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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 30, 1997
MEDITRUST
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(Exact name of registrant as specified in its charter)
Commission file number 1-09582
MASSACHUSETTS 04-6532031
(State or other jurisdiction of (I.R.S. Employer or
incorporation or organization) Identification No.)
197 FIRST AVENUE, NEEDHAM, MASSACHUSETTS 02194-9127
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(617) 433-6000
--------------------------
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
On April 13, 1997, Meditrust and its wholly-owned subsidiary, Meditrust
Acquisition Company ("MAC," and together with Meditrust, "Meditrust") entered
into a definitive Agreement and Plan of Merger (the "Merger Agreement") with
Santa Anita Realty Enterprises, Inc. ("Realty") and Santa Anita Operating
Company ("Operating," and together with Realty, "Santa Anita" or "The Santa
Anita Companies"). When the transaction is consummated, Meditrust will be merged
into Santa Anita (the "Mergers"), and shareholders of Meditrust will receive
1.2016 paired common shares (hereinafter "Paired Common Stock" or "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 Mergers, the surviving corporations will be called
Meditrust Corporation and Meditrust Operating Company (the "Surviving
Corporations").
Meditrust has agreed to buy approximately 1.2 million Paired Common
Shares of Santa Anita either from Santa Anita at $31.00 per Paired Common Share
or in the open market. In addition, Santa Anita has agreed to sell to one or
more independent parties designated by Meditrust approximately 2.2 million newly
issued Santa Anita Paired Common Shares less the number of Shares Meditrust
purchases from Santa Anita at a price of $31.00 per Paired Common Share. As of
March 31, 1997, there were approximately 61.5 million shares of beneficial
interest of Meditrust outstanding and there were approximately 11.5 million
Paired Shares 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 Mergers are 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.
RISK FACTORS RELATING TO THE SANTA ANITA TRANSACTION:
Tax Risks; Dependence on Qualifications as a REIT. If the Santa Anita
transaction is consummated, Meditrust Corporation intends to continue to qualify
as a REIT for federal income tax purposes. In order to qualify as a REIT, a
company must comply with highly technical and complex tax provisions. The
complexity of these provisions is greater in the case of a REIT that owns real
estate and leases it to a corporation with which its stock is paired. In 1983,
Congress passed legislation which would ordinarily prevent a corporation from
qualifying as a REIT if its stock is paired with the stock of a corporation
whose activities are inconsistent with REIT status, such as Meditrust Operating
Company. This disqualification does not apply to a paired REIT if the REIT and
its paired operating company were paired on June 30, 1983. Santa Anita was
paired on June 30, 1983. There are, however, no judicial or administrative
authorities interpreting this "grandfathering" rule in the context of a merger
or otherwise. There is also no guarantee that new legislation, new regulations,
administrative interpretations or court decisions will not change the tax laws
with respect to qualification as a REIT or the effect of the pairing agreement.
If Meditrust Corporation fails to qualify as a REIT, it would be required to pay
federal income tax on its taxable income at corporate rates. Unless permitted by
relief under certain statutory provisions, Meditrust Corporation also would not
be allowed to re-elect REIT status for the following four taxable years. This
would reduce the net earnings of Meditrust Corporation available for
distribution to shareholders because of the additional tax liability to
Meditrust Corporation for the year or years involved. Meditrust Corporation
might be required to borrow funds or to sell certain of its investments to pay
the tax due on any distributions made. The failure to qualify as a REIT would
also constitute a default under certain debt obligations of Meditrust
Corporation.
Dilutive Effect of the Mergers; Dependence on Acquisitions. As a result
of the amount being paid to acquire Santa Anita, the transaction has a dilutive
effect on Meditrust's net income per share on a pro forma basis for 1996
and the three months ended March 31, 1997 and may have a dilutive effect on net
income per share in future periods. In addition, management believes that the
transaction initially will cause the Surviving Corporations' funds from
operations per share not to grow as fast in the periods following the
transaction as might be expected without the transaction. The Surviving
Corporations will try to minimize this potential effect by making strategic
acquisitions which benefit from the use of the paired share structure. There is
no assurance, however, that the Surviving Corporations will be able to identify
and acquire at appropriate prices businesses that meet their goals or that any
such acquired businesses will perform in a manner that will allow the Surviving
Corporations to increase the rate of growth in funds from operations.
Furthermore, because of the paired share arrangement, the Surviving
Corporations will face certain limitations in structuring potential
acquisitions, especially acquisitions that will be tax-free for the owners of
the acquired properties. These limitations could prevent some acquisitions and
in other cases, increase the acquisition costs. The longer it takes to make
acquisitions and the greater the costs of making acquisitions, the less likely
it will be that the Surviving Corporations will meet their anticipated growth
in funds from operations.
Effect of Certain Acquisitions on Existing Operations; Reliance on
Outside Management. If the Surviving Corporations acquire new businesses, and
if those new businesses compete with the existing businesses of operators in
Meditrust Corporation's portfolio, those existing operators may reduce the
amount of new business that they do with Meditrust Corporation. In order to
acquire businesses outside the health care or horse racing sectors, the
Surviving Corporations will need to hire and retain experienced management to
run those businesses. There is no assurance that the Surviving Corporations will
be able to hire and retain experienced management for such businesses. If the
Surviving Corporations cannot hire qualified management for such businesses,
they might not acquire such businesses, which may lengthen the time it takes to
make acquisitions and increase its funds from operations per share. In addition,
if the Surviving Corporations cannot hire and retain qualified management for
these businesses, these businesses might not be successful once acquired.
Substantial Expenses and Payments if the Mergers Fail to Occur.
Consummation of the Santa Anita transaction is subject to a number of
conditions, some of which are beyond the control of Meditrust's management.
Consequently, there can be no assurance that the transaction will be
consummated. If the transaction is not completed, Meditrust will have incurred
substantial expenses in connection therewith. Meditrust must pay Santa Anita a
fee of $4 million under certain circumstances if the shareholders of Meditrust
fail to approve the transaction.
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BUSINESS STRATEGY. If the transaction is consummated, the paired share
structure of the Surviving Corporations will enable them to derive the
benefits of being a REIT as well as an operating company. The primary business
objective of the Surviving Corporations will be to maximize the long-term total
return to their shareholders. This objective is predicated on the following
two factors:
- Positive Spread Investment. Management will seek to maximize
shareholder value through positive spread investment opportunities
which provide an accretive cash flow return. Through their paired
share structure, the Surviving Corporations will be able to acquire
operating companies and assets thereby reducing "leakage." Meditrust
will bring its sound capital structure to the paired share structure
to facilitate the acquisition of growth oriented companies.
- Quality of Management. The Surviving Corporations will seek to
employ a strong management team for each line of business which is
acquired, properly incentivizing each such team and providing them
with appropriate financial and capital resources.
