-----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, ICYTNBGBQUH3sP8cvCCbXNQ9T7RVWAUWy3iyaYqzDxNwGIck2PpKaMXhS/XTeegV 5qeQtEvfhF43M7HoZBSuDg== 0000950135-97-001177.txt : 19970508 0000950135-97-001177.hdr.sgml : 19970508 ACCESSION NUMBER: 0000950135-97-001177 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970312 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDITRUST CENTRAL INDEX KEY: 0000774350 STANDARD INDUSTRIAL CLASSIFICATION: 6798 IRS NUMBER: 046532031 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09582 FILM NUMBER: 97554942 BUSINESS ADDRESS: STREET 1: 197 FIRST AVE CITY: NEEDHAM STATE: MA ZIP: 02194 BUSINESS PHONE: 6174336000 MAIL ADDRESS: STREET 1: 197 FIRST AVENUE CITY: NEEDHAM STATE: MA ZIP: 02194 10-K 1 MEDITRUST 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Mark One) [X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1996 or [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from_______ to__________ Commission file number: 0-14022 MEDITRUST (Exact name of registrant as specified in its charter) Massachusetts 04-6532031 - - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 197 First Avenue, Needham Heights, MA. 02194-9127 - - --------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (617) 433-6000 -------------- Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered ------------------- ----------------------------------------- Shares of Beneficial Interest without par value New York Stock Exchange 9% Convertible Debentures due 2002 New York Stock Exchange 7% Convertible Debentures due 1998 New York Stock Exchange 7 1/2% Convertible Debentures due 2001 New York Stock Exchange 8.54% Convertible Debentures due 2000 New York Stock Exchange 8.56% Convertible Debentures due 2002 New York Stock Exchange Medium-Term Notes due from 1999 to 2015 New York Stock Exchange 7.82% Notes due September 10, 2026 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 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 --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K__. Aggregate market value of voting shares held by non-affiliates as of January 31, 1997: $2,365,612,000 Number of Shares of Beneficial Interest outstanding of registrant as of January 31, 1997: 61,444,463 The following documents are incorporated by reference into the indicated Part of this Form 10-K. Document Part -------- ---- Definitive Proxy Statement for the May 7, 1997 Annual Meeting of Shareholders, to be filed pursuant to Regulation 14A III 2 PART I ITEM 1. BUSINESS GENERAL Unless otherwise specified, information regarding Meditrust's business is given as of December 31, 1996. Meditrust (the "Company"), a real estate investment trust organized on August 6, 1985, invests primarily in the health care industry in locations throughout the United States and also invests in other entities which invest in similar facilities outside of the United States. The objective of the Company is to enable shareholders to participate in the investment in health care related facilities held primarily for the production of income to be distributed to shareholders. In meeting this objective, the Company invests in high quality facilities that are managed by experienced operators and achieves diversity in its property portfolio by sector of the health care industry, geographic location, operator and form of investment. The Company was organized to qualify, and intends to continue to operate, as a real estate investment trust in accordance with federal tax laws and regulations. So long as the Company so complies, with limited exceptions, the Company will not be taxed under federal income tax laws on that portion of its taxable income that it distributes to its shareholders. The Company has distributed, and intends to continue to distribute, substantially all of its real estate investment trust taxable income to shareholders. As of December 31, 1996, the Company had investments in 408 facilities, consisting of 274 long-term care facilities, 84 retirement and assisted living facilities, 26 rehabilitation hospitals, 17 medical office buildings, six alcohol and substance abuse and psychiatric facilities, and one acute care hospital campus. Included in the 408 facilities are 42 properties under construction which are expected to be completed during the next 12 to 18 months. The Company's investments take the form of permanent mortgage loans, sale/leaseback transactions and development projects. Generally, the Company enters into development projects where, upon completion of the facility, the Company's development funding is to be replaced by either a permanent mortgage loan or a sale/leaseback transaction with the Company. The Company's net increase in gross real estate investments totaled $431,158,000 during 1996 as a result of the Company entering into sale/leaseback transactions and making permanent mortgage loans and providing development financing. Total gross investments were $2,286,160,000 at December 31, 1996. SALE/LEASEBACK TRANSACTIONS. The Company acquired 45 assisted living facilities in California, Florida, Idaho, Kansas, Massachusetts, Oklahoma, Pennsylvania, South Carolina, Texas, Washington and Wisconsin and 13 long-term care facilities in Florida, Indiana, New Hampshire, New Jersey and Ohio for $243,034,000. The Company also provided net funding of $82,755,000 for the construction of 21 assisted living facilities in Arkansas, Florida, Idaho, Kansas, Mississippi, Pennsylvania, South Carolina, Tennessee, Texas and Washington and one medical office building in Florida. In addition, the Company received proceeds of $4,701,000 from the sale of one rehabilitation facility in New York. -2- 3 PERMANENT MORTGAGE LOANS. During 1996, the Company provided permanent mortgage financing of $137,686,000 for 29 long-term care facilities located in California, Colorado, Idaho, Missouri, New Mexico, New York, Rhode Island and Washington; 11 assisted living facilities located in Michigan, Ohio and Wisconsin and one retirement living facility located in North Carolina. The Company also funded $9,903,000 of increases to existing permanent mortgage financing secured by eight long-term care facilities located in Connecticut, Indiana, Massachusetts, Nevada and Washington and one assisted living facility in Michigan. DEVELOPMENT FINANCING. During 1996, the Company provided new construction financing of $59,862,000 relating to five long-term care facilities in Florida, Idaho, Massachusetts, Nevada and New Jersey; four assisted living facilities in Indiana and Michigan; and five medical office buildings in Arizona, Florida and Texas. The Company also provided $57,633,000 for on-going construction of facilities already in development prior to 1996. OTHER TRANSACTIONS. During the year ended December 31, 1996, the Company received principal payments on real estate mortgages of $33,962,000 and received $128,285,000 in mortgage prepayments for 21 facilities located in Arizona, Connecticut, Michigan, New Jersey, North Carolina and Pennsylvania. CONVERSION OF DEVELOPMENT FINANCING TO SALE/LEASEBACK TRANSACTIONS. During 1996, the Company provided development financing and completed construction of three assisted living facilities in Florida for $7,676,000. CONVERSION OF DEVELOPMENT FINANCING TO PERMANENT MORTGAGE LOANS. During 1996, the Company provided on-going development financing of $27,136,000, which resulted in the completion of construction of three long-term care facilities in Idaho and Massachusetts and eight medical office buildings in Connecticut and Florida. Total aggregate funding of these projects was $96,099,000. OTHER INVESTMENTS. On July 25, 1996, the Company invested approximately $13,509,000 in exchange for 7,936,000 shares of common stock, representing a 19.99% interest in Nursing Home Properties Plc (NHP Plc), a property investment group which specializes in the financing, through sale and leaseback transactions, of nursing homes located in the United Kingdom. The Company does not have the right to vote more than 9.99% of the shares of NHP Plc. As of December 31, 1996, NHP Plc had invested or committed to invest approximately $163,000,000 in 52 nursing homes, totaling 2,923 beds. As of December 31, 1996 the market value of this investment was $16,037,000 and is included in other assets in the Company's financial statements. The resulting difference between the current market value and cost, $2,528,000, is included in shareholders' equity in the Company's financial statements. CAPITAL RAISING TRANSACTIONS. On January 16, 1996, the Company issued an unsecured note in the aggregate principal amount of $20 million which matures in January 2006 and bears interest at the annual rate of 7.3%. During February 1996, the Company completed the sale of 9,200,000 Shares at $34.00 per Share. The net proceeds to the Company from this offering were used to repay short-term borrowings and for investments in additional health care facilities. -3- 4 On September 10, 1996, the Company completed the sale of $175,000,000 of 7.82% notes due September 10, 2026. The notes include a put feature which gives each noteholder the right to redeem the notes at par on September 10, 2003. The net proceeds from the issuance of these securities were utilized to repay the outstanding balance of the Company's unsecured credit facilities and for investments in additional health care facilities. During the twelve months ended December 31, 1996, $3,416,000 of principal amount of 9% convertible debentures were converted into 126,507 Shares and $12,550,000 of principal amount of 7% convertible debentures were converted into 409,787 Shares. The Company has a total of $280,000,000 in unsecured credit facilities consisting of unsecured revolving lines ("Lines") of credit. Both Lines bear interest at the lender's prime rate or LIBOR plus .875%. One of the Lines totaling $230,000,000 expires September 23, 1999 and the other, totaling $50,000,000, expires December 12, 1999. A total of approximately $259,000,000 was available under the Company's Lines at January 27, 1997. The Company believes that its various sources of capital are adequate to finance its operations as well as pending property acquisitions, mortgage financings and future dividends. During 1997, as the Company identifies appropriate investment opportunities, the Company may raise additional capital through the sale of Shares or Preferred Shares, by the issuance of additional long-term debt or through a securitization transaction. -4- 5 INVESTMENT AND OTHER POLICIES GENERAL The Company invests in income-producing health care related facilities which may include long-term care facilities, rehabilitation hospitals, retirement and assisted living facilities, medical office buildings, alcohol and substance abuse treatment facilities, psychiatric hospitals, and other health care related facilities. The Company also invests in other entities which invest in similar facilities outside the United States. These investments are made primarily for the production of income. Because the Company invests in health care related facilities, the Company is not in a position to diversify its investment portfolio to include assets selected to reduce the risks associated with investment in improved real estate in a single industry. The Company intends to continue to diversify its portfolio by broadening its geographic base, providing financing to more operators, diversifying the type of health care facilities in its portfolio and diversifying the types of financing methods provided. In evaluating potential investments, the Company considers such factors as: (1) the current and anticipated cash flow and its adequacy to meet operational needs and other obligations and to provide a competitive market return on equity to the Company's shareholders; (2) the geographic area, type of property and demographic profile; (3) the location, construction quality, condition and design of the property; (4) the potential for capital appreciation, if any; (5) the growth and regulatory environment of the communities in which the properties are located; (6) occupancy and demand for similar health care facilities in the same or nearby communities; (7) an adequate mix of private and government-sponsored patients; (8) potential alternative uses of the facilities; and (9) prospects of liquidity through financing or refinancing. Management reviews and verifies market research for all potential investments on behalf of the Company. Management also reviews the value of the property, the interest rates and debt service coverage requirements of any debt to be assumed and the anticipated sources of repayment for such debt. The