-----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, Pel56kpja2ak0wb/zeRvmV4FUbqIZNpjSkI/o2EXm7+6fCB0HPAtSx/9CwT76Q3t XM1qmFKp8W05yOGgltpIxQ== 0000950135-97-003501.txt : 19970815 0000950135-97-003501.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950135-97-003501 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDITRUST CENTRAL INDEX KEY: 0000774350 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 046532031 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09582 FILM NUMBER: 97661218 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-Q 1 MEDITRUST FORM 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For The Quarterly Period Ended JUNE 30, 1997 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 incorporation or organization) Identification Number) 197 First Avenue NEEDHAM HEIGHTS, MASSACHUSETTS 02194-9127 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 433-6000 -------------- 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 ----- ----- As of June 30, 1997 there were outstanding 61,588,182 Shares of Beneficial Interest, without par value. 2 MEDITRUST FORM 10-Q INDEX Part I. Financial Information Page(s) -------
Item 1. Financial Statements Consolidated Balance Sheets at June 30, 1997 (unaudited) and December 31, 1996 3 Consolidated Statements of Income for the three months ended June 30, 1997 and 1996 (unaudited) 4 Consolidated Statements of Income for the six months ended June 30, 1997 and 1996 (unaudited) 5 Consolidated Statements of Cash Flows for the six months ended June 30, 1997 and 1996 (unaudited) 6 Notes to Consolidated Financial Statements (unaudited) 7-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-13 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders 14 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15
-2- 3 MEDITRUST PART I. FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1997 1996 ----------- ------------ (Unaudited) (Audited) (In thousands) ASSETS Real estate investments (Note 3): Land ..................................................................... $ 83,917 $ 68,098 Buildings and improvements, net of accumulated depreciation of $110,429 and $98,082, respectively ............................................ 1,058,131 938,162 Real estate mortgages .................................................... 1,300,748 1,181,818 ---------- ---------- Total real estate investments ........................................ 2,442,796 2,188,078 Other assets, net (Note 4) ................................................... 68,983 65,893 Fees, interest and other receivables ......................................... 25,677 20,178 Cash and cash equivalents .................................................... 29,148 42,726 ---------- ---------- Total assets ........................................................ $2,566,604 $2,316,875 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Indebtedness (Note 5): Notes payable, net ........................................................ $ 495,166 $ 494,790 Convertible debentures, net ............................................... 278,512 280,813 Bank notes payable, net ................................................... 275,483 24,114 Bonds and mortgages payable, net .......................................... 59,544 59,043 ---------- ---------- Total indebtedness .................................................. 1,108,705 858,760 Deferred income .............................................................. 9,130 9,716 Accrued expenses and other liabilities ....................................... 61,004 63,458 ---------- ---------- Total liabilities ................................................... 1,178,839 931,934 ---------- ---------- Commitments and contingencies (Notes 3 and 8) Shareholders' equity (Notes 4, 5, 6 and 9): Shares of beneficial interest without par value: Unlimited shares authorized; 61,588 and 61,349 shares issued and outstanding in 1997 and 1996, respectively ........................... 1,527,625 1,520,454 Distributions in excess of net income ................................... (139,860) (135,513) ---------- ---------- Total shareholders' equity .............................................. 1,387,765 1,384,941 ---------- ---------- Total liabilities and shareholders' equity .......................... $2,566,604 $2,316,875 ========== ==========
The accompanying notes, together with the Notes to the Consolidated Financial Statements incorporated by reference in the Company's Form 10-K for the year ended December 31, 1996, are an integral part of these financial statements. -3- 4 MEDITRUST CONSOLIDATED STATEMENTS OF INCOME for the three months ended June 30, 1997 and 1996 (Unaudited)
