UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended September 30, 1998
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 (IRS Employer
incorporation or organization) Identification Number)
4265 Kellway Circle, Addison, Texas, 75001
(Address of principal executive offices)
(972) 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 November 12, 1998, the issuer had outstanding approximately 6,733,000 shares
of par value $.01 common stock.
<PAGE>
Greenbriar Corporation
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets September 30, 1998
and December 31, 1997...............................................3
Consolidated Statements of Earnings
Three & Nine Months Ended September 30, 1998 and 1997...............5
Consolidated Statements of Cash Flows
Three and Nine Months Ended September 30, 1998 and 1997.............6
Notes to Consolidated Financial Statements..........................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation.................................11
Part II. Other Information
Other Information..................................................16
Signatures.........................................................17
<PAGE>
PART I. FINANCIAL INFORMATION
- - ------------------------------
ITEM 1. FINANCIAL STATEMENTS
- - -----------------------------
Greenbriar Corporation
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
September 30, December 31,
ASSETS 1998 1997
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 7,523 $ 23
Accounts receivable-trade 1,306 1,162
Stock subscription receivable - 22,000
Other current assets 2,651 1,317
----------- -----------
Total current assets 11,480 24,502
REAL ESTATE OPERATIONS HELD FOR SALE,
at lower of cost or market 1,318 3,097
DEFERRED INCOME TAX BENEFIT 4,750 2,632
INVESTMENT IN SECURITIES, AT COST 2,046 2,025
MORTGAGE NOTE RECEIVABLE, net of
deferred gain of $3,083 3,617 3,617
PROPERTY AND EQUIPMENT, AT COST
Land and improvements 12,146 12,114
Buildings and improvements 83,177 80,758
Equipment and furnishings 6,405 5,898
Construction in progress 630 4,864
----------- -----------
102,358 103,634
Less accumulated depreciation 7,444 5,486
----------- -----------
94,914 98,148
DEPOSITS 4,845 3,619
GOODWILL AND OTHER INTANGIBLES 12,401 12,129
OTHER ASSETS 769 1,474
----------- -----------
$ 136,140 $ 151,243
=========== ===========
3
<PAGE>
Greenbriar Corporation
CONSOLIDATED BALANCE SHEETS - CONTINUED
(Amounts in thousands)
<TABLE>
<S> <C>
September 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
(Unaudited)
CURRENT LIABILITIES
Current maturities of long-term debt $ 4,511 $ 13,403
Notes payable - affiliate - 1,479
Accounts payable - trade 1,044 1,883
Accrued expenses 2,188 3,345
Other current liabilities 3,018 1,798
----------- -----------
Total current liabilities 10,761 21,908
MORTGAGE NOTES COLLATERALIZED BY
real estate held for sale 886 893
LONG-TERM DEBT 56,780 54,851
FINANCING OBLIGATIONS 10,815 10,815
OTHER LONG TERM LIABILITIES 675 259
----------- -----------
TOTAL LIABILITIES 79,917 88,726
PREFERRED STOCK REDEMPTION OBLIGATION 21,375 -
STOCKHOLDERS' EQUITY
Preferred stock 289 289
Common stock $.01 par value authorized, 20,000
shares; issued and outstanding, 7,310 shares 73 73
Additional paid-in capital 63,423 83,339
Accumulated deficit (26,422) (18,669)
----------- -----------
37,363 65,032
Less stock purchase note receivable
(including $2,438 from related parties) (2,515) (2,515)
----------- -----------
34,848 62,517
----------- -----------
$ 136,140 $ 151,243
=========== ===========
</TABLE>
4
<PAGE>
Greenbriar Corporation
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
For The Three Month For The Nine Month
Period Ended Period Ended
September 30, September 30,
1998 1997 1998 1997
-------- -------- -------- --------
(Unaudited) (Unaudited)
Revenue
Assisted living operations $ 13,888 $ 9,806 $ 42,050 $ 27,932
Other 11 57 94 121
-------- -------- -------- --------
13,899 9,863 42,144 28,053
Operating Expenses
Assisted living community $ 9,057 $ 6,625 $ 28,339 $ 18,385
Operations
Lease Expense 2,586 1,222 7,881 3,486
Depreciation and amortization 1,140 806 3,413 2,349
Corporate general and
administrative 1,003 1,249 4,082 3,952
-------- -------- -------- --------
13,786 9,902 43,715 28,172
-------- -------- -------- --------
Operating income (loss) 113 (39) (1,571) (119)
Other income (expense)
Interest and dividend income $ 269 $ 98 $ 839 $ 331
Interest expense (1,524) (1,725) (4,861) (4,894)
Other (44) (3) (890) 946
-------- -------- -------- --------
(1,299) (1,630) (4,912) (3,617)
-------- -------- -------- --------