Company's Declaration of Trust places no limitations on the percentage of the Company's total assets that may be invested in any one property or joint venture or on the nature or identity of the operators of such properties. The independent Trustees of the Company, however, may establish such limitations as they deem appropriate from time to time. From time to time, the Company enters into senior debt transactions. The Company has no current plans to underwrite securities of other issuers. The Company has authority to offer Shares in exchange for investments which conform to its standards and to repurchase or otherwise acquire its Shares or other securities. The Company has no present plans to invest in the securities of others for the purpose of exercising control, although the Company owns interests in partnerships which own health care facilities and a property investment group in the United Kingdom which invests in health care facilities. The Company makes loans on such terms as the Trustees may approve. The Company will not, without the prior approval of a majority of Trustees, including a majority of the independent Trustees of the Company, acquire from or sell to any Trustee, director, officer or employee of the Company, or any affiliate thereof, any of the assets or other property of the Company. The Company provides its shareholders on request with annual reports containing audited financial statements and quarterly reports containing unaudited financial information. -5- 6 REINVESTMENT OF SALES PROCEEDS In the event the Company sells or otherwise disposes of any of its properties, the independent Trustees will determine whether and to what extent the Company will acquire additional properties or distribute the proceeds to the shareholders. SHORT-TERM INVESTMENTS The Company invests its cash in certain short-term investments during interim periods between the receipt of revenues and distributions to shareholders. Cash not invested in facilities may be invested in interest-bearing bank accounts, certificates of deposit, short-term money-market securities, short-term United States government securities, mortgage-backed securities guaranteed by the Government National Mortgage Association, mortgages insured by the Federal Housing Administration or guaranteed by the Veterans Administration, mortgage loans, mortgage loan participations, and certain other similar investments. The Company's ability to make certain of these investments may be limited by the Company's borrowing agreements and by tax considerations. The Company's return on these short-term investments may be more or less than its return on real estate investments. BORROWING POLICIES The Company may incur additional indebtedness when, in the opinion of the Trustees, it is advisable. For short-term purposes, the Company may, from time to time, negotiate lines of credit, arrange for other short-term borrowings from banks or others or issue commercial paper. The Company may arrange for long-term borrowing from banks, insurance companies, public offerings or private placements to institutional investors. Under the Company's Declaration of Trust and under documents pertaining to certain existing indebtedness, the Company is subject to various restrictions with respect to borrowings. See "Prohibited Investments and Activities." In addition, the Company may incur mortgage indebtedness on real estate which it has acquired through purchase, foreclosure or otherwise. When terms are deemed favorable, the Company may invest in properties subject to existing loans or mortgages. The Company also may obtain financing for unleveraged properties in which it has invested or may refinance properties acquired on a leveraged basis. There is no limitation on the number or amount of mortgages which may be placed on any one property, but overall restrictions on mortgage indebtedness are provided under documents pertaining to certain existing indebtedness. PROHIBITED INVESTMENTS AND ACTIVITIES The Declaration of Trust prohibits the Company from engaging in any investment practices or activities that would disqualify the Company as a real estate investment trust under the provisions of the Internal Revenue Code. In addition to prohibitions and restrictions imposed by the Declaration of Trust, there are and may be, from time to time, additional restrictions imposed by debt instruments or other agreements entered into by the Company. -6- 7 POLICY CHANGES The Declaration of Trust may not be changed by the Trustees without shareholder approval except in limited circumstances to comply with federal and state law. All other policies set forth herein may be changed by the Trustees without shareholder approval. COMPETITION The Company competes, primarily on the basis of knowledge of the industry, economics of the transaction and flexibility of financing structure, with real estate partnerships, other real estate investment trusts, banks and other investors generally in the acquisition, leasing and financing of health care related facilities. The operators of the facilities compete on a local and regional basis with other operators of comparable facilities. They compete with independent operators as well as companies managing multiple facilities, some of which are substantially larger and have greater resources than the operators of the Company's facilities. Some of these facilities are operated for profit while others are owned by governmental agencies or tax-exempt not-for-profit organizations. EMPLOYEES As of December 31, 1996, the operations of the Company were maintained by 40 employees. The Company has not experienced any significant labor problems and believes that its employee relations are good. DECLARATION OF TRUST The Declaration of Trust of the Company provides that shareholders of the Company shall not be subject to any liability for the acts or obligations of the Company and that, as far as is practicable, each written agreement of the Company is to contain a provision to that effect. No personal liability will attach to the shareholders for claims under any contract containing such a provision in writing where adequate notice is given of such provision, except possibly in a few jurisdictions. With respect to all types of claims in such jurisdictions and with respect to tort claims, contract claims where the shareholder liability is not disavowed as described above, claims for taxes and certain statutory liabilities in other jurisdictions, a shareholder may be held personally liable to the extent that claims are not satisfied by the Company. However, the Declaration of Trust provides that, upon payment of any such liability, the shareholder will be entitled to reimbursement from the general assets of the Company. The Trustees intend to conduct the operations of the Company, with the advice of counsel, in such a way as to avoid, as far as is practicable, the ultimate liability of the shareholders of the Company. The Trustees do not intend to provide insurance covering such risks to the shareholders. GOVERNMENT REGULATION The Company recognizes a portion of revenue from percentage, supplemental and/or additional rent or interest. This revenue can be a contractual amount or be based on the health care facility operator's gross revenues, which, in most cases, is subject to changes in the reimbursement and licensure policies of federal, state and local governments. In addition, the acquisition of health care facilities is generally subject to state and local regulatory approval. -7- 8 MEDICARE, MEDICAID, BLUE CROSS AND OTHER PAYORS Certain of the operators receive payments for patient care from federal Medicare programs for elderly and disabled patients, state Medicaid programs for medically indigent and cash grant patients, private insurance carriers, employers and Blue Cross plans, health maintenance organizations, preferred provider organizations and directly from patients. In general, Medicare payments for long-term care services, psychiatric care, and rehabilitative care are based on allowable costs plus a return on equity for proprietary facilities. Payments from state Medicaid programs for psychiatric care are based on reasonable costs or are at fixed rates. Long-term care facilities are generally paid by the Medicaid programs at fixed rates. Most Medicare and Medicaid payments are below retail rates. Payments from other payors are generally also below retail rates. Blue Cross payments in different states and areas are based on costs, negotiated rates or retail rates. LONG-TERM CARE FACILITIES Regulation of long-term care facilities is exercised primarily through the licensing of such facilities. The particular agency having regulatory authority and the license qualification standards vary from state to state and, in some instances, from locality to locality. Licensure standards are constantly under review and undergo periodic revision. Governmental authorities generally have the power to review the character, competence and community standing of the operator and the financial resources and adequacy of the facility, including its plant, equipment, personnel and standards of medical care. Long-term care facilities are certified under the Medicare program and all are eligible to qualify under state Medicaid programs, although not all participate in the Medicaid programs. REHABILITATION HOSPITALS Rehabilitation hospitals are also subject to extensive federal, state and local legislation and regulation. Rehabilitation hospitals are subject to periodic inspections and licensure requirements. Inpatient rehabilitation facilities are cost-reimbursed, receiving the lower of reasonable costs or reasonable charges. Typically, the fiscal intermediary pays a set rate per day based on the prior year's costs for each facility. Annual cost reports are filed with the operator's fiscal intermediary and adjustments are made, if necessary. MEDICAL OFFICE BUILDINGS The individual physicians, groups of physicians and health care providers which occupy medical office buildings are subject to a variety of federal, state and local regulations applicable to their specific areas of practice. Since medical office buildings may contain numerous types of medical services, a wide variety of regulations may apply. In addition, medical office buildings must comply with the requirements of municipal building codes, health codes and local fire departments. ACUTE CARE HOSPITALS Acute care hospitals are subject to extensive federal, state and local legislation and regulation relating to among other things the adequacy of medical care, equipment, personnel, hygiene, operating policies and procedures, fire prevention, rate-setting and compliance with building codes and environmental protection laws. Hospitals must maintain strict standards in order to obtain their state hospital licenses from a department of health or other applicable agency in each state. In granting and renewing licenses, a department of health considers, among other things, the physical buildings and -8- 9 equipment, the qualifications of the administrative personnel and nursing staff, the quality of care and continuing compliance with the laws and regulations relating to the operation of the facilities. State licensing of facilities is a prerequisite to certification under the Medicare and Medicaid programs. Various other licenses and permits also are required in order to dispense narcotics, operate pharmacies, handle radioactive materials and operate certain equipment. Hospital facilities are subject to periodic inspection by governmental and other authorities to assure continued compliance with the various standards necessary for their licensing and accreditation. RETIREMENT AND ASSISTED LIVING Residential communities such as retirement and assisted living facilities are subject to varying degrees of regulation and licensing by local and state health and social service agencies, and other regulatory authorities specific to their location. Typically these regulations and licensing requirements relate to fire safety, sanitation, staff training, staffing levels and living accommodations and include requirements specific to certain health related services offered. Levels of service provided and corresponding regulation vary considerably from operator to operator as some of the residential communities are similar to long-term care facilities, while others fall into the relatively unregulated care of a retirement community. ALCOHOL AND SUBSTANCE ABUSE TREATMENT FACILITIES Alcohol and substance abuse treatment facilities must comply with the licensing requirements of federal, state and local health