1997 1996 ---- ---- (Dollars in thousands except per Share amounts) Revenues: Rental income ................................... $33,798 $27,149 Interest income ................................. 37,216 35,024 ------- ------- Total revenues ............................. 71,014 62,173 ------- ------- Expenses: Interest ........................................ 20,263 14,491 Depreciation and amortization ................... 6,879 5,760 General and administrative ...................... 1,925 1,679 ------- ------- Total expenses ............................. 29,067 21,930 ------- ------- Net income ......................................... $41,947 $40,243 ======= ======= Net income per share, based on 61,575 and 60,665 weighted average shares outstanding in 1997 and 1996, respectively....... $.68 $.66 ==== ====
The accompanying notes, together with the Notes to the Consolidated Financial Statements incorporated by reference in the Company's Form 10-K for the year ended December 31, 1996, are an integral part of these financial statements. -4- 5 MEDITRUST CONSOLIDATED STATEMENTS OF INCOME for the six months ended June 30, 1997 and 1996 (Unaudited)
1997 1996 ---- ---- (Dollars in thousands except per Share amounts) Revenues: Rental income ................................. $ 66,091 $ 50,955 Interest income ............................... 72,888 70,545 -------- -------- Total revenues ........................... 138,979 121,500 -------- -------- Expenses: Interest ...................................... 38,378 30,596 Depreciation and amortization ................. 13,355 11,184 General and administrative .................... 4,246 3,944 -------- -------- Total expenses ........................... 55,979 45,724 -------- -------- Net income ....................................... $ 83,000 $ 75,776 ======== ======== Net income per share, based on 61,509 and 57,909 weighted average shares outstanding in 1997 and 1996, respectively ..... $1.35 $1.31 ===== =====
The accompanying notes, together with the Notes to the Consolidated Financial Statements incorporated by reference in the Company's Form 10-K for the year ended December 31, 1996, are an integral part of these financial statements. -5- 6 MEDITRUST CONSOLIDATED STATEMENTS OF CASH FLOWS for the six months ended June 30, 1997 and 1996 (Unaudited)
1997 1996 ---- ---- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income .................................................................... $ 83,000 $ 75,776 Depreciation of real estate ................................................... 12,346 10,214 Goodwill amortization ......................................................... 778 778 Shares issued for compensation ................................................ 1,000 720 Other depreciation, amortization and other items, net ......................... 368 886 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES AVAILABLE FOR DISTRIBUTION .................................................... 97,492 88,374 Net change in other assets and liabilities .................................... (10,664) (4,368) --------- --------- Net cash provided by operating activities .................................. 86,828 84,006 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from equity offering ................................................. -- 312,800 Proceeds from bank notes and mortgages payable ................................ 373,000 157,399 Repayment of bank notes payable ............................................... (121,000) (200,000) Equity offering and debt issuance costs ....................................... (39) (16,553) Proceeds from stock options ................................................... 3,463 4,188 Principal payments on bonds and mortgages payable ............................. (510) (462) Distributions to shareholders ................................................. (87,346) (77,272) --------- --------- Net cash provided by financing activities ................................. 167,568 180,100 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of real estate and development funding ............................ (148,135) (187,222) Investment in real estate mortgages and development funding ..................................................................... (125,839) (114,244) Prepayment proceeds and principal payments on real estate mortgages ............................................................ 7,037 35,566 Working capital advances ...................................................... (485) (19,366) Collection of receivables and repayment of working capital advances ............................................................ 20,228 Investment in equity securities ............................................... (552) --------- --------- Net cash used in investing activities ..................................... (267,974) (265,038) --------- --------- Net decrease in cash and cash equivalents ................................. (13,578) (932) Cash and cash equivalents at: Beginning of period ......................................................... 42,726 44,248 --------- --------- End of period ............................................................... $ 29,148 $ 43,316 ========= ========= Supplemental disclosure of cash flow information (see Note 2).