Loss before income taxes (1,186) (1,669) (6,483) (3,736)
Income tax benefit -- (666) (2,118) (1,680)
-------- -------- -------- --------
Net loss (1,186) (1,003) (4,365) (2,056)
Preferred stock dividend
requirement (1,189) (80) (3,378) (240)
Loss allocable to common
stockholders (2,375) (1,083) (7,743) (2,296)
======== ======== ======== ========
Net loss per common share -
basic and diluted $ (0.32) $ (0.16) $ (1.06) $ (0.35)
Weighted average number
of common and equivalent
shares outstanding 7,310 6,564 7,310 6,564
5
<PAGE>
Greenbriar Corporation
CONSOLIDATED STATEMENTS OF CASH FLOW
(Amounts in thousands)
For the nine month
Period Ended September 30,
1998 1997
-------- --------
(Unaudited) (Unaudited)
Cash flows from operating activities
Net loss $ (4,365) $ (2,056)
Adjustments to reconcile net loss to net
cash used in operating activities
Discontinued operations - (792)
Depreciation and amortization 3,413 2,349
Loss on sales of assets 741 -
Changes in operating assets and
liabilities
Accounts receivable (144) (792)
Deferred income taxes (2,118) (1,480)
Other current and non-current assets (3,603) (245)
Accounts payable and other liabilities (367) (1,639)
-------- --------
Net cash used in operating activities (6,443) (4,655)
-------- --------
Cash flows from investing activities
Proceeds from sale of assets 7,492 -
Collections of notes receivable - 96
Purchase of property and equipment (5,451) (9,772)
Additions to notes receivable - (297)
Investing activities of discontinued operations - 2,734
-------- --------
Net cash provided by (used in) investing
activities 2,041 (7,239)
Cash flows from financing activities
Proceeds from borrowings 18,530 10,651
Payments on debt (26,972) (1,035)
Dividends on preferred stock (1,184) (225)
Purchase of common and preferred stock (472) (1)
Issuance of preferred stock 22,000 -
Exercise of stock options - 263
-------- --------
Net cash provided by financing activities 11,902 9,653
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,500 (2,241)
Cash and cash equivalents at beginning of period 23 2,784
-------- --------
Cash and cash equivalents at end of period $ 7,523 $ 543
======== ========
6
<PAGE>
Greenbriar Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Unaudited Three and Nine Months Ended September 30, 1998 and 1997
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
for interim 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 three and nine month periods ended September 30, 1998
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. 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, 1997.
NOTE B - ACQUISITIONS
- - ---------------------
VILLA RESIDENTIAL CARE HOMES, INC.
On December 29, 1997, Greenbriar acquired Dallas, Texas based Villa Residential
Care Homes, Inc., and related partnerships ("Villa"). Villa leased and operated
11 assisted living communities in Texas with a resident capacity of 955. A
Greenbriar subsidiary became the managing general partner of the operating
partnerships.
The purchase price was 184,476 shares of registered Greenbriar common stock and
10,464,321 operating partnership units convertible after a one year holding
period into 536,990 shares of Greenbriar common stock subject to future
registration rights. An additional 85,984 shares of common stock subject to
future registration rights may be issued within two years based on certain of
the communities meeting performance requirements. The total number of Greenbriar
common shares to be issued in the transaction will therefore be between 721,466
and 887,960. For accounting purposes, all the common shares into which the
operating units may be converted have been included in outstanding common
shares.
7
<PAGE>
WINDSOR GROUP
In October 1997, Greenbriar issued 160,000 shares of Greenbriar common stock in
the acquisition of the Windsor Group ("Windsor"). The Windsor Group owned and
operated two communities, had two under construction and had expansion underway
in one of the two existing communities. The completion of that construction will
provide the service capacity for an additional 122 residents.
The acquisitions have been accounted for as purchase transactions and Villa's
and Windsor's operations are reflected in the consolidated statement of earnings
beginning January 1, 1998 and October 1, 1997, respectively.
The following table presents pro forma unaudited consolidated results of
operations for the nine month period ended September 30, 1997, assuming that the
acquisition had taken place on January 1, 1997. 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, 1997, or of future results of operations
of the combined companies.
