-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jfb3CeTrYCJAdHhc4pQmhPGQwneYulnhel6xaI9rM6ZswI/X84K1gvVVI3pF3MCe 8I/IKuh+mHt/0QKBFrIgrw== 0000930661-96-000838.txt : 19960807 0000930661-96-000838.hdr.sgml : 19960807 ACCESSION NUMBER: 0000930661-96-000838 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960725 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREENBRIAR CORP CENTRAL INDEX KEY: 0000105744 STANDARD INDUSTRIAL CLASSIFICATION: 8051 IRS NUMBER: 752399477 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-08187 FILM NUMBER: 96598610 BUSINESS ADDRESS: STREET 1: 4265 KELLWAY CIRCLE CITY: ADDISON STATE: TX ZIP: 75244 BUSINESS PHONE: 2144078400 MAIL ADDRESS: STREET 1: 4265 KELLWAY CIRCLE CITY: ADDISON STATE: TX ZIP: 75244 FORMER COMPANY: FORMER CONFORMED NAME: MEDICAL RESOURCE COMPANIES OF AMERICA DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: WESPAC INVESTORS TRUST DATE OF NAME CHANGE: 19900605 10QSB/A 1 AMENDMENT #2 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB/A (Amendment No.2) (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 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 Greenbriar Corporation CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except per share data)
March 31, December 31, 1996 1995 ----------- ------------ (Unaudited) 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 ======= =======
3 Greenbriar Corporation CONSOLIDATED BALANCE SHEETS - CONTINUED (Amounts in thousands, except per share data)
March 31, December 31, 1996 1995 ----------- ------------- (Unaudited) 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 ======== ========
4 Greenbriar Corporation CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in thousands, except per share data)
For the Three Month Period Ended March 31, March 31, 1996 1995 ------------------- -------------- (Unaudited) (Unaudited) 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 ------ ------ 899 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
5 Greenbriar Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands)
For The Three Month Period Ended March 31, March 31, 1996 1995 ----------- ----------- (Unaudited) (Unaudited) 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
6 Greenbriar Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued (Amounts in thousands)
For The Three Month Period Ended March 31, March 31, 1996 1995 ----------- ----------- (Unaudited) (Unaudited) 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 ========== ==========
Supplemental information on noncash investing and financing transactions is as follows:
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) $ - ========== =========
7 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. 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, respectively or of future results of operations of the combined companies. 8 Greenbriar Corporation Acquisition - Continued - - -----------
(Amounts in Thousands) Three Month Three Month Period Ended Period Ended March 31, 1996 March 31, 1995 -------------- -------------- 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 Net earnings per share $ 0.05 $ 0.51
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 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 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 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 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 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 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. Statement of Financial Accounting Standards Not Yet Adopted - - ----------------------------------------------------------- Statement of Financial Accounting Standards (SFAS) No. 121, which the Company will adopt in 1996, establishes accounting standards for the impairment of long-lived assets and certain other intangible assets. Management is currently analyzing the impact of the adoption of SFAS No. 121, but does not anticipate any material impact on the Company's consolidated financial statements. 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 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 Greenbriar Corporation ITEM 6. Exhibits and Reports on Form 8-K -------------------------------- (a) The following exhibits are filed with this report. 27.1 Financial Data Schedule required by Item 601 of Regulation S-B. (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. 17 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 July 23, 1996 are being filed with respect to 8-Ks that were filed February 15, 1995; February 23, 1996 and April 1, 1996 (as amended by 8-K/A filed May 30, 1996). 18 Greenbriar Corporation SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, registrant has duly caused this Amendment No. 2 report to be signed on its behalf by undersigned, thereunto duly authorized. Greenbriar Corporation Date: July 22, 1996 By: Gene S. Bertcher -------------------------- Executive Vice President Chief Financial Officer 19 EX-27 2 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-QSB CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1996 AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 5,642 0 584 0 0 7,862 58,391 268 88,351 5,604 36,563 0 266 35 41,305 88,351 0 899 0 73 0 0 26 76 29 47 580 0 0 627 .17 0
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