<PAGE> 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, 1994
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, 1994, there were outstanding 34,347,995 Shares of
Beneficial Interest, without par value.
<PAGE> 2
<TABLE>
MEDITRUST
FORM 10-Q
INDEX
<CAPTION>
Part I. Financial Information Page (s)
--------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 1994 (unaudited)
and December 31, 1993 3
Consolidated Statements of Income for the three months ended
June 30, 1994 and 1993 (unaudited) 4
Consolidated Statements of Income for the six months ended
June 30, 1994 and 1993 (unaudited) 5
Consolidated Statements of Cash Flows for the six months ended
June 30, 1994 and 1993 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 7-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-11
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 12
</TABLE>
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<TABLE>
MEDITRUST
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
June 30, December 31,
1994 1993
---------- ----------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Real estate investments (Notes 3 and 4):
Land $ 42,060 $ 48,257
Buildings and improvements, net of accumulated
depreciation of $58,742 and $73,294, respectively 514,448 564,345
Real estate mortgages 775,394 601,706
---------- ----------
Total real estate investments 1,331,902 1,214,308
Other assets, net 53,220 66,862
Short-term cash investments 44,240 16,306
Fees, interest and other receivables 16,076 12,925
---------- ----------
Total assets $1,445,438 $1,310,401
========== ==========
LIABILITIES & SHAREHOLDERS' EQUITY
Indebtedness (Note 5):
Senior unsecured notes payable, net $ 285,003 $ 297,155
Senior mortgage notes payable, net 31,905 31,804
Convertible debentures, net 251,248 199,822
Bank notes payable, net 139,028 69,375
Bonds and mortgages payable, net 59,684 60,089
---------- ----------
Total indebtedness 766,868 658,245
Deferred income 14,259 14,468
Accrued expenses and other liabilities 44,089 51,893
---------- ----------
Total liabilities 825,216 724,606
---------- ----------
Commitments and contingencies (Note 3)
Shareholders' equity (Notes 5 and 6):
Shares of Beneficial Interest without par value:
Unlimited Shares authorized; 34,348
and 32,836 Shares issued and
outstanding in 1994 and 1993, respectively 707,825 666,220
Distributions in excess of net income (87,603) (80,425)
---------- ----------
Total shareholders' equity 620,222 585,795
---------- ----------
Total liabilities and shareholders' equity $1,445,438 $1,310,401
========== ==========
</TABLE>
The accompanying notes, together with the Notes to the Consolidated
Financial Statements included in the Company's Form 10-K for the year ended
December 31, 1993, are an integral part of these financial statements.
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<PAGE> 4
<TABLE>
MEDITRUST
CONSOLIDATED STATEMENTS OF INCOME
for the three months ended June 30, 1994 and 1993
(Unaudited)
<CAPTION>
1994 1993
---- ----
(Dollars in thousands
except per Share amounts)
<S> <C> <C>
Revenues:
Rental income $21,499 $19,733
Interest income 20,879 17,579
------- -------
Total revenues 42,378 37,312
------- -------
Expenses:
Interest expense 16,629 15,610
Depreciation and amortization 4,573 4,027
General and administrative expenses 2,168 1,674
------- -------
Total expenses 23,370 21,311
------- -------
Net income $19,008 $16,001
======= =======
Net income per Share, based on 34,192,000
and 31,144,000 weighted average Shares
outstanding in 1994 and 1993, respectively $.56 $.51
==== ====
</TABLE>
The accompanying notes, together with the Notes to the Consolidated
Financial Statements included in the Company's Form 10-K for the year ended
December 31, 1993, are an integral part of these financial statements.