The accompanying notes, together with the Notes to the Consolidated Financial Statements incorporated by reference in the Company's Form 10-K for the year ended December 31, 1996, are an integral part of these financial statements. -6- 7 MEDITRUST NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted in this Form 10-Q in compliance with the Rules and Regulations of the Securities and Exchange Commission. However, in the opinion of Meditrust (the "Company"), the disclosures contained in this Form 10-Q are adequate to make the information presented not misleading. See the Company's Annual Report on Form 10-K for the year ended December 31, 1996 (and the Report on Form 8-K dated January 31, 1997 incorporated by reference therein) for additional information relevant to significant accounting policies followed by the Company. BASIS OF PRESENTATION In the opinion of the Company, the accompanying unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly its financial position as of June 30, 1997 and its results of operations for each of the three- and six-month periods ended June 30, 1997 and 1996 and cash flows for each of the six-month periods ended June 30, 1997 and 1996. The results of operations for the six-month period ended June 30, 1997 are not necessarily indicative of the results which may be expected for the entire year. 2. SUPPLEMENTAL CASH FLOW INFORMATION
Six Months Ended June 30, ----------------- 1997 1996 ------ ------ (in thousands) Interest paid during the period .......................... $36,509 $29,616 Non-cash investing and financing transactions: Increase in real estate mortgages net of participation reduction .............................. 128 144 Change in market value of equity securities in excess of cost .............................................. (186) Value of Shares issued for conversion of debentures .... 2,927 4,285
3. REAL ESTATE INVESTMENTS During the six months ended June 30, 1997, the Company acquired 28 assisted living facilities, one long-term care facility and one medical office building for $106,604,000. In addition, during the six month period ended June 30, 1997, the Company provided net funding of $3,572,000 for the construction of three assisted living facilities and $1,400,000 for additions to four long-term care facilities already in the portfolio. The Company also provided net funding of $36,559,000 for ongoing construction of facilities already in the portfolio prior to 1997. -7- 8 MEDITRUST NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Unaudited) 3. REAL ESTATE INVESTMENTS, CONTINUED Also, during the six months ended June 30, 1997, the Company provided permanent mortgage financing of $21,689,000 for two long-term care facilities, six assisted living facilities and one retirement living facility. The Company also provided $6,272,000 in additions to permanent mortgages already in the portfolio. The Company commenced new development funding of $48,093,000 relating to three long-term care facilities, seven assisted living facilities, and five medical office buildings. The Company also provided $49,785,000 for ongoing construction of facilities already in the portfolio prior to 1997. During the six months ended June 30, 1997, the Company received principal payments on real estate mortgages of $7,037,000. At June 30, 1997, the Company was committed to provide additional financing of approximately $202,089,000 relating to 30 assisted living facilities, 12 medical office buildings, and nine long-term care facilities currently under construction, and additions to existing facilities already in the portfolio. 4. INVESTMENT IN EQUITY SECURITIES 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 June 30, 1997 the market value of this investment was $15,851,000 and is included in other assets in the accompanying balance sheet. The resulting difference between the current market value and cost, $2,342,000, is included in shareholders' equity in the accompanying balance sheet. 5. INDEBTEDNESS AND SHAREHOLDERS' EQUITY During the six months ended June 30, 1997, $1,150,000 of principal amount of 9% convertible debentures were converted into 42,587 Shares; $1,702,000 of principal amount of 7% convertible debentures were converted into 55,573 Shares and $75,000 of principal amount of 7.5% convertible debentures were converted into 2,072 Shares. The Company has a total of $280,000,000 in unsecured lines of credit, bearing interest at the lenders' prime rate or LIBOR plus .875%, and an unsecured short-term borrowing in the amount of $25,000,000 bearing interest at the prime rate of a specified institution or LIBOR plus 1%. A total of $28,000,000 was available at June 30, 1997. See Note 9 "Subsequent Events" for additional financing transactions. -8- 9 MEDITRUST NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued 6. DISTRIBUTIONS PAID TO SHAREHOLDERS On May 15, 1997, the Company paid a dividend of $.7125 per Share to shareholders of record on April 30, 1997. This dividend related to the period from January 1, 1997 through March 31, 1997. 