-----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, MfwP41uAe8WSQZpAZwQc/b7U6zaw3W7EccS80Y/g7v8oE2rQ04kFzM1Lqd/PzM1f WL/9ts+NgaJshZ7/cPyFvA== 0000930661-96-001101.txt : 19960820 0000930661-96-001101.hdr.sgml : 19960820 ACCESSION NUMBER: 0000930661-96-001101 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960819 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREENBRIAR CORP CENTRAL INDEX KEY: 0000105744 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 752399477 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-08187 FILM NUMBER: 96617695 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 1 FORM 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) ( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended June 30, 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 August 14, 1996, the issuer had outstanding 3,479,000 shares of par value $.01 common stock. 1 GREENBRIAR CORPORATION INDEX Page No. -------- PART I - FINANCIAL INFORMATION 3 Item 1. Consolidated Financial Statements Consolidated Balance Sheets- June 30, 1996 and December 31, 1995 4 Consolidated Statements of Earnings- 6 Three and Six Month Periods Ended June 30, 1996 and 1995 Consolidated Statements of Cash Flows- 8 Six Month Periods Ended June 30, 1996 and 1995 Notes to Consolidated Financial Statements 10 Item 2. Management's Discussion and Analysis of 14 Financial Condition and Results of Operations PART II - OTHER INFORMATION 21 Item 6. Exhibits and Reports on Form 8-K 22 SIGNATURES 23 2 PART I - FINANCIAL INFORMATION 3 GREENBRIAR CORPORATION CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except per share data)
June 30, December 31, 1996 1995 ----------- ------------ (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 2,928 $ 7,199 Accounts receivable 948 23 Deferred income tax benefit - 2,150 Real estate operations held for sale 5,432 - Other current assets 1,273 1,536 ------- ------- TOTAL CURRENT ASSETS 10,581 10,908 REAL ESTATE - 3,190 NET ASSETS OF MOBILITY GROUP - 3,371 INVESTMENT IN SECURITIES, AT COST 4,153 1,853 NOTES RECEIVABLE 9,179 7,368 PROPERTY AND EQUIPMENT, AT COST Land 7,624 322 Buildings and improvements 48,484 767 Equipment and furnishings 2,013 203 Construction in progress 3,963 1,576 ------- ------- 62,084 2,868 Less accumulated depreciation 683 252 ------- ------- 61,401 2,616 RESTRICTED CASH AND INVESTMENTS 3,050 105 OTHER ASSETS 1,397 361 ------- ------- $89,761 $29,772 ======= =======
4 GREENBRIAR CORPORATION CONSOLIDATED BALANCE SHEETS - CONTINUED (Amounts in thousands, except per share data)
June 30, December 31, 1996 1995 --------- ------------ (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term obligations $ 960 $ 8 Due to affiliates 718 - Accounts payable 1,727 412 Accrued expenses 1,547 343 Mortgage notes collateralized by real estate held for sale 905 - Other current liabilities 617 130 ------- ------- TOTAL CURRENT LIABILITIES 6,474 893 LONG-TERM OBLIGATIONS 37,672 901 DEFERRED INCOME TAXES 1,309 - DEFERRED GAIN 3,083 3,083 STOCKHOLDERS' EQUITY Preferred stock, $.10 par value; liquidation value of $24,237 in 1996 and $3,330 in 1995; authorized, 10,000 shares; issued and outstanding (in four series),2,648 shares in 1996 and 34 shares in 1995 266 3 Common stock, $.01 par value; authorized, 100,000 shares; issued and outstanding, 3,478 shares in 1996 and 3,452 shares in 1995 35 35 Additional paid-in capital 49,846 33,957 Accumulated deficit (6,408) (6,584) ------- ------- 43,739 27,411 Less stock purchase notes receivable (2,516) (2,516) ------- ------- 41,223 24,895 ------- ------- $89,761 $29,772 ======= =======
5 GREENBRIAR CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in thousands, except per share data)
FOR THE THREE FOR THE SIX MONTH PERIOD ENDED MONTH PERIOD ENDED JUNE 30, JUNE 30, 1996 1995 1996 1995 ------ ------ ------ ------ (Unaudited) (Unaudited) REVENUE Assisted living facility income $4,319 $ - $4,319 $ 555 Other 47 - 47 - ------ ------ ------ ------- 4,366 - 4,366 555 OPERATING EXPENSES Assisted living facility operating expenses 2,706 - 2,706 276 Lease expense 454 - 454 - Facility depreciation and amortization 405 - 405 42 Corporate general and administrative 807 611 1,519 1,300 ------ ------ ------ ------- 4,372 611 5,084 1,618 ------ ------ ------ ------- OPERATING LOSS (6) (611) (718) (1,063) OTHER INCOME (EXPENSE) Interest and dividend income 224 375 468 568 Interest expense (798) (3) (798) (98) Gain on sales of assets - 655 32 5,804 Other 3 - 453 9 Minority interest in earnings of consolidated partnership (37) - (37) - ------ ------ ------ ------- (608) 1,027 118 6,283 ------ ------ ------ ------- EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (614) 416 (600) 5,220 INCOME TAX EXPENSE (BENEFIT) (234) 143 (229) 1,775 ------ ------ ------ ------- EARNINGS (LOSS) FROM CONTINUING OPERATIONS (380) 273 (371) 3,445 DISCONTINUED OPERATIONS Earnings from operations, net of income taxes 78 78 116 12 Gain on disposal, net of income taxes - - 580 - ------ ------ ------ ------- NET EARNINGS (LOSS) (302) 351 325 3,457