Management of the Surviving Corporations will seek to continue to
increase shareholder value by operating the core businesses of the former
Meditrust and The Santa Anita Companies in a manner consistent with maximizing
funds from operations, and by actively pursuing acquisition opportunities that
will best utilize the benefits of the paired share structure. The Surviving
Corporations will seek to participate in joint ventures and partnerships to
facilitate such acquisitions. Such joint venture partners and acquisition
candidates may include companies in which Abraham D. Gosman, Chief Executive
Officer and director, and/or other directors of the Surviving Corporations have
an interest, but any such acquisitions or joint ventures would be subject to
the approval of the disinterested directors of the Surviving Corporations.
The key elements of this strategy are the following:
- Continue to expand core sale leaseback and mortgage financing
portfolio. Meditrust's portfolio consists of over $2.4 billion in
health care investments, making it the largest health care REIT in the
country. Meditrust's growth and profitability have historically been
driven by its ability to make investments in additional properties.
The Surviving Corporations will be committed to further expanding and
diversifying the Company's existing portfolio of investments.
- Make strategic acquisitions of operating companies in the health care
sector. After the transaction is completed, the paired share structure
will allow Meditrust Corporation to act as an owner of real estate
assets and Meditrust Operating Company to act as an operator of
businesses with real estate assets, thereby providing shareholders
with the benefits of real estate ownership through a REIT and the
economic growth associated with a fully integrated operating company.
The paired share structure should also facilitate the purchase of
international health care related real estate assets, as many of such
assets are currently affiliated with operating companies.
- Make acquisitions outside the health care sector. The Surviving
Corporations intend to explore a range of other strategic acquisitions
outside the health care industry in order to capitalize on the
inherent value of the paired share structure through diversified
active and passive investments. Management of the Surviving
Corporations intends to seek to consummate such acquisitions which
may benefit from the paired share structure.
- Maximize the value of the Santa Anita horse racing and real estate
assets. The Surviving Corporations anticipate continuing The Santa
Anita Companies' commitment to high quality horse racing and
maintaining its industry leadership in the horse racing industry. The
Surviving Corporations also will seek to maximize the value of the
approximately 85 acres of the underutilized land at Santa Anita Park.
There is no assurance that the Surviving Corporations will be able to
meet any or all of these objectives.
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SUMMARY COMBINED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following tables set forth historical and pro forma financial
information for Meditrust and The Santa Anita Companies and the combined
Meditrust Corporation and Meditrust Operating Company and should be read in
conjunction with, and are qualified in their entirety by, the historical
financial statements and notes thereto of Meditrust and The Santa Anita
Companies.
PRO FORMA(1)
MEDITRUST CORPORATION
HISTORICAL HISTORICAL AND MEDITRUST
THE SANTA ANITA COMPANIES MEDITRUST OPERATING COMPANY
--------------------------- --------------------------- ---------------------------
THREE MONTHS THREE MONTHS THREE MONTHS
YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED ENDED
DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31,
1996 1997 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING DATA:
Total revenue........................ $ 77,225 $ 37,810 $254,024 $ 67,965 $331,249 $105,775
Total expenses....................... 76,685 36,177 96,048 26,912 175,893 62,800
-------- -------- -------- ---------- -------- ----------
Net income........................... 540 1,633 157,976 41,053 155,356 42,975
Preferred stock dividends............ 12,420 2,183 -- -- -- --
-------- -------- -------- ---------- -------- ----------
Net income (loss) applicable to
common shares...................... $ (11,880) $ (550) $157,976 $ 41,053 $155,356 $ 42,975
======== ======== ======== ========== ======== ==========
PER SHARE:
Net income (loss).................... $ (1.05) $ (.05) $ 2.66 $ .67 $ 1.86 $ .50
OTHER DATA:
Funds from operations(2)............. $ 14,244 $ 9,036 $179,245 $ 47,025 $190,793 $ 55,700
Cash provided from operating
activities......................... $ 11,977 $ 17,116 $188,551 $ 31,956 $189,699 $ 52,108
Weighted average common shares
outstanding........................ 11,317 11,480 59,458 61,442 83,629 86,176
MARCH 31, MARCH 31, MARCH 31,
1997 1997 1997
------------ ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
BALANCE SHEET DATA:
Real estate investments, net......... $ 39,779 $2,293,086 $2,546,397
Total assets......................... $107,952 $2,386,371 $2,915,415
Indebtedness, net:
Notes and bank notes payable....... $ 28,247 $ 605,263 $ 633,510
Convertible debentures............. -- 278,591 278,591
Bonds and mortgages payable........ -- 58,795 58,795
Total.............................. $ 28,247 $ 942,649 $ 970,896
Total liabilities.................... $ 70,791 $ 999,961 $1,145,752
Series A redeemable preferred
stock.............................. $ 24,778 -- --
Total shareholders' equity........... $ 12,383 $1,386,410 $1,769,663
Total shares outstanding............. 11,496 61,514 86,278
OTHER DATA:
Ratio of Total Debt/Total Assets..... 26.2% 39.5% 33.3%
Ratio of Secured Debt/Total Assets... 0% 2.5% 2.0%
- ---------------
(1) The pro forma information does not purport to represent what Meditrust
Corporation's and Meditrust Operating Company's results of operations would
have been for the fiscal year ended December 31, 1996 if the Merger had in
fact occurred on January 1, 1996 or what Meditrust Corporation's or
Meditrust Operating Company's financial position or results of operations
would have been for or as of the quarter ended March 31, 1997, if the Merger
had in fact occurred on or prior to January 1, 1997. Such pro forma
information should not be used or relied upon to project Meditrust
Corporation's and Meditrust Operating Company's financial position for any
future periods or to project Meditrust Corporation's and Meditrust Operating
Company's results of operations for any future periods.
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(2) In accordance with a resolution adopted by the Board of Govenors of the
National Association of Real Estate Investment Trusts, Inc. ("NAREIT"),
funds from operations represent net income (loss) (computed in accordance
with generally accepted accounting principles), excluding gains or losses
from debt restructuring or sales of property, significant non-recurring
items and after adjustments for unconsolidated partnerships, joint ventures
and corporations. Pro forma financial information also includes certain
adjustments to funds from operations for real estate related goodwill
amortization ($5,330 and $1,332 on a pro forma basis for Meditrust
Corporation and Meditrust Operating Company combined for the year ended
December 31, 1996 and three months ended March 31, 1997, respectively).
Funds from operations should not be considered as an alternative to net
income or other measurements under generally accepted accounting principles,
as an indicator of operating, investing or financing activities or as a
measure of liquidity. Funds from operations does not reflect working capital
changes, cash expenditures for capital improvements or principal payments on
indebtedness.
The following is a reconciliation of funds from operations to cash provided
by operating activities.
