-----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, Dms6QeEdLprtxzUXSSfRzM5VsHrvHfTQpfrEo2BcYMTILSfh+2mEcLNu5vXLAk7w QfeG2S/3FbIQlyTEs7V91Q== 0001104659-00-000244.txt : 20000516 0001104659-00-000244.hdr.sgml : 20000516 ACCESSION NUMBER: 0001104659-00-000244 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 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: 10-Q SEC ACT: SEC FILE NUMBER: 000-08187 FILM NUMBER: 633696 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 10-Q 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-Q (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended March 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-8187 GREENBRIAR CORPORATION (Exact name of Registrant as specified in its charter) NEVADA 75-2399477 (State or other jurisdiction of (IRS Employer Incorporation or organization) Identification No.) 4265 KELLWAY CIRCLE, ADDISON, TEXAS 75001 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (972) 407-8400 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered ------------------- --------------------- Common Stock, $.01 par value American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark 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 12 months (or for such shorter period that the issuer 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 12, 2000, the issuer had outstanding approximately 7,011,000 shares of par value $.01 Common Stock. GREENBRIAR CORPORATION Index to Quarterly Report on Form 10-Q Period ended March 31, 2000 Part I: Financial Information................................................3 Item 1: Financial Statements..............................................3 Consolidated Balance Sheets.............................................3 Consolidated Statements Of Operations...................................5 Consolidated Statements Of Cash Flow....................................6 Notes To Consolidated Financial Statements..............................7 Item 2: Management's Discussion And Analysis Of Financial Condition And Results Of Operations...........................................10 Three month period ended March 31, 2000 compared to three month period ended March 31, 1999................................................11 Effect of Inflation....................................................13 Forward Looking Statements.............................................13 Part II: Other Information..................................................15 2 PART I: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS GREENBRIAR CORPORATION Consolidated Balance Sheets (Amounts in thousands)
March 31, December 31, 2000 1999 (Unaudited) ASSETS Current Assets Cash And Cash Equivalents $ 3,324 $ 8,814 Accounts Receivable-Trade 303 182 Other Current Assets 1,520 848 ------------ ------------- Total Current Assets 5,147 9,844 Deferred Income Tax Benefit 4,750 4,750 Mortgage Note Receivable, Net Of Deferred Gain Of $3,083 3,617 3,617 Property And Equipment, At Cost Land And Improvements 10,361 11,179 Buildings And Improvements 77,142 76,848 Equipment And Furnishings 6,696 6,586 ------------- ------------- 94,199 94,613 Less Accumulated Depreciation 10,644 9,888 ------------- ------------- 83,555 84,725 Deposits 3,962 3,907 Goodwill And Other Intangibles 10,437 10,439 Other Assets 2,089 2,626 ------------- ------------- $ 113,557 $ 119,908 ============= =============
3 GREENBRIAR CORPORATION Consolidated Balance Sheets - Continued (Amounts in thousands)
March 31, December 31, 2000 1999 (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current Maturities Of Long-Term Debt $ 2,587 $ 3,317 Accounts Payable - Trade 460 2,072 Accrued Expenses 1,274 1,345 Other Current Liabilities 912 678 ------------- ------------- Total Current Liabilities 5,233 7,412 Long-Term Debt 50,408 50,477 Financing Obligations 10,815 10,815 Other Long Term Liabilities 836 721 ------------- ------------- Total Liabilities 67,292 69,425 Preferred Stock Redemption Obligation 23,504 27,763 Stockholders' Equity Preferred Stock 262 289 Common Stock $.01 Par Value; Authorized, 20,000 Shares; Issued And Outstanding, 7,514 Shares 76 76 Additional Paid-In Capital 62,982 61,520 Accumulated Deficit (38,192) (36,798) ------------- ------------- 25,128 25,087 Less Stock Purchase Notes Receivable (Including $2,250 From Related Parties) (2,367) (2,367) ------------- ------------- 22,761 22,720 ------------- ------------- $ 113,557 $ 119,908 ============= =============
4 GREENBRIAR CORPORATION Consolidated Statements Of Operations (Amounts in thousands, except per share data)