agencies and with the requirements of municipal building codes, health codes and local fire departments. In granting and renewing a facility's license, a state health agency considers, among other things, the physical buildings and equipment, the qualifications of the administrative personnel and health care staff, the quality of nursing and other services and the continuing compliance of such facility with the laws and regulations applicable to its operations. PSYCHIATRIC HOSPITALS Psychiatric hospitals generally are subject to extensive federal, state and local legislation and regulation. Licensing for psychiatric hospitals is subject to periodic inspections regarding standards of medical care, equipment and hygiene. In addition, there are specific laws regulating civil commitment of patients and disclosure of information regarding patients being treated for chemical dependency. Many states have adopted a "patient's bill of rights" which sets forth standards, such as using the least restrictive treatment, allowing patient access to the telephone and mail, allowing the patient to see a lawyer and requiring the patient to be treated with dignity. Insurance reimbursement for psychiatric treatment generally is more limited than for general health care. HEALTH CARE REFORM AND REGULATION Many of the operators with which the Company does business rely on government reimbursement, primarily Medicare and Medicaid, for a significant portion of their operating revenues. During the 1994 session of the United States Congress, there was active consideration of various proposals for national health care reform, including the administration's proposal to cap national health care spending and the future growth of Medicare and Medicaid funding. Other proposals discussed in the 1995 and 1996 sessions of Congress included replacement of the current Medicaid program with block grants to the states and other limitations on Medicaid spending. No such legislation was passed during the 1994, 1995 or 1996 sessions of Congress. Some of these proposals, if enacted, could have had an impact on -9- 10 operators doing business with the Company. It is not possible to predict whether and when health care reform legislation will be passed by Congress and, if passed, what features such legislation will contain or the effect it may have on the nursing home, assisted living or rehabilitation care industries, the reimbursement levels available to health care providers or on the health care industry in general. From time to time, Medicaid, Medicare and other governmental payors have reviewed the billing practices of many health care facilities operators including certain of the operators with which the Company does business. It is unclear what impact such reviews may have on these operators. The Company does not believe, however, that any adverse findings against these operators would materially affect the Company's financial position. ITEM 2. PROPERTIES The table sets forth certain information as of December 31, 1996 regarding the Company's facilities:
PURCHASE PRICE ANNUAL BASE RENT NUMBER OF NUMBER OF OR MORTGAGE OR LOCATION FACILITIES BEDS(1) AMOUNT(2) INTEREST PAYMENT(3) - - -------- ---------- ---- --------- ------------------- (DOLLARS IN THOUSANDS) LONG-TERM CARE FACILITIES Alabama 1 230 $ 7,759 $ 940 Arizona 6 1,004 39,185(4) 4,497 California 6 680 24,472(4) 2,488 Colorado 13 1,201 49,484(4) 5,283 Connecticut 16 2,100 117,776(5) 13,798 Florida 12 1,647 121,647(6) 11,875 Georgia 1 155 2,512(4) 270 Idaho 2 100 7,742(7) 749 Illinois 26 2,266 47,999(4) 4,800 Indiana 13 1,709 57,533(8) 5,622 Kansas 3 383 8,633(4) 932 Kentucky 1 228 12,116(4) 1,233 Maryland 1 170 18,188 1,910 Massachusetts 36 5,296 335,554(9) 36,281 Michigan 3 392 15,430(10) 1,855 Missouri 19 2,468 81,480(11) 8,923 Nebraska 3 406 12,342(4) 1,344 Nevada 3 361 21,581(12) 2,220 New Hampshire 6 537 33,135 2,324 New Mexico 1 168 3,221(4) 309 New Jersey 7 1,277 69,952(13) 7,245 New York 5 512 51,342(14) 3,913 North Carolina 1 120 2,074(4) 225 Ohio 7 843 35,217 3,170 Pennsylvania 5 662 26,867(15) 3,200 Rhode Island 2 328 12,923(4) 1,318 Tennessee 9 1,221 48,405(4) 4,077 Texas 47 4,506 109,033(4) 11,338 Utah 2 220 10,063(4) 1,123 Washington 8 822 46,854(4) 4,672 West Virginia 7 615 29,646(16) 2,988
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PURCHASE PRICE ANNUAL BASE RENT NUMBER OF NUMBER OF OR MORTGAGE OR LOCATION FACILITIES BEDS(1) AMOUNT(2) INTEREST PAYMENT(3) - - -------- ---------- ---- --------- ------------------- (DOLLARS IN THOUSANDS) Long-Term Care, continued - - ------------------------- Wyoming 2 313 14,318(4) 1,553 --- ------ Various 13,700(25) 1,404 --------- ------- TOTAL LONG-TERM CARE 274 32,940 1,488,183 153,879 --- ------ --------- ------- ASSISTED LIVING Arkansas 5 255 3,340 342 California 1 88 4,152 417 Florida 17 1,555 106,994(17) 10,468 Idaho 3 246 12,844 1,276 Indiana 3 183 6,552(18) 672 Kansas 5 231 13,028 1,290 Massachusetts 1 50 5,423 526 Michigan 6 296 19,818(19) 1,984 Mississippi 1 80 2,633 263 Ohio 1 59 4,718(4) 467 Oklahoma 1 26 1,425 140 Pennsylvania 5 239 22,842 2,214 South Carolina 2 231 13,049 1,273 Tennessee 1 50 1,929 192 Texas 15 795 39,256 4,067 Washington 3 198 12,079 1,173 Wisconsin 10 214 8,004(20) 2,362 -- ----- ------- ------ TOTAL ASSISTED LIVING 80 4,796 278,086 29,126 -- ----- ------- ------ REHABILITATION HOSPITALS Arizona 1 80 9,965 1,196 Arkansas 2 112 17,450 1,442 California 5 299 67,264(21) 7,385 Colorado 1 117 10,750(4) 1,129 Kansas 1 67 11,649 751 Kentucky 1 55 10,000 1,050 Louisiana 3 276 30,670 1,807 Massachusetts 1 86 10,859 1,140 Michigan 1 45 7,821 821 New Hampshire 1 128 13,571 1,344 New Jersey 1 70 14,300 1,501 Tennessee 1 60 8,621(4) 1,078 Texas 5 356 46,137 4,071 Washington 1 52 5,861 615 Wisconsin 1 125 13,888 1,619 -- ----- ------- ------ TOTAL REHABILITATION 26 1,928 278,806 26,949 -- ----- ------- ------ MEDICAL OFFICE BUILDINGS Arizona 1 5,223(22) 535 California 2 13,052(4) 1,240 Florida 9 44,170(23) 4,232 Tennessee 1 8,028(4) 709 Texas 4 24,554(24) 2,438 -- ------- ------ TOTAL MEDICAL OFFICE BUILDINGS 17 95,027 9,154 -- ------- ------
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PURCHASE PRICE ANNUAL BASE RENT NUMBER OF NUMBER OF OR MORTGAGE OR LOCATION FACILITIES BEDS AMOUNT(2) INTEREST PAYMENT(3) - - -------- ---------- ---- --------- ------------------- (DOLLARS IN THOUSANDS) ACUTE CARE HOSPITAL Arizona 1 492 65,650 7,222 --- --- ---------- ----- RETIREMENT LIVING FACILITIES Colorado 1 220 15,592(4) 1,676 Florida 1 184 11,500(4) 1,150 North Carolina 1 190 5,468(4) 483 Utah 1 287 9,112(4) 993 --- --- ---------- ----- TOTAL RETIREMENT LIVING 4 881 41,672 4,302 --- --- ---------- ----- PSYCHIATRIC HOSPITALS AND ALCOHOL AND SUBSTANCE ABUSE California 1 61 5,750 719 Florida, New York and Oklahoma 5 564 32,986(4) 3,628 --- --- ---------- ----- TOTAL PSYCHIATRIC AND ALCOHOL AND SUBSTANCE ABUSE 6 625 38,736 4,347 --- --- ---------- ----- TOTAL ALL FACILITIES(26) 408 $2,286,160 === ==========
Other Health Care Investments - - ----------------------------- During 1996, the Company invested approximately $13,509,000 in exchange for 7,936,000 Shares, representing 19.99% of Nursing Home Properties Plc (NHP Plc), a property investment group which specializes in the financing, through sale and leaseback transactions, of nursing homes located in the United Kingdom. The Company does not have the right to vote more than 9.99% of the shares of NHP Plc. As of December 31, 1996, NHP Plc had invested or committed to invest approximately $163,000,000 in 52 nursing homes, totaling 2,923 beds. The facilities are leased to 11 nursing home operators in the United Kingdom with terms and conditions similar to those contained in the Company's leases. (1) Based upon information provided by the operators of the facilities, the average occupancy of the Company's portfolio of operating facilities, including start-up facilities, for the nine months ended September 30, 1996, was as follows: long-term care facilities, 84%; rehabilitation hospitals, 70%; alcohol and substance abuse treatment facilities, 72%; assisted living, 86%; retirement living facilities, 92%; acute care hospitals 51%. Generally, average occupancy rates are determined by dividing the number of patient days in each period by the average number of licensed bed days during such period. (2) Represents purchase price or mortgage amount at December 31, 1996 for operating facilities and the funded loan amounts for facilities under construction. (3) The annual base rentals/interest payments under the leases or mortgages are generally projected to be approximately 9% - 13% of the purchase price or mortgage amount, in accordance with the terms of the respective agreements. Base rent excludes additional and percentage rent and interest. Additional and percentage rent and interest for the year ended December 31, 1996 was an aggregate of $11,409,000 for all of the facilities. Additional and percentage rent and interest are -12- 13 calculated based upon a percentage of a facility's revenues over an agreed upon base amount or an automatic annual escalation. (4) Permanent mortgage loans. (5) Includes permanent mortgage loans aggregating $38,567,000. (6) Includes a permanent mortgage loan of $35,486,000 and a construction loan of $5,382,000. (7) Includes a permanent mortgage loan of $5,497,000 and a construction loan of $2,245,000. (8) Includes permanent mortgage loans of $44,011,000. (9) Includes permanent mortgage loans of $167,748,000 and construction loans of $19,689,000. (10) Includes a permanent mortgage loan of $7,946,000. (11) Includes permanent mortgage loans of $72,682,000. (12) Includes permanent mortgage loans of $18,213,000 and a construction loan of $3,368,000. (13) Includes a permanent mortgage loan of $3,203,000 and a construction loan of $12,861,000. (14) Includes a permanent mortgage loan of $516,000. (15) Includes a permanent mortgage loan of $8,852,000 and a construction loan of $6,483,000. (16) Includes permanent mortgage loans of $12,446,000. (17) Includes a construction loan of $19,428,000. (18) Includes construction loans of $6,552,000. (19) Includes a permanent mortgage loan of $4,682,000 and a construction loan of $1,531,000. (20) Includes a permanent mortgage loan of $5,046,000. (21) Includes a permanent mortgage loan of $28,275,000. (22) Includes a construction loan of $5,223,000. (23) Includes permanent mortgage loans of $35,710,000 and construction loans of $8,460,000. (24) Includes permanent mortgage loans of $10,494,000 and construction loans of $14,060,000. (25) Includes a line of credit of up to $15,000,000 of which $13,700,000 has been drawn. The amount outstanding is cross-collateralized by affiliated facilities of the operator. -13- 14 (26) Investments by the Company in facilities operated by Sun Healthcare Group, Inc., Life Care Centers of America, Inc., Emeritus Corporation, Horizon/CMS Inc., Springwood/Chur Associates, and Health Asset Realty Trust, represented 17%, 22%, 7%, 6%, 5% and 5%, respectively, of the Company's total portfolio as of December 31, 1996. LONG-TERM CARE FACILITIES. The long-term care facilities offer restorative, rehabilitative and custodial nursing care for patients not requiring the more extensive and sophisticated treatment available at acute care hospitals. The facilities are designed to provide custodial care and to supplement hospital care and many have transfer agreements with one or more acute care hospitals. ASSISTED LIVING FACILITIES. The assisted living facilities provide a combination of housing, supportive services, personalized assistance and health care designed to respond to individual needs for daily living and instrumental activities. Support services are generally available 24 hours a day to meet scheduled and unscheduled needs. RETIREMENT LIVING FACILITIES. The retirement living facilities offer specially designed residential units for active and ambulatory elderly residents and provide various ancillary services. They may contain nursing facilities to provide a continuum of care. The retirement living facilities offer their residents an opportunity for an independent lifestyle with a range of social and health services. REHABILITATION HOSPITALS. The rehabilitation hospitals provide treatment to restore physical, psycho-social, educational, vocational and economic usefulness and independence to disabled persons. Rehabilitation concentrates on physical disabilities and impairments and utilizes a coordinated multidisciplinary team approach to help patients attain measurable goals. MEDICAL OFFICE BUILDINGS. Medical office building facilities contain individual physician, physician