7. NEWLY ISSUED ACCOUNTING STANDARDS Financial Accounting Standards Board Statement No. 128 ("FAS No. 128") "Earnings Per Share" is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. The Company intends to adopt the requirements of this pronouncement in its financial statements for the year ended December 31, 1997. FAS No. 128 specifies the computation, presentation and disclosure requirements for net income per share. As stated in the Summary of Significant Accounting Policies included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996 (and the Report on Form 8-K dated January 31, 1997 incorporated by reference therein), net income per Share is calculated using weighted average number of Shares outstanding during the year and the affect of common stock equivalents is immaterial. FAS No. 128 also requires the presentation of diluted net income per share which the Company was not previously required to present under generally accepted accounting principles. Financial Accounting Standards Board Statement No. 130 ("FAS No. 130") "Reporting Comprehensive Income" is effective for fiscal years beginning after December 15, 1997, although earlier application is permitted. The Company intends to adopt the requirements of this pronouncement in its financial statements for the year ended December 31, 1998. FAS No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. FAS No. 130 requires that all components of comprehensive income shall be reported in the financial statements in the period in which they are recognized. Furthermore, a total amount for comprehensive income shall be displayed in the financial statement where the components of other comprehensive income are reported. The Company was not previously required to present comprehensive income or the components thereof in its financial statements under generally accepted accounting principals. The Company does not believe that the implementation of FAS No. 128 or FAS No. 130 will have a material impact on its financial statements. 8. CONTINGENCIES On April 23, 1997, the Company and certain of its subsidiaries were served with a complaint in an action in the Suffolk County, Massachusetts Superior Court entitled Temkin, et al. v. Meditrust, et al., alleging that a former borrower of the Company had transferred funds to the Company without fair consideration at a time when the transferors were insolvent. The plaintiffs, who are unsecured creditors of the transferors, seek damages against the Company in the amount of approximately $6.5 million, plus costs, attorneys fees and multiple damages. The Company believes that there is no basis for these claims and will defend the matter vigorously. -9- 10 MEDITRUST NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued On April 13, 1997, the Company and its wholly-owned subsidiary, Meditrust Acquisition Corporation IV (together, "Meditrust") entered into a definitive Agreement and Plan of Merger (the "Merger Agreement") with Santa Anita Realty Enterprises, Inc. and Santa Anita Operating Company (together, "Santa Anita"). When the transaction is consummated, Meditrust will be merged into Santa Anita, and shareholders of Meditrust will receive 1.2016 paired common shares of Santa Anita for each share of Meditrust they own in a tax-free exchange of shares. Based on the closing price of Meditrust on April 11, 1997 of $37.25 per share, the transaction will have an initial value to the shareholders of Santa Anita of approximately $383 million or $31.00 per paired common share. Upon completion of the merger, the surviving corporations will be called Meditrust Corporation and Meditrust Operating Company. Meditrust has agreed to buy approximately 1.2 million paired common shares of Santa Anita at $31.00 per paired common share. In addition, Santa Anita has agreed to sell to one or more independent parties designated by Meditrust approximately 1.0 million Santa Anita paired common shares at a price of $31.00 per paired common share. As of June 30, 1997, there were approximately 61.6 million shares of beneficial interest of Meditrust outstanding and as of March 31, 1997 there were approximately 11.5 million paired shares of common stock and approximately 867,000 paired shares of preferred stock of Santa Anita outstanding. The Merger Agreement also provides that, if requested by Santa Anita, Meditrust will make available to Santa Anita $100 million (less the purchase price of the 1.2 million paired common shares acquired by Meditrust) to be used by Santa Anita for a cash self tender or cash election to its shareholders at a price of $31.00 per paired common share. The transaction, which has been approved unanimously by the Board of Trustees of Meditrust and the Boards of Directors of Santa Anita, is subject to regulatory approvals and approvals of the shareholders of both Meditrust and Santa Anita. The merger is not subject to any financing conditions. The parties intend to file proxy materials for the proposed transaction as soon as possible. The transaction is expected to close in the fall of 1997. 