-----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, CakXP3bmPpKhkf2qw7JNgFfPQ+MdYSIcAPwBwygiHWg3BK6k+LbY+iFNKHr/vSaS az//XYMYJq4C2GuVuJf03w== 0001029869-98-000368.txt : 19980312 0001029869-98-000368.hdr.sgml : 19980312 ACCESSION NUMBER: 0001029869-98-000368 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980103 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980311 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDITRUST OPERATING CO CENTRAL INDEX KEY: 0000313749 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-RACING, INCLUDING TRACK OPERATION [7948] IRS NUMBER: 963419438 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-08132 FILM NUMBER: 98563173 BUSINESS ADDRESS: STREET 1: 197 FIRST AVE STREET 2: STE 100 CITY: NEEDHAM STATE: MA ZIP: 02194 BUSINESS PHONE: 7814538062 MAIL ADDRESS: STREET 1: MEDITRUST OPERATING CO STREET 2: 197 FIRST AVENUE SUITE 100 CITY: NEEDHAM STATE: CA ZIP: 91066-0808 FORMER COMPANY: FORMER CONFORMED NAME: SANTA ANITA OPERATING CO DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDITRUST CORP CENTRAL INDEX KEY: 0000314661 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-RACING, INCLUDING TRACK OPERATION [7948] IRS NUMBER: 953520818 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-08131 FILM NUMBER: 98563174 BUSINESS ADDRESS: STREET 1: MEDITRUST CORP STREET 2: 197 FIRST AVE STE 300 CITY: NEEDHAM STATE: MA ZIP: 02194 BUSINESS PHONE: 7814336000 MAIL ADDRESS: STREET 1: MEDITRUST CORP STREET 2: 197 FIRST AVENUE SUITE 300 CITY: NEEDHAM STATE: MA ZIP: 02194 FORMER COMPANY: FORMER CONFORMED NAME: SANTA ANITA REALTY ENTERPRISES INC DATE OF NAME CHANGE: 19920703 8-K 1 FETS ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 8-K Current Report Pursuant to Section 13 or 15(d) of THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): January 3, 1998 Commission file number 0-9109 Commission file number 0-9110 MEDITRUST CORPORATION MEDITRUST OPERATING COMPANY --------------------- --------------------------- (Exact name of registrant as specified (Exact name of registrant as specified in its charter) in its charter) Delaware Delaware -------- -------- (State or other jurisdiction of (State or other jurisdiction of incorporation or organization) incorporation or organization) 95-3520818 95-3419438 ---------- ---------- (I.R.S. Employer Identification No.) (I.R.S Employer Identification No.) 197 First Avenue, Suite 300 197 First Avenue, Suite 100 Needham Heights, Massachusetts 02194-9127 Needham Heights, Massachusetts 02194-9127 - ----------------------------------------- ----------------------------------------- (Address of principal executive (Address of principal executive offices including zip code) offices including zip code) (781) 433-6000 (781) 453-8062 -------------- -------------- (Registrant's telephone number, (Registrant's telephone number, including area code) including area code)
ITEM 5. OTHER EVENTS THE MEDITRUST COMPANIES INTRODUCTION TO PRO FORMA FINANCIAL STATEMENTS On January 3, 1998, La Quinta Inns, Inc. ("La Quinta"), Meditrust Corporation and Meditrust Operating Company (collectively known as, "The Meditrust Companies") entered into an agreement and plan of merger (the "La Quinta Merger Agreement") pursuant to which La Quinta will merge with and into Meditrust Corporation being the surviving corporation (the "Merger"). As a result of the merger, Meditrust Corporation will acquire all of the assets and liabilities of La Quinta and Meditrust Corporation will assume approximately $900 million of La Quinta's existing indebtedness. La Quinta is currently one of the largest owners/operators of mid-priced hotels, without food and beverage, facilities in the United States, having over 270 inns and hotels primarily located in the western and southern United States. La Quinta was formed and incorporated in Texas in 1968 originally as La Quinta Motor Inns, Inc. La Quinta became a publicly traded entity in 1972 and adopted its present name in 1992. Pursuant to the terms of the La Quinta Merger Agreement, shareholders of La Quinta have the option to elect to receive, either (i) a combination of common stock of The Meditrust Companies (the "Paired Shares") and the earnings and profit distribution referred to below, or (ii) cash, subject to the amount of aggregate cash payable to La Quinta shareholders being limited to approximately $521 million (representing approximately 24% to 28% of the total merger consideration depending on the Meeting Date Price described below). The stock consideration will be payable in Paired Shares under an exchange ratio determined based on the average closing price of the Paired Shares for 20 randomly determined trading days in a 30-day period ending the seventh day prior to La Quinta's shareholder meeting called to consider the Merger (the "Meeting Date Price"). As of the date of the pro forma financial statements presented herein, the meeting date price is anticipated to be $32.00. The La Quinta Merger Agreement provides that the La Quinta shareholders electing to receive stock considerations will receive Paired Shares in an amount, based on the Meeting Date Price, equal to the difference between $26.00 and the earnings and profit distribution to be received per La Quinta share, so long as the Meeting Date Price is between $34.20 and $41.80. La Quinta shareholders electing to receive stock consideration will also receive the earnings and profit distribution so long as they hold the Paired Shares on the applicable record date. The earnings and profit distribution is expected to be declared immediately prior