For The Three Month Period Ended March 31, 2000 1999 ---------- ---------- (Unaudited) Revenue Assisted living operations $ 10,522 $ 10,159 ---------- ---------- 10,522 10,159 Operating Expenses Assisted living community operations $ 6,256 $ 6,094 Lease expense 1,288 1,285 Depreciation and amortization 979 1,014 Corporate general and administrative 1,112 1,095 ---------- ---------- 9,635 9,488 ---------- ---------- Operating income 887 671 Other income (expense) Interest and dividend income $ 115 $ 158 Interest expense (1,391) (1,439) Gain on the sale of assets - Other (68) 145 ---------- ---------- (1,236) (1,136) ---------- ---------- Loss before income taxes (349) (465) Income tax benefit - - ---------- ---------- Net loss (349) (465) Preferred stock dividend requirement (1,047) (1,169) Loss allocable to common stockholders (1,396) (1,634) ========== ========== Net loss per common share - basic and diluted $ (0.19) $ (0.22) Weighted average number of common and equivalent shares outstanding 7,514 7,275
5 GREENBRIAR CORPORATION Consolidated Statements Of Cash Flow (Amounts in thousands)
For the three month Period Ended March 31, 2000 1999 ----------- ---------- (Unaudited) (Unaudited) Cash flows from operating activities Net loss $ (349) $ (465) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 979 1,014 Gain on sale of assets (108) - Changes in operating assets and liabilities Accounts receivable (122) (284) Other current and noncurrent assets (413) 310 Accounts payable and other liabilities (1,332) (678) ----------- ---------- Net cash used in operating activities (1,345) (103) ----------- ---------- Cash flows used in investing activities Proceeds from sale of property 341 - Purchase of property and equipment (416) (428) ----------- ---------- Net cash used in investing activities (75) (428) Cash flows from financing activities Proceeds from borrowings - 76 Payments on debt (199) (409) Dividends on preferred stock (371) (405) Redemption of preferred stock Distributions to minority partners - (111) ----------- ---------- Net cash used in financing activities (4,070) (849) ----------- ---------- NET DECREASE IN CASH AND (5,490) (1,380) CASH EQUIVALENTS Cash and cash equivalents at beginning of period 8,814 6,024 ----------- ---------- Cash and cash equivalents at end of period $ 3,324 $ 4,644 =========== ==========
6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE UNAUDITED THREE MONTHS ENDED MARCH 31, 2000 AND 1999 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 inter-company 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-Q and, accordingly, do not include all of the information and footnotes required by generally accepted accounting principles. 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 three-month period ended March 31, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999. 7 NOTE B: LONG-TERM OBLIGATIONS Long-term debt is comprised of the following (in thousands):
March 31, December 31, 2000 1999 ------------ ------------ Notes payable to financial institutions maturing through 2018; fixed and variable interest rates ranging from 7.5% to 11.75%; collateralized by property, fixtures, equipment and the assignment of rents $ 25,527 $ 25,681 Notes payable to individuals and companies maturing through 2022; variable and fixed interest rates ranging from 7% to 12% collateralized by real property, personal property, fixtures, equipment and the assignment of rent 4,510 4,572 Note payable to the Redevelopment Agency of the City of Corona, California, payable into a sinking fund semi-annually in increasing amounts from $65 to $420 through May 1, 2015; variable interest rate of 4.85% at March 31, 2000; collateralized by personal property, land, fixtures and rent 7,110 7,110 Mortgage note payable to a financial institution maturing in 2003; bearing interest at 8.06%; collateralized by property and equipment 13,972 13,972 Other 1,876 2,459 ------------ ------------ 52,995 53,794 Less: current maturities 2,587 3,317 ------------ ------------ $ 50,408 $ 50,477
The Company operates two communities that are financed through sale-leaseback obligations. At the end of the tenth year of the fifteen-year leases (March 31, 2004), the Company has options to repurchase the communities for the greater of the sales prices or their current replacement costs less depreciation plus land at current fair market values. Accordingly, these transactions have been accounted for as financings, and the Company has recorded the proceeds from the sales as financing obligations, classified the lease payments as interest expense and continues to carry the communities and record depreciation. 8 NOTE C: PREFERRED STOCK The following summarizes the various classes of preferred stock at December 31, 1999, and March 31, 2000. (amounts in thousands except per share data): Series B cumulative convertible preferred stock, $.10 par value; liquidation value of $100; authorized, 100 shares; issued and outstanding, 1 share $ 1 Series D cumulative convertible preferred stock, $.10 par value; liquidation value of $3,375; authorized, issued and outstanding 675 shares 68 Series F voting cumulative convertible preferred stock, $.10 par value; liquidation value of $14,000; authorized, issued and outstanding, 1,400 shares 140 Series G cumulative convertible preferred stock, $.10 par value; liquidation value of $8,000; authorized, issued and outstanding, 530 shares 53 ------- $ 262 =======