6 GREENBRIAR CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS - Continued (Amounts in thousands, except per share data)
FOR THE THREE FOR THE SIX MONTH PERIOD ENDED MONTH PERIOD ENDED JUNE 30, JUNE 30, 1996 1995 1996 1995 ------- ------- ------ ------ (Unaudited) (Unaudited) Preferred stock dividend requirement (114) (47) (148) (128) ------ ------ ------ ------- Earnings (loss) allocable to common shareholders $ (416) $ 304 $ 177 $ 3,329 ====== ====== ====== ======= Earnings (loss) per share Continuing operations $(0.14) $ 0.06 $(0.15) $ 0.90 Net earnings $(0.12) $ 0.09 $ 0.05 $ 0.90 Weighted average number of common and equivalent shares outstanding 3,478 3,511 3,460 3,679
7 GREENBRIAR CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands)
For The Six Month Period Ended June 30, June 30, 1996 1995 ----------- ----------- (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 325 $ 3,457 Adjustments to reconcile net earnings to net cash used in operating activities Discontinued operations (696) (12) Depreciation and amortization 431 76 Gain on sales of assets (32) (5,804) Changes in operating assets and liabilities Accounts receivable (368) 795 Due to/from affiliates (6) 3 Deferred income taxes 199 1,781 Other current and noncurrent assets (848) 634 Accounts payable and other liabilities (237) (2,246) ------- ------- Total adjustments (1,557) (4,773) ------- ------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES OF: Continuing operations (1,232) (1,316) Discontinued operations (190) 336 ------- ------- NET CASH USED IN OPERATING ACTIVITIES (1,422) (980) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of assets 256 19,361 Purchase of property and equipment (5,427) (43) Net cash effect of purchase of businesses 739 - Additions to loans receivable (459) (5,478) Repayment of loans receivable 148 1,500 Investing activities of discontinued operations (3) 483 ------- ------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (4,746) 15,823
8 GREENBRIAR CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued (Amounts in thousands)
For The Six Month Period Ended June 30, June 30, 1996 1995 ----------- ----------- (Unaudited) (Unaudited) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings $ 2,257 $ - Payments on debt (156) (14,140) Dividends on preferred stock (80) (92) Retirement of preferred stock - (1,085) Purchase of common stock (122) (1,301) Financing activities of discontinued operations (2) (17) ------- -------- NET CASH PROVIDED BY (USED IN)FINANCING ACTIVITIES 1,897 (16,635) ------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (4,271) (1,792) Cash and cash equivalents at beginning of period 7,199 8,202 ------- -------- Cash and cash equivalents at end of period $ 2,928 $ 6,410 ======= ========
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 businesses Fair value of assets acquired $ 61,332 $ - Liabilities assumed (40,499) - Deferred income tax liability (4,691) - Pre-acquisition loan and other costs (680) - Preferred stock issued (16,201) - -------- ------- Cash received $ (739) $ - ======== =======
9 GREENBRIAR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - BASIS OF PRESENTATION - ------------------------------ The accompanying unaudited consolidated financial statements include the accounts of Greenbriar Corporation and its majority-owned subsidiaries (collectively, the Company). All significant intercompany transactions and accounts have been eliminated. The 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, and accordingly, do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. 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. Operating results for the six month period ended June 30, 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 as amended by Form 10-KSB/A, Amendments 1-3. NOTE B - 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 are reflected in the consolidated statement of earnings beginning April 1, 1996. Wedgwood was one of the first developers 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 $59,000,000 ($55,000,000 of property and equipment) and liabilities assumed were approximately $45,000,000. 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. 10 GREENBRIAR CORPORATION ---------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED NOTE B - ACQUISITION - CONTINUED - -------------------------------- 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 stockholder approval, expected at a stockholders' meeting anticipated to be held in September 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 stockholders of the Company fail to approve, within two years from the issuance date, the rights of the Series E preferred stockholders 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 period ended June 30, 1995 and six month periods ended June 30, 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.