to the La Quinta Merger, payable to all shareholders of record of The Meditrust Companies on a date to be determined by Meditrust between the fifteenth and the forty-fifth day following the Merger and payable within fifteen days of such record date. If the Meeting Date Price is greater than or equal to $41.80 but less than or equal to $45.60, the exchange ratio for each share of La Quinta common stock exchanged into Paired Shares will be 0.6220, reduced by the consideration to be received in the earnings and profit distribution per La Quinta share (resulting in total consideration based on the Meeting Date Price ranging from $26.00 to $28.36 per share of La Quinta common stock, including the earnings and profit distribution, as the Meeting Date Price increases through this range). If the Meeting Date Price is greater than $45.60, then each La Quinta share will be entitled to receive $28.36 in total consideration based on the Meeting Date Price, comprised of Paired Shares and the earnings and profit distribution referred to above. If the Meeting Date Price is less than $34.20 but greater than or equal to $30.40, the exchange ratio for each share of La Quinta common stock exchanged into Paired Shares will be 0.7602, reduced by the amount to be received in the earnings and profit distribution per La Quinta share (resulting in total consideration based on the Meeting Date Price ranging from $26.00 to $23.11 per share of La Quinta common stock, including the earnings and profit distribution, as the Meeting Date Price decreases through this range). If the Meeting Date Price is below $30.40, La Quinta will have the right to terminate the Merger Agreement under certain circumstances, subject to a "top-up" right exercisable by The Meditrust Companies, which is designed to return total consideration per La Quinta share based on the Meeting Date Price to at least $23.11 inclusive of the earning and profit distribution. If the Meeting Date Price is below $28.50, La Quinta will have the unilateral right to terminate the Merger Agreement. The La Quinta Merger is subject to various conditions including, without limitation, approval of the Merger by two-thirds of the outstanding shares of La Quinta common stock, by a majority of the outstanding shares of The Meditrust Companies, and regulatory agencies. 1 In addition, on January 11, 1998, The Meditrust Companies and Cobblestone Holdings, Inc. ("Cobblestone") entered into an Agreement and Plan of Merger (the "Cobblestone Merger Agreement" and together with the Merger with La Quinta, the "La Quinta/Cobblestone Mergers"), pursuant to which Cobblestone will merge with and into The Meditrust Companies. Cobblestone is a privately held company and one of the leading owners/operators of golf courses in the United States. Cobblestone has a portfolio of 25 facilities with 29 courses in major golf markets in Arizona, California, Florida, Georgia, Texas and Virginia. Under the terms of the Cobblestone Merger Agreement, The Meditrust Companies will acquire all of the outstanding common stock of Cobblestone for Paired Shares of The Meditrust Companies, and all of the outstanding preferred stock of Cobblestone for either Paired Shares of The Meditrust Companies and/or, at The Meditrust Companies' option, cash, with an aggregate value of approximately $241 million. The number of Paired Shares of The Meditrust Companies to be issued in exchange for each outstanding share of common and preferred stock of Cobblestone, is expected to be 7,531 shares using $32.00 as the stock price as of the calculation date, are subject to adjustment in the manner described in the Cobblestone Merger Agreement. In addition, approximately $154,000,000 of Cobblestone debt and associated costs will be refinanced or assumed as a condition of the closing. The Cobblestone Merger is subject to customary closing conditions. The Pro Forma Financial Statements have been adjusted for the purchase method of accounting whereby the hotels, golf resorts and related improvements and other assets and liabilities owned by La Quinta and Cobblestone are adjusted to estimated fair market value. The fair market value of the assets and liabilities of La Quinta and Cobblestone have been determined based upon preliminary estimates and are subject to change as additional information is obtained. Management does not anticipate that the preliminary allocation of purchase costs based upon the estimated fair market value of the assets and liabilities of La Quinta and Cobblestone will materially change; however, the allocation of purchase costs is subject to final determination based upon estimates and other evaluations of fair market value as of the close of the transactions. Therefore, the allocations reflected in the following unaudited Pro Forma Financial Statements may differ from the amounts ultimately determined. The Pro Forma Financial Statements have also been adjusted for the issuance of 8,500,000 shares of Series A Non-Voting Convertible Common Stock by The Meditrust Companies on February 27, 1998. The estimated aggregate proceeds is $272 million, net of transaction costs. The net proceeds of this transaction will be used to finance certain costs associated with the La Quinta/Cobblestone Mergers and to finance ongoing investments for health care financing transactions. The following unaudited Pro Forma Condensed Statements of Operations presented assume the La Quinta/Cobblestone Mergers had been consummated on terms set forth in the La Quinta/Cobblestone Merger Agreements as of or at the beginning of the period presented. In