<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 8-K/A
(Amendment No. 4)
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)
<TABLE>
<CAPTION>
<S> <C> <C>
NEVADA 0-8187 75-2399477
---------------------- ----------- -----------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
</TABLE>
4265 Kellway Circle, Addison, Texas 75244
------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 407-8400
Page 1
<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-1 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-17
Pro Forma Consolidated Statement of Earnings -
Year Ended December 31, 1995 (Unaudited) F-18
Explanatory Notes to Consolidated Financial Statements F-19
(c) Exhibits
The following exhibits are filed with this report.
1 - Stock purchase agreement among the Company, Wedgwood and certain
principals of Wedgwood.*
* Previously filed
Page 2
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment No. 4 to this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Greenbriar Corporation
Dated: August 19, 1996 By: /s/ Gene Bertcher
-------------------
Name: Gene Bertcher
Title: Chief Financial Officer
Page 3
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Grant Thornton LLP Certified Public Accountants............ F-2
Wedgwood Retirement Inns, Inc.
Combined Balance Sheets at December 31, 1994 and 1995.............. F-3
Combined Statements of Operations for the years ended
December 31, 1993, 1994, and 1995................................. F-5
Combined Statements of Stockholder, Members', Partners' and Owners'
Deficit for the years ended December 31, 1993, 1994 and 1995...... F-6
Combined Statements of Cash Flows for the years ended
December 31, 1993, 1994 and 1995.................................. F-7
Notes to Combined Financial Statements............................. F-8
Unaudited Pro Forma Financial Statements
Pro Forma Consolidated Balance Sheet--December 31, 1995............ F-17
Pro Forma Consolidated Statement of Earnings--Year Ended
December 31, 1995................................................. F-18
Explanatory Notes to Consolidated Financial Statements............. F-19
</TABLE>
F-1
<PAGE>
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, 1994 and 1995, 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, 1994 and 1995, 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.
GRANT THORNTON LLP
Portland, Oregon
March 21, 1996
F-2
<PAGE>
Wedgwood Retirement Inns
COMBINED BALANCE SHEETS
(Amounts in thousands)
December 31,
---------------------
ASSETS 1994 1995
-------- --------
<TABLE>
<CAPTION>
CURRENT ASSETS
<S> <C> <C>
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
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
Wedgwood Retirement Inns
COMBINED BALANCE SHEETS - CONTINUED
(Amounts in thousands)
LIABILITIES AND STOCKHOLDERS', MEMBERS', December 31,
---------------------
PARTNERS' AND OWNERS' DEFICIT 1994 1995
-------- --------
<TABLE>
<CAPTION>
CURRENT LIABILITIES
<S> <C> <C>
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,
Year ended December 31,
---------------------------
1993 1994 1995
-------- -------- -------
<TABLE>
<CAPTION>
Revenues
<S> <C> <C> <C>
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 EARNINGS (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)
<TABLE>
<CAPTION>
<S> <C>
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)
======
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
Wedgwood Retirement Inns
COMBINED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------
1993 1994 1995
----------- -------- -----------
<S> <C> <C> <C>
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)
Business acquisitions - (1,794) -
Purchases of property and equipment (977) (4,413) (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:
<TABLE>
<CAPTION>
Common
Entity Control Legal Form
- --------------------------- -------- -------------------
<S> <C> <C>
Crown Pointe Development -
Corona 60.00% Partnership
Hermiston Assisted Living,
Inc. (Meadowbrook) 100.00 S Corporation
King City Retirement
Corporation
(dba Pacific Pointe
Retirement Inn) 90.00 S Corporation
Liberty Acquired Brain
Injury Habilitation
Services, Inc. (Liberty) 25.00 S Corporation
Lincolnshire Partners
(Lincolnshire) 40.50 Partnership
Neawanna by the Sea
(Neawanna) 58.88 Limited Partnership
Retirement Housing
Associates (dba Villa Del
Rey-Merced) 50.00 Partnership
Villa Del Rey-Visalia Division of Retirement
Housing Associates
The Terrace Retirement,
Inc. 50.00 S Corporation
Villa Del Rey-Napa 100.00 Proprietorship
Villa Del Rey-Roswell,
Limited Partnership
(VDR-Roswell) 72.12 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. 82.50 S Corporation
</TABLE>
*Transferred to partners
on January 1, 1995.
The following additional entities are included as of and for the year ended
December 31, 1995:
<TABLE>
<CAPTION>
Common
Entity Control Legal Form
- --------------------------- ---------- -------------------------
<S> <C> <C>
Lewiston Group LLC (dba
Wedgwood Terrace) 82.00% Limited Liability Company
Rose Garden Estates, LLC 92.00 Limited Liability Company
Roswell Retirement, Ltd.
