<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB/A
(Amendment No.3)
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended March 31, 1996
or
( ) 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: 0-8187
GREENBRIAR CORPORATION
(Name of Small Business Issuer in its Charter)
Nevada 75-2399477
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4265 Kellway Circle, Addison, Texas, 75244
(Address of principal executive offices)
(214) 407-8400
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past twelve months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
YES X NO___
---
At May 14, 1996, the issuer had outstanding 3,478,000 shares of par value $.01
common stock.
1
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Greenbriar Corporation
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
--------------------
The accompanying unaudited Consolidated Financial Statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310 of
Regulation S-B. These financial statements have not been examined by
independent certified public accountants, but in the opinion of management, all
adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of consolidated results of operations, consolidated financial
position and consolidated cash flows at the dates and for the periods indicated,
have been included.
These financial statements do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. Operating results for the three month period ended March 31, 1996
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1996. For further information, refer to the Consolidated
Financial Statements and notes thereto included in the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1995.
2
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Greenbriar Corporation
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 5,642 $ 7,199
Accounts receivable - trade 584 23
Deferred income tax benefit - 2,150
Other current assets 1,636 1,536
------- -------
Total current assets 7,862 10,908
REAL ESTATE 5,455 3,190
NET ASSETS OF MOBILITY GROUP - 3,371
INVESTMENT IN SECURITIES, AT COST 4,153 1,853
NOTES RECEIVABLE 9,117 7,368
PROPERTY AND EQUIPMENT, AT COST
Land 6,360 322
Buildings and improvements 46,358 767
Equipment and furnishings 1,789 203
Construction in progress 3,884 1,576
------- -------
58,391 2,868
Less accumulated depreciation 268 252
------- -------
58,123 2,616
RESTRICTED CASH AND INVESTMENTS 3,254 105
OTHER ASSETS 387 361
------- -------
$88,351 $29,772
======= =======
</TABLE>
3
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Greenbriar Corporation
CONSOLIDATED BALANCE SHEETS - CONTINUED
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------------- -----------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term
debt $ 1,575 $ 8
Accounts payable - trade 1,554 412
Accrued expenses 1,980 343
Other current liabilities 495 130
--------------- -----------------
Total current liabilities 5,604 893
LONG-TERM DEBT 36,563 901
DEFERRED INCOME TAXES 1,495 -
DEFERRED GAIN 3,083 3,083
STOCKHOLDERS' EQUITY
Series B cumulative convertible preferred
stock, $.10 par value; liquidation
value of $353 in 1996 and $1,330 in
1995; authorized, 100 shares; issued
and outstanding, 4 and 14 shares in 1996
and 1995, respectively 1 1
Series C cumulative convertible preferred
stock, $.10 par value; liquidation
value of $2,000; authorized, issued and
outstanding, 20 shares 2 2
Series D cumulative preferred stock,
$.10 par value; liquidation value of
$3,375 in 1996; authorized, issued and
outstanding 675 shares in 1996 68 -
Series E cumulative preferred stock,
$.10 par value; liquidation value of
$18,552 in 1996; authorized, issued
and outstanding 1,950 shares in 1996 195 -
Common stock; $.01 par value; authorized
20,000 shares; issued and outstanding,
3,478 and 3,452 shares in 1996 and 1995,
respectively 35 35
Additional paid-in capital 49,847 33,957
Accumulated deficit (6,026) ( 6,584)
-------- ---------
44,122 27,411
Less stock purchase note receivable (2,516) (2,516)
-------- --------
41,606 24,895
-------- --------
$ 88,351 $ 29,772
========= =========
</TABLE>
4
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Greenbriar Corporation
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
For the Three
Month Period Ended
March 31, March 31,
1996 1995
------------------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenue
Long term care facilities rentals $ - $ 555
Real estate rentals 156 195
Gain on sale of assets 32 5,149
Interest and dividends 261 193
Other 450 9
------ ------
8990 6,101
Expenses
Long term care facilities operations - 318
Real estate operations 73 97
General and administrative 724 837
Interest 26 121
------ ------
823 1,373
Earnings from continuing operations
before income taxes 76 4,728
Income tax expense 29 1,608
------ ------
Earnings from continuing operations 47 3,120