The Series B preferred stock has a liquidation value of $100 per share and is convertible into common stock over a ten-year period at prices escalating from $25.00 per share in 1993 to $55.55 per share by 2001. Dividends, at a rate of 6%, are payable in cash or preferred shares at the option of the Company. The Series D preferred stock has a liquidation value of $5 per share and is convertible into common stock at $10.00 per share. Cumulative dividends are payable in cash at a rate of 9.5%. The Series F voting preferred stock has a liquidation value of $10.00 per share and each share is convertible into .57 shares of common stock. The Series F Shareholders have the rights, as a class, to elect one member of the Company's board of directors and to approve or reject certain transactions, including any mergers or spin-offs involving the Company. The holder has the option to convert beginning in January 2000 and must convert by January 2001. Dividends are payable in cash at a rate of 6%. The Series G preferred stock has a liquidation value of $10.00 per share and each share is convertible into .57 shares of common stock. The holder has the option to convert beginning in January 2000 and must convert by January 2001. Dividends are payable in cash at a rate of 6%. The Series F and Series G preferred shares were sold to one investor in December 1997, for $22,000,000, less selling and offering costs of $716,000. In connection with the sale, the Company entered into an agreement which provides that, on the date of conversion, if the value of the Company's common stock has not increased at an annual rate of at least 14% during the period the preferred shares are outstanding, the Company is required to make a Cash Payment 9 to the preferred stockholders equal to the market price deficiency on the shares received upon conversion. See Item 2, Liquidity and Capital Resources for additional information regarding Series F and G preferred shareholders. Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview During 1994 the Company began a series of steps to focus its business on the development, management and ownership of assisted living communities. 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. The Company began to develop its assisted living business in 1994, began construction of its first assisted living community in July 1995, and opened that community to residents on May 30, 1996. In order to increase the Company's presence in the assisted living industry, create geographic diversity and obtain experienced personnel the Company acquired Wedgwood Retirement Inns, Inc. (Wedgwood) in March 1996, American Care Communities, Inc. (American Care) in December 1996, Windsor Group LLC (Windsor) in October 1997 and Villa Residential Care Homes, Inc. (Villa) in December 1997. At December 31, 1997 the Company operated 55 communities that were owned, leased or managed for third parties. During the third quarter of 1998 the Company made several strategic decisions as to its future direction. It was decided that the Company redirect itself with the following objectives: o Terminate existing management contracts under which the Company managed communities for a fee. As of January 1, 1998 the company had two such contracts. o Reduce the percentage of residents in the Company's communities who were dependent on direct assistance from governmental agencies for payment of their fees. As of January 1, 1998 approximately 50% of the residents at the Company's communities received government assistance. o Move toward direct ownership of the communities operated by the Company as opposed to long-term lease arrangements. As of January 1, 1998 approximately 50% of the Company's communities were operated under long-term lease arrangements. o Divestiture of communities with limited future profit potential or geographic locations that were isolated from other Company operations. As of March 31, 2000 the Company had terminated its management contracts to manage for others and reduced to 29 the number of communities that it operated. In 1999 the Company disposed of two communities. In the first quarter of 2000 the Company did not renew a lease on a third community. The Company owns or has current options to purchase all but five of its communities. The percentage of residents who are private pay is approximately 90%. 