addition, the unaudited Pro Forma Condensed Combined Balance Sheet presented assumes the La Quinta/Cobblestone Mergers had occurred on December 31, 1997. The following unaudited Pro Forma Condensed Statements of Operations for the year ended December 31, 1997 of The Meditrust Companies, Meditrust Corporation and Meditrust Operating Company are derived from historical financial information and pro forma information based in part upon the Combined and separate Statements of Income of The Meditrust Companies, filed with The Meditrust Companies' Form 8-K for the year ended December 31, 1997, and in part upon the Consolidated Statements of Operations of La Quinta Inns, Inc. filed with Form 8-K for the year ended December 31, 1997 and the Consolidated Statements of Operations of Cobblestone Holdings, Inc. filed on Form 10-K for the year ended September 30, 1997. The following unaudited Pro Forma Condensed Combined Balance Sheet is based in part upon The Meditrust Companies Combined and separate Balance Sheets as of December 31, 1997 and should be read in conjunction with the La Quinta Inns, Inc. and Cobblestone Holdings, Inc's financial statements as of December 31, 1997 and September 30, 1997, respectively. In management's opinion, all material adjustments necessary to reflect the effects of the La Quinta/Cobblestone Mergers have been made. 2 The following unaudited Pro Forma Condensed Statements of Operations are not necessarily indicative of what the actual results of The Meditrust Companies would have been assuming such transactions had been completed as of the beginning of the period presented, nor do they purport to represent the results for future periods. The following unaudited Pro Forma Condensed Combined Balance Sheet is not necessarily indicative of what the actual financial position would have been assuming the La Quinta/Cobblestone Mergers had been completed as of December 31, 1997, nor does it purport to represent the future financial position of The Meditrust Companies. 3 THE MEDITRUST COMPANIES PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF DECEMBER 31, 1997 (UNAUDITED)
The Meditrust La Quinta Companies La Quinta Cobblestone Pro Forma (Historical) (A) (Historical) (B) (Historical) (C) Adjustments ------------------ ------------------ ------------------ ------------------- (In thousands) ASSETS Real estate investments .................. $2,935,772 $1,449,215 $ 156,229 $ 1,083,632(D) Cash and cash equivalents ................ 43,732 2,110 3,519 -- Trade, notes and other receivables ....... 29,439 15,909 9,141 42,000 (E) Deferred charges, prepaid expenses, inventory and other assets .............. 120,055 24,977 9,770 (5,047)(F) Deferred income taxes .................... -- 9,813 -- (9,813)(G) Intangible assets ........................ -- -- 3,611 112,543 (H) Goodwill ................................. 194,893 -- -- 425,269 (I) ---------- ---------- --------- ------------ Total assets ........................... $3,323,891 $1,502,024 $ 182,270 $ 1,648,584 ========== ========== ========= ============ LIABILITIES AND SHAREHOLDERS' EQUITY Debt ..................................... $1,377,438 $ 901,685 $ 129,565 $ 955,440(J) Accounts payable, accrued expenses and other liabilities ................... 120,213 126,893 15,549 -- Deferred income taxes .................... 501 38,253 4,184 (38,253)(G) Minority interest ........................ -- 2,667 337 -- ---------- ---------- --------- ------------ Total liabilities ...................... 1,498,152 1,069,498 149,635 917,187 ---------- ---------- --------- ------------ Redeemable preferred stock ............... -- -- 42,241 -- Shareholders' equity: Series A Non-Voting Convertible Common Stock ............................ -- -- -- -- Common stock ............................. 17,626 8,501 17 140 (K) Additional paid-in-capital ............... 2,001,086 249,612 5,389 1,230,670 (L) Unearned officer's compensation .......... -- (1,016) -- 1,016 (M) Retained earnings (loss) ................. -- 270,462 (15,012) (270,462)(N) Distributions in excess of net income..... (192,973) -- -- (325,000)(O) Treasury stock, at cost .................. -- (95,033) -- 95,033 (M) ---------- ---------- --------- ------------ Total shareholders' equity ............. 1,825,739 432,526 (9,606) 731,397 ---------- ---------- --------- ------------ Total liabilities and shareholders' equity ................................ $3,323,891 $1,502,024 $ 182,270 $ 1,648,584 ========== ========== ========= ============ Cobblestone Total Pro Forma Other Pro Forma Pro Forma Total Adjustments Adjustments Adjustments Pro Forma -------------------- ------------------------ -------------- ------------- (In thousands) ASSETS Real estate investments .................. $ 73,628(AA) $ -- $1,157,260 $5,698,476 Cash and cash equivalents ................ -- -- -- 49,361 Trade, notes and other receivables ....... -- -- 42,000 96,489 Deferred charges, prepaid expenses, inventory and other assets .............. -- -- (5,047) 149,755 Deferred income taxes .................... -- -- (9,813) -- Intangible assets ........................ 7,389 (BB) -- 119,932 123,543 Goodwill ................................. 168,164 (CC) -- 593,433 788,326 ------------ ------------ ---------- ---------- Total assets ........................... $ 249,181 $ -- $1,897,765 $6,905,950 ============ ============ ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Debt ..................................... $ 45,000(DD) $ (272,000)(AAA) $ 728,440 $3,137,128 Accounts payable, accrued expenses and other liabilities ................... -- -- -- 262,655 Deferred income taxes .................... (4,184)(EE) -- (42,437) 501 Minority interest ........................ -- -- -- 3,004 ------------ ------------ ---------- ---------- Total liabilities ...................... 40,816 (272,000) 686,003 3,403,288 ------------ ------------ ---------- ---------- Redeemable preferred stock ............... (42,241)(FF) -- (42,241) -- Shareholders' equity: Series A Non-Voting Convertible Common Stock ............................ -- 1,700 (AAA) 1,700 1,700 Common stock ............................. 1,489 (GG) -- 1,629 27,773 Additional paid-in-capital ............... 234,105 (HH) 270,300 (AAA) 1,735,075 3,991,162 Unearned officer's compensation .......... -- -- 1,016 -- Retained earnings (loss) ................. 15,012 (II) -- (255,450) -- Distributions in excess of net income..... -- -- (325,000) (517,973) Treasury stock, at cost .................. -- -- 95,033 -- ------------ ------------ ---------- ---------- Total shareholders' equity ............. 250,606 272,000 1,254,003 3,502,662 ------------ ------------ ---------- ---------- Total liabilities and shareholders' equity ................................ $ 249,181 $ -- $1,897,765 $6,905,950 ============ ============ ========== ==========
See accompanying notes to the unaudited pro forma condensed combined balance sheet. 4 The Meditrust Companies Notes to Pro Forma Condensed Combined Balance Sheet as of December 31, 1997 (In Thousands, Except Per Share Amounts) (Unaudited) (A) Represents the historical combined balance sheet of Meditrust Corporation and Operating Company as of December 31, 1997. (B) Represents the historical balance sheet of La Quinta as of December 31, 1997. (C) Represents the historical balance sheet of Cobblestone as of September 30, 1997. Adjustments for the La Quinta Transaction: (D) Represents adjustments for the purchase method of accounting whereby the investment in La Quinta hotel properties is adjusted to its estimated fair market value. (E) Represents adjustment for the purchase method of accounting to record a receivable associated with the tax benefit provided from the realization of a preacquisition net operating loss carry back resulting from the buyout of La Quinta stock options and restricted stock. (F) Represents adjustments for the purchase method of accounting to write off deferred costs of $10,047 and record $5,000 of deferred loan costs expected to be incurred in connection with increasing the availability under The Meditrust Companies' Revolving Credit Facility. (G) Represents adjustments for the purchase method of accounting to write off the deferred tax assets and liabilities of La Quinta. (H) Represents adjustments for the purchase method of accounting whereby the tradename, assembled work force and customer reservation system of La Quinta are adjusted to their estimated fair market values. (I) Represents purchase consideration in excess of the fair market value of the net assets of La Quinta. (J) Represents additional borrowings assumed to be incurred in connection with the Merger as follows: Cash consideration for La Quinta shares .................................................. $414,440 Assumed current and accumulated earnings and profits distribution ........................ 325,000 Buyout of La Quinta stock options and restricted stock ................................... 132,000 Estimated transaction costs .............................................................. 37,000 Estimated employment-related costs ....................................................... 32,000 Estimated call premium for retirement of $120,000 La Quinta 9.25% Senior Subordinated Notes plus interest on defeasance of debt .............................................. 10,000 Estimated loan costs in connection with increasing the availability under The Meditrust Companies' Revolving Credit Facility .................................................... 5,000 -------- Total additional borrowings .............................................................. $955,440 ========
(K) Represents adjustments to record the exchange of La Quinta common stock for Paired Shares of The Meditrust Companies. Pursuant to the La Quinta Merger Agreement, La Quinta shareholders may elect to receive either (i) $26.00 cash per share of La Quinta common stock; or (ii) Paired Shares, for which the Exchange Ratio, as defined in the La Quinta Merger Agreement, is based upon the Meeting Date Price of a Paired Share of The Meditrust Companies. For purposes of these statements, the Meeting Date Price is assumed to be $32.00 and the earnings and profits distribution is assumed to be $325,000. At December 31, 1997, there were 77,137 shares of La Quinta common stock outstanding. Assuming approximately 15,940 outstanding shares of La Quinta are exchanged for cash, the remaining 61,197 shares will be exchanged for 43,205 Paired Shares of The Meditrust Companies. The change in common stock is summarized as follows: 5 Paired Shares issued in connection with the Merger ......... 43,205 Par value of each Paired Share ............................. $ 0.20 -------- Increase in common stock ................................... 8,641 Less: La Quinta historical common stock .................... (8,501) -------- Adjustment to common stock ................................. $ 140 ========