PRO FORMA(1)
MEDITRUST CORPORATION
HISTORICAL HISTORICAL AND MEDITRUST
THE SANTA ANITA COMPANIES MEDITRUST OPERATING COMPANY
--------------------------- --------------------------- ---------------------------
THREE MONTHS THREE MONTHS THREE MONTHS
YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED ENDED
DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31,
1996 1997 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Funds from operations........... $ 14,244 $ 9,036 $179,245 $ 47,025 $190,793 $ 55,700
Other non real estate
depreciation and
amortization.................. 1,767 1,031 2,601 706 3,601 1,253
Shares issued for
compensation.................. 524 15 2,039 608 2,563 623
Other items, net................ (3,790) (1,100) 167 42 (7,258) (5,468)
Changes in working capital...... (768) 8,134 4,499 (16,425) -- --
-------- ------- -------- -------- -------- --------
Cash provided by operating
activities.................... $ 11,977 $ 17,116 $188,551 $ 31,956 $189,699 $ 52,108
======== ======== ======== ======== ======== ========
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(1) Pro forma cash provided by operating activities represents pro forma net
income plus depreciation and amortization less the effect of the
non-cash portion of equity in earnings (loss) of unconsolidated joint
ventures. The pro forma amounts do not include adjustments from changes in
working capital resulting from changes in current assets and current
liabilities.
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MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
PRO FORMA FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
Realty and Operating are two separate companies whose shares of common
stock are paired and trade together as a single unit. At the time of the
Mergers, Meditrust will merge with and into Realty, with Realty to be the
surviving corporation, which will change its name to Meditrust Corporation. MAC
will merge with and into Operating, with Operating to be the surviving
corporation, which will change its name to Meditrust Operating Company.
Pursuant to the above, the following pro forma financial statements have
been provided: (i) Meditrust Corporation and Meditrust Operating Company
combined pro forma financial statements which combine the activities of
Meditrust and The Santa Anita Companies, (ii) separate Meditrust Corporation
consolidated pro forma financial statements which reflect the activities of
Meditrust and Realty and (iii) separate Meditrust Operating Company consolidated
pro forma financial statements which reflect the activities of MAC and
Operating.
The following unaudited Pro Forma Condensed Statements of Operations and
Balance Sheets presented assume the Mergers had been consummated on terms set
forth in the Merger Agreement as of or at the beginning of the periods
presented. In addition, the unaudited Pro Forma Condensed Balance Sheets
presented assume the Mergers had occurred on March 31, 1997.
The following unaudited Pro Forma Condensed Statements of Operations for
the year ended December 31, 1996 and the three months ended March 31, 1997 of
Meditrust Corporation and Meditrust Operating Company are derived from the
historical financial information and pro forma information based in part upon
the Combined and Separate Statements of Income of The Santa Anita Companies
filed with the Santa Anita Form 10-K for the year ended December 31, 1996 and
Quarterly Report on Form 10-Q for the three months ended March 31, 1997, as
amended, and in part upon the Consolidated Statements of Operations of Meditrust
filed with Meditrust's Annual Report on Form 10-K for the year ended December
31, 1996 and Quarterly Report on Form 10-Q for the three months ended March 31,
1997. The following unaudited Pro forma Condensed Balance Sheets are based in
part upon The Santa Anita Companies' Combined and Separate Balance Sheets as of
March 31, 1997 and Meditrust's Balance Sheet as of March 31, 1997 and should be
read in conjunction with the financial statements filed with The Santa Anita
Companies' and Meditrust's respective Quarterly Reports on Form 10-Q for the
three months ended March 31, 1997. In management's opinion, all material
adjustments necessary to reflect the effects of the Mergers have been made.
In conjunction with the financial statements filed with The Santa Anita
Companies' Annual and Quarterly Reports, separate financial statements are
prepared for Realty and Operating. Combined Realty and Operating financial
statements are prepared for The Santa Anita Companies. The separate net income
(loss) and related per share amounts of Realty and Operating cannot be added
together to total the combined net income (loss) and related per share amounts
for The Santa Anita Companies because of adjustments and eliminations arising
from inter-entity transactions. Inter-entity pro forma adjustments are reflected
only in the separate pro forma financial statements and not in the combined pro
forma presentation. As such, the separate Meditrust Corporation and Meditrust
Operating Company pro forma financial statements on pages 12 to 19 together do
not necessarily reconcile to the combined Meditrust Corporation and Meditrust
Operating Company pro forma financial statements on pages 8 to 11.
The following unaudited Pro Forma Financial Statements have been adjusted
for the purchase method of accounting whereby Santa Anita Park, related
leasehold improvements and other real estate assets owned by The Santa Anita
Companies are adjusted to estimated fair market value. Although The Santa Anita
Companies are issuing their shares of Paired Common Stock to Meditrust
shareholders and will be the surviving entities following the Mergers, The Santa
Anita Companies are considered the acquired companies for accounting
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purposes as the current Meditrust shareholders will hold the majority of the
combined shares of Paired Common Stock subsequent to the Mergers. The fair
market values of the assets and liabilities of The Santa Anita Companies have
been determined based upon preliminary estimates and are subject to change as
additional information is obtained. Management of Meditrust does not anticipate
that the preliminary allocation of purchase costs based upon the estimated fair
market value of the assets and liabilities of The Santa Anita Companies will
materially change; however, the allocations of purchase costs are subject to
final determination based upon estimates and other evaluations of fair market
value as of the consummation of the Mergers. Therefore, the allocations
reflected in the following unaudited Pro Forma Financial Statements may differ
from the amounts ultimately determined.
The following unaudited Pro Forma Condensed Statements of Operations are
not necessarily indicative of what the actual results of operations of Meditrust
Corporation and Meditrust Operating Company would have been assuming such
transactions had been completed as of the beginning of the period presented, nor
do they purport to represent the results of operations for future periods.
Further, the unaudited Pro Forma Condensed Statements of Operations for the
interim period ended March 31, 1997 are not necessarily indicative of the
results of operations for the full year.
The following unaudited Pro Forma Condensed Balance Sheets are not
necessarily indicative of what the actual financial position would have been
assuming such transactions had been completed as of March 31, 1997, nor do they
purport to represent the future financial position of Meditrust Corporation and
Meditrust Operating Company.