(Amounts in thousands except per share data) FOR THE THREE FOR THE SIX MONTH PERIOD ENDED MONTH PERIOD ENDED JUNE 30, JUNE 30, 1996 1995 1996 1995 (Actual) (Pro forma) (Pro forma) (Pro forma) -------- ----------- ----------- ----------- (Unaudited) (Unaudited) Revenue $4,366 $3,541 $8,628 $7,589 Earnings (loss)from continuing operations $ (380) $ 130 $ (643) $3,052 Net earnings (loss) $ (302) $ 208 $ 53 $3,064 Earnings (loss) allocable to common shareholders $ (416) $ 81 $ (175) $2,776 Earnings (loss) per share Continuing operations $(0.14) $ 0.00 $(0.20) $ 0.52 Net earnings $(0.12) $ 0.02 $(0.04) $ 0.52
NOTE C - DISPOSITION OF REAL ESTATE OPERATIONS - ---------------------------------------------- In August 1996, the Company entered into contracts to sell three of its four remaining real estate assets. The fourth property, a shopping center, is being 11 GREENBRIAR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED marketed and management expects to complete the sale within a year. Management expects that the proceeds from the sales will be at least equal to the $5,432,000 book value of the real estate assets. Accordingly, the Company's real estate operations have been reflected as discontinued in the financial statements at June 30, 1996. Financial statements for prior periods have been restated for comparability. Revenues from real estate operations for the three months ended June 30, 1996 and 1995 were $234,000 and $177,000, respectively, and for the six months ended June 30, 1996 and 1995 were $390,000 and $372,000, respectively. NOTE D - LONG-TERM OBLIGATIONS - ------------------------------ Long-term obligations consist of the following(amounts in thousands):
June 30, December 31, 1996 1995 -------- ------------ Notes payable to banks and financial institutions $15,356 $ 909 Notes payable to individuals and companies 4,626 - Note payable to the Redevelopment Agency of the City of Corona, CA 7,740 - Financing obligations 10,815 - Other 95 - ------- ----- 38,632 Less current maturities 960 8 ------- ----- Long-term obligations $37,672 $ 901 ======= =====
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 June 30, 1996. 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 June 30, 1996. 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 $65,000 to $420,000 through May 1, 2015. The variable interest rate was 4.75% at June 30, 1996. The note is collateralized by personal property, land, fixtures and rents. During 1994, Wedgwood entered into sale-leaseback transactions for two facilities. 12 GREENBRIAR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED At the end of the tenth year of the fifteen year leases, Wedgwood 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 proceeds from the sales have been recorded as financing obligations, and the lease payments are classified as interest expense. NOTE E - PREFERRED STOCK - ------------------------ The following summarizes the various classes of preferred stock (amounts in thousands except per share data):
June 30, December 31, 1996 1995 -------- ------------ Series B cumulative convertible preferred stock, $.10 par value; liquidation value of $310 in 1996 and $1,330 in 1995; authorized, 100 shares; issued and outstanding, 3 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 - ----- ------ $ 266 $ 3 ===== ======
13 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. In addition to its assisted living operations, the Company's historical businesses during the past five years have included ownership and operation of skilled nursing centers, real estate investments, and manufacture and leasing of electric convenience vehicles and wheelchairs. The nursing centers and convenience vehicle businesses have been sold, and the real estate investments are being liquidated. Also, in 1994 and 1995, the Company sold its existing assisted living/retirement facilities. 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 August 1, 1996, the Company had seven assisted living facilities under construction (i.e., construction activities have commenced and are ongoing) and was developing eleven additional assisted living facilities (i.e., the site is under control and development activities such as site permitting, preparation of surveys, architectural plans and negotiation of construction contracts have commenced). In order to increase the Company's presence in the assisted living industry, the Company acquired Wedgwood in March 1996. Liquidity and Capital Resources - ------------------------------- At June 30, 1996, the Company had working capital of $4,107,000. 