(L) Represents adjustments to eliminate La Quinta's historical additional paid-in-capital and record equity based upon the number of Paired Shares issued in connection with the Merger as follows: Consideration for La Quinta outstanding shares (61,197 shares of La Quinta common stock for $24.33 per share in Paired Shares and earnings and profits distribution; 15,940 shares for $26.00 cash per share) .............................................................. $1,903,363 Less: 15,940 shares of La Quinta common stock to be exchanged for cash ................... (414,440) ---------- Remaining consideration .................................................................. 1,488,923 Book value of La Quinta's additional paid-in-capital ..................................... (249,612) Increase in common stock ................................................................. (8,641) ---------- Adjustment to additional paid-in-capital ................................................. $1,230,670 ==========
(M) Represents adjustments to eliminate unearned officer's compensation and treasury stock of La Quinta of $1,016 and $95,033, respectively. (N) Represents adjustment to eliminate La Quinta's historical retained earnings of $270,462. (O) Represents adjustment to record the distribution of current and accumulated earnings and profits, which is assumed to be $325,000, to the shareholders of The Meditrust Companies after consummation of the Merger. The estimated earnings and profits distribution has been presented as if the transaction had been consummated based on the terms and assumptions set forth in the La Quinta Merger Agreement. For a discussion of the assumed amount of the earnings and profits distribution. Adjustments for the Cobblestone Transaction (AA) Represents adjustments for the purchase method of accounting whereby the investment in Cobblestone golf properties is adjusted to its estimated fair market value. (BB) Represents adjustments for the purchase method of accounting to write off certain intangible assets of Cobblestone of $3,611 and record the tradename, assembled work force and other intangible assets of $11,000 acquired in the Cobblestone Merger at their estimated fair market values. (CC) Represents purchase consideration in excess of the fair market value of the net assets of Cobblestone. (DD) Represents additional borrowings assumed to be incurred in connection with the Cobblestone Merger as follows: Estimated cash required for tender premium to retire outstanding Cobblestone debt $15,000 Buyout of Cobblestone stock options .............................................. 13,000 Estimated transaction costs ...................................................... 12,000 Estimated employment-related costs ............................................... 5,000 ------- Total additional borrowings ...................................................... $45,000 =======
(EE) Represents adjustment for the purchase method of accounting to write off the deferred tax liability of Cobblestone. (FF) Represents the exchange of 5,220 shares of redeemable preferred stock of Cobblestone with a historical value of $42,241 for 1,346 Paired Shares of The Meditrust Companies based on a redemption price of $8.25 per redeemable preferred share and an assumed exchange price of $32.00 per Paired Share of The Meditrust Companies. (GG) Represents adjustments to record the exchange of redeemable preferred stock and common stock of Cobblestone for Paired Shares. Pursuant to the Cobblestone Merger Agreement, each share of outstanding Cobblestone common stock will be converted into the right to receive Paired Shares based on the Exchange Ratio, as defined in the Cobble- 6 stone Merger Agreement, and each share of outstanding Cobblestone redeemable preferred stock will be converted into $8.25 per share payable in cash, or Paired Shares. At the balance sheet date, The Meditrust Companies will exchange 7,530 Paired Shares for 5,220 and 1,722 shares of redeemable preferred stock and common stock of Cobblestone, respectively, based upon an assumed exchange price of $32.00. The increase in common stock is summarized as follows: Paired Shares issued in connection with the Cobblestone Merger ......... 7,531 Par value of each Paired Share ......................................... $ 0.20 ------ Increase in common stock ............................................... 1,506 Less: Cobblestone's historical common stock ............................ (17) ------ Adjustment to common stock ............................................. $1,489 ======
(HH) Represents adjustments to eliminate Cobblestone's historical additional paid-in capital and record equity based upon the number of Paired Shares issued in the Cobblestone Merger as follows: Purchase consideration for outstanding shares of Cobblestone redeemable preferred stock and common stock (5,220 redeemable preferred shares at $8.25 per share and 1,722 common shares at $114.94 per share) ............................................................ $241,000 Book value of Cobblestone's additional paid-in-capital ................................... (5,389) Increase in common stock ................................................................. (1,506) -------- Adjustment to additional paid-in-capital ................................................. $234,105 ========
(II) Represents the adjustment to eliminate Cobblestone's historical retained loss of $15,012. Other Pro Forma Adjustments: (AAA) Represents the issuance of 8,500 shares of Series A Non-Voting Convertible Common Stock of The Meditrust Companies in a Forward Equity Transaction, net of transaction costs, the proceeds of which will be used to finance certain costs associated with the La Quinta/Cobblestone Mergers and to finance ongoing investments for healthcare financing transactions. For purposes of these statements, the issuance price is assumed to be $32.625 per share and each share has an effective dividend rate of LIBOR plus 75 basis points. 7 THE MEDITRUST COMPANIES PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED)