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MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
FOR THE YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------------
THE SANTA ANITA PRO FORMA PRO FORMA
MEDITRUST COMPANIES ADJUSTMENTS COMBINED
--------- --------------- ----------- ---------
Revenues:
Rental income ................................. $109,119 $ 6,671 $115,790
Horse racing .................................. 68,606 68,606
Interest income ............................... 144,905 1,948 146,853
-------- -------- --------
Total revenues ........................... 254,024 77,225 331,249
-------- -------- --------
Expenses:
Horse racing operating costs .................. 48,735 48,735
Rental property operating expenses ............ 2,434 2,434
Interest ...................................... 64,216 3,263 67,479
Depreciation and amortization ................. 23,207 4,870 2,371(A)(B) 30,448
General and administrative .................... 8,625 10,289 18,914
Losses from unconsolidated joint ventures ..... 994 789(A) 1,783
Strategic alliance costs ...................... 1,200 1,200
Arcadia development costs ..................... 2,900 2,900
Program for disposition of non-core real estate
assets ...................................... 2,000 2,000
-------- -------- -------- --------
Total expenses ........................... 96,048 76,685 3,160 175,893
-------- -------- -------- --------
Net income (loss) ................................ 157,976 540 (3,160) 155,356
Preferred stock dividends ........................ 12,420 (12,420)(C)
-------- -------- -------- --------
Net income (loss) applicable to common shares .... $157,976 $(11,880) $ 9,260 $155,356
======== ======== ======== ========
Per share:
Net income (loss) (D) ............................ $ 2.66 $ (1.05) $ 0.25 $ 1.86
======== ======== ======== ========
Weighted average common shares outstanding ....... 59,458 11,317 12,854(E) 83,629
======== ======== ======== ========
Dividends paid per common share .................. $ 2.78 $ 0.80
======== ========
Dividend consists of:
Return of capital ............................. $ 0.15 $ 0.80
Income ........................................ 2.63
-------- --------
$ 2.78 $ 0.80
======== ========
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(A) Represents adjustment to decrease depreciation by $2,959 as a result of
recording the investment in land, buildings, improvements and operating
property, plant and equipment at fair market value. Also represents
adjustments to increase depreciation related to joint ventures by $789.
Depreciation is computed using the straight-line method and is based upon
the estimated useful lives ranging from 5 to 40 years. Depreciation expense
decreased due to the fact that Meditrust uses longer depreciable lives than
those used by The Santa Anita Companies for certain types of assets. The
adjustments to real estate assets and operating equipment include an
increase of $151,560 to non-depreciable land, an increase of $55,892 in
the carrying value of buildings and a reduction of $10,697 in the carrying
value of operating equipment.
(B) Represents adjustment to reflect amortization of goodwill of $5,330.
Goodwill represents the purchase consideration in excess of the fair market
value of the assets of The Santa Anita Companies. Amortization of goodwill
is computed using the straight-line method over a 40-year estimated useful
life.
(C) Represents adjustment to eliminate Series A Preferred Stock dividends as a
result of exchanging the Series A Preferred Stock for shares of Paired
Common Stock.
(D) In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ("Statement 128") which specifies
the computation, presentation and disclosure requirements for basic
earnings per share and dilutive earnings per share. Management believes
that adoption of Statement 128 will not have a material effect on the
earnings per share of Meditrust Corporation or Meditrust Operating Company.
(E) Represents adjustment to reflect additional shares of Paired Common Stock
issued to Meditrust and MAC shareholders at the time the Mergers become
effective and assumes the exchange of Series A Preferred Stock for shares
of Paired Common Stock.
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MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
FOR THE THREE MONTHS ENDED MARCH 31, 1997
------------------------------------------------------------
THE SANTA ANITA PRO FORMA PRO FORMA
MEDITRUST COMPANIES ADJUSTMENTS COMBINED
--------- --------------- ----------- ---------
Revenues:
Rental income ................................................ $32,293 $ 1,033 $ $33,326
Horse racing ................................................. 36,307 36,307
Interest income .............................................. 35,672 470 36,142
------- ------- -------- -------
Total revenues .......................................... 67,965 37,810 105,775
------- ------- -------- -------
Expenses:
Horse racing operating costs ................................. 24,754 24,754
Rental property operating expenses ........................... 258 258
Interest ..................................................... 18,115 621 18,736
Depreciation and amortization ................................ 6,476 2,599 (492)(A)(B) 8,583
General and administrative ................................... 2,321 2,790 5,111
Losses from unconsolidated joint ventures .................... 155 203 (A) 358
Strategic alliance costs ..................................... 4,500 4,500
Program for disposition of non-core real estate assets ....... 500 500
------- ------- -------- -------
Total expenses .......................................... 26,912 36,177 (289) 62,800
------- ------- -------- -------
Net income ...................................................... 41,053 1,633 289 42,975
Preferred stock dividends ....................................... 2,183 (2,183)(C)
------- ------- -------- -------
Net income (loss) applicable to common shares ................... $41,053 $ (550) $ 2,472 $42,975
======= ======= ======== =======
Per share:
Net income (loss) (D) ........................................... $ 0.67 $ (0.05) $ (0.12) $ 0.50
======= ======= ======== =======
Weighted average common shares outstanding ...................... 61,442 11,480 13,254 (E) 86,176
======= ======= ======== =======
Dividends paid per common share ................................. $ 0.71 $ 0.20
======= =======
Dividend consists of:
Return of capital ............................................ $ 0.04 $ 0.20
Income ....................................................... 0.67
------- -------
$ 0.71 $ 0.20
======= =======
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(A) Represents adjustment to decrease depreciation by $1,824 as a result of
recording the investment in land, buildings, improvements and operating
property, plant and equipment at fair market value. Also represents
adjustments to increase depreciation related to joint ventures by $203.
Depreciation is computed using the straight-line method and is based upon
the estimated useful lives ranging from 5 to 40 years. Depreciation expense
decreased due to the fact that Meditrust uses longer depreciable lives than
those used by The Santa Anita Companies for certain types of assets. The
adjustments to real estate assets and operating equipment include an
increase of $151,560 to non-depreciable land, an increase of $55,892 in
the carrying value of buildings and a reduction of $10,697 in the carrying
value of operating equipment.
(B) Represents adjustment to reflect amortization of goodwill of $1,332.
Goodwill represents the purchase consideration in excess of the fair market
value of the assets of The Santa Anita Companies. Amortization of goodwill
is computed using the straight-line method over a 40-year estimated useful
life.
(C) Represents adjustment to eliminate Series A Preferred Stock dividends as a
result of exchanging the Series A Preferred Stock for shares of Paired
Common Stock.
(D) In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128 ("Statement 128") which specifies
the computation, presentation and disclosure requirements for basic
earnings per share and dilutive earnings per share. Management believes
that adoption of Statement 128 will not have a material effect on the
earnings per share of Meditrust Corporation or Meditrust Operating Company.
(E) Represents adjustment to reflect additional shares of Paired Common Stock
issued to Meditrust and MAC shareholders at the time the Mergers become
effective and assumes the exchange of Series A Preferred Stock for shares
of Paired Common Stock.