9. SUBSEQUENT EVENTS On July 1, 1997 the Company entered into an agreement for $25,000,000 in unsecured short-term borrowings from a lender, expiring September 27, 1997, bearing interest at the lender's prime rate or LIBOR plus 1% (6.64% at July 28, 1997). On July 28, 1997 the Company entered into an agreement for $35,000,000 in unsecured short-term borrowing from a lender, expiring December 31, 1997, bearing interest at the lender's prime rate or LIBOR plus 1%. On August 7, 1997, the Company completed the sale of $160,000,000 of 7% notes due August 15, 2007. The Company also completed the sale of $100,000,000 in notes due August 15, 2002 bearing interest at LIBOR plus .45% (6.17% on August 7, 1997), such interest is subject to reset quarterly during the first year of the loan. Subsequent to the first year of the loan, the character and duration of the interest rate will be determined periodically by the Company and the underwriter. The Company also completed the sale of $150,000,000 of 7.114% notes due August 15, 2011. The notes were sold to a trust from which exercisable put option securities due August 15, 2004, each representing a fractional undivided beneficial interest in the trust, were issued. The trust has entered a call option pursuant to which the callholder has the right to purchase the notes from the trust on August 15, 2004 at par value. The trust also has a put option, which it is required to exercise if the callholder does not exercise the call option, pursuant to which the Company must repurchase the notes at par value on August 15, 2004. On July 8, 1997, the Company declared a dividend of $.7175 per Share payable on August 15, 1997 to shareholders of record on July 31, 1997. This dividend relates to the period from April 1, 1997 through June 30, 1997. -10- 11 MEDITRUST MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Revenues for the three months ended June 30, 1997 were $71,014,000 compared to $62,173,000 for the three months ended June 30, 1996, an increase of $8,841,000 or 14.2%. Revenue growth was attributed to increased rental income of $6,649,000 and increased interest income of $2,192,000. These increases were principally the result of additional real estate investments made during the past year. For the three months ended June 30, 1997, total expenses increased by $7,137,000 compared to the three months ended June 30, 1996. Interest expense increased by $5,772,000 due to increases in debt outstanding resulting from additional real estate investments made during the past year. Depreciation and amortization increased by $1,119,000, as a result of increased real estate investments. General and administrative expenses increased by $246,000. Revenues for the six months ended June 30, 1997 were $138,979,000 compared to $121,500,000 for the six months ended June 30, 1996, an increase of $17,479,000 or 14.4%. Revenue growth resulted from increased rental income of $15,136,000 and increased interest income of $2,343,000, which resulted primarily from additional real estate investments during the past twelve months. For the six months ended June 30, 1997, total expenses increased by $10,255,000. Interest expense increased by $7,782,000 due to increases in debt outstanding resulting from additional real estate investments made during the past year. Depreciation and amortization expenses increased by $2,171,000, as a result of increased real estate investments. General and administrative expenses increased by $302,000. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1997, the Company's gross real estate investments totaled approximately $2,553,225,000 consisting of 278 long-term care facilities, 26 rehabilitation hospitals, 129 retirement and assisted living facilities, 24 medical office buildings, six alcohol and substance abuse treatment facilities and psychiatric hospitals, and one acute care hospital campus. As of June 30, 1997, the Company's outstanding commitments for additional financing totaled approximately $202,089,000 for the completion of 51 facilities under construction and additions to existing facilities in the portfolio. The Company had shareholders' equity of $1,387,765,000 and debt constituted 44% of the Company's total capitalization as of June 30, 1997. The Company provides funding for its investments through a combination of long-term and short-term financing including both debt and equity. The Company obtains long-term financing through the issuance of Shares, the issuance of long-term unsecured notes, the issuance of convertible debentures and the assumption of mortgage notes. The Company obtains short-term financing through the use of unsecured notes and bank lines of credit which are replaced with long-term -11- 12 MEDITRUST MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued LIQUIDITY AND CAPITAL RESOURCES, CONTINUED financing as appropriate. From time to time, the Company may utilize interest rate caps or swaps to hedge interest rate volatility. It is the Company's objective to match mortgage and lease terms with the terms of its borrowings. The Company seeks to maintain an appropriate spread between its borrowing costs and the rate of return on its investments. When development loans convert to sale/leaseback transactions or permanent mortgage loans, the base rent or interest rate, as appropriate, is fixed at the time of such conversion. On April 13, 1997, Meditrust and its wholly-owned subsidiary, Meditrust Acquisition Corporation IV (together, "Meditrust") entered into a definitive Agreement and Plan of Merger (the "Merger Agreement") with Santa Anita Realty Enterprises, Inc. and Santa Anita Operating Company (together, "Santa Anita"). When the transaction is consummated, Meditrust will be merged into Santa Anita, and shareholders of Meditrust will receive 1.2016 paired common shares of Santa Anita for each share of Meditrust they own in a tax-free exchange of shares. Based on the closing price of Meditrust on April 11, 1997 of $37.25 per share, the transaction will have an initial value to the shareholders of Santa Anita of approximately $383 million or $31.00 per paired common share. Upon completion of the merger, the surviving corporations will be called Meditrust Corporation and Meditrust Operating Company. Meditrust has agreed to buy approximately 1.2 million paired common shares of Santa Anita at $31.00 per paired common share. In addition, Santa Anita has agreed to sell to one or more independent parties designated by Meditrust approximately 1.0 million Santa Anita paired common shares at a price of $31.00 per paired common share. As of June 30, 1997, there were approximately 61.6 million shares of beneficial interest of Meditrust outstanding and as of March 31, 1997 there were approximately 11.5 million paired shares of common stock and approximately 867,000 paired shares of preferred stock of Santa Anita outstanding. The Merger Agreement also provides that, if requested by Santa Anita, Meditrust will make available to Santa Anita $100 million (less the purchase price of the 1.2 million paired common shares acquired by Meditrust) to be used by Santa Anita for a cash self tender or cash election to its shareholders at a price of $31.00 per paired common share. The transaction, which has been approved unanimously by the Board of Trustees of Meditrust and the Boards of Directors of Santa Anita, is subject to regulatory approvals and approvals of the shareholders of both Meditrust and Santa Anita. The merger is not subject to any financing conditions. The parties intend to file proxy materials for the proposed transaction as soon as possible. The transaction is expected to close in the fall of 1997. As of July 28, 1997, the Company had unsecured revolving lines of credit expiring September 23, 1999 in the aggregate amount of $280,000,000, bearing interest at the lender's prime rate (8.5%) or LIBOR plus .875% (6.52% at July 28, 1997), and unsecured short-term borrowings expiring September 27, 1997 and December 31, 1997 in the total amount of $85,000,000, bearing interest at the lenders' prime rate or LIBOR plus 1% (6.64% at July 28, 1997). A total of $38,000,000 was available from all credit -12- 13 MEDITRUST MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued LIQUIDITY AND CAPITAL RESOURCES, CONTINUED facilities at July 28, 1997. On August 7, 1997, the Company completed the sale of $160,000,000 of 7% notes due August 15, 2007. The Company also completed the sale of $100,000,000 in notes due August 15, 2002 bearing interest at LIBOR plus .45% (6.17% on August 7, 1997), such interest is subject to reset quarterly during the first year of the loan. Subsequent to the first year of the loan, the character and duration of the interest rate will be determined periodically by the Company and the underwriter. The