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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 MARCH 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
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(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-6532031
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
197 First Avenue
Needham Heights, Massachusetts 02194
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 433-6000
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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
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As of April 17, 1996, there were outstanding 60,620,883 shares of beneficial
interest, without par value.
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MEDITRUST
FORM 10-Q
INDEX
Part I. Financial Information Page(s)
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Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 1996 (unaudited)
and December 31, 1995 3
Consolidated Statements of Income for the three months ended
March 31, 1996 and 1995 (unaudited) 4
Consolidated Statements of Cash Flows for the three months ended
March 31, 1996 and 1995 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
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MEDITRUST
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1996 1995
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(Unaudited) (Audited)
(In thousands)
ASSETS
Real estate investments (Note 3)
Land ...................................................... $ 59,823 $ 47,993
Buildings and improvements, net of
accumulated depreciation of $82,140 and $77,204,
respectively........................................... 734,023 621,182
Real estate mortgages...................................... 1,141,535 1,108,623
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Total real estate investments.......................... 1,935,381 1,777,798
Other assets, net.............................................. 51,180 49,400
Fees, interest and other receivables........................... 17,402 20,406
Cash and cash equivalents...................................... 92,607 44,248
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Total assets.......................................... $2,096,570 $1,891,852
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LIABILITIES AND SHAREHOLDERS' EQUITY
Indebtedness (Note 4):
Notes payable, net.......................................... $ 320,560 $ 300,813
Convertible debentures, net................................. 293,511 295,209
Bank notes payable, net..................................... 113,709
Bonds and mortgages payable, net............................ 59,738 52,560
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Total indebtedness.................................... 673,809 762,291
Deferred income................................................ 9,780 9,222
Accrued expenses and other liabilities......................... 47,941 58,584
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Total liabilities..................................... 731,530 830,097
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Commitments and contingencies (Note 3)
Shareholders' equity (Notes 4, 5 and 6):
Shares of beneficial interest without par value:
Unlimited shares authorized; 60,604
and 51,177 shares issued and outstanding in 1996
and 1995, respectively................................. 1,495,621 1,192,612
Distributions in excess of net income..................... (130,581) (130,857)
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Total shareholders' equity................................ 1,365,040 1,061,755
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Total liabilities and shareholders' equity............ $2,096,570 $1,891,852
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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, 1995,
are an integral part of these financial statements.
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MEDITRUST
CONSOLIDATED STATEMENTS OF INCOME
for the three months ended March 31, 1996 and 1995
(Unaudited)
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1996 1995
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(In thousands, except per Share amounts)
Revenues:
Rental income.............................................. $23,806 $21,056
Interest income............................................ 35,521 27,877
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Total revenues.......................................... 59,327 48,933
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Expenses:
Interest................................................... 16,105 18,474
Depreciation and amortization.............................. 5,424 4,343
General and administrative................................. 2,265 1,933
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Total expenses.......................................... 23,794 24,750
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Net income..................................................... $35,533 $24,183
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Net income per share, based on 55,153 and 40,594 weighted
average Shares outstanding in 1996 and 1995, respectively.. $ .64 $ .60
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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, 1995,
are an integral part of these financial statements.