The Meditrust Operating Meditrust Corporation Company Eliminating Companies Pro Forma (A) Pro Forma (B) Entries Pro Forma --------------- --------------- ------------------- ------------ (In thousands, except per share amounts) Revenue: Rental ............................................. $ 137,868 $ -- $ -- $137,868 Rent from Operating Company ........................ 280,270 -- (280,270)(C) -- Interest ........................................... 151,315 -- (193)(D) 151,122 Horse racing revenue ............................... -- 5,228 -- 5,228 Hotel revenue ...................................... -- 494,494 -- 494,494 Restaurant rent, food & beverage revenue ........... -- 21,158 -- 21,158 Golf club revenue .................................. -- 65,515 -- 65,515 Other .............................................. -- 3,480 -- 3,480 --------- -------- ----------- -------- Total revenue ..................................... 569,453 589,875 (280,463) 878,865 Expenses: Interest expense ................................... 200,052 209 (193)(D) 200,068 Amortization of goodwill ........................... 31,536 135 -- 31,671 Depreciation, amortization & asset retirements ...................................... 142,642 6,438 -- 149,080 General and administrative ......................... 10,111 22,413 -- 32,524 Rental expense due to Meditrust .................... -- 280,270 (280,270)(C) -- Horse racing operations ............................ -- 4,263 -- 4,263 Hotel and restaurant operations .................... -- 220,769 -- 220,769 Golf club operations ............................... -- 55,952 -- 55,952 Property operations ................................ 26,786 -- -- 26,786 Net gain on property transactions .................. -- (8,808) -- (8,808) Partners' equity in earnings ....................... -- 860 -- 860 --------- -------- ----------- -------- Total expenses .................................... 411,127 582,501 (280,463) 713,165 --------- -------- ----------- -------- Income before income taxes .......................... 158,326 7,374 -- 165,700 Income tax provision ................................ -- 2,802 -- 2,802 --------- -------- ----------- -------- Income before extraordinary items ................... 158,326 4,572 -- 162,898 --------- -------- ----------- -------- Income allocated to Series A Non-Voting Convertible Common Stock ......................... 17,590 -- -- 17,590 --------- -------- ----------- -------- Income available for Paired Common Shares ........... $ 140,736 $ 4,572 $ -- $145,308 ========= ======== =========== ======== Basic earnings per share ............................ $ 1.11 $ 0.04 $ 1.15 Basic weighted average shares outstanding ........... 127,002 126,805 126,805 Diluted earnings per share .......................... $ 1.10 $ 0.04 $ 1.14 Diluted weighted average shares outstanding ......... 127,456 126,805 127,259
See accompanying notes to the unaudited pro forma condensed combined statement of operations. 8 The Meditrust Companies Notes to Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 1997 (In Thousands, Except Per Share Amounts) (Unaudited) (A) Represents the pro forma results of operations of Meditrust Corporation for the year ended December 31, 1997 as adjusted for the Merger and the Cobblestone Merger. (B) Represents the pro forma results of operations of Operating Company for the year ended December 31, 1997 as adjusted for the Merger and the Cobblestone Merger. (C) Represents the elimination of rental income and expense related to the race track, hotels and golf course properties leased by Operating Company from Meditrust. (D) Represents the elimination of interest income and expense related to the operating note between Meditrust Corporation and Operating Company. 9 MEDITRUST CORPORATION PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED)
Meditrust La Quinta Cobblestone Other Meditrust Corporation Merger Merger Pro Forma Corporation Historical (A) Adjustments (B) Adjustments (C) Adjustments Pro Forma ---------------- ----------------- ----------------- -------------------- ------------- (In thousands, except per share amounts) Revenue: Rental ................................... $ 137,868 $ -- $ -- $ -- $ 137,868 Rent from Operating Company .............. 740 258,010 (D) 21,520 (D) -- 280,270 Interest ................................. 151,315 -- -- -- 151,315 --------- ----------- ---------- ------------ --------- Total revenue ........................... 289,923 258,010 21,520 -- 569,453 Expenses: Interest expense ......................... 87,412 119,540 (E) 13,500 (F) (20,400) (J) 200,052 Amortization of goodwill ................. 2,214 20,914 (G) 8,408 (G) -- 31,536 Depreciation and amortization ............ 26,954 107,383 (H) 8,305 (H) -- 142,642 General and administrative ............... 10,111 -- -- -- 10,111 Property operations ...................... 220 23,732 (I) 2,834 (I) -- 26,786 --------- ----------- ---------- ------------ --------- Total expenses .......................... 126,911 271,569 33,047 (20,400) 411,127 --------- ----------- ---------- ------------ --------- Income before extraordinary items ......... 163,012 (13,559) (11,527) 20,400 158,326 --------- ----------- ---------- ------------ --------- Income allocated to Series A Non-Voting Convertible Common Stock ........................... -- -- -- 17,590 (K) 17,590 --------- ----------- ---------- ------------ --------- Income available for Paired Common Shares .......................... $ 163,012 $ (13,559) $ (11,527) $ 2,810 $ 140,736 ========= =========== ========== ============ ========= Basic earnings per share .................. $ 2.14 $ 1.11 Basic weighted average shares outstanding ............................ 76,267 127,002 Diluted earnings per share ................ $ 2.12 $ 1.10 Diluted weighted average shares outstanding .............................. 76,721 127,456