Discontinued operations
Loss from operations, net of income
taxes - (14)
Gain on disposal, net of income
taxes 580 -
------ ------
Net earnings 627 3,106
Preferred stock dividend requirement (34) (81)
------ ------
Earnings allocable to common stockholders $ 593 $3,025
====== ======
Earnings per share
Continuing operations $.01 $.83
Net earnings $.17 $.83
Weighted average number of common and
equivalent shares outstanding 3,444 3,655
</TABLE>
5
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Greenbriar Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION>
For The Three
Month Period Ended
March 31, March 31,
1996 1995
------------------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 627 $ 3,106
Adjustments to reconcile net
earnings to net cash used in
operating activities
Discontinued operations (580) 14
Depreciation and amortization 34 206
Gain on sales of assets (32) (5,149)
Changes in operating assets
and liabilities
Accounts receivable (4) 790
Due from affiliates - 7
Deferred income taxes 378 1,598
Other current and noncurrent
assets (550) 1,172
Accounts payable and other
liabilities (124) (2,087)
------- -------
Total adjustments (878) (3,449)
------- -------
Net cash provided by (used in)
operating activities of:
Continuing operations (251) (343)
Discontinued operations (349) 78
------- -------
Net cash used in operating
activities (600) (265)
Cash flows from investing activities
Proceeds from sales of assets 256 18,276
Additions to real estate - (33)
Purchase of property and equipment (1,580) (103)
Net cash effect of purchase of
subsidiary 739 -
Additions to notes receivable (249) (3,100)
Investing activities of discontinued
operations - (90)
------- -------
Net cash provided by (used in)
investing activities (834) 14,950
</TABLE>
6
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Greenbriar Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS -Continued
(Amounts in thousands)
<TABLE>
<CAPTION>
For The Three
Month Period Ended
March 31, March 31,
1996 1995
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from financing activities
Payments on debt $ (2) $(14,049)
Dividends on preferred stock - (62)
Purchase of common stock (121) (1,065)
------- --------
Net cash used in
financing activities (123) (15,176)
------- --------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (1,557) (491)
Cash and cash equivalents at beginning
of period 7,199 8,311
------- --------
Cash and cash equivalents at end of
period $ 5,642 $ 7,820
======= ========
</TABLE>
Supplemental information on noncash investing and financing transactions is as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Stock dividend paid on preferred
shares $ 73 $ -
Sale of subsidiary
Securities received
Note receivable $ 2,000 -
Preferred stock - Series A -
Innovative Health Services,
Inc. $ 2,300 -
Net assets sold $ 3,371 -
Purchase of subsidiary
Fair value of assets acquired $ 60,819 $ -
Liabilities assumed (40,499) -
Deferred income tax (3,261) -
Pre-acquisition loan and other
costs (680) -
Preferred stock issued (17,118) -
-------- ---
Total cash received $ (739) $ -
======== ===
</TABLE>
7
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Greenbriar Corporation
PART I. FINANCIAL INFORMATION - Continued
Acquisition
- -----------
In March 1996, 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"), headquartered in Vancouver,
Washington. The acquisition has been accounted for as a purchase transaction
and Wedgwood's operations will be reflected in the consolidated statement of
earnings beginning April 1, 1996. Wedgwood was one of the first builders and
management companies in the retirement and assisted living industry. The
business of Wedgwood consists of the operation of 15 assisted or independent
living facilities.
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 certain of
his affiliates and family members(the Gilley Group). Due to the fact that the
Gilley Group is a majority shareholder of Greenbriar and owner of the shopping
center, the property was recorded for accounting purposes at the Gilley Group's
historical cost basis of approximately $2,300,000. Consideration given was
675,000 shares of Series D preferred stock. Wedgwood's assets were valued at
approximately $58,000,000 ($54,000,000 of property and equipment) and
liabilities assumed were approximately $44,000,000. In exchange, Greenbriar
issued 1,949,950 shares of Series E preferred stock recorded for accounting
purposes at approximately $14,000,000, 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. In the event the shareholders of the Company fail to
approve, within two years from the issuance date, the rights of the Series E
preferred shareholders to convert their shares into shares of the Company's
common stock, the Series E preferred stock will bear a cumulative dividend of
12% from the date of issuance.