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 did not have a material impact on the Company's liquidity. In March 1996, the Company acquired Wedgwood. As of June 30, 1996, the Company had assets of $89,761,000, liabilities of $48,538,000 and stockholders' equity of $41,223,000. Net cash used for operating activities during the six months ended June 30, 1996 was $1,422,000 principally constituting general and administrative expenses and interest expense in excess of income from real estate operations and interest income. This is a level consistent with that of operations of the prior year. Net cash used in investing activities during the six months ended June 30, 1996 was $4,746,000 resulting primarily from development and construction activities of assisted living facilities. Net cash provided by financing activities during the six months ended June 30, 1996 was $1,897,000 resulting principally from the proceeds from loans which were used by the Company to finance the development and construction of assisted living facilities. 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. 14 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 assisted living/retirement centers, the Mobility Group, and an eating disorder facility. As of June 30, 1996 the Company owns three retail centers located in Georgia and one shopping center in North Carolina. The three retail centers are currently under contract for sale and the Company anticipates the sale will occur in the fourth quarter of 1996. The Company is seeking a buyer for the North Carolina property. The Company anticipates that the properties will be sold for an amount which at least equals the book value of $5,432,000. The Company has financed the construction of its assisted living facility in Denison, Texas with approximately $3,200,000 of its own cash, and is now in the process of financing the 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 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. Seven facilities were under construction as of August 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 $25,421,000 and are estimated to be substantially completed by June 30, 1997. The Company has eleven facilities under development which are estimated to cost approximately $41,918,000. Of the resulting total of $67,339,000 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 are 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. The Company is actively negotiating to acquire twenty additional sites for the development of both assisted living and Alzheimer facilities. There can be no assurance that any or all of these sites will be acquired and developed. 15 GREENBRIAR CORPORATION Liquidity and Capital Resources - Continued - ------------------------------- As of August 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 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 (but callable at the discretion of the bank in 5 years) based 16 GREENBRIAR CORPORATION Liquidity and Capital Resources - Continued - ------------------------------- 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 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 over 48 months. The interest rate will be prime plus one percent. 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. Future development activities of the Company are dependent upon obtaining capital and financing through various means, including financing obtained from sale/leaseback transactions, construction financing, long-term state bond financing, debt or equity offerings and, to the extent available, cash generated from operations. There can be no assurance that the Company will be able to obtain adequate capital to finance its projected growth. 17 GREENBRIAR CORPORATION RESULTS OF OPERATIONS - --------------------- THREE AND SIX MONTH PERIOD ENDED JUNE 30, 1996 COMPARED TO THREE AND SIX END MONTH PERIOD ENDED JUNE 30, 1995. Revenues and Operating Expenses from Assisted Living Operations - --------------------------------------------------------------- Effective March 31, 1996 the Company acquired Wedgwood which operates 16 assisted living facilities in six states, with a capacity for 1,276 residents, consisting of 15 facilities owned by the Company or in which it has ownership or leasehold interest and one facility managed for a third party. The revenue and related operating expenses from the assisted living operations reflect the operations during the second quarter of those 15 facilities as well as one facility which opened in June 1996.