See accompanying notes to the unaudited pro forma condensed consolidated statement of operations. 10 Meditrust Corporation Notes to Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 1997 (In Thousands, Except Per Share Amounts) (Unaudited) (A) Represents the historical statement of operations of Meditrust Corporation for the year ended December 31, 1997. (B) Represents adjustments to Meditrust Corporation's results of operations assuming the Merger had occurred as of January 1, 1997. (C) Represents adjustments to Meditrust Corporation's results of operations assuming the Cobblestone Merger had occurred as of January 1, 1997. (D) Represents the pro forma lease revenue from Operating Company to Meditrust Corporation for the use of assets that Meditrust Corporation will have ownership of subsequent to the La Quinta/Cobblestone Mergers. The respective lease revenue is calculated based upon the historical revenue and expenses of the assets for the period presented. (E) Represents adjustments to historical interest expense of Meditrust Corporation based on the Merger as follows: Reclassification of historical interest expense from Operating Company ................ $49,186 Adjustment to reflect the increase in interest expense as a result of additional borrowings of $487,674 at an assumed rate of 7.5% partially offset by the effect of refinancing the existing La Quinta $120,000 9.25% Senior Subordinated Notes from an effective rate of 9.58% to 7.5% ........................... 34,080 Amortization of additional deferred loan costs ........................................ 1,000 ------- Adjustment to interest expense ........................................................ $84,266 =======
(F) Represents adjustments to historical interest expense of Meditrust Corporation based on the Cobblestone Merger as follows: Reclassification of historical interest expense from Operating Company ................ $ 15,273 Adjustment to reflect the net decrease in interest expense as a result of additional borrowings of $45,000 and refinancing the existing debt at 7.5%....................... (1,773) -------- Adjustment to interest expense ........................................................ $ 13,500 ========
Interest expense on The Meditrust Companies' Revolving Credit Facility assumes an average interest rate of 7.5%. An increase of 25 basis points in the interest rate on this variable rate debt would increase pro forma interest expense by $2,466, decrease net income to $135,460 and decrease basic earnings per share by $0.02 based upon 127,002 basic weighted average common shares outstanding. (G) Represents adjustments to reflect amortization of goodwill of $20,914 and $8,408 pertaining to the mergers with La Quinta and Cobblestone, respectively. Goodwill represents purchase consideration in excess of the fair market value of the net assets of La Quinta and Cobblestone. Amortization of goodwill is computed using the straight line method over a 20 year estimated useful life. (H) Represents adjustment to increase depreciation of real estate and personalty and amortization of intangible assets acquired. Depreciation is computed using the straight line method and is based upon the estimated useful lives of 30 years for buildings and improvements, 20 years for land improvements and 5 to 7 years for personal property. Amortization of the tradename asset is computed using the straight line method over a 20 year estimated life. Intangible assets for the assembled work force and customer reservation system are amortized on a straight line basis over a 3 year estimated life. These estimates are based upon management's knowledge of the properties and the hotel and golf course industries in general. (I) Represents adjustment to reclassify property tax and insurance expenses related to the ownership of real estate assets from Operating Company to Meditrust Corporation. (J) Represents adjustments to interest expense based upon the reduction in additional borrowings assumed to be incurred in connection with the La Quinta/Cobblestone Mergers, effected through the receipt of approximately $272,000 from the issuance of 8,500 shares of Series A Non-Voting Convertible Common Stock in a Forward Equity Transaction. (K) Represents the adjustments to record dividends allocable to the holders of Series A Non-Voting Convertible Common Stock, assuming a dividend rate of LIBOR plus 75 basis points. 11 MEDITRUST OPERATING COMPANY PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED)