The following table presents pro forma unaudited consolidated results of
operations for the three month periods ended March 31, 1996 and 1995, assuming
that the acquisition had taken place on January 1, 1995. The pro forma results
are not necessarily indicative of the results of operations that would have
occurred had the acquisition been made on January 1, 1995, or of future results
of operations of the combined companies.
8
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Greenbriar Corporation
Acquisition - Continued
- -----------------------
<TABLE>
<CAPTION>
(Amounts in Thousands)
Three Month Three Month
Period Ended Period Ended
March 31, 1996 March 31, 1995
--------------- --------------
<C> <C>
<S>
Revenue $ 5,202 $ 9,617
Earnings (loss)from
continuing operations $ (225) $ 2,870
Net earnings $ 355 $ 2,856
Earnings allocable to common
shareholders $ 241 $ 2,695
Earnings (loss) per share
Continuing operations $ (0.07) $ 0.51
Net earnings $ 0.05 $ 0.51
</TABLE>
Sale of Mobility Assistance Subsidiaries
- ----------------------------------------
Effective January 1, 1996, the Company sold its wholly owned subsidiary American
Mobility, Inc. ("AMI") along with AMI's subsidiaries Odyssey Mobility Systems,
Inc., Aviation Mobility, Inc. and Alpha Mobility, Inc. to Innovative Health
Services, Inc. ("IHS"), a private company. The sales price was $4,300,000,
consisting of a $2 million note and $2,300,000 (230,000 shares) of IHS's Class A
convertible preferred stock. The Company recorded a pre-tax gain of
approximately $930,000 on the sale of AMI. The price and terms of the sale were
determined through arms length negotiations between the parties. The fair value
of the preferred stock for accounting purposes was determined based on the
discounted projected future cash flows. The $2 million note bears interest at
the prime rate plus 1% and is payable quarterly. The note calls for annual
principal payments equal to a percentage of IHS's earnings with a final payment
due on February 9, 2001. The preferred stock has a cumulative dividend rate of
8% per annum, payable quarterly. The preferred stock has no voting rights
unless dividends are in arrears. After three years, under certain
circumstances, the Company can convert the preferred stock into IHS common stock
at a price of 75% of the prevailing market price at the time of conversion. As
a result of this sale, the Company is no longer involved in the business of
manufacturing, selling and leasing mobility assistance equipment. Until the
note is paid in full, the Company has the right to designate one member of the
Board of Directors of IHS. Gene S. Bertcher, Executive Vice President and Chief
Financial Officer of the Company, presently serves as the Company's designee.
9
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Greenbriar Corporation
ITEM 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations.
------------------------------------
During 1994 the Company began a series of steps to focus its business on the
development, management and ownership of assisted living properties. The
Company's historical businesses during the past five years have included
ownership and operation of skilled nursing and retirement centers, real estate
investments, and manufacture and leasing of electric convenience vehicles and
wheelchairs. The nursing and retirement centers and convenience vehicle
businesses have been sold, and the real estate investments are being liquidated.
Revenues and earnings in years prior to 1996 are attributed to these prior
businesses. During 1994, the Company began independently to develop its
assisted living business, began construction on its first assisted living
facility in July 1995, and opened such facility to residents on May 30, 1996.
By July 1, 1996, the Company (not including the properties of Wedgwood) had
three additional assisted living facilities under construction and nine under
development. In order to increase the Company's presence in the assisted living
industry, the Company acquired Wedgwood in March 1996. The Wedgwood acquisition
is accounted for as a purchase, and the historical financial statements of the
Company do not include any revenues or earnings (losses) attributed to Wedgwood.
Liquidity and Capital Resources
- -------------------------------
At March 31, 1996, the Company had positive working capital of $2,258,000.
During the first quarter of 1996, the Company sold the Mobility Group, which was
a continuation of the Company's program of selling its non-strategic assets and
using the proceeds to invest in existing operations. The sale of the Mobility
Group is not expected to have a material impact on the Company's liquidity. In
March 1996, the Company acquired Wedgwood. As of March 31, 1996, the Company
and Wedgwood have combined assets of $88,351,000, combined liabilities of
$46,745,000 and combined stockholders' equity of $41,606,000. The Company and
Wedgwood combined have sufficient liquidity and capital resources to meet their
current obligations.
Net cash used for operating activities during the three months ended March 31,
1996 was $251,000, principally constituting general and administrative expenses
in excess of relatively small income from real estate operations and interest
income. No revenue from assisted living operations was reported during the
quarter.