group and other health care provider offices for the administration and treatment of patients, usually in close proximity to the general service acute care hospital to which the physicians are affiliated. The types of services provided in a medical office building may include outpatient therapy, clinics, examination facilities and the provision of other medical services in a non-hospital setting. ACUTE CARE HOSPITALS. Acute care hospitals provide services that include, among others, general surgery, internal medicine, obstetrics, emergency room care, radiology, diagnostic services, coronary care, pediatric services and psychiatric services. On an outpatient basis, the services include, among others, same day surgery, diagnostic radiology (e.g. magnetic resonance imaging, CT scanning, X-ray), rehabilitative therapy, clinical laboratory services, pharmaceutical services and psychiatric services. ALCOHOL AND SUBSTANCE ABUSE TREATMENT FACILITIES. These facilities provide inpatient treatment for alcohol and substance abuse, including medical evaluation, detoxification and rehabilitation. Specialized programs offer treatment for adults, adolescents, families and chronic abusers. PSYCHIATRIC HOSPITALS. The psychiatric hospitals offer comprehensive, multidisciplinary adult, adolescent and substance abuse psychiatric programs. Patients are evaluated upon admission and an individualized treatment plan is developed. Elements of the treatment plan include individual, group and family therapy, activity therapy, educational programs and career and vocational planning. -14- 15 LEASES Each facility (which includes the land, buildings, improvements, related easements, and rights and fixtures (the "Leased Properties")) that is owned by the Company is leased pursuant to a long-term triple net lease (collectively, the "Leases") which generally contains terms as outlined below. Generally, the Leased Properties do not include major movable equipment. The Leases generally have a fixed term of approximately 10 years and contain multiple renewal options. Some Leases are subject to earlier termination upon the occurrence of certain contingencies described in the Lease. The Company's Leased Properties aggregated approximately $1,104,342,000 of gross real estate investments at December 31, 1996. The base rents range from approximately 9% to 13% per annum of the Company's equity investment in the Leased Properties. The base rents for the renewal periods are generally fixed rents for the initial renewal periods and can be fixed or at market rates for later renewal periods. All Leases provide for either an automatic fixed annual rent escalation or additional variable rents in addition to the base rent, based on revenues exceeding specified base revenues. The Company typically also charges a lease commitment fee at the initiation of the sale/leaseback transaction. Each Lease is a triple net lease requiring the lessee to pay rent and all additional charges incurred in the operation of the Leased Property. The lessees are required to repair, rebuild and maintain the Leased Properties. The obligations under the Leases are generally guaranteed by the parent corporation of the lessee, if any, or affiliates or individual principals of the lessee. Some obligations are further backed by letters of credit, cash collateral or pledges of certificates of deposit from various financial institutions which may cover up to one full year's lease payments and which remain in effect until the expiration of a fixed time period or the fulfillment of certain performance criteria. The Company also obtains other credit enhancement devices similar to those it may obtain with respect to permanent mortgage loans. See "Permanent Mortgage Loans" for description. With respect to two of the facilities, the Company leases the land pursuant to ground leases and in turn subleases the land to the operator of the facility. Such subleases contain terms substantially similar to those found in the Leases. PERMANENT MORTGAGE LOANS The Company's permanent mortgage loan program is comprised of secured loans which are structured to provide the Company with interest income, additional interest based upon the revenue growth of the operating facility or a fixed rate increase, principal amortization and commitment fees. Virtually all of the approximately $1,181,818,000 of permanent mortgage loans as of December 31, 1996 are first mortgage loans. The interest rates on the Company's investments in permanent mortgage loans for operating facilities range from approximately 9% to 13% per annum on the outstanding balances. The yield to the Company on permanent mortgage loans depends upon a number of factors, including the stated interest rate, average principal amount outstanding during the term of the loan, the amount of the commitment fee charged at the inception of the loan, the interest rate adjustments and the additional interest earned. -15- 16 The permanent mortgage loans for operating facilities made through December 31, 1996 generally contain 10-year terms with up to 30-year amortization schedules that provide for a balloon payment of the outstanding principal balance at the end of the tenth year. The Company generally requires a variety of additional forms of security and collateral beyond that which is provided by the lien of the mortgage. For example, the Company requires one or more of the following items: (a) a guaranty of the complete payment and performance of all obligations associated with each mortgage loan from the borrower's parent corporation, if any, other affiliates of the borrower and/or one or more of the individual principals controlling such borrower; (b) a collateral assignment from the borrower of the leases and the rents relating to the mortgaged property; (c) a collateral assignment from the borrower of all permits, licenses, approvals and contracts relating to the operation of the mortgaged property; (d) a pledge of all, or substantially all, of the equity interest held in the borrower; (e) letter of credit, cash collateral or a pledge of a certificate of deposit, for a negotiated dollar amount typically equal to three months to one year's principal and interest on the loan (which letter of credit, cash collateral or pledge of certificate of deposit typically remains in effect until the later to occur of (i) three years after the closing of the mortgage loan or (ii) the achievement by the facility of an agreed-upon cash flow debt coverage ratio for three consecutive fiscal quarters; (f) an agreement by the guarantor or any affiliate of the guarantor, borrower or operator of the facility to subordinate all payments due to it from the borrower to all payments due to the Company under the mortgage loan; and (g) a security interest in all of the borrower's personal property, including, in most instances, the borrower's accounts receivable. In addition, the mortgage loans are generally cross-defaulted and cross-collateralized with any other mortgage loans, leases or other agreements between the borrower or any affiliate of the borrower and the Company. DEVELOPMENT INVESTMENTS AND LOANS The Company makes development investments or loans which by their terms are, or convert into, sale/leaseback transactions or permanent mortgage loans upon the completion of the facilities. Generally, the interest or yield rates on the outstanding balances of the Company's developments are up to 200 basis points over the prime rate of a specified financial institution. The Company also typically charges a commitment fee at the commencement of the project. The development period generally commences upon the funding of such investments or loans and terminates upon the earlier of the completion of development of the applicable facility or a specific date. This period is generally 12 to 24 months. During the development term, funds are advanced pursuant to draw requests in accordance with the terms and conditions of the applicable agreement which, if significant, require a site visit prior to the advancement of funds. Monthly payments based on an interest or yield rate only are made on the total amount of the investment or loan proceeds advanced during the development period. The Company began its development program in August 1987 and since that time has converted many of these developments into sale/leaseback transactions or permanent mortgage loans representing an investment of $362,463,000 as of December 31, 1996. In addition, at December 31, 1996 the Company had outstanding development financing of $209,014,000 and was committed to providing additional financing of approximately $135,346,000. As with the Company's sale/leaseback transactions or permanent mortgage financing programs, the developments generally include a variety of additional forms of security and collateral. See "Leases" and "Permanent Mortgage Loans" for description. During the development period, the Company generally requires additional security and collateral in the form of either payment and performance completion bonds or completion guarantees by either one, or a combination of, the lessee's or borrower's parent entity, other affiliates, or one or more of the individual principals. -16- 17 As a further safeguard during the development period, the Company generally will retain a portion of the funding equal to 5% to 10% of the transaction amount until it has received satisfactory evidence that the project has been fully completed in accordance with the applicable plans and specifications and the period during which liens may be perfected with respect to any work performed, or labor or materials supplied, in connection with the construction of the project has expired. The Company also monitors the progress of the development of each project, the construction budget and the accuracy of draw requests by having its own inspector perform on-site inspections of the project prior to the release of any requested funds. ITEM 3. LEGAL PROCEEDINGS In December 1993, the Chapter 11 Trustee of Towers Financial Corporation commenced an action in the Suffolk County Superior Court for the Commonwealth of Massachusetts against one of the Company's former lessees and in January 1994 two subsidiaries of the Company were named as additional defendants. The plaintiff alleges that it holds a prior security interest in accounts receivable of seven health care facilities, one of which is owned by the Company. The plaintiff demands payment of all such receivables including those collected by the Company, as well as interest and attorney's fees in an amount up to $18,000,000. The Company is vigorously defending this action, denies any liability to the plaintiff and has asserted that the plaintiff does not have a valid prior security interest in any assets of the Company or its borrowers. The trial on this matter has commenced and on September 4, 1996, the judge in this matter issued a decision which was unfavorable to the Company in Phase I of the trial, which trial had previously been segregated by agreement of the parties into three distinct phases. The Company intends to continue to defend the matter with regard to the remaining two phases and is considering an appeal of the Phase I ruling. The Company is also a party to a number of other claims and lawsuits arising out of the normal course of business; the Company believes that none of these claims or pending lawsuits, either individually or in the aggregate, will have a material adverse affect on the Company's business or on its consolidated financial position. -17- 18 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS NONE. ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT The following information relative to the Company's executive officers is given as of January 31, 1997: Name Age Position with the Company ---- --- ------------------------- Abraham D. Gosman 68 Chairman, Chief Executive Officer and Trustee David F. Benson 47 President, Treasurer and Trustee Michael F. Bushee 39 Chief Operating Officer Michael S. Benjamin 39 Senior Vice President, Secretary and Corporate Counsel Laurie Tidor 39 Chief Financial Officer Stephen C. Mecke 34 Vice President of Development Debora A. Pfaff 33 Vice President of Operations Stephen H. Press 60 Vice President of Acquisitions John G. Demeritt 36 Controller Abraham D. Gosman has been Chairman of Meditrust since he founded this organization in 1985 and became Chief Executive Officer in February 1991. Mr. Gosman is also Founder, Chairman of the Board, CEO and President of PhyMatrix Corp., a physician practice management company which renders managerial/administrative services to a variety of specialized medical care and treatment providers and which completed its initial public offering in January 1996 (NASDAQ:PHMX). Additionally, Mr. Gosman is Founder and Chairman of the Board of CareMatrix Corporation (AMEX:CMD) which provides a full range of quality senior residential services in assisted living settings. David F. Benson has been the President and a Trustee of Meditrust since September 1991 and previously was Treasurer of the Company since its inception in August 1985. Prior to that he was associated with Coopers & Lybrand and specialized in providing services to a variety of health care clients. Mr. Benson is also a Trustee of Mid-Atlantic Realty Trust, (AMEX:MRR), a shopping center REIT, a Director of Harborside Healthcare Corporation, (NYSE:HRB), a long-term care company, and a Director of Nursing Home Properties, Plc (AIM:Nursing Home Properties Plc), a company specializing in the purchase and leasing of purpose-built nursing homes located in the United Kingdom. -18- 19 Michael F. Bushee has been Chief Operating Officer of the Company since September 1994. He was Senior Vice President of Operations of the Company from November 1993 through August 1994, Vice President from December 1989 to October 1993, Director of Development from January 1988 to December 1989 and has been associated with the Company since April 1987. He was previously associated with The Stop & Shop Companies, Inc., a retailer of food products and general merchandise, for three years and Wolf & Company, P.C., independent accountants, for four years. He is also a Director of Sterling House Corporation, an assisted-living provider, traded on the American Stock Exchange. Michael S. Benjamin has been Senior Vice President, Secretary and General Counsel of the Company since October 1993. He was Vice President, Secretary and General Counsel from May 1992 to October 1993, Secretary and General Counsel from December 1990 to May 1992 and Assistant Counsel to the Company from November 1989 to December 1990. His previous association was with the law firm of Brown, Rudnick, Freed & Gesmer, from 1983 to 1989. Laurie Tidor has been Chief Financial Officer since December 1996. Prior to that, she was associated with Coopers & Lybrand, L.L.P. in various capacities, including Partner, from 1982 to 1996. During her career at the firm, clients serviced included publicly traded real estate investment trusts, public utility companies and investment companies. Stephen C. Mecke has been Vice President of Development since October 1995 and has been the Company's Director of Development since June 1992. He was previously the manager of underwriting at Continental Realty Credit Inc., a commercial mortgage company, from October 1988 to June 1992. Debora A. Pfaff has been Vice President of Operations since October 1995 and has been the Company's Director of Operations since September 1992. She was previously a Senior Manager with KPMG Peat Marwick where she worked from 1985 to 1992. Stephen H. Press has been Vice President of Acquisitions of the Company since October 1993 and previously held this position with the Company from June 1987 to December 1990. He was Vice President of Development and Regulatory Affairs for Integrated Health Services, Inc., a medical services company, from April 1991 to October 1993. John G. Demeritt has been Controller of the Company since October 1995. Prior to that, he was Corporate Controller of CMG Information Services, Inc., an information service provider, from 1994 to 1995. He was Vice President of Finance and Treasurer of Salem Sportswear Corporation, a manufacturer and marketer of licensed sports apparel, from June 1991 to November 1993. He was Controller of Scitex America Corporation, a manufacturer and distributor of electronic prepress equipment, from August 1986 to June 1991, and was previously associated with Laventhol & Horwath, independent accountants, from 1983 to 1986. -19- 20 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) and (b) The Company's Shares are traded on the New York Stock Exchange under the symbol MT. The following table sets forth for the periods shown the high and low sales prices for the Shares (as reported on the New York Stock Exchange Composite Tape):
1996 1995 - - -------------------------------------- ------------------------------------ Quarter High Low Quarter High Low ------- ---- --- ------- ---- --- First $36.63 $33.25 First $32.13 $29.50 Second $34.38 $31.75 Second $34.13 $29.00 Third $35.38 $33.13 Third $35.50 $32.63 Fourth $40.00 $34.50 Fourth $35.50 $31.25
There were approximately 5,541 holders of record of the Company's Shares as of January 31, 1997. Included in the number of Shareholders of record are Shares held in "nominee" or "street" name. (c) The Company has declared the following distributions during its two most recent fiscal years:
Distributions Period Declared Per Share ------ ------------------ Quarter Ended March 31, 1995.................................. $ .6675 Quarter Ended June 30, 1995 .................................. .6725 Quarter Ended September 30, 1995.............................. .6775 Quarter Ended December 31, 1995............................... .6825 ------- $2.70 ===== Quarter Ended March 31, 1996.................................. $ .6875 Quarter Ended June 30, 1996................................... .6925 Quarter Ended September 30, 1996.............................. .6975 Quarter Ended December 31, 1996............................... .7025 ------- $2.78 =====
The Company intends to distribute to its shareholders on a quarterly basis a majority of cash flow from operating activities available for distribution. Cash flow from operating activities available for distribution to shareholders of the Company will be derived primarily from the rental payments and interest payments derived from its real estate investments. All distributions will be made by the Company at the discretion of the Trustees and will depend on the earnings of the Company, its financial condition and such other factors as the Trustees deem relevant. In order to qualify for the beneficial tax treatment accorded to real estate investment trusts by Sections 856 to 860 of the Internal Revenue Code, the Company is required to make distributions to holders of its Shares of at least 95% of its "real estate investment trust taxable income". -20- 21 ITEM 6. SELECTED FINANCIAL INFORMATION
Year Ended December 31, -------------------------------------------------------------- 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- (In thousands, except per Share data) OPERATING DATA: Revenues ............................... $254,024 $209,369 $172,993 $150,375 $132,394 -------- -------- -------- -------- -------- Expenses: Interest expense .................... 64,216 64,163 67,479 62,193 58,159 Depreciation and amortization ....... 23,207 18,176 17,171 16,277 14,032 General and administrative expenses . 8,625 7,058 7,883 8,269 8,845 -------- -------- -------- -------- -------- Total expenses .................... 96,048 89,397 92,533 86,739 81,036 -------- -------- -------- -------- -------- Net income before extraordinary item ... 157,976 119,972 80,460 63,636 51,358 Loss on prepayment of debt ............. 33,454 -------- -------- -------- -------- -------- Net income ............................. $157,976 $ 86,518 $ 80,460 $ 63,636 $ 51,358 ======== ======== ======== ======== ======== Shares of beneficial interest (weighted average) .................. 59,458 47,563 35,314 31,310 26,360 PER SHARE DATA: Net income before extraordinary item ... $ 2.66 $ 2.52 $ 2.28 $ 2.03 $ 1.95 Loss on prepayment of debt ............. .70 -------- -------- -------- -------- -------- Net income ............................. $ 2.66 $ 1.82 $ 2.28 $ 2.03 $ 1.95 ======== ======== ======== ======== ======== Distributions paid ..................... $ 2.78 $ 2.70 $ 2.62 $ 2.54 $ 2.46 ======== ======== ======== ======== ========
December 31, -------------------------------------------------------------- 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- (In thousands) BALANCE SHEET DATA: Real estate investments, net ........... $2,188,078 $1,777,798 $1,484,229 $1,214,308 $1,021,630 Total assets ........................... 2,316,875 1,891,852 1,595,130 1,310,401 1,094,941 Indebtedness ........................... 858,760 762,291 765,752 658,245 606,585 Total liabilities ...................... 931,934 830,097 824,983 724,606 663,458 Total shareholders' equity ............. 1,384,941 1,061,755 770,147 585,795 431,483
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is incorporated by reference to the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Current Report on Form 8-K dated January 31, 1997. -21- 22 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The "Consolidated Financial Statements", "Notes to Consolidated Financial Statements" and "Report of Independent Accountants" required by this item are incorporated herein by reference in the Current Report on Form 8-K dated January 31, 1997. -22- 23 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To the Shareholders and Trustees of Meditrust: Our report on the consolidated financial statements of Meditrust has been incorporated by reference in this Form 10-K from Meditrust's Current Report on Form 8-K dated January 31, 1997. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed on page 37 in the index of this Form 10-K. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. Boston, Massachusetts Coopers & Lybrand L.L.P. January 16, 1997 -23- 24 MEDITRUST SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
Additions Balance at Charged to Additions Balance at Beginning of Costs and Charged to Other End of Description Period Expenses Accounts Deductions Period ----------- ------ -------- -------- ---------- ------ General valuation allowance included in Accrued Expenses and Other Liabilities for the year ended December 31: 1994 $12,035,670 $3,783,176 $11,272,009 (A) $4,546,837 1995 4,546,837 $5,167,735 9,714,572 1996 9,714,572 1,715,000 (B) 7,999,572 (A) Includes $9,100,000 reclassified as a reduction to Other Assets and $2,172,009 relating to the valuation of a real estate investment. (B) Relates to receivables charged off.
Additions Balance at Charged to Additions Balance at Beginning of Costs and Charged to Other End of Description Period Expenses Accounts Deductions Period ----------- ------ -------- -------- ---------- ------ General valuation allowance included in Other Assets for the year ended December 31: 1994 $ 9,100,000 (A) $9,100,000 1995 $9,100,000 13,325,221 $18,192,698 (B) 4,232,523 1996 4,232,523 3,050,328 (C) 1,182,195 (A) Reclassified from valuation allowance included in Accrued Expenses and Other Liabilities. (B) Includes approximately $89,000 relating to the valuation of other assets and $18,104,000 relating to receivables charged off. (C) Relates to receivables charged off.
-24- 25 MEDITRUST SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996
Initial Cost to Company Gross Amount at Which Carried at Close of Period ---------- Cost ------------------------------------------------ Capitalized Building & Subsequent to Building & Accum. Const. Date Description(1) Encumbrances Improvements Acquisitions Land(2) Improvements Total(5) Deprec.(4)(5) Date Acquired - - -------------- ------------ ------------ ------------- ------- ------------ -------- ------------- ---- -------- LONG-TERM CARE - - -------------- Alabaster, AL....... $ 5,799,000 $1,810,000 $ 150,000 $ 7,609,000 $ 7,759,000 $1,589,875 1971 8/87 Cheshire, CT........ 6,770,000 455,000 6,770,000 7,225,000 1,896,996 1975 10/85 Danbury, CT......... 5,295,000 305,000 5,295,000 5,600,000 1,483,677 1976 10/85 Darien, CT.......... 4,202,477 45,000 4,202,477 4,247,477 280,160 1975 6/94 Milford, CT......... 5,538,590 5,538,590 5,538,590 334,631 1971 6/94 Milford, CT......... 10,000,000 10,000,000 10,000,000 645,823 1992 6/94 Newington, CT....... 8,970,000 430,000 8,970,000 9,400,000 2,513,441 1978 10/85 Southbury, CT....... 3,224,151 1,020,000 3,224,151 4,244,151 208,227 1975 6/94 Southfield, CT...... 7,750,000 750,000 7,750,000 8,500,000 613,546 1993 11/93 Westport, CT........ 4,970,000 400,000 4,970,000 5,370,000 1,392,618 1965 10/85 Wethersfield, CT.... 12,440,000 6,643,218 19,083,218 19,083,218 3,549,395 1965 8/86 Bradenton, FL....... $3,420,000 9,900,000 4,100,000 9,900,000 14,000,000 2,227,500 1985 12/87 Naples, FL.......... 6,123,616 26,775 6,123,616 6,150,391 153,096 1969 1/96 Palm Beach, FL...... 46,399,797 46,399,797 46,399,797 1996 4/96 Sarasota, FL........ 4,447,012 1,060,800 4,447,012 5,507,812 111,180 1982 1/96 Venice, FL.......... 8,592,203 128,500 8,592,203 8,720,703 214,800 1985 1/96 Indianapolis, IN.... 2,455,612 114,700 2,455,612 2,570,312 61,392 1973 1/96 New Haven, IN....... 4,553,541 128,100 4,553,541 4,681,641 113,844 1982 1/96 W. Lafayette, IN.... 4,190,275 6,030,000 190,000 50,000 6,220,000 6,270,000 1,379,286 1964 1/88 Beverly, MA......... 6,300,000 645,000 6,300,000 6,945,000 1,765,315 1972 10/85 Concord, MA......... 8,762,000 3,538,000 8,762,000 12,300,000 273,811 1995 11/95 New Bedford, MA..... 7,492,000 1,008,000 7,492,000 8,500,000 234,120 1995 11/95 Newton, MA.......... 12,430,000 630,000 12,430,000 13,060,000 3,483,007 1977 10/85 Lexington, MA....... 11,210,000 590,000 11,210,000 11,800,000 2,899,109 1965 8/86 E. Longmeadow, MA... 12,400,000 3,595,928 400,000 15,995,928 16,395,928 3,047,268 1986 9/87 Holyoke, MA......... 11,980,670 684,248 121,600 12,664,918 12,786,518 1,352,953 1973 9/92 Lowell, MA.......... 9,897,730 594,621 500,000 10,492,351 10,992,351 1,120,264 1975 9/92 Lynn, MA............ 13,293,267 870,248 1,206,734 14,163,515 15,370,249 1,330,923 1960 4/93 Northampton, MA..... 2,709,612 187,500 2,709,612 2,897,112 174,995 1974 6/94 Peabody, MA......... 7,245,315 805,035 7,245,315 8,050,350 1,936,425 1987 10/90 Randolph, MA........ 9,014,760 1,001,640 9,014,760 10,016,400 1,408,575 1987 10/90 Weymouth, MA........ 10,719,932 850,000 10,719,932 11,569,932 692,323 1994 6/94 Wilmington, MA...... 6,689,925 743,325 6,689,925 7,433,250 1,818,726 1987 10/90 Montgomery, MD...... 16,888,000 1,300,000 16,888,000 18,188,000 527,747 1994 11/95