Operating Company La Quinta Cobblestone (Historical)(A) (Historical)(B) (Historical)(C) ----------------- ----------------- ----------------- (In thousands, except per share amounts) Revenue: Horse racing revenue ...................... $ 5,228 $ -- $ -- Hotel revenue ............................. -- 494,494 -- Restaurant rent, food & beverage revenue .................................. -- 8,075 13,083 Golf club revenue ......................... -- -- 65,515 Other ..................................... 137 -- 3,343 ------- -------- -------- Total revenue ............................ 5,365 502,569 81,941 Expenses: Interest expense .......................... 209 49,186 15,273 Amortization of goodwill .................. 135 -- -- Depreciation, amortization & asset retirements .............................. 171 60,817 8,909 General and administrative ................ 447 18,524 4,030 Rent expense due to Meditrust ............. 740 -- -- Horse racing operations ................... 4,263 -- -- Hotel operations .......................... -- 244,501 -- Golf club operations ...................... -- -- 58,786 Net gain on property transactions ......... -- (8,808) -- Partners' equity in earnings .............. -- 860 -- ------- -------- -------- Total expenses ........................... 5,965 365,080 86,998 ------- -------- -------- (Loss) income before income taxes .......... (600) 137,489 (5,057) Income tax provision ....................... -- 50,185 49 ------- -------- -------- (Loss) income before extraordinary items .................................... $ (600) $ 87,304 $ (5,106) ======= ======== ======== Basic earnings per share ................... $ (0.01) Basic weighted average shares outstanding ............................... 76,070 Diluted earnings per share ................. $ (0.01) Diluted weighted average shares outstanding ............................... 76,070 La Quinta Cobblestone Total Operating Pro Forma Pro Forma Pro Forma Company Adjustments(D) Adjustments(E) Adjustments Pro Forma ------------------ ------------------ ------------- ----------- (In thousands, except per share amounts) Revenue: Horse racing revenue ...................... $ -- $ -- $ -- $ 5,228 Hotel revenue ............................. -- -- -- 494,494 Restaurant rent, food & beverage revenue .................................. -- -- -- 21,158 Golf club revenue ......................... -- -- -- 65,515 Other ..................................... -- -- -- 3,480 ----------- ----------- ---------- --------- Total revenue ............................ -- -- -- 589,875 Expenses: Interest expense .......................... (49,186)(F) (15,273)(F) (64,459) 209 Amortization of goodwill .................. -- -- -- 135 Depreciation, amortization & asset retirements .............................. (58,592)(F) (4,867)(F) (63,459) 6,438 General and administrative ................ -- (588)(I) (588) 22,413 Rent expense due to Meditrust ............. 258,010 (G) 21,520 (G) 279,530 280,270 Horse racing operations ................... -- -- -- 4,263 Hotel operations .......................... (23,732)(F) -- (23,732) 220,769 Golf club operations ...................... -- (2,834)(F) (2,834) 55,952 Net gain on property transactions ......... -- -- -- (8,808) Partners' equity in earnings .............. -- -- -- 860 ----------- ----------- ---------- --------- Total expenses ........................... 126,500 (2,042) 124,458 582,501 ----------- ----------- ---------- --------- (Loss) income before income taxes .......... (126,500) 2,042 (124,458) 7,374 Income tax provision ....................... (47,432)(H) -- (47,432) 2,802 ----------- ----------- ---------- --------- (Loss) income before extraordinary items .................................... $ (79,068) $ 2,042 $ (77,026) $ 4,572 =========== =========== ========== ========= Basic earnings per share ................... $ 0.04 Basic weighted average shares outstanding ............................... 126,805 Diluted earnings per share ................. $ 0.04 Diluted weighted average shares outstanding ............................... 126,805
See accompanying notes to the unaudited pro forma condensed consolidated statement of operations. 12 Meditrust Operating Company Notes to Pro Forma Condensed Consolidated Statement of Operations For the Year Ended December 31, 1997 (In Thousands, Except Per Share Amounts) (Unaudited) (A) Represents the historical statement of operations of Operating Company for the period ended December 31, 1997. (B) Represents the historical statement of operations of La Quinta for the year ended December 31, 1997. (C) Represents the historical statement of operations of Cobblestone for the year ended September 30, 1997. (D) Represents adjustments to Operating Company's results of operations assuming the Merger had occurred as of January 1, 1997. (E) Represents adjustments to Operating Company's results of operations assuming the Cobblestone Merger had occurred as of January 1, 1997. (F) Represents the adjustment to reclassify interest, depreciation and amortization, property taxes and insurance expenses related to the ownership of real estate assets from Operating Company to Meditrust Corporation. (G) Represents the pro forma lease expense of Operating Company for the use of assets that Meditrust Corporation will have ownership of subsequent to the La Quinta/Cobblestone mergers. The respective lease expense is calculated based upon the historical revenue and expenses of the assets for the periods presented. (H) Represents the adjustment to La Quinta's income tax provisions necessitated by the impact to taxable income from the effects of the Merger. (I) Represents the adjustment to eliminate semi-annual investment banking and service fees to an affiliate of the majority shareholder of Cobblestone. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Meditrust Corporation Meditrust Operating Company By: /s/ David F. Benson ----------------------------------- David F. Benson President Date: March 10, 1998 14 -----END PRIVACY-ENHANCED MESSAGE-----