Net cash used in investing activities during the three months ended March 31,
1996 was $834,000, resulting primarily from development and construction of
assisted living facilities in Texas in the amount of $1,580,000, offset
partially by $739,000 of cash acquired from Wedgwood.
During the past five years the Company has met its needs for liquidity and
capital resources primarily from profitable sales of assets acquired for
investment, and, to a lesser extent, from cash flow from operated businesses.
10
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Greenbriar Corporation
Liquidity and Capital Resources - Continued
- -------------------------------
The assets acquired and sold have included real estate properties acquired in
the merger in 1993 with EquiVest, Inc. ("EquiVest"), six skilled nursing
facilities, two retirement centers, the Mobility Group, and an eating disorder
facility.
Since January 1, 1994, these sources of cash from investment activities included
approximately $18,200,000 received in January 1995 from the sale of the
Fountainview retirement facility in West Palm Beach, Florida; approximately
$26,600,000 in proceeds after 1993 from the sale of the properties acquired in
the merger with EquiVest; and approximately $6,900,000 proceeds from the sale of
the Rivermont retirement facility in December 1994.
Net cash used in financing activities since January 1, 1994 have consisted
primarily of repayments of mortgage indebtedness as real estate investments were
sold totaling approximately $50,000,000, payments of preferred dividends
totaling approximately $300,000, and repurchases of common stock totaling
approximately $2,000,000, offset by additional borrowings of approximately
$10,200,000 for real estate investments and working capital.
The Company will utilize additional financing to develop additional assisted
living facilities currently under construction and development. The Company was
participating in the construction of seven facilities as of July 1, 1996. Of
the seven facilities under construction as of July 1, 1996 the Company is
responsible for arranging financing for six of them and a development partner is
responsible for arranging financing for the seventh. The six facilities for
which the Company is arranging financing are subject to fixed cost construction
contracts and other arrangements estimated to cost approximately $24,800,000 and
are estimated to be substantially completed by June 30, 1997. The eleven
facilities under development that the Company is responsible for financing are
estimated to cost approximately $45,100,000. Of the resulting total of
$69,900,000 of development costs that the Company is responsible for financing,
the Company has financing committed for five specific facilities costing
$21,530,000. The remaining development and construction costs of approximately
$48,370,000 is expected to be financed from available sources as described below
in the amount of $60,000,000 or from other sources the Company is seeking.
As of July 1, 1996, the Company has loans in place or has received commitments
for future financing, subject, in the case of the commitments, to final
documentation, as follows:
(i) Health Care REIT, Inc. has issued a commitment to provide $60
million over three years to acquire and pay 100% of the construction costs
of assisted living facilities to be leased to the Company. The term of the
leases will range from 11 years to 14 years plus two five year renewal
options, with lease payments based
11
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Greenbriar Corporation
Liquidity and Capital Resources - Continued
- -------------------------------
upon the interest rate on U.S. Treasury notes plus 3.75%, subject to
inflation adjustments not to exceed .25% per year. A 1% commitment fee is
required. The Company will have the option to purchase each facility at
the end of the term for its original cost plus 50% of the increase in its
fair market value. As additional security to the lessor, the Company will
provide a letter of credit for 5% of the amount financed, a first lien on
personal property and receivables of the facility, and subordination of
management fees and rentals from subtenants.
(ii) In 1995 Health Care REIT, Inc. provided mortgage loan commitments
for two facilities totaling $16,891,000. Of that amount, $4,536,000 was
used to refinance one of the facilities (Camelot) and $5,625,000 is being
used to construct another facility (Villa de la Rosa) which will open in
the fourth quarter of 1996. The balance includes $5,160,000 to fund
construction of the Camelot Assisted Living facility scheduled to begin
construction in the third quarter of 1996 and $645,000 to fund certain
improvements to the existing Camelot facility that is currently under
construction, along with $925,000 for the construction of a second Villa de
la Rosa, which is not presently scheduled for development and is not
included in the development and construction total. The construction loans
convert to term loans upon completion of construction. The term loans
mature in seven to ten years, initially bear interest at a rate of 4.5%
over the corresponding U.S. Treasury Note rate and are secured by the
facilities, an assignment of leases, rents and management contract, letters
of credit, and an assignment of the facilities licenses and permits.