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MEDITRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the three months ended March 31, 1996 and 1995
(Unaudited)
1996 1995
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(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................. $ 35,533 $ 24,183
Depreciation of real estate................................ 4,937 3,874
Goodwill amortization...................................... 389 389
Shares issued for compensation............................. 359 202
Other depreciation and amortization and other items, net... 492 794
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CASH FLOWS FROM OPERATING ACTIVITIES
AVAILABLE FOR DISTRIBUTION................................. 41,710 29,442
Net change in other assets and liabilities................. (9,883) (3,937)
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Net cash provided by operating activities.................. 31,827 25,505
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from equity offering.............................. 312,800 263,594
Proceeds from debt issuance................................ 110,399 161,700
Repayment of bank notes payable............................ (197,000) (280,700)
Repayment of senior unsecured notes and
mortgage notes payable.................................. (12,500)
Equity offering and debt issuance costs.................... (16,435) (13,594)
Principal payments on bonds and mortgages payable.......... (227) (223)
Distributions to shareholders.............................. (35,257) (26,553)
Proceeds from stock options................................ 3,987 48
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Net cash provided by financing activities............... 178,267 91,772
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of real estate................................. (129,607) (65,677)
Investment in real estate mortgages and
development funding..................................... (39,369) (46,665)
Prepayment proceeds and principal payments
on real estate mortgages................................ 6,511 1,537
Working capital advances................................... (9,884) (10,865)
Collection of receivables and repayment of
working capital advances................................ 10,614 8,680
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Net cash used in investing activities................... (161,735) (112,990)
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Net increase in cash and cash equivalents............... 48,359 4,287
Cash and cash equivalents at:
Beginning of period..................................... 44,248 39,937
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End of period........................................... $ 92,607 $ 44,224
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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, 1995,
are an integral part of these financial statements.
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MEDITRUST
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies
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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, 1995 (and the Report on Form 8-K
dated January 29, 1996 incorporated by reference therein) for additional
information relevant to significant accounting policies followed by the
Company.
Basis of Presentation
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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 March 31, 1996 and its results of operations and cash flows for each of
the three-month periods ended March 31, 1996 and 1995. The results of
operations for the three-month period ended March 31, 1996 are not
necessarily indicative of the results which may be expected for the entire
year. Certain 1995 amounts have been reclassified to conform to the 1996
presentation.
2. Supplemental Cash Flow Information
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Three Months Ended
March 31,
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1996 1995
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(in thousands)
Interest paid during the period............................. $23,954 $14,809
Non-cash financing transaction:
Value of shares issued upon conversion of debentures..... $ 2,080 $ 9,129
3. Real Estate Investments
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During the three months ended March 31, 1996, the Company acquired for
$129,607,000 13 long-term care facilities and 13 assisted living
facilities.
During the three months ended March 31, 1996, the Company provided
permanent mortgage financing of $17,800,000 for two long-term care
facilities and one retirement living facility located in Washington and
North Carolina. The Company also provided $1,890,000 in additional
permanent mortgage financing secured by 24 long-term care facilities
located in 12 states.
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MEDITRUST
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
In addition, the Company provided net development financing of $19,679,000
for 12 medical office buildings, four long-term care facilities and two
assisted living facilities under construction. During the three months
ended March 31, 1996, the Company received principal payments on real
estate mortgages of $3,434,000 and received $3,077,000 in mortgage
prepayments for one facility located in North Carolina.
At March 31, 1996, the Company was committed to provide additional
financing of approximately $102,961,000 relating to 12 medical office
buildings, four long-term care facilities, and three assisted living
facilities currently under construction and additions to permanent
mortgages secured by eight long-term care facilities.
4. Indebtedness and Shareholders' Equity
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In February 1996, the Company completed the sale of 9,200,000 shares of
beneficial interest, without par value ("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.
During the three months ended March 31, 1996, the Company issued a total
of $40,000,000 in notes payable with maturity dates ranging from
January 17, 1997 to August 17, 2015, bearing interest at rates between
6.35% to 8.625%. The net proceeds from the issuance of these securities
were utilized to reduce the outstanding balance of the Company's
unsecured credit facilities. On March 18, 1996, $20,000,000 of these
notes were repaid.
During the three months ended March 31, 1996, $865,000 of principal amount
of 9% convertible debentures were converted into 32,034 Shares and
$1,215,000 of principal amount of 7% convertible debentures were converted
into 39,672 Shares.
The Company has a total of $205,000,000 in unsecured lines of credit,
bearing interest at the lenders' prime rate or LIBOR plus 1.0%, all of
which was available at March 31, 1996.
5. Distributions Paid to Shareholders
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On February 15, 1996, the Company paid a dividend of $.6875 per Share to
shareholders of record on January 31, 1996. This dividend related to the
period from October 1, 1995 through December 31, 1995.