9
10
MEDITRUST CORPORATION AND MEDITRUST OPERATING COMPANY
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)
AS OF MARCH 31, 1997
----------------------------------------------------------------
THE SANTA ANITA PRO FORMA PRO FORMA
MEDITRUST COMPANIES ADJUSTMENTS COMBINED
---------- --------------- ----------- ---------
Real estate investments:
Meditrust building and improvements ..................... $1,051,345 $ $ $1,051,345
Santa Anita Racetrack(A) ................................ 8,667 108,333 (B) 117,000
Commercial properties(A) ................................ 9,273 71,742 (B) 81,015
Commercial properties to be sold ........................ 9,076 (376)(B) 8,700
Investments in and advances to unconsolidated joint
ventures .............................................. 2,154 33,833 (B) 35,987
Real estate mortgages & loans ........................... 1,241,741 10,609 1,252,350
---------- ----------- ---------- ----------
Total real estate investments ...................... 2,293,086 39,779 213,532 2,546,397
---------- ----------- ---------- ----------
Cash and cash equivalents .................................. 5,666 36,991 42,657
Fees, interest and other receivables ....................... 22,013 4,953 26,966
Operating property, plant & equipment ...................... 19,697 (10,697)(B) 9,000
Other assets, net .......................................... 65,606 6,532 5,056 (C) 77,194
Goodwill ................................................... 213,201 (D) 213,201
---------- ----------- ---------- ----------
Total assets ....................................... $2,386,371 $ 107,952 $ 421,092 $2,915,415
========== =========== ========== ==========
Liabilities and Shareholders' Equity
Indebtedness:
Notes payable, net ...................................... 494,972 20,309 515,281
Convertible debentures, net ............................. 278,591 278,591
Bank notes payable, net ................................. 110,291 7,938 118,229
Bonds and mortgages payable, net ........................ 58,795 58,795
---------- ----------- ---------- ----------
Total indebtedness ................................. 942,649 28,247 970,896
---------- ----------- ---------- ----------
Deferred income & expenses ................................. 9,918 2,501 12,419
Accrued expenses and other liabilities ..................... 47,394 40,043 75,000 (E) 162,437
---------- ----------- ---------- ----------
Total liabilities .................................. 999,961 70,791 75,000 1,145,752
---------- ----------- ---------- ----------
Commitments and contingencies
Series A Redeemable Preferred Stock ........................ 24,778 (24,778)(F)
Shareholders' equity
Common stock 86,278 shares proforma combined
outstanding ........................................... 2,297 14,968 (F)(G) 17,265
Additional paid-in-capital .............................. 140,443 1,749,889 (F)(H) 1,890,332
Shares of beneficial interest .............................. 1,524,344 (1,524,344)(H)
Retained Earnings/Distributions in excess of net
income .................................................. (137,934) (129,687) 129,687 (H) (137,934)
Unearned compensation expense .............................. (670) 670 (H)
---------- ----------- ---------- ----------
Total shareholders' equity ......................... 1,386,410 12,383 370,870 1,769,663
---------- ----------- ---------- ----------
Total liabilities and shareholders' equity ................. $2,386,371 $ 107,952 $ 421,092 $2,915,415
========== =========== ========== ==========
10
11
(A) No post-merger accumulated depreciation has been recorded.
(B) Represents adjustments for the purchase method of accounting whereby the
investment in land, buildings, improvements, joint ventures and operating
property, plant and equipment owned by The Santa Anita Companies are
adjusted to estimated fair market value based on recent appraisals.
Adjustments for the joint ventures were determined by applying The Santa
Anita Companies' share (per the partnership agreements) to the estimated
fair value of the underlying net assets of the joint ventures.
(C) Represents estimated adjustments to fair value detailed as follows:
Works of art owned by Operating.................................. $10,000
Reclassification of Entertainment Center Costs to Commercial
Properties..................................................... (3,215)
Write-off of straight-line rent receivable....................... (1,153)
Write-off of Other Deferred Costs................................ (576)
-------
$ 5,056
=======
(D) Represents the purchase consideration in excess of the fair market value of
the assets of The Santa Anita Companies.
(E) Represents estimated adjustments for (1) accrued merger costs including
financial advisory, legal and accounting fees, printing and various other
professional fees anticipated in connection with the Mergers, (2) accrued
expenses associated with certain employment agreements and benefit programs
of The Santa Anita Companies including severance agreements, settlement of
options and purchase accounting adjustments related to The Santa Anita
Companies' defined benefit pension and deferred compensation plans; since
management is presently evaluating the effects of the integration of the
companies, these amounts are preliminary and subject to change, and (3)
other liabilities including potential settlement of outstanding legal
matters consisting of a shareholder lawsuit, a breach of contract lawsuit
and various claims and lawsuits arising from business operations.
(F) Represents the exchange of Series A Preferred Stock for shares of Paired
Common Stock.
(G) Represents the exchange of shares of Meditrust and MAC for shares of Paired
Common Stock.
(H) Based upon 12,363 shares of Paired Common Stock outstanding (which includes
the effect of having exchanged the 867 shares of Series A Preferred Stock
for shares of Paired Common Stock), the estimated total purchase
consideration is $383,253. The adjustment to shareholders' equity eliminates
The Santa Anita Companies' historical equity accounts totaling $37,161
(which includes the effect of exchanging the Series A Preferred Stock which
has a value of $24,778 for shares of Paired Common Stock) and records equity
based on the number of shares of Paired Common Stock held by shareholders of
The Santa Anita Companies that remain outstanding after the Mergers at $31
per share of Paired Common Stock, which is based on the closing price of
Meditrust Shares on April 11, 1997 of $37.25 per share.
11
12
MEDITRUST CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
FOR THE YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------
SANTA ANITA
REALTY PRO FORMA PRO FORMA
MEDITRUST ENTERPRISES, INC. ADJUSTMENTS COMBINED
--------- ----------------- ----------- ---------
Revenues:
Rental income ............................................ $109,119 $ 6,671 $ $115,790
Rental income--Operating ................................. 10,861 10,861
Interest income .......................................... 144,905 1,652 146,557
-------- -------- -------- --------
Total revenues ...................................... 254,024 19,184 273,208
-------- -------- -------- --------
Expenses:
Rental property operating expenses ....................... 2,434 2,434
Interest ................................................. 64,216 2,670 66,886
Depreciation and amortization ............................ 23,207 1,718 3,699(A)(B) 28,624
General and administrative ............................... 8,625 4,046 12,671
Losses from unconsolidated joint ventures ................ 994 789(A) 1,783
Strategic alliance costs ................................. 1,090 1,090
Arcadia development costs ................................ 2,900 2,900
Program for disposition of non-core real estate
assets ................................................. 2,000 2,000
-------- -------- -------- --------
Total expenses ...................................... 96,048 17,852 4,488 118,388
-------- -------- -------- --------
Net Income .................................................. 157,976 1,332 (4,488) 154,820
Preferred stock dividends ................................... 12,368 (12,368)(C)
-------- -------- -------- --------
Net income (loss) applicable to common shares ............... $157,976 $(11,036) $ 7,880 $154,820
======== ======== ======== ========
Per share:
Net income (loss) (D) ....................................... $ 2.66 $ (0.97) $ 0.16 $ 1.85
======== ======== ======== ========
Weighted average common shares outstanding .................. 59,458 11,429 12,854(E) 83,741
======== ======== ======== ========
Dividends paid per common share ............................. $ 2.78 $ 0.80
======== ========
Return of capital ........................................ $ 0.15 $ 0.80
Income ................................................... 2.63
-------- --------
$ 2.78 $ 0.80
======== ========
- ----------------
(A) Represents adjustment to decrease depreciation by $807 as a result of
recording the investment in land, buildings, improvements and operating
property, plant and equipment at fair market value. Also represents
adjustment to increase depreciation related to joint ventures by $789.