(Amounts in Thousands,
except per share data)
For the Nine
Month Period Ended September 30,1997
(Pro Forma)
-----------
(Unaudited)
Revenue $ 37,523
Net Loss $ (2,813)
Preferred stock dividend requirement $ (4,240)
Loss allocable to common shareholders $ (.47)
NET LOSS PER SHARE $ (.43)
NOTE C - DISPOSITION OF REAL ESTATE HELD FOR SALE
- - -------------------------------------------------
At January 1, 1998 the Company owned three shopping centers in Georgia. While
all the centers are profitable, they do not fit into the Company's long range
strategic plans and commitment to the assisted living industry. In June 1998,
the Company sold one of the shopping centers for approximately $1.5 million
dollars. The Company is actively attempting to sell the remaining two centers
which as of September 30, 1998, have an aggregate book value of $1,318,000.
NOTE D - DISPOSITION OF ASSISTED LIVING COMMUNITIES
- - ---------------------------------------------------
In June 1998, the Company sold one of its assisted living communities in North
Carolina. The proceeds of $5.8 million dollars were used to reduce long term
debt. In addition, in September 1998 the Company terminated leases on two other
communities in North Carolina and subleased one community in Oregon to a local
operator.
8
<PAGE>
See MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERTIONS for additional information regarding the disposition of real estate.
NOTE E - LONG-TERM OBLIGATIONS
- - ------------------------------
<TABLE>
<CAPTION>
Long-term debt is comprised of the following (in thousands):
<S> <C>
September 30, December 31,
1998 1997
---- ----
Notes payable to financial institutions
maturing through 2015; fixed and variable
Interest rates ranging from 7.5% to 11.75%;
collateralized by property, fixtures,
equipment and the assignment of rents $ 32,026 $ 30,090
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 rents 4,724 9,544
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
5.725% at June 30, 1997; collateralized by
personal property, land, fixtures and rents 7,405 7,495
Notes payable to related parties maturing in
2001; interest rates ranging from 9.25% to
12% - 897
Notes payable to financial institution
maturing through 2000; bearing
interest at prime plus .50% to 1.25%;
collateralized by property and equipment 2,225 8,023
Mortgage note payable to a financial
institution maturing in 2007; bearing
interest at 11.35%; collateralized by
property and equipment 14,069 11,413
Other 842 792
-------- --------
61,291 68,254
Less: current maturities 4,511 13,403
-------- --------
$ 56,780 $ 54,851
======== ========
</TABLE>
9
<PAGE>
The Company operates two communities that are financed through sale-leaseback
obligations. At the end of the tenth year of the fifteen-year leases, 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.
NOTE F - PREFERRED STOCK
- - ------------------------
The following summarizes the various classes of preferred stock at December 31,
1997, and September 30, 1998. (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, 800 shares 80
--------
$ 289
========
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 5.7 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%.
10
<PAGE>
The Series G preferred stock has a liquidation value of $10.00 per share and
each share is convertible into 5.7 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 in December 1997, for
$22,000,000, less selling and offering costs of $453,000. Payment was received
in January 1998. 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 ("the Cash Payment") to the preferred stockholders equal
to the market price deficiency on the shares received upon conversion.
The 14% guaranteed return will be 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 September 30, 1998, a Cash Payment of $21,375,000 would
have been due assuming conversion took place.
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 began construction of its first assisted living community in July 1995,
and opened that community to residents on May 30, 1996. By July 1, 1996, the
Company (excluding acquisitions) had three additional assisted living
communities under construction. 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 ("Wedgwood")in March
1996 and American Care Communities, Inc. ("American Care") in December 1996,
Windsor in October 1997, and Villa in December 1997. The acquisitions of
Wedgwood, Windsor and Villa have been accounted for as purchases, and the
historical financial statements of the Company do not include any revenues or
earnings (losses) attributed to those operations prior to the acquisition. The
American Care acquisition has been accounted for as a pooling of interests and
accordingly, the Company's financial statements have been restated to include
the accounts and operations of American Care for all periods prior to the
acquisition.
11
<PAGE>
Results of Operations
- - ----------------------
Three and nine month periods ended September 30, 1998 compared to three and nine
month periods ended September 30, 1997.
Revenues and Operating Expenses from Assisted Living Operations
- - ---------------------------------------------------------------
Revenues were $13,899,000 and $42,144,000 for the three and nine months ended
September 30, 1998 as compared to $9,863,000 and $28,053,000 for the three and
nine months ended September 30, 1997. Community operating expenses which
consists of assisted living community expenses, lease expense and depreciation
and amortization, were $12,783,000 and $39,633,000 for the three and nine months
ended September 30, 1998 as compared to $8,653,000 and $24,220,000 for the three
and nine months ended September 30, 1997.