(iii) Commitments from First National Bank & Trust Co. of McAlester,
Oklahoma of $5.2 million to provide mortgage financing for the two assisted
living facilities under construction in Muskogee, Oklahoma and Sherman,
Texas. Such loans require a 2% commitment fee and are payable in 10 years
based on a 20 year amortization, with interest at prime plus 2% (subject to
a minimum interest rate of 8.70% and a maximum interest rate of 12.75%).
(iv) In 1995 Investors Real Estate Trust ("IRET") issued a commitment
to provide 100% of the construction costs up to $2,810,000 for the
Sweetwater Springs, Georgia facility that is presently under construction.
Upon completion the facility will be
12
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Greenbriar Corporation
Liquidity and Capital Resources - Continued
- -------------------------------
leased to the Company for a term of 15 years. In 1996 the commitment was
increased by $1,540,000 to a maximum of $4,350,000 in order to provide for
the construction of a second phase of the facility, consisting of 16
Alzheimer's special care units. The monthly lease payments will be based on
the funded amount and on annual interest rates of 11.0% for the first five
years, 12.65% for the next five years and 14.55% for the last five years of
the lease. The Company has an option to purchase the facility at fair
market value during the first nine months of the fourteenth year of the
lease. The lease is secured by the facility.
In addition to development and construction financing Comerica Bank-Texas has
issued a commitment to provide $1,600,000 to finance buses and other vehicles to
transport residents of the Company's facilities. Each vehicle will be financed
at 90% of cost, and the loan for each vehicle will be amortized only 48 months.
The interest rate will be prime plus one percent.
Therefore, the Company believes it has adequate resources to complete its
facilities currently under construction and development and currently plans to
use the balance of such committed sources and its net working capital in excess
of operating needs for future development of assisted living facilities.
The Company will finance the construction, development and lease-up of the 17
facilities under construction or development as of July 1, 1996, for which it is
responsible for obtaining financing, which the Company expects to require
approximately $70 million of capital (including the $24,800,000 already under
construction), through a combination of the sources described above; its own
funds and additional funds from other traditional sources of financing,
including financial institutions, banks and real estate investment trusts.
13
<PAGE>
Greenbriar Corporation
Results of Operations
- ---------------------
Three month period ended March 31, 1996 compared to three month period ended
March 31, 1995.
Revenues and Net Earnings
- -------------------------
Revenues for the three months ended March 31, 1996 were $899,000 as compared to
$6,101,000 for the comparable period in 1995. Net earnings for the three months
ended March 31, 1996 were $627,000 as compared to $3,106,000 for the three
months ended March 31, 1995. Such decreases reflect the deposition of the
Company's historical business operations and start-up efforts in the assisted
living industry.
Long Term Care Facilities
- -------------------------
The Company sold "The Fountainview" on January 28, 1995. During January, 1995
"The Fountainview" generated revenue of $552,000 and operating expenses of
$318,000. For the three month period ended March 31, 1996 there was no
comparable property.
Real Estate Operations
- ----------------------
Revenue from real estate operations not related to the development and
acquisition of residential retirement and assisted living facilities was
$156,000 for the three months ended March 31, 1996 as compared to $195,000 for
the comparable period in 1995. Costs of operating these properties were $73,000
for the three months ended March 31, 1996 as compared to $97,000 for the
comparable period in the prior year. The reduced level of revenue and expenses
for real estate operations reflects the ongoing sale of those properties.
Gain on Sale of Assets
- ----------------------
During January 1995 the Company sold "The Fountainview" and recorded a gain of
$5,149,000. In February, 1996, the Company sold an investment in common stock
for a gain of $32,000.
General and Administrative Expenses
- -----------------------------------
General and administrative expenses were $724,000 for the three months ended
March 31, 1996 compared to $837,000 for the comparable period in 1995. The
change is due principally to the reduction of expenses related to the
discontinued operations of the Mobility Group and "The Fountainview".