Depreciation is computed using the straight-line method and is based upon
the estimated useful lives ranging from 5 to 40 years. Depreciation expense
decreased due to the fact that Meditrust uses longer depreciable lives than
those used by The Santa Anita Companies for certain types of assets. The
adjustments to real estate assets include an increase of $151,560 to
non-depreciable land and an increase of $55,892 in the carrying value of
buildings.
(B) Represents adjustment to reflect amortization of goodwill of $4,506.
Goodwill represents the purchase consideration in excess of the fair market
value of the assets of Realty. Amortization of goodwill is computed using
the straight-line method over a 40-year estimated useful life.
(C) Represents adjustment to eliminate Series A Preferred Stock dividends as a
result of exchanging the Series A Preferred Stock for shares of Realty
Common Stock.
(D) In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128 ("Statement 128") which specifies
the computation, presentation and disclosure requirements for basic
earnings per share and dilutive earnings per share. Management believes
that adoption of Statement 128 will not have a material effect on the
earnings per share of Meditrust Corporation.
(E) Represents adjustment to reflect additional shares of Realty Common Stock
issued to Meditrust shareholders at the time the Mergers become effective
and assumes the exchange of Series A Preferred Stock for shares of Realty
Common Stock.
12
13
MEDITRUST CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
FOR THE THREE MONTHS ENDED MARCH 31, 1997
---------------------------------------------------------
SANTA ANITA
REALTY PRO FORMA PRO FORMA
MEDITRUST ENTERPRISES, INC. ADJUSTMENTS COMBINED
--------- ----------------- ----------- ---------
REVENUES:
Rental income ............................................ $32,293 $ 1,033 $ $33,326
Rental income--Operating ................................. 6,440 6,440
Interest income .......................................... 35,672 432 36,104
------- ------- ------- -------
Total revenues ...................................... 67,965 7,905 75,870
------- ------- ------- -------
Expenses:
Interest ................................................. 18,115 555 18,670
Depreciation and amortization ............................ 6,476 727 628(A)(B) 7,831
General and administrative ............................... 2,321 1,019 3,340
Losses from unconsolidated joint ventures ................ 155 203(A) 358
Strategic alliance costs ................................. 4,080 4,080
Program for disposition of non-core real estate
assets ................................................. 500 500
------- ------- ------- -------
Total expenses ...................................... 26,912 7,036 831 34,779
------- ------- ------- -------
Net Income .................................................. 41,053 869 (831) 41,091
Preferred stock dividends ................................... 2,183 (2,183)(C)
------- ------- ------- -------
Net income (loss) applicable to common shares ............... $41,053 $(1,314) $ 1,352 $41,091
======= ======= ======= =======
Per share:
Net income (loss) (D) ....................................... $ 0.67 $ (0.11) $ (0.08) $ 0.48
======= ======= ======= =======
Weighted average common shares outstanding .................. 61,442 11,586 13,254(E) 86,282
======= ======= ======= =======
Dividends paid per common share ............................. $ 0.71 $ 0.20
======= =======
Dividend consists of:
Return of capital ........................................ $ 0.04 $ 0.20
Income ................................................... 0.67
------- -------
$ 0.71 $ 0.20
======= =======
- ----------------
(A) Represents adjustment to decrease depreciation by $498 as a result of
recording the investment in land, buildings, improvements and operating
property, plant and equipment at fair market value. Also represents
adjustment to increase depreciation related to joint ventures by $203.
Depreciation is computed using the straight-line method and is based upon
the estimated useful lives ranging from 5 to 40 years. Depreciation expense
decreased due to the fact that Meditrust uses longer depreciable lives than
those used by The Santa Anita Companies for certain types of assets. The
adjustments to real estate assets include an increase of $151,560 to
non-depreciable land and an increase of $55,892 in the carrying value of
buildings.
(B) Represents adjustments to reflect amortization of goodwill of $1,126.
Goodwill represents the purchase consideration in excess of the fair market
value of the assets of Realty. Amortization of goodwill is computed using
the straight-line method over a 40-year estimated useful life.
(C) Represents adjustment to eliminate Series A Preferred Stock dividends as a
result of exchanging the Series A Preferred Stock for shares of Realty
Common Stock.
(D) In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128 ("Statement 128") which specifies
the computation, presentation and disclosure requirements for basic
earnings per share and dilutive earnings per share. Management believes
that adoption of Statement 128 will not have a material effect on the
earnings per share of Meditrust Corporation.
(E) Represents adjustment to reflect additional shares of Realty Common Stock
issued to Meditrust shareholders at the time the Mergers become effective
and assumes the exchange of Series A Preferred Stock for shares of Realty
Common Stock.
13
14
MEDITRUST CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
AS OF MARCH 31, 1997
---------------------------------------------------------------------
SANTA ANITA
REALTY PRO FORMA PRO FORMA
MEDITRUST ENTERPRISES, INC. ADJUSTMENTS COMBINED
---------- ----------------- ------------ -----------
Real estate investments:
Meditrust building and improvements .............. $1,051,345 $ $ $1,051,345
Santa Anita Racetrack (A) ........................ 8,667 108,333 (B) 117,000
Commercial properties (A) ........................ 12,214 71,742 (B) 83,956
Commercial properties to be sold ................. 9,076 (376)(B) 8,700
Investments in and advances to
unconsolidated joint ventures .................. 2,154 33,833 (B) 35,987
Real estate mortgages & loans .................... 1,241,741 10,609 1,252,350
---------- --------- ----------- ----------
Total real estate investments ............... 2,293,086 42,720 213,532 2,549,338
---------- --------- ----------- ----------
Cash and cash equivalents ........................... 5,666 13,558 19,224
Fees, interest and other receivables ................ 22,013 103 22,116
Due from (to) paired entity ......................... 359 359
Other assets, net ................................... 65,606 5,527 (4,944)(C) 66,189
Goodwill ............................................ 180,233 (D) 180,233
---------- --------- ----------- ----------
Total assets ........................................ $2,386,371 $ 62,267 $ 388,821 $2,837,459
========== ========= =========== ==========
Liabilities and Shareholders' Equity
Indebtedness:
Notes payable, net ............................... 494,972 20,309 515,281
Convertible debentures, net ...................... 278,591 278,591
Bank notes payable, net .......................... 110,291 7,300 117,591
Bonds and mortgages payable, net ................. 58,795 58,795
========== ========= =========== ==========
Total indebtedness .......................... 942,649 27,609 970,258
========== ========= =========== ==========
Deferred income & expenses .......................... 9,918 9,918
Accrued expenses and other liabilities .............. 47,394 5,886 42,560 (E) 95,840
========== ========= =========== ==========
Total liabilities ........................... 999,961 33,495 42,560 1,076,016
========== ========= =========== ==========
Commitments and contingencies
Series A Redeemable Preferred Stock .............. 23,728 (23,728)(F)
Shareholders' equity
Common stock 86,368 shares pro forma
outstanding .................................... 1,159 7,478 (F)(G) 8,637
Additional paid-in-capital ....................... 121,902 1,779,838 (F)(H)(I) 1,901,740
Shares of beneficial interest ....................... 1,524,344 (1,524,344)(H)
Retained Earnings/Distributions in excess of
net income ....................................... (137,934) (118,017) 118,017 (H) (137,934)
Note receivable--from Meditrust Operating
Company .......................................... (11,000)(I) (11,000)
---------- --------- ----------- ----------
Total shareholders' equity .................. 1,386,410 5,044 369,989 1,761,443
---------- --------- ----------- ----------
Total liabilities and shareholders' equity .......... $2,386,371 $ 62,267 $ 388,821 $2,837,459
========== ========= =========== ==========
14
15
(A) No post-merger accumulated depreciation has been recorded.
