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.
<PAGE>
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
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
GREENBRIAR CORPORATION
Consolidated Balance Sheets
(Amounts in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
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
============= =============
</TABLE>
3
<PAGE>
GREENBRIAR CORPORATION
Consolidated Balance Sheets - Continued
(Amounts in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
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
============= =============
</TABLE>
4
<PAGE>
GREENBRIAR CORPORATION
Consolidated Statements Of Operations
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
For The Three Month
Period Ended
March 31,
2000 1999
---------- ----------
(Unaudited)
<S> <C> <C>
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
</TABLE>
5
<PAGE>
GREENBRIAR CORPORATION
Consolidated Statements Of Cash Flow
(Amounts in thousands)
<TABLE>
<CAPTION>
For the three month
Period Ended March 31,
2000 1999
----------- ----------
(Unaudited) (Unaudited)
<S> <C> <C>
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
=========== ==========
</TABLE>
6
<PAGE>
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
<PAGE>
NOTE B: LONG-TERM OBLIGATIONS
Long-term debt is comprised of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
<S> <C> <C>
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
</TABLE>
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
<PAGE>
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):
<TABLE>
<S> <C>
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
=======
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
PART II: OTHER INFORMATION
ITEMS 1-4: ARE NOT APPLICABLE.
15
<PAGE>
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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,324
<SECURITIES> 0
<RECEIVABLES> 303
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,147
<PP&E> 94,199
<DEPRECIATION> 10,644
<TOTAL-ASSETS> 113,557
<CURRENT-LIABILITIES> 5,233
<BONDS> 50,408
0
262
<COMMON> 76
<OTHER-SE> 22,423
<TOTAL-LIABILITY-AND-EQUITY> 113,557
<SALES> 0
<TOTAL-REVENUES> 10,522
<CGS> 0
<TOTAL-COSTS> 6,256
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,391
<INCOME-PRETAX> (349)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (349)
<EPS-BASIC> (.19)
<EPS-DILUTED> 0
</TABLE>