Co. (dba Villa De La Rosa) 82.00 Limited Liability Company
Roswell Villa Partners
(dba Villa Del Sol) 50.00 Partnership
Sweetwater Springs Group,
LLC 82.00 Limited Liability Company
</TABLE>
F-8
<PAGE>
Wedgwood Retirement Inns
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
(Amounts in thousands of dollars)
NOTE B - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of
the accompanying 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 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
straight-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 - CONTINUED
(Amounts in thousands of dollars)
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 beginning 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.
11. Impairment of Long-Lived Assets
-------------------------------
The Company reviews its long-lived assets and certain identifiable intangibles
for impairment when events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. In reviewing
recoverability, the Company estimates the future cash flows expected to result
from using the assets and eventually disposing of them. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized based
on the asset's fair value.
F-10
<PAGE>
Wedgwood Retirement Inns
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
(Amounts in thouands of dollars)
NOTE C - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Year ended December 31,
------------------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Supplemental cash flow information
Interest paid $675 $2,167 $2,758
Supplemental data on noncash investing
and financing activities
Businesses acquired
Fair value of asset 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 - -
</TABLE>
On January 1, 1995 the operations of The Village at Forest Glen were
transferred to the individual partners as follows:
<TABLE>
<S> <C>
Current assets $ 23
Property and equipment 2,521
Other assets 35
Accounts payable and accrued liabilities (297)
Debt (1,595)
Equity (687)
------
$ -
======
</TABLE>
F-11
<PAGE>
Wedgwood Retirement Inns
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
(Amounts in thousands of dollars)
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:
<TABLE>
<CAPTION>
Camelot Summerhill VFG
-------------- ---------- --------------
<S> <C> <C> <C>
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
====== ====== ======
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
====== ====== ======
</TABLE>
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 completed in late 1995 and operations began 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.
F-12
<PAGE>
Wedgwood Retirement Inns
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
(Amounts in thousands of dollars)
NOTE D - ACQUISITIONS AND NEW ENTITIES - Continued
During 1995, Roswell Retirement, 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 operations 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.
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:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Prepaid rents $ 35 $ 65
Unit sales deposits 68 16
Tenant security deposits 206 288
---- ----
$309 $369
==== ====
</TABLE>
F-13
<PAGE>
Wedgwood Retirement Inns
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
(Amounts in thousands of dollars)
NOTE G - LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
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
====== ======
</TABLE>
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 4.75% at December 31,
1995. The note is collateralized by personal property, land, fixtures and
rents.
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.
F-14
<PAGE>
Wedgwood Retirement Inns
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
(Amounts in thousands of dollars)
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 years
1996 through 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 unit 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 - COMMITMENTS
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 payments following December 31, 1995 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $1,654
1997 1,737
1998 1,053
1999 1,078
2000 334
Thereafter 4,641
------
$10,497
======
</TABLE>
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.
F-15
<PAGE>
Wedgwood Retirement Inns
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
(Amounts in thousands of dollars)
NOTE I - COMMITMENTS - Continued
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 totaling $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 the 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). Under the terms of the agreement, the
Company's owners received preferred stock of Greenbriar and cash in exchange
for all of the outstanding shares of Wedgwood Retirement Inns, Inc. and
substantially all of the assets and liabilities of the combined entities
included in these financial statements.
F-16
<PAGE>
Greenbriar Corporation
PRO FORMA CONSOLIDATED BALANCE SHEET
(Amounts in thousands)
December 31, 1995
<TABLE>
<CAPTION>
Greenbriar Wedgwood Gilley Pro forma Consolidated
Corporation Retirement Inns Property Adjustments Notes Pro forma
------------ --------------- -------- ----------- --------- ------------
<S> <C> <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 0 (2,452) 9,968
REAL ESTATE 3,190 - 2,283 1 5,473
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 15,211 2 45,742