6. Subsequent Events
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On April 9, 1996, the Company declared a dividend of $.6925 per Share
payable on May 15, 1996 to shareholders of record on April 30, 1996. This
dividend relates to the period from January 1, 1996 through March 31, 1996.
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MEDITRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
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Revenues for the three months ended March 31, 1996 were $59,327,000 compared to
$48,933,000 for the three months ended March 31, 1995, an increase of
$10,394,000 or 21%. Revenue growth was comprised of increased interest income of
$7,644,000 and increased rental income of $2,750,000, which resulted primarily
from additional real estate investments made during the past year.
For the three months ended March 31, 1996, total expenses decreased by $956,000
compared to the three months ended March 31, 1995. Interest expense decreased by
$2,369,000 primarily due to reductions in debt outstanding as a result of an
equity offering in February 1996, and lower interest rates on the notes
outstanding during the three months ended March 31, 1996, compared to those
outstanding during the three months ended March 31, 1995. Depreciation and
amortization expenses increased by $1,081,000, as a result of increased real
estate investments made during the past year. General and administrative
expenses increased by $332,000 due to growth in the Company's investment
portfolio.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company's gross real estate investments totaled
approximately $2,018,000,000 consisting of 261 long-term care facilities, 24
rehabilitation hospitals, 22 retirement and assisted living facilities, 15
medical office buildings, ten alcohol and substance abuse treatment facilities
and psychiatric hospitals, and one acute care hospital campus. As of March 31,
1996, the Company's outstanding commitments for additional financing totaled
approximately $102,961,000 for the completion of 19 facilities under
construction and additions to permanent mortgages secured by eight long-term
care facilities.
The Company had shareholders' equity of $1,365,040,000 and debt constituted 33%
of the Company's total capitalization as of March 31, 1996.
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 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.
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MEDITRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, Continued
Liquidity and Capital Resources, Continued
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On August 10, 1995, the Company commenced a Medium-Term Note program, offering
on a continuing basis, notes due from nine months to 30 years from date of
issue, as selected by the purchaser and agreed to by the Company at an aggregate
initial public offering price not to exceed $200 million. During the three
months ended March 31, 1996, $40,000,000 of these notes were issued with
maturity dates ranging from January 17, 1997 to August 17, 2015, and bearing
interest at annual rates between 6.35% to 8.625%. The net proceeds from the
issuance of these securities were utilized to reduce the outstanding balance of
the Company's unsecured credit facilities. On March 18, 1996, $20,000,000 of
these notes were repaid.
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.
As of April 4, 1996, the Company has unsecured revolving lines of credit
expiring June 30, 1997 in the aggregate amount of $205,000,000 bearing interest
at the lender's prime rate (8.25%) or LIBOR plus 1.0% (6.4375% at April 4,
1996). The total amount was available at April 4, 1996. In addition, the Company
has effective shelf registrations on file with the Securities and Exchange
Commission under which the Company may issue up to approximately $81,000,000 of
securities including debt, convertible debt and warrants to purchase debt,
convertible debt and Shares. The Company has also filed with the Securities
and Exchange Commission an additional Shelf Registration with respect to
$500,000,000 of Securities.
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 1996, however, in the event that the Company identifies
appropriate investment opportunities, the Company may raise additional capital
through the sale of Shares or by the issuance of additional long-term debt.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits
Exhibit
No. Title Method of Filing
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10 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)
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 March 31, 1996, the Company filed (i) a current report
on Form 8-K dated January 29, 1996, which included the consolidated financial
statements of the Company for the year ended December 31, 1995, and (ii) an
amendment dated March 20, 1996 to its current report on Form 8-K dated March 4,
1992, which updated the Company's discussion of potential tax consequences from
an investment in the Company's securities.
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: April 26, 1996 By: /s/ Lisa P. McAlister
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Lisa P. McAlister,
Chief Financial Officer
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