-25- 26 MEDITRUST SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996
Initial Cost to Company Gross Amount at Which Carried at Close of Period ---------- Cost ------------------------------------------------ Capitalized Building & Subsequent to Building & Accum. Const. Date Description(1) Encumbrances Improvements Acquisitions Land(2) Improvements Total(5) Deprec.(4)(5) Date Acquired - - -------------- ------------ ------------ ------------- ------- ------------ -------- ------------- ---- -------- LONG-TERM CARE, CONTINUED Grand Blanc, MI..... $ 6,500,000 $863,800 $ 120,000 $ 7,363,800 $ 7,483,800 $1,531,028 1970 5/88 Riverside, MO....... 8,559,900 238,000 8,559,900 8,797,900 1,872,466 1965 3/88 Bedford, NH......... $7,367,943 12,691,500 808,500 12,691,500 13,500,000 322,211 1992 1/96 Keene, NH........... 3,688,917 87,000 3,688,917 3,775,917 92,200 1965 1/96 Petersborough, NH... 4,779,992 128,700 4,779,992 4,908,692 119,496 1976 1/96 Milford, NH......... 3,195,288 52,000 3,195,288 3,247,288 79,884 1900 1/96 Milford, NH......... 4,222,545 82,000 4,222,545 4,304,545 105,564 1972 1/96 Winchester, NH...... 3,363,325 35,000 3,363,325 3,398,325 84,084 1987 1/96 Bridgewater, NJ..... 12,208,944 1,193,400 12,208,944 13,402,344 305,220 1971 1/96 Bound Brook, NJ..... 1,624,000 1,176,000 1,624,000 2,800,000 405,963 1963 12/86 Oradell, NJ......... 14,986,000 1,714,000 14,986,000 16,700,000 468,315 1995 11/95 Camden, NJ.......... 8,334,780 450,250 8,334,780 8,785,030 2,083,675 1984 12/86 Marlton, NJ......... 14,060,000 240,000 14,060,000 14,300,000 439,380 1995 11/95 New Milford, NJ..... 11,110,000 1,090,000 11,110,000 12,200,000 2,499,767 1971 12/87 Niskayuna, NY....... 9,708,000 834,537 292,000 10,542,537 10,834,537 1,000,833 1976 3/93 Rennsselaer, NY..... 1,400,000 1,400,000 1,400,000 75,842 1975 11/94 Troy, NY............ 9,967,564 491,673 56,100 10,459,237 10,515,337 889,295 1972 8/93 Bellbrook, OH....... 2,787,134 212,000 2,787,134 2,999,134 423,888 1981 12/90 Huber Heights, OH... 3,593,360 174,000 3,593,360 3,767,360 546,486 1984 12/90 Swanton, OH......... 5,500,000 350,000 5,500,000 5,850,000 240,625 1950 4/95 Troy, OH............ 5,756,197 210,600 5,756,197 5,966,797 143,904 1970 1/96 Medina, OH.......... 6,700,705 10,568,000 232,000 10,568,000 10,800,000 2,289,767 1954 4/88 New London, OH...... 2,110,837 22,600 2,110,837 2,133,437 321,033 1985 12/90 West Carrolton, OH.. 3,483,669 216,400 3,483,669 3,700,069 529,816 1983 12/90 Erie, PA............ 4,753,000 375,000 335,000 5,128,000 5,463,000 1,140,648 1977 12/87 Greensburg, PA...... 5,544,012 525,000 5,544,012 6,069,012 704,551 1991 6/90 (4) Facilities, WV.. 16,299,400 900,600 16,299,400 17,200,000 443,317 1987 12/95 ASSISTED LIVING Blytheville, AR..... 554,743 554,743 554,743 1996 4/96 Maumelle, AR........ 766,539 766,539 766,539 1996 11/96 Mt. Home, AR........ 626,033 626,033 626,033 1996 11/96 Pocahontas, AR...... 469,012 469,012 469,012 1996 11/96 Sherwood, AR........ 923,619 923,619 923,619 1996 11/96
-26- 27 MEDITRUST SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996
Initial Cost to Company Gross Amount at Which Carried at Close of Period ---------- Cost ------------------------------------------------ Capitalized Building & Subsequent to Building & Accum. Const. Date Description(1) Encumbrances Improvements Acquisitions Land(2) Improvements Total(5) Deprec.(4)(5) Date Acquired - - -------------- ------------ ------------ ------------ ------- ------------ -------- ------------- ---- -------- ASSISTED LIVING, CONTINUED Grand Terrace, CA... $ 3,702,263 $ 450,000 $ 3,702,263 $ 4,152,263 $ 38,565 1989 8/96 Bradenton, FL....... 4,046,153 470,000 4,046,153 4,516,153 95,559 1978 3/96 Brandon, FL......... 5,404,280 290,000 5,404,280 5,694,280 112,590 1991 3/96 Ft. Myers, FL....... 3,012,558 620,000 3,012,558 3,632,558 62,760 1996 3/96 Ft. Myers, FL....... 3,252,481 513,000 3,252,481 3,765,481 6,776 1982 12/96 Jupiter, FL......... 400,347 400,347 400,347 1996 6/96 Lakeland, FL........ 6,076,053 600,000 6,076,053 6,676,053 126,580 1991 3/96 Lecanto, FL......... 4,019,365 150,000 4,019,365 4,169,365 66,992 1986 5/96 Melbourne, FL....... 2,565,000 2,565,000 2,565,000 6/96 Orlando, FL......... 6,201,839 3,125,000 6,201,839 9,326,839 129,210 1996 3/96 Pinellas, FL........ 8,785,192 620,000 8,785,192 9,405,192 91,515 1986 8/96 Sarasota, FL........ 5,939,699 540,000 5,939,699 6,479,699 123,740 1982 3/96 Sarasota, FL........ 7,841,931 7,841,931 7,841,931 1989 Stuart, FL.......... 2,517,500 2,517,500 2,517,500 1996 6/96 Sunrise, FL......... 13,747,273 470,000 13,747,273 14,217,273 229,120 1991 5/96 Tampa, FL........... 3,366,481 399,000 3,366,481 3,765,481 7,014 1996 12/96 Vera Beach, FL...... 2,593,500 2,593,500 2,593,500 1996 6/96 Chubbock, ID........ 4,472,363 90,000 4,472,363 4,562,363 46,586 1996 8/96 Coeur d'Alene, ID... 4,921,376 4,921,376 4,921,376 1996 6/96 Pocatello, ID....... 3,200,000 160,000 3,200,000 3,360,000 20,001 1996 10/96 Hutchinson, KS...... 6,943,183 6,943,183 6,943,183 1989 3/96 Wichita, KS......... 6,762,000 748,000 6,762,000 7,510,000 140,879 1993 3/96 Tewksbury, MA....... 4,943,256 480,000 4,943,256 5,423,256 102,990 1987 3/96 Ann Arbor, MI....... 2,797,488 280,800 2,797,488 3,078,288 5,828 1995 12/96 Farmington I, MI.... 3,205,250 215,600 3,205,250 3,420,850 6,678 1994 12/96 Farmington II, MI... 3,504,592 246,400 3,504,592 3,750,992 7,301 1995 12/96 Utica, MI........... 3,077,414 277,200 3,077,414 3,354,614 6,411 1995 12/96 Ridgeland, MS....... 2,632,661 2,632,661 2,632,661 1996 6/96 Altoona, PA......... 642,634 642,634 642,634 1996 12/96 Lower Makesfield, PA 4,494,920 504,000 4,494,920 4,998,920 9,364 1996 12/96 Montgomery, PA...... 4,487,033 480,000 4,487,033 4,967,033 9,348 1996 12/96 Northhampton, PA.... 9,624,115 1,212,000 9,624,115 10,836,115 20,050 1990 12/96 State College, PA... 1,397,618 1,397,618 1,397,618 1996 8/96 Anderson Place, SC.. 10,499,705 170,000 10,499,705 10,669,705 65,622 1987 10/96 Greenville, SC...... 2,378,802 2,378,802 2,378,802 1996 6/96
-27- 28 MEDITRUST SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996
Initial Cost to Company Gross Amount at Which Carried at Close of Period ---------- Cost ------------------------------------------------ Capitalized Building & Subsequent to Building & Accum. Const. Date Description(1) Encumbrances Improvements Acquisitions Land(2) Improvements Total(5) Deprec.(4)(5) Date Acquired - - -------------- ------------ ------------- ------------ ------- ------------ -------- ------------- ---- -------- ASSISTED LIVING, CONTINUED Clarksville, TN..... $ 1,929,036 $ 1,929,036 $ 1,929,036 1996 7/96 Amarillo, TX........ 2,577,771 2,577,771 2,577,771 1996 7/96 Texas, ALC.......... 11,155,104 $ 625,000 11,155,104 11,780,104 185,920 1996 5/96 Beaumont, TX........ 4,866,433 4,866,433 4,866,433 1996 5/96 Lubbock, TX......... 4,388,436 4,388,436 4,388,436 1996 4/96 Midland, TX......... 4,531,340 4,531,340 4,531,340 1996 4/96 Nacodoches, TX...... 4,968,892 230,000 4,968,892 5,198,892 41,408 1996 9/96 San Angelo, TX...... 2,894,651 2,894,651 2,894,651 1996 8/96 Wichita Falls, TX... 3,018,241 3,018,241 3,018,241 1996 8/96 Billingham, WA...... 3,327,423 350,000 3,327,423 3,677,423 20,796 1996 10/96 Federal Way, WA..... 5,185,000 590,000 5,185,000 5,775,000 97,218 1996 4/96 Ocean Shores, WA.... 2,627,050 2,627,050 2,627,050 1996 8/96 Brown Deer, WI...... 635,266 72,000 635,266 707,266 1,324 1995 12/96 Analaska, WI........ 1,205,931 84,000 1,205,931 1,289,931 2,512 1995 12/96 Sussex, WI.......... 874,824 86,000 874,824 960,824 1,823 1995 12/96 REHABILITATION - - -------------- Benton, AR.......... 7,865,000 392,410 135,000 8,257,410 8,392,410 767,595 1967 4/93 Jonesboro, AR....... $4,116,215 8,861,835 196,225 8,861,835 9,058,060 1,763,816 1989 2/89 Tucson, AZ.......... 9,965,000 9,965,000 9,965,000 1,598,542 1990 8/90 Bakersfield, CA..... 10,907,463 1,522,537 10,907,463 12,430,000 1,795,194 1990 6/90 Fresno, CA.......... 7,750,611 14,469,580 2,088,920 14,469,580 16,558,500 2,110,169 1991 3/91 Kentfield, CA....... 9,650,000 350,000 9,650,000 10,000,000 2,110,932 1963 3/88 Topeka, KS.......... 5,053,721 10,353,741 1,295,499 10,353,741 11,649,240 2,033,646 1989 2/89 Bowling Green, KY... 10,000,000 10,000,000 10,000,000 645,825 1992 6/94 Ruston, LA.......... 4,073,344 10,021,549 321,551 10,021,549 10,343,100 2,038,984 1988 12/88 Baton Rouge, LA..... 5,411,752 10,366,008 1,211,000 10,366,008 11,577,008 2,008,418 1988 4/89 New Bedford, MA..... 10,000,000 859,303 10,859,303 10,859,303 676,261 1920 6/94 Battle Creek, MI.... 7,265,913 408,529 146,970 7,674,442 7,821,412 715,222 1933 4/93 Effingham, NH....... 8,121,200 3,971,031 1,478,800 12,092,231 13,571,031 1,073,644 1985 4/93 Cortland, NY........ 26,309,407 1,503,410 263,000 27,812,817 28,075,817 2,354,608 1971 8/93 Arlington, TX....... 10,132,662 1,161,338 10,132,662 11,294,000 1,667,690 1990 6/90 Ft. Worth, TX....... 5,771,733 10,814,520 1,548,022 10,814,520 12,362,542 1,734,810 1990 8/90 Houston, TX......... 5,249,663 10,707,069 525,000 10,707,069 11,232,069 2,074,485 1989 4/89 Lake Terrace, WA.... 4,389,224 441,796 1,029,980 4,831,020 5,861,000 315,678 1987 5/93 Waterford, WI....... 11,515,023 2,093,205 280,000 13,608,228 13,888,228 1,246,272 1968 4/93
-28- 29 MEDITRUST SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996
Initial Cost to Company Gross Amount at Which Carried at Close of Period ---------- Cost ------------------------------------------------ Capitalized Date Building & Subsequent to Building & Accum. Const. Ac- Description(1) Encumbrances Improvements Acquisitions Land(2) Improvements Total(5) Deprec.(4)(5) Date quired - - -------------- ------------ ------------ ------------- ------- ------------ -------- ------------- ---- ------- ACUTE CARE HOSPITAL - - ------------------- Phoenix, AZ......... $ 63,960,000 $ 1,690,000 $ 63,960,000 65,650,000 $ 3,064,750 1954 2/95 ALCOHOL AND SUBSTANCE ABUSE TREATMENT CENTERS AND PSYCHIATRIC FACILITIES ---------- Hollywood, CA....... 4,035,000 1,715,000 4,035,000 5,750,000 874,225 1957 5/88 Monroe, LA.......... 7,770,000 $ 450,000 530,000 8,220,000 8,750,000 1,768,650 1982 5/88 DeSoto, TX.......... 3,934,000 1,775,730 849,270 5,709,730 6,559,000 1,234,098 1988 1/88 College Station, TX. 3,650,771 58,122 980,185 3,708,893 4,689.078 531,865 1987 5/93 ----------- -------------- ----------- ----------- -------------- -------------- ----------- --------- TOTAL............... $59,105,962 $1,007,337,208 $28,906,809 $68,098,156 $1,036,244,017 $1,104,342,173(3) $98,082,165 =========== ============== =========== =========== ============== ============== ===========
-29- 30 MEDITRUST SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED DECEMBER 31, 1996 (1) Facility classifications are Long-Term Care (LTC), Retirement Living (RL), Psychiatric Hospital (Psych), Rehabilitation Hospital (Rehab) and Assisted Living (AL). (2) Gross amount at which land is carried at close of period also represents initial cost to the Company. (3) Cost for federal income tax purposes. (4) Depreciation is calculated using a 40-year life for all completed facilities. (5) Real estate and accumulated depreciation reconciliations for the three years ended December 31, 1996 are as follows:
Accumulated Real Estate Depreciation ----------- ------------ (In thousands) Balance at close of year--December 31, 1993................... $ 685,896 $ 73,294 Additions during the period: Acquisitions........................................... 18,327 Value of real estate acquired.......................... 30,000 Additions to existing properties....................... 10,785 Other.................................................. 11,570 Provision for depreciation............................. 15,209 Deductions: Lease terminations..................................... (124,000) (22,463) Sale of real estate.................................... (4,000) Other.................................................. (2,172) (122) ----------- -------- Balance at close of year-- December 31, 1994.................. 626,406 65,918 Additions during the period: Acquisitions.......................................... 91,700 Value of real estate acquired......................... 69,988 Additions to existing properties...................... 2,487 Provision for depreciation............................ 16,283 Deductions: Lease terminations..................................... (35,602) (3,486) Sale of real estate.................................... (8,600) (1,512) ---------- -------- Balance at close of year--December 31, 1995................... 746,379 77,203 Additions during the period: Acquisitions.......................................... 325,789 Value of real estate acquired......................... 36,875 Additions to existing properties...................... Provision for depreciation............................ 21,269 Deductions: Sale of real estate................................... (4,701) (390) ---------- -------- Balance at close of year -- December 31, 1996................. $1,104,342 $ 98,082 ========== ========
-30- 31 MEDITRUST SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 1996
Periodic Face Carrying Interest Final Maturity Payment Amount of Amount of Description (A) Rate Date Terms Mortgages Mortgages (B) --------------- ---- ---- ----- --------- ------------- Individual mortgages in excess of 3% of the total carrying amount: 26 long-term care facilities 10.50% February 1, 2004 Monthly payments of $48,800,000 $47,999,000 located in Illinois principal and interest of $446,000, balloon payment of $44,588,000 due at maturity 6 long-term care facilities 10.50% June 8, 2004 Interest only through 42,000,000 42,000,000 located in Massachusetts July 1998, monthly principal and interest of $397,000 thereafter, balloon payment of $39,210,000 due at maturity 23 long-term care facilities 10.40% November 1, 2004 Monthly payments of 46,000,000 45,481,000 located in Texas principal and interest of $417,000, balloon payment of $42,085,000 due at maturity
-31- 32 MEDITRUST SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 1996
Periodic Face Carrying Interest Final Maturity Payment Amount of Amount of Description (A) Rate Date Terms Mortgages Mortgages (B) --------------- ---- ---- ----- --------- ------------- 18 long-term care facilities 10.85% August 23, 2005 Monthly payments of 86,700,000 85,951,000 located in Colorado, Florida, principal and interest of Indiana, Kansas, Missouri, $800,000, balloon Nebraska, North Carolina, payment of Tennessee and Washington $78,276,000 due at maturity 17 long-term care facilities 10.75% May 21, 2003 Monthly payments of 103,618,000 102,044,000 located in Arizona, California, principal and interest Colorado, Florida, Georgia, of $968,000, balloon Indiana, Kansas, Tennessee and payment of $95,501,000 Utah due at maturity 10 long-term care facilities 10.95% November 17, 2001 Monthly payments of 37,100,000 36,754,000 located in Missouri, Nebraska principal and interest and Texas of $352,000, balloon payment of $35,461,000 due at maturity 7 long-term care facilities, 10.70% August 31, 2006 Interest only through 41,385,000 41,385,000 located in Missouri October 1997, monthly principal and interest of $385,000 thereafter, balloon payment of $38,625,000 due at maturity
-32- 33 MEDITRUST SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 1996
Periodic Face Carrying Interest Final Maturity Payment Amount of Amount of Description (A) Rate Date Terms Mortgages Mortgages (B) --------------- ---- ---- ----- --------- ------------- Mortgages individually less than 3% of total carrying amount: Long-term care facilities, 51 From 8.83% From December 1996 (C) 470,887,000 mortgages, face amounts ranging to 12.30% to November 2006 from $900,000 to $32,216,000, located in Arizona, California, Colorado, Connecticut, Florida, Idaho, Indiana, Kentucky, Massachusetts, Michigan, Missouri, New Jersey, New Mexico, Nevada, New York, Pennsylvania, Rhode Island, Tennessee, Texas, Utah, Washington, West Virginia and Wyoming Rehabilitation hospitals, 3 From 10.50% From September 2000 47,646,000 mortgages, face amounts ranging to 12.50% to July 2004 from $9,000,000 to $30,975,000, located in California, Colorado and Tennessee Retirement living facilities, From 8.83% From December 1998 41,673,000 4 mortgages, face amounts ranging to 11.00% to January 2006 from $5,500,000 to $15,820,000, located in Colorado, Florida, North Carolina and Utah Alcohol and substance abuse 11.00% September 29, 2005 32,986,000 treatment facility, face amount of $33,300,000, located in New York
-33- 34 MEDITRUST SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 1996
Periodic Face Carrying Interest Final Maturity Payment Amount of Amount of Description (A) Rate Date Terms Mortgages Mortgages (B) --------------- ---- ---- ----- --------- ------------- Medical office buildings, From 8.72% From February 2004 67,284,000 10 mortgages, face amounts to 9.55% to January 2008 ranging from $2,400,000 to $10,655,000, located in California, Florida, Tennessee and Texas Assisted living facilities, From 9.85% From September 2005 14,445,000 3 mortgages, face amounts ranging to 10.61% to September 2006 from $4,725,000 to $5,046,000, located in Michigan, Missouri, Ohio and Wisconsin Construction Loans: - - ------------------- Long-term care facilities, 7 loans, From 9.75% (E) 50,029,000 amounts ranging from $6,939,000 to 10.75% to $25,570,000, located in Florida, Idaho, Massachusetts, New Jersey, Nevada and Pennsylvania Medical office buildings, 6 loans, 10.25% (E) 27,743,000 amounts ranging from $3,550,000 to $11,975,000, located in Arizona, Florida and Texas Assisted living facilities, 5 loans, From 8.83% (E) 27,511,000 amounts ranging from $4,691,000 to to 10.25% ------------ -------------- $21,400,000, located in Florida, Indiana and Michigan $405,603,000 $1,181,818,000 (D) ============ ==============
-34- 35 MEDITRUST SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE (A) Virtually all mortgage loans on real estate are first mortgage loans. (B) No mortgage loan is subject to delinquent principal or interest, except for one property located in New Jersey. (C) Mortgage loan term has been extended for a one-year period. (D) The aggregate cost for federal income tax purposes. (E) Final maturity date will be determined upon completion of construction. Reconciliation of carrying amount of mortgage loans for the three years ended December 31, 1996 is as follows: (In thousands) Balance at December 31, 1993 .......................... $ 601,706 Additions during period: New mortgage loans ............................ 241,339 Construction loan advances .................... 49,688 Non-cash additions ............................ 71,594 Deductions during period: Collection of principal ....................... (5,149) Conversion of construction loans to sale/leaseback transactions ................ (10,239) Prepayment of mortgage loans .................. (14,835) Other ......................................... (10,363) ---------- Balance at December 31, 1994 .......................... 923,741 Additions during period: New mortgage loans ............................ 152,216 Construction loan advances .................... 106,946 Other ......................................... 9,953 Deductions during period: Collection of principal ....................... (6,615) Non-cash deductions ........................... (34,386) Prepayment of mortgage loans .................. (43,232) ---------- Balance at December 31, 1995 .......................... 1,108,623 Additions during period: New mortgage loans ............................ 137,686 Construction loan advances .................... 117,495 Other ......................................... 9,903 Deductions during period: Collection of principal ....................... (33,962) Non-cash deductions ........................... (29,642) Prepayment of mortgage loans .................. (128,285) ---------- Balance at December 31, 1996 .......................... $1,181,818 ==========
-35- 36 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE NOT APPLICABLE. PART III ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated by reference to Item 4a above and the table and the information following it appearing in the first subsection of the section entitled "Election of Trustees" contained in the Company's Proxy Statement for its Annual Meeting of Shareholders ("Annual Meeting Proxy Statement"), to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended ("Regulation 14A"). There are no family relationships among any of the Trustees or executive officers of the Company. Incorporated by reference to the section entitled "Section 16(a) Beneficial Ownership Reporting Compliance" contained in the Company's Annual Meeting Proxy Statement, to be filed pursuant to Regulation 14A. ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference to the section entitled "Executive Compensation" contained in the Company's Annual Meeting Proxy Statement, to be filed pursuant to Regulation 14A. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference to the table appearing in the first subsection of the section entitled "Election of Trustees" and the section entitled "Voting Securities, Principal Holders Thereof and Holdings by Certain Executive Officers" contained in the Company's Annual Meeting Proxy Statement, to be filed pursuant to Regulation 14A. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated by reference to the section entitled "Certain Transactions" contained in the Company's Annual Meeting Proxy Statement, to be filed pursuant to Regulation 14A. -36- 37 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements No financial statements have been filed as a part of this report other than those incorporated by reference in Item 8. 2. Financial Statement Schedules Page(s) ------- Report of Independent Accountants on Financial Statement Schedules..... 23 II. Valuation and Qualifying Accounts...................... 24 III. Real Estate and Accumulated Depreciation............... 25-30 IV. Mortgage Loans on Real Estate.......................... 31-35 All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions, are inapplicable or have been disclosed in the notes to consolidated financial statements, and therefore, have been omitted. 3. Exhibits Exhibits required as part of this report are listed in the index appearing on Pages 40 through 44. EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS 1988 Stock Option Plan - Form 10-K for fiscal year ended December 31, 1988, Exhibit 10.13 Amended and Restated 1992 - Form 10-Q for fiscal quarter ended Equity Incentive Plan September 30, 1996, Exhibit 4 Trustee Retirement Plan - Form 10-K for fiscal year ended December 31, 1995, Exhibit 4.3 Employment Agreement with - Form 10-Q for fiscal quarter ended Abraham D. Gosman March 31, 1993, Exhibit 10.1 (b) The Company did not file any reports on Form 8-K during the quarter ended December 31, 1996. -37- 38 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MEDITRUST By:/s/ Laurie Tidor ------------------------------------------------ Chief Financial Officer (and Principal Financial and Accounting Officer) Dated: March 12, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Title Date ---- ----- ---- /s/ Abraham D. Gosman Chairman, Chief Executive March 12, 1997 - - ------------------------ Officer and Trustee Abraham D. Gosman /s/ David F. Benson President, Treasurer and March 12, 1997 - - ------------------------ Trustee David F. Benson /s/ Edward W. Brooke Trustee March 12, 1997 - - ------------------------ Edward W. Brooke /s/ Philip L. Lowe Trustee March 12, 1997 - - ------------------------ Philip L. Lowe /s/ Thomas J. Magovern Trustee March 12, 1997 - - ------------------------ Thomas J. Magovern /s/ Gerald Tsai, Jr Trustee March 12, 1997 - - ------------------------ Gerald Tsai, Jr. /s/ Frederick W. Zuckerman Trustee March 12, 1997 - - ------------------------ Frederick W. Zuckerman -38- 39 The Declaration of Trust establishing Meditrust dated August 6, 1985 (the "Declaration"), a copy of which is duly filed in the office of the Secretary of State of the Commonwealth of Massachusetts, provides that the name "Meditrust" refers to the Trustees under the Declaration collectively as Trustees, but not individually or personally; and that no Trustee, officer, shareholder, employee or agent of the Company shall be held to any personal liability, jointly or severally, for any obligation of, or claim against, the Company. All persons dealing with the Company, in any way, shall look only to the assets of the Company for the payment of any sum or the performance of any obligation. -39- 40 EXHIBITS