(B) Represents adjustments for the purchase method of accounting whereby the
investment in land, buildings, improvements and joint ventures owned by
Realty are adjusted to estimated fair market value based on recent
appraisals. Adjustments for the joint ventures were determined by applying
The Santa Anita Companies' share (per the partnership agreements) to the
fair value of the underlying net assets of the joint ventures.
(C) Represents estimated adjustments to fair value detailed as follows:
Reclassification of the Entertainment Center Costs to Commercial
Properties ................................................... $(3,215)
Write-off of straight-line rent receivable...................... (1,153)
Write-off of other Deferred Costs............................... (576)
-------
$(4,944)
=======
(D) Represents the purchase consideration in excess of the fair market value of
the assets of Realty.
(E) Represents estimated adjustments for (1) accrued merger costs including
financial advisory, legal and accounting fees, printing and various other
professional fees anticipated in connection with the Mergers, (2) accrued
expenses associated with certain employment agreements and benefit programs
of Realty including severance agreements, settlement of options and purchase
accounting adjustments related to Realty's defined benefit pension and
deferred compensation plans; since management is presently evaluating the
effects of the integration of the two companies, these amounts are
preliminary and subject to change, and (3) other liabilities including
potential settlement of outstanding legal matters consisting of a
shareholder lawsuit, a breach of contract lawsuit and various claims and
lawsuits arising from business operations.
(F) Represents the exchange of Series A Preferred Stock for shares of Realty
Common Stock.
(G) Represents the exchange of shares of Meditrust for shares of Realty Common
Stock.
(H) Based on the relative value between Realty and Operating of the 12,363
shares of Realty Common Stock outstanding (which includes the effect of
having exchanged the 867 shares of Series A Preferred Stock for shares of
Realty Common Stock), the estimated total purchase consideration allocable
to Realty is approximately $375,587. The adjustment to shareholders' equity
eliminates Realty's historical equity accounts totaling $28,772 (which
includes the effect of exchanging the Series A Preferred Stock which has a
value of $23,728 for Realty Common Stock) and records equity based on the
number of shares of Realty Common Stock held by shareholders of Realty that
remain outstanding after the Mergers.
(I) To reflect the delivery of the Operating Note (as such term is defined in
the Merger Agreement), the purpose of which is to adjust the relative
values of Realty and Operating to approximate the relative values of
Meditrust and MAC immediately prior to the time when the Mergers become
effective. Due to the affiliation of Meditrust Corporation and Meditrust
Operating Company, the Operating Note has been classified in shareholders'
equity.
15
16
MEDITRUST OPERATING COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
FOR THE YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------
MEDITRUST SANTA ANITA
ACQUISITION OPERATING PRO FORMA PRO FORMA
COMPANY COMPANY ADJUSTMENTS COMBINED
----------- ----------- ----------- ---------
Revenues:
Horse racing ............................................. $ $68,606 $ $68,606
Interest and other income ................................ 581 3,300 (A) 3,881
------- ------- ------- -------
Total revenues ...................................... 69,187 3,300 72,487
------- ------- ------- -------
Expenses:
Horse racing operating costs ............................. 48,735 48,735
Interest ................................................. 788 660 (B) 1,448
Depreciation and amortization ............................ 3,212 (1,430)(C)(D) 1,782
General and administrative(E) ............................ 17,104 17,104
Strategic alliance costs ................................. 110 110
------- ------- ------- -------
Total expenses ...................................... 69,949 (770) 69,179
------- ------- ------- -------
Net Income (loss) ........................................... (762) 4,070 3,308
Preferred stock dividends ................................... 52 (52)(F)
------- ------- ------- -------
Net income (loss) applicable to common shares ............... $ $ (814) $ 4,122 $ 3,308
======= ======= ======= =======
Per share:
Net income (loss)(G) ........................................ $ $ (0.07) $ 0.11 $ 0.04
======= ======= ======= =======
Weighted average common shares outstanding .................. 59,458 11,317 12,854 (H) 83,629
======= ======= ======= =======
- ------------------
(A) Represents estimated dividends (based upon Meditrust's 1996 distributions
declared of $2.78 per share) on the shares of Realty acquired by MAC and
subsequent to the Mergers held by Operating.
(B) Represents estimated interest expense on the Operating Note.
(C) Represents adjustment to decrease depreciation by $2,213 as a result of
recording the investment in property, plant and equipment at fair market
value. Depreciation is computed using the straight-line method and is based
upon the estimated useful lives ranging from 5 to 40 years. Depreciation
expense decreased due to the fact that Meditrust uses longer depreciable
lives than those used by The Santa Anita Companies for certain types of
assets. The adjustment to operating equipment included a reduction of
$10,697 in the carrying value of operating equipment.
(D) Represents adjustment to reflect amortization of goodwill of $783. Goodwill
represents the purchase consideration in excess of the fair market value of
the assets of Operating. Amortization of goodwill is computed using the
straight-line method over a 40-year estimated useful life.
(E) Includes rental income paid to Realty of $10,861.
(F) Represents adjustment to eliminate Series A Preferred Stock dividends as a
result of exchanging the Series A Preferred Stock for shares of Operating
Common Stock.
(G) In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard; No. 128 ("Statement 128") which specifies
the computation, presentation and disclosure requirements for basic
earnings per share and dilutive earnings per share. Management believes
that adoption of Statement 128 will not have a material effect on the
earnings per share of Meditrust Operating Company.
(H) Represents adjustment to reflect additional shares of Operating Common
Stock issued to MAC shareholders at the time the Mergers become effective
and assumes the exchange of Series A Preferred Stock for shares of
Operating Common Stock.