Villa and Windsor were acquired in the fourth quarter of 1997, in transactions
that were accounted for as purchases. The revenue and related expenses for the
communities acquired through these acquisitions are not included in the amounts
for 1997. The revenues and related expenses for these communities for the three
and nine months ended September 30, 1998, were $3,539,556 and $3,660,925, and
$10,084,542 and $10,701,977 respectively. The balance or the increases are due
to the opening by Greenbriar of new communities during 1997, and increased
census at the existing communities.
Three Month Period Ended
September 30, 1998
(Amounts in thousands)
Stabilized Start-up Total
Communities Communities
(1) (2)
-------- -------- --------
Assisted Living Community Income $ 13,260 $ 639 $ 13,899
Assisted Living Community Operating
Expenses 8,521 536 9,057
-------- -------- --------
Gross Operating Income 4,739 103 4,842
Lease Expense 2,165 421 2,586
Community depreciation and
amortization 1,119 21 1,140
-------- -------- --------
Income (loss) from community
operations $ 1,455 $ (339) $ 1,116
========= ========== ========
1. Stabilized communities are those communities that have been
operating for one year or have achieved stabilized occupancy
of 95%.
2. Start-up communities are those communities that have not been
operating for one year and have not achieved a stabilized
occupancy of 95% or more.
12
<PAGE>
3. At September 30, 1998 the Company has 49 stabilized and
6 start-up communities.
4. The community operating expense does not include
corporate general and administrative expense or lease
expense for the respective communities.
Corporate General and Administrative Expenses
- - ---------------------------------------------
General and administrative expenses were $1,003,000 and $4,082,000 for the three
and nine months ended September 30, 1998 compared to $1,249,000 and $3,952,000
for the three and nine months ended September 30, 1997. The decrease in the
three month expense is a result of reorganization of the regional and corporate
office that resulted in the elimination of one of the regional offices and a
reduction in Corporate staff in the third quarter of 1998. The increase in the
nine month expense is due primarily to the growth in the number of communities.
Interest and Dividend Income
- - ----------------------------
Interest and dividend income for the three and nine months ended September 30,
1998 was $269,000 and $839,000 compared to $98,000 and $331,000 for the
comparable period in 1997. In the first quarter of 1998, the Company received
proceeds from the sale of preferred stock of $22,000,000. The increase in
interest and dividend income is due to an increase in cash available for
investment purposes.
Interest Expense
- - ----------------
Interest expense for the three and nine months ended September 30, 1998 was
$1,524,000 and $4,861,000 compared to $1,725,000 and $4,894,000 for the
comparable period in 1997. The decrease in interest expense is reflective of the
sale of one Community and thus a decrease in the mortgage debt.
Other Income (Expense)
- - ----------------------
Other income (expense) for the three and nine months ended September 30, 1998,
was ($44,000) and ($890,000) compared to ($3,000) and $946,000 for the same
period in 1997. The other income is 1997, is the result of a gain recorded on
the sale of assets. The losses recorded in 1998, are attributable to losses on
the sales of assets as well as a minority interest.
Disposition of Certain Assisted Living Communities
- - --------------------------------------------------
Greenbriar has determined that it would be advantageous to reduce the number of
communities in its portfolio that are reliant on government reimbursement
programs for the majority of their revenue. In September 1998 the Company
terminated two leases for communities located in North Carolina. (See Note D)
13
<PAGE>
Subsequent to September 30, 1998, in two unrelated transactions the Company sold
nine communities in North Carolina and eight communities in Texas. The sales
were to unrelated third parties and were effective as of October 31, 1998. As of
October 31, 1998, the total occupancy of the 17 communities was 1,020 of which
681 were residents where payments were received from governmental agencies.
After giving effect to the above transactions, Greenbriar will have a revenue
mix of 90% private pay and 10% state assistance.
From time to time the Company will dispose of communities from its portfolio.
Effective October 31, 1998 the company sold a leased community in Florida. The
community had a capacity of 60 residents.
All of the disposed communities were held by Greenbriar through long term leases
at rates ranging from 9.72% to 10.65%. Each of these leases had escalation
clauses which increase the lease cost by as much as 30 % during the remainder of
the lease. At the conclusion of the above transactions the Company will own 21
Communities and lease 11 Communities. The Company has purchase options for eight
of the leases and a right of first refusal on one Community.