THREE MONTH PERIOD ENDED JUNE 30, 1996 (Amounts in thousands) Stabilized Start-up Total Residences Residences (1) (2) ---------- ---------- ------- Assisted living facility income $3,646 $ 673 $4,319 Assisted living facility operating expenses 2,093 613 2,706 ------ ----- ------ Gross operating income 1,553 60 1,613 Lease expense 392 62 454 Facility depreciation & amortization 294 111 405 ------ ----- ------ Income(loss)from facility operations $ 867 $(113) $ 754 ====== ===== ======
(1) Stabilized residences are those residences that have been operating for one year or have achieved stabilized occupancy of 95% (2) Start-up residences are those residences that have not been operating for one year and have not achieved a stabilized occupancy of 95% or more. (3) The Company had 11 stabilized and 5 start-up residences. Corporate General and Administrative Expenses - --------------------------------------------- Corporate general and administrative expenses were $807,000 and $1,519,000 for the three and six months ended June 30, 1996. Expenses for the comparable period in 1995 were $611,000 and $1,300,000. The increases were due primarily to the acquisition of Wedgwood. 18 GREENBRIAR CORPORATION RESULTS OF OPERATIONS - Continued - --------------------- Interest Expense ---------------- Interest expense for the three and six months ended June 30, 1996 was $798,000 as compared to $3,000 and $98,000 for the comparable periods in 1996. The increase in interest expense represents the interest incurred on the mortgage debt and financing obligations on the Wedgwood properties. Gain on Sales of Assets ----------------------- Gain on sales of assets during the three and six month periods ended June 30, 1995 were $655,000 and $5,804,000 respectively. These gains were from the sale of the Fountainview in January 1995 ($5,149,000) and sale of an economic interest in a legal claim in June 1995 ($655,000). Discontinued Operations ----------------------- Earnings from discontinued operations include both the Mobility Group, which was sold in February 1996, and the real estate operations that are for sale. The Mobility Group had losses of $29,000 and $132,000 for the three and six months ended June 30, 1995 respectively. The real estate operations had earnings of $78,000 and $116,000 for the three and six months ended June 30, 1996, respectively, and earnings of $107,000 and $144,000 for the comparable periods in 1995. The sale in the first quarter of 1996 of the Mobility Group resulted in 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. 19 GREENBRIAR CORPORATION 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. 20 PART II - OTHER INFORMATION 21 PART II. OTHER INFORMATION 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) Since April 1, 1996, the Company filed the following reports on Form 8-K and amendments to previously filed Form 8-K's: Form 8-K filed 4/1/96 to report the acquisition of Wedgwood Form 8-K/A filed 5/30/96 to amend the report on the acquisition of Wedgwood Form 8-K/A filed 7/24/96 to amend the report on the acquisition of Wedgwood Form 8-K/A filed 7/24/96 to amend the report on the sale of a subsidiary and properties Form 8-K/A filed 7/24/96 to amend the report on the sale of The Mobility Group Form 8-K/A filed 8/9/96 to amend the report on the acquisition of Wedgwood Form 8-K/A filed 8/9/96 to amend the report on the sale of The Mobility Group Form 8-K/A being filed concurrently herewith to amend the report on the acquisition of Wedgwood 22 GREENBRIAR CORPORATION SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, registrant has duly caused this report to be signed on its behalf by undersigned, thereunto duly authorized. Greenbriar Corporation Date: August 15, 1996 By: Gene S. Bertcher --------------------------------- Executive Vice President Chief Financial Officer 23 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-QSB CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996 AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 2,928 0 948 0 0 10,581 62,084 683 89,761 6,474 37,672 0 266 35 40,922 89,761 0 4,366 0 3,565 0 0 798 (600) (229) (371) 696 0 0 325 .05 0
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