Company also completed the sale of $150,000,000 of 7.114% notes due August 15, 2011. The notes were sold to a trust from which exercisable put option securities due August 15, 2004, each representing a fractional undivided beneficial interest in the trust, were issued. The trust has entered a call option pursuant to which the callholder has the right to purchase the notes from the trust on August 15, 2004 at par value. The trust also has a put option, which it is required to exercise if the callholder does not exercise the call option, pursuant to which the Company must repurchase the notes at par value on August 15, 2004. A portion of the net proceeds from the sale of the notes described above will be used to repay the outstanding balance on the unsecured revolving line of credit and other unsecured short-term borrowings. As of August 12, 1997, the Company has effective shelf registrations on file with the Securities and Exchange Commission under which the Company may issue up to approximately $146,000,000 of securities including Shares, Preferred shares of beneficial interest ("Preferred Shares"), debt, convertible debt and warrants to purchase Shares, Preferred Shares, debt and convertible debt. 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. For 1997, however, in the event that the Company identifies appropriate investment opportunities, the Company may raise additional capital through the sale of Shares or Preferred Shares or by the issuance of additional long-term debt or through a securitization transaction. -13- 14 MEDITRUST PART II. OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Annual Meeting of Shareholders of the Company held on May 7, 1997 (the "Annual Meeting"), the recorded vote to fix the number of trustees at seven and to vote for the election of all nominees as listed below was as follows:
For Against --- ------- Abraham D. Gosman 44,271,965 165,552 David F. Benson 44,280,545 156,972 Edward W. Brooke 44,247,512 190,005 Philip L. Lowe 44,242,835 194,682 Thomas J. Magovern 44,282,039 155,478 Gerald Tsai, Jr. 44,265,377 172,140 Frederick W. Zuckerman 44,291,842 145,675
There were no abstentions. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
EXHIBIT NO. TITLE METHOD OF FILING ----- ---------------- 11 Statement Regarding Computation of Per Share Earnings .... Filed herewith 27 Financial Data Schedule................................... Filed herewith
(b) Reports on Form 8-K During the quarter ended June 30, 1997, the Company filed a current report on Form 8-K dated April 16, 1997, which included a description of the proposed merger with Santa Anita. -14- 15 MEDITRUST PART II. OTHER INFORMATION, Continued SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MEDITRUST Date: August 14, 1997 By: /s/ Laurie T. Gerber ----------------------------------------- Laurie T. Gerber, Chief Financial Officer -15- EX-11 2 COMPUTATION OF PER SHARE EARNINGS 1 Exhibit 11 MEDITRUST STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (000 omitted except for per share amounts)
QUARTER ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------- ----------------- 1997 1996 1997 1996 ---- ---- ---- ---- PRIMARY Weighted average shares 61,575 60,665 61,509 57,909 Dilutive effect of: Stock options 181 141 196 159 Weighted average number of shares and equivalent shares outstanding 61,756 60,806 61,705 58,068 ======= ======= ======= ======= Net income $41,947 $40,243 $83,000 $75,776 ======= ======= ======= ======= Net income per share (A) $.68 $.66 $1.35 $1.30 ==== ==== ===== =====
(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 shares 61,575 60,665 61,509 57,909 Dilutive effect of: Stock options 231 156 231 159 Assumed conversion of debentures 8,075 8,589 8,103 8,634 ------- ------- ------- -------- Fully diluted weighted average shares and equivalent shares outstanding 69,881 69,410 69,843 66,702 ======= ======= ======= ======= Net income $41,947 $40,243 $83,000 $75,776 Interest and debt amortization on assumed conversion of debentures 5,693 5,985 11,326 12,044 ------- ------- ------- ------- Adjusted net income for fully diluted calculation $47,640 $46,228 $94,326 $87,820 ======= ======= ======= ======= Net income per share (B) $.68 $.67 $1.35 $1.32 ==== ==== ===== =====
(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 anti-dilutive results. -16- EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997 AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1997 OF MEDITRUST AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 1 29,148 0 25,677 0 0 0 1,252,477 110,429 2,566,604 0 1,108,705 0 0 1,527,625 (139,860) 2,566,604 0 138,979 0 0 0 0 38,378 83,000 0 83,000 0 0 0 83,000 1.35 1.35
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