10 THREE-MONTH PERIOD ENDED MARCH 31, 2000 COMPARED TO THREE-MONTH PERIOD ENDED MARCH 31, 1999. REVENUES AND OPERATING EXPENSES FROM ASSISTED LIVING OPERATIONS Revenues were $10,522,000 for the three months ended March 31, 2000 as compared to $10,159,000 for the three months ended March 31, 1999. Community operating expenses, which consist of assisted living community expenses, lease expense and depreciation and amortization, were $8,523,000 for the three months ended March 31, 2000 as compared to $8,393,000 for the three months ended March 31, 1999. While the Company has three less communities in the first quarter of 2000 than it did the same period of 1999, the revenue and operating expenses have remained consistent due to an increase in both census and average rental rates at the remaining twenty-nine communities. CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses were $1,112,000 for the three months ended March 31, 2000 compared to $1,095,000 for the three months ended March 31, 1999. INTEREST AND DIVIDEND INCOME Interest and dividend income for the three months ended March 31, 2000 was $115,000 compared to $158,000 for the comparable period in 1999. In the fourth quarter of 1999 the Company disposed of a preferred stock investment in another company that generated quarterly dividends in 1999. The decrease in interest and dividend income in 2000 is due to the absence of the dividend income from the preferred stock investment and less cash available for investment purposes. INTEREST EXPENSE Interest expense for the three months ended March 31, 2000 was $1,391,000 compared to $1,439,000 for the comparable period in 1999. The decrease in interest expense is reflective of the sale of two owned communities in 1999. GAIN ON THE SALE OF ASSETS The gain on the sale of assets for the three months ended March 31, 2000 was $108,000. The 2000 gain is attributable to the sale of undeveloped land that did not fit into the Company's strategic plans. 11 OTHER INCOME (EXPENSE) Other income (expense) for the three months ended March 31, 2000, was ($68,000) compared to $145,000 for the same period in 1999. The expense for the three months ended March 31, 2000 is attributable to a minority interest. The income for the three months ended March 31, 1999 is a result of a favorable settlement with a former employee regarding an employment agreement that was accrued for in 1998. LIQUIDITY AND CAPITAL RESOURCES At March 31, 2000, the Company had a working capital deficit of $86,000. In December 1997 the Company sold Series F and Series G preferred shares for $22,000,000 less selling and offering costs of $716,000. In connection with the sale, the Company entered into an agreement which provides that, on the date of conversion, if the value of the Company's common stock has not increased at the annual rate of at least 14% during the period the preferred shares are outstanding, the Company is required to make a cash payment ("Cash Payment") to the preferred stockholders equal to the market price deficiency on the shares received upon conversion. The 14% guaranteed return is being accreted by a charge to accumulated deficit. The amount of the Cash Payment that would be required assuming conversion at each balance sheet date will be transferred from stockholders equity to temporary equity. At March 31, 2000, a Cash Payment of $23,504,000 would have been due assuming conversion took place. In 2000 the Company made payments totaling $4,000,000 to redeem a portion of the preferred stock. In conjunction with the $4,000,000 payment noted above, Greenbriar and the preferred stockholders have an agreement whereby Greenbriar would redeem the Series F & G preferred stock from proceeds generated from the sale or refinancing of certain assets. The original agreement provides the Series F & G preferred stockholders the option to convert beginning January 2000. Management of Greenbriar believes that the preferred stockholders have no plans to exercise their early conversion rights; however there can be no assurance that such an event will not occur. The Company is proceeding with a plan to refinance its existing portfolio of communities. At current interest rates and property values the Company believes it can refinance its existing communities and, if necessary, also sell certain Communities and obtain sufficient cash to meet the potential Cash Payment. In addition the Company will seek out additional third party financing. While the Company believes it will be able to meet any potential Cash Payment requirement there can be no assurance that the Company's plan will be successful. At March 31, 2000 and since the date of issuance of the Series F and G preferred stock, the Company was not in compliance with one of the financial ratio covenants of the stock purchase agreement. The Company believes this situation stems from a computational mistake that was made at the time this particular ratio test was originally determined. 