14
<PAGE>
Greenbriar Corporation
Interest Income and Expense
- ---------------------------
Interest and dividend income were $261,000 for the three month period ended
March 31, 1996 compared to $193,000 for the comparable period in 1995. Interest
expense was $26,000 for the three months ended March 31, 1996 compared to
$121,000 for the comparable period in 1995. Throughout 1995 and the three
months ended March 31, 1996 the Company disposed of assets not essential to its
long range healthcare strategy. The proceeds from those sales were used to
reduce debt and increase working capital. The increase in interest income is
the result of having more working capital to invest. The decrease in interest
expense is due to the reduction in debt due both to the payoff of mortgages when
real estate assets were sold and the reduction of corporate debt when the
proceeds from the sale of assets were used to pay off that debt.
Discontinued Operations
- -----------------------
During the first quarter of 1996 the Company sold all of its operations in the
Mobility Group and recorded a gain on sale, net of tax, of $580,000.
Effect of Inflation
- -------------------
The Company's principal sources of revenues are from resident fees from Company-
owned or leased assisted living facilities and management fees from facilities
operated by the Company for third parties. The operation of the facilities are
affected by rental rates which are highly dependent upon market conditions and
the competitive environment in the areas where the facilities are located.
Compensation to employees is the principal cost element relative to the
operations of the facilities. Although the Company has not historically
experienced any adverse effects of inflation on salaries or other operating
expenses, there can be no assurance that such trends will continue or that
should inflationary pressures arise that the Company will be able to offset such
costs by increasing rental rates or management fees.
Newly Issued Accounting Standards
- ---------------------------------
SFAS No. 123, "Accounting For Stock-Based Compensation", establishes financial
accounting and reporting standards for stock-based employee compensation plans.
SFAS No. 123 permits, as an alternative, the use of existing accounting rules
for such plans. The Company expects to adopt this alternative in 1996 and,
therefore, SFAS No. 123 will have no effect on the Company's consolidated
financial statements except for the additional required disclosures.
15
<PAGE>
Forward Looking Statements
- --------------------------
Certain statements included in this Managements' Discussion and Analysis are
forward looking statements that predict the future development of the Company.
The realization of these predictions will be subject to a number of variable
contingencies, and there is no assurance that they will occur in the time frame
proposed. The risks associated with the potential actualization of the
Company's plans include: contractor delays, the availability and cost of
financing, availability of managerial oversight and regulatory approvals, to
name a few.
16
<PAGE>
Greenbriar Corporation
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) The following exhibits are filed with this report.
(b) During the quarter ended March 31, 1996, the Company filed a report
dated February 20, 1996 on Form 8-K which reported the sale of
American Mobility, Inc. along with its subsidiaries Odyssey Mobility
Systems, Inc., Aviation Mobility, Inc. and Alpha Mobility, Inc. (See
Part I, Item 2). The financial statements included with the filing
were:
A). A pro forma consolidated balance sheet of the Company as of
September 30, 1995 prepared as though the disposition had
occurred on September 30, 1995,
B). A pro forma consolidated statement of operations of the Company
for the year ended December 31, 1994 prepared as though the
disposition had occurred at the beginning of the period, and,
C). A pro forma consolidated statement of operations of the Company
for the nine month period ended September 30, 1995 prepared as
though the disposition had occurred at the beginning of the
period.
Also during the first quarter of 1996, the Company filed a report dated
March 29, 1996 on Form 8-K which reported the acquisition of Wedgwood
Retirement Inns, Inc. (See Part I, Item 2). The financial statements
required to be filed with respect to the acquisition were filed by
amendment and consisted of the following:
A). The audited 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.
B). A pro forma consolidated balance sheet of the Company as of
December 31, 1995 prepared as though the acquisition had
occurred on that date.
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Greenbriar Corporation
ITEM 6. Exhibits and Reports on Form 8-K - Continued
--------------------------------
C). A pro forma consolidated statement of earnings of the Company
for the year ended December 31, 1995 prepared as though the
acquisition had occurred at the beginning of the period.
Contemporaneously herewith three 8-K/As dated August 8, 1996 are being
filed with respect to 8-Ks that were filed February 23, 1996 and April 1,
1996 (as amended by 8-K/A filed May 30, 1996 and as both were amended by 8-
K/A filed July 23, 1996).
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Greenbriar Corporation
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
registrant has duly caused this Amendment No. 3 report to be signed on its
behalf by undersigned, thereunto duly authorized.
Greenbriar Corporation
Date: August 8, 1996 By: Gene S. Bertcher
--------------------------
Executive Vice President
Chief Financial Officer
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