Liquidity and Capital Resources
At September 30, 1998, the Company had working capital of $719,000.
In December 1997, the Company sold Series F and Series G preferred shares for
$22,000,000 less selling and offering costs of $453,000. Payment was received in
January 1998.
Throughout 1997, and into 1998, the Company has been refinancing certain of its
long term debt. In July 1997 and January 1998, the Company refinanced the debt
on a total of six of its communities resulting in a lower interest rate and
additional working capital of $2,800,000 and $1,935,000 respectively.
In June 1998, the Company sold an assisted living community in North Carolina
for approximately $5,800,000. The proceeds were used to reduce long term debt.
The agreements between the Company and the Series F and G preferred shareholders
contain certain financial covenants, which the Company must maintain. The
Company believes that certain of the required calculations are not clearly
defined in the agreement. Further, certain events subsequent to the issuance of
the preferred stock including a decline in the Company's stock price and the
sale, by the Company, of 21 Communities, have changed the factors used in
determining compliance with such covenants.
Greenbriar does not believe it is currently in default, however it has asked the
preferred stockholders to review and amend certain of the covenants. The
preferred stockholders have agreed to review issues raised by the Company.
The agreements between the Company and the Series F and G preferred shareholders
14
<PAGE>
also provide for Greenbriar to obtain approval prior to the sale or transfer of
five or more Communities. Greenbriar has effective November 1, 1998 exceeded the
limit of five. Greenbriar has been consulting with the Series F and G preferred
shareholders throughout the negotiations and anticipates approval once all the
legal documents are completed and reviewed.
Greenbriar believes that it will be successful in clarifying any existing
covenant issues and will receive formal approval for the sale of the
Communities. However, should it be determined that Greenbriar is in default of
the terms of the agreement and should such default not be waived, the preferred
shareholders could exercise their rights which would include (a) additional
dividends of $1.20 per share, (b) a requirement that Greenbriar repurchase the
outstanding preferred stock or (c) an exercise of conversion rights for
Greenbriar common stock.
As of September 30, 1998, 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:
Health Care REIT, Inc. has issued a commitment to provide $90 million to acquire
and pay 100% of the construction costs of assisted living communities to be
leased to the Company. The term of the leases will be the maximum term available
for operating lease treatment but not less than 13 years plus three five-year
renewal options. The credit facility will expire on December 31, 2000. A 1%
commitment fee is required, as each lease is entered into. The Company will have
the option to purchase each community 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 community,
and subordination of management fees and rentals from subtenants.
In 1995 Investors Real Estate Trust ("IRET") issued a commitment to provide 100%
of the construction costs up to $2,810,000 for Sweetwater Springs in Lithia
Springs, Georgia that opened in October 1996. Upon completion the community was
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 community consisting of 16 Alzheimer's
special care units. The Company has an option to purchase the Community at fair
market value during the first nine months of the fourteenth year of the lease.
The lease is secured by the community.
Construction of the second phase has been deferred indefinitely. Though some of
the additional funding has been utilized, the remaining funds available are
considered sufficient to complete the second phase.
The Company believes it has adequate resources to complete its communities
currently under construction and development and 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 communities.
15
<PAGE>
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.
Forward Looking Statements
- - --------------------------
Certain statements included in this Management's 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 or be realized 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.
PART II. OTHER INFORMATION
- - ---------------------------
Not applicable
<PAGE>
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: November 12, 1998 By: /s/ Gene S. Bertcher
----------------------------
Executive Vice President
Chief Financial Officer
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Form 10-Q unaudited consolidated balance sheet as of
September 30, 1998 and the unaudited consolidated statement of
earnings for the nine month period ended September 30, 1998
and is qualified in its entirety by reference to such financials
statements.
</LEGEND>
<CIK> 0000105744
<NAME> Greenbrier Corporation
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 7,523
<SECURITIES> 0
<RECEIVABLES> 1,306
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,480
<PP&E> 102,358
<DEPRECIATION> 7,444
<TOTAL-ASSETS> 136,140
<CURRENT-LIABILITIES> 10,761
<BONDS> 56,780
0
289
<COMMON> 73
<OTHER-SE> 34,486
<TOTAL-LIABILITY-AND-EQUITY> 136,140
<SALES> 0
<TOTAL-REVENUES> 42,144
<CGS> 0
<TOTAL-COSTS> 43,715
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,861
<INCOME-PRETAX> (6,483)
<INCOME-TAX> 2,118
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,365)
<EPS-PRIMARY> (1.06)
<EPS-DILUTED> 0
</TABLE>