Exhibit No Title Method of Filing - - ------- ----- ---------------- 3.1 Restated Declaration of Trust, as amended............................ Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed October 19, 1994 3.2 By-Laws, as amended................... Incorporated by reference to Exhibit 3.2 to Form 10-K for the fiscal year ended December 31, 1992 4.1 1988 Stock Option Plan, as amended ... Incorporated by reference to Exhibit 10.13 to Form 10-K for the fiscal year ended December 31, 1988 4.2 Amended and Restated 1992 Equity Incentive Plan (effective August 15, 1996)................................. Incorporated by reference to Exhibit 4 to Form 10-Q for the quarter ended September 30, 1996 4.3 Trustee Retirement Plan............... Incorporated by reference to Exhibit 4.3 to Form 10-K for the fiscal year ended December 31, 1995. 4.4 Form of Indenture dated February 4, 1993 between The Company and Fleet National Bank, as trustee............. Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-3 (File No. 33-55386) 4.5 Form of 7% Convertible Debenture due 1998.............................. Incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-3 (File No. 33-55386) 4.6 Form of Fiscal Agency Agreement dated February 4, 1993 between the Company and Fleet National Bank as fiscal agent....................... Incorporated by reference to Exhibit 4.5 to Form 10-K for the fiscal year ended December 31, 1993 4.7 Form of 7% Convertible Debenture due 1998.............................. Incorporated by reference to Exhibit 4.6 to Form 10-K for the fiscal year ended December 31, 1993 4.8 Form of Fiscal Agency Agreement dated November 15, 1993 between the Company and Fleet National Bank as fiscal agent.................. Incorporated by reference to Exhibit 4.7 to Form 10-K for the fiscal year ended December 31, 1993
-40- 41
Exhibit No Title Method of Filing - - ------- ----- ---------------- 4.9 Form of 6 7/8% Convertible Debenture due 1998................... Incorporated by reference to Exhibit 4.8 to Form 10-K for the fiscal year ended December 31, 1993 4.10 Form of Indenture dated April 23, 1992 between The Company and Fleet National Bank, as Trustee...... Incorporated by reference to Exhibit 4 to the Registration Statement on Form S-3 (File No. 33-45979) 4.11 Form of 9% Convertible Debenture due 2002............................. Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-3 (File No. 33-45979) 4.12 Form of Indenture dated March 9, 1994 between the Company and Shawmut Bank, as Trustee.............. Incorporated by reference to Exhibit 4 to the Registration Statement on Form S-3 (File No. 33-50835) 4.13 Form of 7 1/2% Convertible Debenture due 2001.............................. Incorporated by reference to Exhibit 4 to the Registration Statement on Form S-3 (File No. 33-50835) 4.14 Form of Second Supplemental Indenture dated as of July 28, 1995 between the Company and Fleet National Bank, as Trustee............. Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated July 27, 1995 4.15 Form of 8.54% Convertible Senior Note due July 1, 2000...................... Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated July 27, 1995 4.16 Form of 8.56% Convertible Senior Note due July 1, 2002...................... Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated July 27, 1995
-41- 42
Exhibit No Title Method of Filing - - ------- ----- ---------------- 4.17 Form of Distribution Agreement dated August 10, 1995 between the Company, Goldman, Sachs & Co. and other underwriters relating to $200,000,000 of Medium-term Notes.................. Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated August 8, 1995 4.18 Form of Third Supplemental Indenture dated as of August 10, 1995 between the Company and Fleet National Bank... Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated August 8, 1995 4.19 Form of Fixed Rate Senior Medium-term Note.................................. Incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K dated August 8, 1995 4.20 Form of Floating Rate Medium-term Note.................................. Incorporated by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K dated August 8, 1995 4.21 Form of First Supplemental Indenture dated as of July 26, 1995 between the Company and Fleet National Bank....... Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated July 13, 1995 4.22 Form of 7.375% Note due July 15, 2000.................................. Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated July 13, 1995 4.23 Form of 7.60% Note due July 15, 2001.. Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated July 13, 1995
-42- 43
Exhibit No Title Method of Filing - - ------- ----- ---------------- 4.24 Form of Fourth Supplemental Indenture dated as of September 10, 1996 between the Company and Fleet National Bank... Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated September 6, 1996 10.1 Note Agreement relating to first mortgage notes due December 1, 1997... Incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-11 (File No. 33-20557) 10.2 Amended and Restated Lease Agreement between Mediplex of Queens, Inc. and QPH, Inc. dated December 30, 1986..... Incorporated by reference to Exhibit 2.2 to the Form 8-K dated January 13, 1987 10.3 Form of Lease for Carmel, New York and Scotia, New York facilities........... Incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-11 (File No. 33-7483) 10.10 Amended and Restated Revolving Credit Agreement dated as of July 21, 1995 between the Company and Via Banque.... Incorporated by reference to Exhibit 10.2 to Form 10-Q for the fiscal quarter ended September 30, 1995. 10.12 Amended and Restated Revolving Credit Agreement dated July 21, 1995 among the Company, various financial institutions and Fleet Bank, National Association and First Union National Bank of North Carolina, as Agents................... Incorporated by reference to Exhibit 10.1 to Form 10-Q dated October 20, 1995 10.13 Agreement dated as of March 8, 1996 between the Company and Robert Cataldo............................... Incorporated by reference to the Registration Statement on Form S-8 (File No. 333-0891)
-43- 44
Exhibit No Title Method of Filing - - ------- ----- ---------------- 11 Statement Regarding Computation of Per Share Earnings........................ Filed herewith 21 Subsidiaries of the Registrant........ Filed herewith 23 Consent of Coopers & Lybrand L.L.P.... Filed herewith 27 Financial Data Schedule............... Incorporated by reference to Exhibit 27 to the Company's Current Report on Form 8-K dated January 31, 1997.
-44- EX-11 2 STATEMENT REGARDING COMPUTATION OF PER SHARE 1 EXHIBIT 11 STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Year ended December 31, -------------------------------------- Primary 1996 1995 1994 ======= ---- ---- ---- Weighted average shares 59,458 47,563 35,314 Dilutive effect of: Stock options 148 136 88 Warrants 21 -------- -------- ------- Weighted average number of shares and equivalent shares outstanding 59,606 47,699 35,423 ======== ======== ======= Net income before extraordinary item $157,976 $119,972 $80,460 Extraordinary item 33,454 --------- --------- ------- Net income (loss) $157,976 $ 86,518 $80,460 ======== ======== ======= Per Share amounts: Net income per share (A) $ 2.65 $ 2.52 $ 2.27 Extraordinary item: Loss on prepayment of debt 0.70 -------- -------- ------- Net income (loss) $ 2.65 $ 1.82 $ 2.27 ======== ======== ======= (A) This calculation is submitted in accordance with Regulation S-K item 601 (b) (11) although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%.
Fully Diluted ============= Weighted average number of shares used in primary calculation 59,458 47,563 35,423 Assumed conversion of convertible debentures 8,563 7,574 7,060 Dilutive effect of: Stock options 255 209 -------- -------- ------- Fully diluted weighted average shares and equivalent shares outstanding 68,276 55,346 42,483 ======== ======== ======= Net income before extraordinary item $157,976 $119,972 $80,460 Interest and debt amortization on assumed conversion of debentures 23,801 20,710 18,632 -------- -------- ------- Adjusted net income before extraordinary item 181,777 140,682 99,092 Extraordinary item 33,454 -------- -------- ------- Net income (loss) $181,777 $107,228 $99,092 ======== ======== ======= Per Share amounts: Net income per share (B) $ 2.66 $ 2.54 $ 2.33 Extraordinary item: Loss on prepayment of debt 0.60 -------- -------- ------- Net income (loss) $ 2.66 $ 1.94 $ 2.33 ======== ======== ======= (B) This calculation is submitted in accordance with Regulation S-K item 601(b) (11) although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive result.
-45- EX-21 3 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT MEDITRUST SUBSIDIARY CORPORATIONS AS OF DECEMBER 31, 1996 -----------------------
State of Name Incorporation - - ---- ------------- Meditrust Acquisition Corporation I Massachusetts Meditrust Acquisition Corporation II Delaware Meditrust Acquisition Corporation III Delaware Meditrust of Alabama, Inc. Alabama Meditrust at Alpine, Inc. Pennsylvania Meditrust of Arizona, Inc. Delaware Meditrust of Arkansas, Inc. Arkansas Meditrust of Arlington, Texas, Inc. Massachusetts Meditrust of Bakersfield, California, Inc. Delaware Meditrust of Baton Rouge, Inc. Louisiana Meditrust of Benton, Inc. Delaware Meditrust of California, Inc. Delaware Meditrust of College Station, Inc. Delaware Meditrust of Colorado, Inc. Delaware Meditrust of Connecticut, Inc. Delaware Meditrust Depository Corporation Delaware Meditrust Finance Corporation Delaware Meditrust Financial Services Corporation Delaware Meditrust of Florida, Inc. New York Meditrust of Bedford, Inc. Delaware Meditrust of Houston, Inc. Massachusetts Meditrust of Illinois, Inc. Illinois Meditrust of Kansas, Inc. Kansas Meditrust of Kentucky, Inc. Delaware Meditrust of Los Angeles, Inc. Delaware
-46- 2 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT MEDITRUST SUBSIDIARY CORPORATIONS (CONTINUED) AS OF DECEMBER 31, 1996 -----------------------
State of Name Incorporation - - ---- ------------- Meditrust of Louisiana, Inc. Louisiana Meditrust of Lynn, Inc. Delaware Meditrust Management Corp. Delaware Meditrust of Maryland, Inc. Delaware Meditrust of Massachusetts, Inc. Delaware Meditrust at Mountainview, Inc. Pennsylvania Meditrust of Michigan, Inc. Delaware Meditrust of Missouri, Inc. Delaware Meditrust Mortgage Investments, Inc. Delaware Meditrust of New Hampshire, Inc. Delaware Meditrust of New Jersey, Inc. Delaware Meditrust of New York, Inc. Delaware Meditrust of Ohio, Inc. Delaware Meditrust of the U.K., Inc. Delaware Meditrust Tri-States, Inc. Delaware New England Finance Corporation Delaware Pacific Finance Corporation Delaware Meditrust of San Antonio, Inc. Delaware Meditrust of Texas, Inc. Delaware Meditrust of West Virginia, Inc. Delaware
-47- EX-23 4 CONSENT OF COOPERS & LYBRAND 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Meditrust on Form S-8 (File Nos. 33-25072, 33-49218, 33-57377, 333-01461 and 333-01935) and on Form S-3 (File Nos. 33-40005, 33-40926, 33-42596, 33-43931, 33-45979, 33-48695, 33-59215, and 333-01843) of our reports dated January 16, 1997 on our audits of the consolidated financial statements and financial statement schedules of Meditrust as of December 31, 1996 and 1995, and for the years ended December 31, 1996, 1995 and 1994, which reports are included (or incorporated by reference) in this Report on Form 10-K. Our report on the 1996 consolidated financial statements of Meditrust appears in Meditrust's report on Form 8-K filed on January 31, 1997. Boston, Massachusetts March 12, 1997 /s/ Coopers & Lybrand L.L.P. -48- -----END PRIVACY-ENHANCED MESSAGE-----