security deposits 206 288
--- ---
$309 $369
==== ====
NOTE G - LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
1994 1995
------- -------
Notes payable to banks and
financial institutions $ 4,598 $10,767
Notes payable to individuals and companies 5,840 5,039
Note payable to the Redevelopment Agency of
the City of Corona, California 7,950 7,815
Notes payable to related parties 680 2,234
Other - 58
------- -------
19,068 25,913
Less current maturities 1,146 1,517
------- -------
$17,922 $24,396
======= =======
Notes payable to banks and financial institutions mature through the year 2015
and include fixed and variable interest rates ranging from 7.5% to 11.75% at
December 31, 1995. The notes are collateralized by real property, personal
property, fixtures, equipment and the assignment of rents.
Notes payable to individuals and companies mature through the year 2015 and
include variable and fixed interest rates ranging from 7% to 10.64% at December
31, 1995. The notes are collateralized by real property, personal property,
fixtures, equipment and the assignment of rents.
The note payable to the Redevelopment Agency of the City of Corona, California
is payable into a sinking fund semi-annually in increasing amounts from $65 to
$420 through May 1, 2015. The variable interest rate was 4.75Z at December 31,
1995. The note is collateralized by personal property, land, fixtures and rents.
F-13
<PAGE>
Wedgwood Retirement Inns
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE G - LONG-TERM OBLIGATIONS - Continued
Notes payable to related parties mature through the year 2000 and include fixed
interest rates ranging from 9.5% to 12%.
Aggregate maturities of long-term debt for the five years following December 31,
1995 are as follows: 1996, $1,517; 1997, $530; 1998, $1,432; 1999, $2,726; and
2000, $2,512.
NOTE H - FINANCING OBLIGATIONS
During 1994, the Company entered into sale-leaseback transactions for the VDR
Roswell and the Neawanna facilities. At the end of the tenth year of the fifteen
year leases, the Company has options to repurchase the facilities for the
greater of the sales prices or their fair market values. The sale-leaseback
transactions have been accounted for as financings. The Company has recorded the
proceeds from the sales as financing obligations, classified the lease payments
as interest expense, and continued to carry the facilities at historical cost
and to record depreciation. At the end of the ten year period, if the repurchase
options are not exercised by the Company, gain on sale will be realized and will
be recognized over the remaining five years of the leases. Annual payments under
the lease agreements are $1,167 for each of the vears 1996 throu~h 2000.
The Company sells certain of its individual independent living units at its
Camelot facility and, at the time of sale, enters into an agreement to
repurchase. The repurchase price of each chit will range from 65% to 80% of the
fair market value at the date of repurchase, based upon the number of years each
tenant has occupied the units. Upon the repurchase of a unit, Camelot has the
intention to resell it. The sales proceeds are recorded as a financing
obligation. At December 31, 1994 and 1995 Camelot had $32 and $985, respectively
of financing obligations under repurchase transactions.
NOTE I - C0MMITMENTS
1. Operating Leases
-----------------
The Company leases certain retirement centers under operating leases which
expire through the year 2024. The leases provide that the Company pay for
property taxes, insurance and maintenance. The rent payments normally include
monthly payment of property taxes and insurance into reserve accounts.
Future minimum Davments followina December 31. 1995 are as follows:
1996 $ 1,654
1997 1,737
1998 1,053
1999 1,078
2000 334
Thereafter 4,641
$10,497
=======
F-14
<PAGE>
Wedgwood Retirement Inns
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE I - COMMITMENTS - Continued
Lease expense in 1993, 1994 and 1995 was $1,617, $2,009 and $1,676,
respectively. Certain leases contain rent escalation clauses which are based
upon future events or changes in indices.
2. Commitments to Repurchase Units
--------------------------------
At the date of the acquisition of Camelot, it had outstanding obligations to
purchase 101 individual independent living units which had been sold with
agreements to repurchase. The repurchase prices are based on a discount from the
market value of each unit. At December 31, 1994 and 1995, the remaining
estimated outstanding repurchase obligation acquired in the Camelot acquisition
was $4,900 and $4,561, respectively. The estimated fair value of the properties
was $7,150 and $6,939, respectively.
3. Letters of Credit
------------------
The Company has three outstanding letters of credit totalling $1,167 as of
December 31, 1995. The letters of credit were issued in conjunction with real
estate financing transactions and are collateralized by the Company's held-to
maturity securities.
4. Agreement to Support
---------------------
The Company, as part of a ground lease for the Lincolnshire facility, entered
into an agreement to support th~ North Lincoln Hospital, a charitable foundation
and the ground lessor. The calculation of the annual contribution will be based
upon 33.33% of the distributable net income of Lincolnshire as defined in the
agreement, less ground rent paid. Contributions are to be made monthly. No
contribution was made in 1995.
NOTE J - RELATED PARTY TRANSACTION
The Company purchases services from Lund Construction and Wedgwood Services,
companies which are owned by a major investor in the Company. During the years
ended December 31, 1994 and 1995, the Company incurred $198 and $266,
respectively, for construction and remodeling services from these related
entities.