12 The Company has brought this mistake to the attention of the representative of the preferred shareholder and anticipates that the ratio will be modified to reflect the original intentions of the parties. The representatives have not indicated to the Company that they consider that a default has occurred. However, an event of default (1) permits the holder to elect a number of persons to the board of directors that will constitute 70% of the board, (2) gives the holder, upon giving the Company written notice of an event of default, the right (Put Right) to require the Company to repurchase, "out of funds legally available therefor," any or all of the preferred stock for an amount equal to the liquidation value ($22,000,000 in the aggregate) plus accumulated but unpaid dividends, plus a premium of 20%, and (3) entitles the holder to additional dividends of $1.20 per share (an aggregate of $660,000 per quarter). Any additional dividends paid pursuant to this provision would reduce the amount of the Cash Payment resulting from the aforementioned 14% guaranteed return. 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. EFFECT OF INFLATION The Company's principal sources of revenues are from resident fees from Company-owned or leased assisted living communities and management fees from communities operated by the Company for third parties. The operation of the communities is affected by rental rates that are highly dependent upon market conditions and the competitive environment in the areas where the communities are located. Compensation to employees is the principal cost element relative to the operations of the communities. 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. FORWARD LOOKING STATEMENTS "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: A number of the matters and subject areas discussed in this press release that are not historical or current facts deal with potential future circumstances, operations, and prospects. The discussion of such matters and subject areas is qualified by the inherent risks and uncertainties surrounding future expectations generally, and also may materially differ from Greenbriar Corporation's actual future experience involving any one or more of such matters and subject areas relating to interest rate fluctuations, ability to obtain adequate debt and equity financing, demand, pricing, competition, construction, licensing, permitting, construction delays on new developments contractual and licensure, and other delays on the disposition, transition, or restructuring of 13 currently or previously owned, leased or managed communities in the Company's portfolio, and the ability of the Company to continue managing its costs and cash flow while maintaining high occupancy rates and market rate assisted living charges in its assisted living communities. Greenbriar Corporation has attempted to identify, in context, certain of the factors that they currently believe may cause actual future experience and results to differ from Greenbriar Corporation's current expectations regarding the relevant matter of subject area. These and other risks and uncertainties are detailed in the Company's reports filed with the Securities and Exchange Commission (SEC), including Greenbriar Corporation's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. 14 PART II: OTHER INFORMATION ITEMS 1-4: ARE NOT APPLICABLE. 15 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: May 12, 2000 By: /s/ Gene S. Bertcher ------------------------- Executive Vice President Chief Financial Officer 16 EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Form 10-Q unaudited consolidated balance sheet as of March 31, 2000 and the unaudited consolidated statement of earnings for the three month period ended March 31, 2000 and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 3,324 0 303 0 0 5,147 94,199 10,644 113,557 5,233 50,408 0 262 76 22,423 113,557 0 10,522 0 6,256 0 0 1,391 (349) 0 0 0 0 0 (349) (.19) 0
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