Furniture, fixtures, and equipment 203 3,127 (1,702) 21,628
Vehicles - 333 (175) 2 158
Construction in progress 1,576 352 1,928
------- ------- ------- ------- -------
2,868 36,922 0 15,664 55,454
Less accumulated depreciation
and amortization (252) (7,797) 7,797 2 (252)
------- ------- ------- ------- -------
2,616 29,125 0 23,461 55,202
RESTRICTED CASH AND INVESTMENTS 105 2,846 2,951
OTHER ASSETS 361 2,595 (1,781) 2 1,175
------- ------- ------- ------- -------
$29,772 $36,078 $ 2,283 $19,228 $87,361
======= ======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term $ 8 1,517 $ $1,525
obligations
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 0 721 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) 2,283 17,341 1,2 40,830
------- ------- ------- ------- -------
$29,772 $36,078 $ 2,283 $19,228 $87,361
======= ======= ======= ======= =======
</TABLE>
* See accompanying explanatory notes
F-17
<PAGE>
Pro Forma Condensed Combined Statement of Operations (Unaudited)
For the Year Ended December 31, 1995
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Less Operations
of the
Company Fountainview Subtotal Wedgwood Adjustments Combined
-------- ------------- --------- --------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Assisted living facilities $ - $ - $ - $ 14,940 - 14,940
Long term care facilities 557 (557) - - - -
Real estate operations 666 - 666 - (666)/(7)/ -
Gain on sale of assets 7,043 (5,149) 1,894 - (1,894)/(7)/ -
Interest and dividends 1,205 - 1,205 - (1,205)/(7)/ -
Other 239 - 239 - - 239
------ ------- ------- ------- --------- -------
9,710 (5,706) 4,004 14,940 (3,765) 15,179
Expenses
Assisted living facilities - - - 10,916 1,279/(5)(7)/ 12,195
Long term care facilities 322 (322) - - - -
Real estate operations 337 - 337 - (337)/(7)/ -
Depreciation and amortization - - - 1,374 (1374)/(5)( -
General and administrative 2,764 (38) 2,726 959 - 3,685
Interest 206 (73) 133 - (133)/(7)/ -
------ ------- ------- ------- -------- -------
3,629 (433) 3,196 13,249 (565) 15,880
------ ------- ------- ------- -------- -------
Operating profit (loss) 6,081 (5,273) 808 1,691 (3,200) (701)
Other income (expense)
Interest and dividend income - - - 160 1,205/(7)/ 1,365
Interest expense - - - (2,843) (133)/(7)/ (2,976)
Gain on sale of assets - - - - 1,894/(7)/ 1,894
Real estate operations, net - - - - 329/(7)/ 329
Other - - - 94 - 94
------ ------- ------- ------- -------- -------
- - (2,589) 3,295 706
------ ------- ------- ------- -------- ------
Earnings (loss) from
continuing operations
before income taxes 6,081 (5,273) 808 (898) 95 5
Income tax expense 186 - 186 - (184)/(4)/ 2
------ ------- ------- ------- --------- -------
Earnings (loss) from
continuing operations 5,895 (5,273) 622 (898) 279 3
Preferred dividend requirement (225) - (225) - (320)/(6)/ (545)
------ ------- ------- ------- -------- -------
Earnings (loss) from
continuing operations
allocable to common
shareholders $5,670 $(5,273) $ 397 $ (898) $ (41) $ (542)
====== ======= ======= ======= ======== =======
Earnings per share
Continuing operations $1.60 $(0.15)
Weighted average number of
common and equivalent
shares outstanding 3,539 3,539
</TABLE>
* See accompanying explanatory notes
F-18
<PAGE>
Explanatory Notes to Pro Forma 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. Included in the
purchase accounting adjustments are write-offs of other assets of
$1,781,000 which include organization costs and start-up costs of $209,000
and financing costs of $1,572,000.
(3) To reflect the anticipated costs of $800,000 to complete the acquisition.
(4) The pro forma income tax expense of $2,000 is based upon applying the
statutory tax rate to pre-tax income. If the Wedgwood acquisition had
taken place at January 1, 1995, the deferred tax liabilities arising from
the transaction would have eliminated the need for a change in the deferred
tax asset valuation allowance during 1995 and, therefore, the effective tax
rate would have approximated 38% rather than the 3% actually experienced.
The Company considers the use of its net operating loss carryforwards as a
result of the Wedgwood acquisition to be more likely than not.
The deferred tax liability is calculated as follows:
<TABLE>
<CAPTION>
<S> <C>
Excess of cost over tax
basis of assets acquired 12,652,000
Deferred tax liability - Wedgwood 4,691,000
Less: Elimination of deferred tax valuation
allowance - Greenbriar (1,430,000)
Deferred tax asset - Greenbriar (2,150,000)
----------
Deferred tax liability - as adjusted 1,111,000
==========
</TABLE>
(5) To reflect the difference in depreciation and amortization on Wedgwood
property and equipment and other assets due to change in asset bases and
lives under purchase accounting.
<TABLE>
<CAPTION>
Depreciation Amortization Total
------------ ------------- ----------
<S> <C> <C> <C>
New basis 1,279,000 - 1,279,000
Old basis 1,090,000 284,000 1,374,000
--------- -------- ---------
Difference 189,000 (284,000) (95,000)
========= ======== =========
</TABLE>
(6) To reflect annual dividend requirement of Series D Preferred Stock.
(7) To classify income and expenses in a manner consistent with the future
direction of the Company in the assisted living business.
(8) In January 1995, the Company sold The Fountainview. The pro forma
statement of operations reflects the operations of the Company as adjusted
to reflect this disposition.
F-19