NOTE K - SUBSEQUENT EVENTS
Subsequent to year end, the Company entered into a merger agreement with
Greenbriar Corporation. Greenbriar is a public company whose stock is listed on
the American Stock Exchange. Under the terms of the agreement, the Company's
owners received stock in Greenbriar in exchange for all of the oustanding shares
of Wedgwood Retirement Inns, Inc. and substantially all of the assets and
liabilities of the combined entities included in this financial statement.
F-15
<PAGE>
Greenbriar Corporation
PRO FORMA CONSOLIDATED BALANCE SHEET
(Amounts in thousands)
December 31, 1995
<TABLE>
<CAPTION>
Greenbriar Wedgwood Pro forma Consolidated
Corporation Retirement Inns Adjustments Notes * Pro forma
----------- --------------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,199 $ 885 $ (303) $ 7,781
Accounts receivable
Trade 23 147 170
Other - 305 305
Deferred income tax benefit 2,150 - (2,150) 4 0
Supplies - 62 62
Other current assets 1,536 113 1 1,650
----- --- - -----
Total current assets 10,908 1,512 (2,452) 9,968
REAL ESTATE 3,190 - 3,190
NET ASSETS OF MOBILITY GROUP 3,371 - 3,371
INVESTMENT IN SECURITIES, AT COST 1,853 - 1,853
NOTES RECEIVABLE 7,368 - 7,368
PROPERTY AND EQUIPMENT, AT COST
Land 322 3,346 2,330 2 5,998
Buildings and improvements 767 29,764 18,411 1,2 48,942
Furniture, fixtures, and equipment 203 3,127 (1,702) 2 1,628
Vehicles - 333 (175) 2 158
Construction in progress 1,576 352 1,928
----- --- -----
2,868 36,922 18,864 58,654
Less accumulated depreciation and
amortization (252) (7,797) 7,797 2 (252)
---- ------ ----- - ----
2,616 29,125 26,661 58,402
RESTRICTED CASH AND INVESTMENTS 105 2,846 2,951
OTHER ASSETS 361 2,595 (1,781) 2 1,175
--- ----- ------ - -----
$ 29,772 $ 36,078 $ 22,428 $ 88,278
========== ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term
obligations $ 8 $ 1,517 $ $ 1,525
Accounts payable-trade 412 948 1,360
Accrued expenses 343 671 721 3 1,735
Other current liabilities 130 369 499
--- --- ---
Total current liabilities 893 3,505 721 5,119
LONG-TERM DEBT, less current maturities 901 24,396 120 25,417
DEFERRED INCOME TAXES - - 1,111 4 1,111
DEFERRED GAIN 3,083 66 (66) 3,083
FINANCING OBLIGATIONS - 11,800 1 11,801
STOCKHOLDERS' EQUITY 24,895 (3,689) 20,541 1,2 41,747
------ ------ ------ --- ------
$ 29,772 $ 36,078 $ 22,428 $ 88,278
========== ========== ========= ==========
</TABLE>
* See accompanying explanatory notes
F-16
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Greenbriar Corporation
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
(Amounts in thousands, except per share data)
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Greenbriar Wedgwood Pro forma Consolidated
Corporation Retirement Inns Adjustments Notes* Pro forma
----------- --------------- ----------- ------ ---------
<S> <C> <C> <C> <C> <C>
Revenue
Assisted living residence rentals $ 557 $ 14,940 $ $ 15,497
Real estate rentals 666 - 666
Gain on sale of assets 7,043 - 7,043
Interest and dividends 1,205 160 1,365
Other 239 94 333
--- -- ---
9,710 15,194 0 24,904
Expenses
Assisted living residence operations 322 12,290 (95) 5 12,517
Real estate operations 337 - 337
General and administrative 2,764 959 3,723
Interest 206 2,843 3,049
--- ----- -----
3,629 16,092 (95) 19,626
----- ------ --- ------
Earnings from continuing operations
before income taxes 6,081 (898) 95 5,278
Income tax expense 186 1,820 4 2,006
--- ----- - -----
Earnings from continuing operations 5,895 (898) (1,725) 3,272
Preferred stock dividend requirement (225) - (320) 6 (545)
---- ---- - ----
Earnings from continuing operations
allocable to common shareholders $ 5,670 $ (898) $ (2,045) $ 2,727
========= ============ ========== ==========
Earnings per share
Continuing operations $ 1.60 $ 0.53
Weighted average number of common and
equivalent shares outstanding 3,539 5,164
</TABLE>
* See accompanying explanatory notes
F-17
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Greenbriar Corporation
Explanatory Notes to Consolidated Financial Statements
(1) To reflect the acquisition of commercial property acquired from the Gilley
group and the issuance of Series D Preferred Stock.
(2) To reflect the application of purchase accounting.
(3) To reflect the anticipated costs of $800,000 to complete the acquisition.
(4) To provide income taxes on the pro forma adjustments and to adjust the
deferred income tax asset valuation reserve as a result of deferred tax
liabilities attributable to temporary differences arising from purchase
accounting.
(5) To reflect the difference in depreciation on Wedgwood property and
equipment due to change in asset bases and lives under purchase accounting.
(6) To reflect annual dividend requirement of Series D Preferred Stock.
F-18
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