16
17
MEDITRUST OPERATING COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
FOR THE THREE MONTHS ENDED MARCH 31, 1997
-----------------------------------------------------------
MEDITRUST SANTA ANITA
ACQUISITION OPERATING PRO FORMA PRO FORMA
COMPANY COMPANY ADJUSTMENTS COMBINED
----------- ----------- ----------- ---------
Revenues:
Horse racing ............................................. $ $36,307 $ $36,307
Interest and other income ................................ 48 825 (A) 873
------- ------- ------- -------
Total revenues ...................................... 36,355 825 37,180
------- ------- ------- -------
Expenses:
Horse racing operating costs ............................. 24,754 24,754
Interest ................................................. 54 165 (B) 219
Depreciation and amortization ............................ 1,891 (1,149)(C)(D) 742
General and administrative(E) ............................ 8,469 8,469
Strategic alliance costs ................................. 420 420
------- ------- ------- -------
Total expenses ...................................... 35,588 (984) 34,604
------- ------- ------- -------
Net Income .................................................. 767 1,809 2,576
------- ------- ------- -------
Net income (loss) applicable to common shares ............... $ $ 767 $ 1,809 $ 2,576
======= ======= ======= =======
Per share:
Net income/(loss) (F) ....................................... $ $ 0.07 $ (0.04)(G) $ 0.03
======= ======= ======= =======
Weighted average common shares outstanding .................. 61,442 11,480 13,254 86,176
======= ======= ======= =======
- ------------------
(A) Represents estimated dividends (based upon Meditrust's 1996 distributions
declared of $2.78 per share) on the shares of Realty acquired by MAC and
subsequent to the Mergers held by Operating.
(B) Represents estimated interest expense on the Operating Note.
(C) Represents adjustment to decrease depreciation by $1,345 as a result of
recording the investment in property, plant and equipment at fair market
value. Depreciation is computed using the straight-line method and is based
upon the estimated useful lives ranging from 5 to 40 years. Depreciation
expense decreased due to the fact that Meditrust uses longer depreciable
lives than those used by The Santa Anita Companies for certain types of
assets. The adjustment to operating equipment included a reduction of
$10,697 in the carrying value of operating equipment.
(D) Represents adjustment to reflect amortization of goodwill of $196. Goodwill
represents the purchase consideration in excess of the fair market value of
the assets of Operating. Amortization of goodwill is computed using the
straight-line method over a 40-year estimated useful life.
(E) Includes rental income paid to Realty of $6,440.
(F) In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ("Statement 128") which specifies
the computation, presentation and disclosure requirements for basic
earnings per share and dilutive earnings per share. Management believes
that adoption of Statement 128 will not have a material effect on the
earnings per share of Meditrust Operating Company.
(G) Represents adjustment to reflect additional shares of Operating Common
Stock issued to MAC shareholders at the time the Mergers become effective
and assumes the exchange of Series A Preferred Stock for shares of
Operating Common Stock.
17
18
MEDITRUST OPERATING COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
AS OF MARCH 31, 1997
-------------------------------------------------------------
MEDITRUST SANTA ANITA
ACQUISITION OPERATING PRO FORMA PRO FORMA
COMPANY COMPANY ADJUSTMENTS COMBINED
----------- ----------- ----------- ---------
Operating property, plant & equipment ......................... $ $19,697 $(10,697)(A) $ 9,000
Cash and cash equivalents ..................................... 23,433 23,433
Fees, interest and other receivables .......................... 4,850 4,850
Other assets, net ............................................. 1,014 10,000(B) 11,014
Goodwill, net ................................................. 31,307(C) 31,307
Investment in Meditrust Corporation ........................... 1,711 36,000(D) 37,711
--------- ------- -------- --------
Total assets .......................................... $ $50,705 $ 66,610 $117,315
========= ======= ======== ========
Liabilities and Shareholders' Equity:
Indebtedness:
Bank notes payable, net .................................... 638 638
Note payable to Meditrust Corporation ...................... 11,000(E) 11,000
--------- ------- -------- --------
Total indebtedness .................................... 638 11,000 11,638
--------- ------- -------- --------
Deferred income & expenses .................................... 2,501 2,501
Accrued expenses and other liabilities ........................ 34,516 35,440(F) 69,956
--------- ------- -------- --------
Total liabilities ..................................... 37,655 46,440 84,095
--------- ------- -------- --------
Commitments and contingencies
Series A Redeemable Preferred Stock ........................ 1,050 (1,050)(G)
Shareholders' equity
Common stock 86,278 shares pro forma outstanding ........... 1,150 7,478(G)(H) 8,628
Additional paid-in-capital ................................. 21,011 3,581(D)(E)(G)(I) 24,592
Retained Earnings/Distributions in excess of net income ....... (9,491) 9,491(I)
Unearned compensation expense ................................. (670) 670(I)
--------- ------- -------- --------
Total shareholders' equity ............................ 12,000 21,220 33,220
--------- ------- -------- --------
Total liabilities and shareholders' equity .................... $ $50,705 $ 66,610 $117,315
========= ======= ======== ========
18
19
(A) Represents adjustments for the purchase method of accounting whereby the
operating property, plant and equipment owned by Operating are adjusted to
estimated fair market value based on recent appraisals.
(B) Represents the estimated fair market value of works of art owned by
Operating.
(C) Represents the purchase consideration in excess of the fair market value of
the assets of Operating.
(D) To reflect the capitalization of MAC by Meditrust and the acquisition by
MAC of the shares of Realty which are assumed to remain outstanding after
the Mergers.
(E) To reflect the delivery of the Operating Note, the purpose of which is to
adjust the relative values of Realty and Operating to approximate the
relative values of Meditrust and MAC immediately prior to the time the
Mergers become effective.
(F) Represents estimated adjustments for (1) accrued merger costs including
financial advisory, legal and accounting fees, printing and various other
professional fees anticipated in connection with the Mergers, (2) accrued
expenses associated with certain employment agreements and benefit programs
of Operating including severance agreements, settlement of options and
purchase accounting adjustments related to Operating's defined benefit
pension and deferred compensation plans; since management is presently
evaluating the effects of the integration of the two companies, these
amounts are preliminary and subject to change, and (3) other liabilities
including potential settlement of outstanding legal matters consisting of a
shareholder lawsuit, a breach of contract lawsuit and various claims and
lawsuits arising from business operations.
(G) Represents the exchange of Series A Preferred Stock for shares of Operating
Common Stock.
(H) Represents the exchange of shares of MAC for shares of Operating Common
Stock.
(I) Based on the relative value between Realty and Operating of the 12,363
shares of Paired Common Stock outstanding (which includes the effect of
having exchanged the 867 shares of Series A Preferred Stock for shares of
Operating Common Stock), the total purchase consideration allocable to
Operating is approximately $7,666. The adjustments to shareholders' equity
eliminate Operating's historical equity accounts totaling $13,050 (which
includes the effect of exchanging the Series A Preferred Stock which has a
value of $1,050 for Operating Common Stock) and record equity based on the
number of shares of Paired Common Stock held by shareholders of Operating
that remain outstanding after the Mergers.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MEDITRUST
July 30, 1997 By: /s/ Laurie T. Gerber
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Laurie T. Gerber
Chief Financial Officer
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