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<TABLE>
MEDITRUST
CONSOLIDATED STATEMENTS OF INCOME
for the six months ended June 30, 1994 and 1993
(Unaudited)
<CAPTION>
1994 1993
---- ----
(Dollars in thousands
except per Share amounts)
<S> <C> <C>
Revenues:
Rental income $42,813 $38,047
Interest income 40,560 35,889
------- -------
Total revenues 83,373 73,936
------- -------
Expenses:
Interest expense 33,044 31,728
Depreciation and amortization 8,995 7,634
General and administrative expenses 4,621 3,735
------- -------
Total expenses 46,660 43,097
------- -------
Net income $36,713 $30,839
======= =======
Net income per Share, based on 33,817,000
and 30,300,000 weighted average Shares
outstanding in 1994 and 1993, respectively $1.09 $1.02
===== =====
</TABLE>
The accompanying notes, together with the Notes to the Consolidated
Financial Statements included in the Company's Form 10-K for the year ended
December 31, 1993, are an integral part of these financial statements.
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<TABLE>
MEDITRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1994 and 1993
(Unaudited)
<CAPTION>
1994 1993
---- ----
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 36,713 $ 30,839
Depreciation, amortization and provision for losses 10,283 9,846
Other items, net 235 (153)
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
AVAILABLE FOR DISTRIBUTION 47,231 40,532
Net change in other assets and liabilities 345 (8,199)
-------- --------
Net cash provided by operating activities 47,576 32,333
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from equity offering 100,374
Equity offering costs (5,016)
Proceeds from convertible debenture offering 90,000 92,120
Debt issuance costs (2,961) (3,162)
Proceeds from bank notes payable 183,000 29,000
Proceeds from warrant conversions and stock
options 4,445 4,483
Payment of bank notes payable (113,000) (95,000)
Payment of senior unsecured notes (12,500)
Principal payments on bonds and mortgages payable
and notes and advances payable (517) (361)
Distributions to shareholders (43,891) (36,958)
-------- --------
Net cash provided by financing activities 104,576 85,480
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of and additions to real estate (13,122) (9,014)
Investment in real estate mortgages and development
financing (114,349) (115,271)
Prepayment proceeds and principal payments on real
estate mortgages and note 2,064 2,594
Working capital advances (22,637)
Collection of receivables and repayment of working
capital advances 23,826
-------- --------
Net cash used in investing activities (124,218) (121,691)
-------- --------
Net increase (decrease) in short-term cash
investments 27,934 (3,878)
Short-term cash investments at:
Beginning of period 16,306 24,858
-------- --------
End of period $ 44,240 $ 20,980
======== ========
<FN>
Supplemental disclosure of cash flow information (see Note 2).
</TABLE>
The accompanying notes, together with the Notes to the Consolidated
Financial Statements included in the Company's Form 10-K for the year ended
December 31, 1993, are an integral part of these financial statements.
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<PAGE> 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 Report on Form 10-K for the year ended December 31,
1993 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 the financial position as of June 30,
1994 and the results of operations for each of the three and six-month
periods ended June 30, 1994 and 1993 and cash flows for each of the
six-month periods ended June 30, 1994 and 1993. The results of operations
for the six-month period ended June 30, 1994 are not necessarily indicative
of the results which may be expected for the entire year.
<TABLE>
2. Supplemental Cash Flow Information
----------------------------------
<CAPTION>
Six Months Ended
June 30
----------------
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Interest paid during the period $30,495 $28,128
Non-cash investing and financing transactions:
Acquisition and lease of real estate:
Value of real estate (sold) acquired:
Land and buildings (94,000) 65,530
Accumulated depreciation 22,463
Increase (reduction) of real estate mortgages
net of participation reduction 85,000 (55,007)
Issuance of demand note payable
related to participation reduction (10,523)
Shares issued for conversion of debentures 37,792 25,063
</TABLE>
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<PAGE> 8
MEDITRUST
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
3. Real Estate Investments
-----------------------
During the six months ended June 30, 1994, the Company provided permanent
mortgage financing of $72,300,000 for 26 long- term care facilities located
in Texas and Massachusetts and refinanced for $50,500,000 an existing
mortgage with a balance of $32,836,000 secured by 28 long-term care
facilities located in Illinois and refinanced for $5,765,000 an existing
mortgage with a balance of $4,246,000 secured by a long-term care facility
in Connecticut. In addition, the Company also provided net development
financing of $22,866,000 for seven long-term care facilities and five
medical office buildings under construction and for additions to existing
long-term care facilities. The Company also received principal payments on
its real estate mortgages of $2,064,000.
Also during the six months ended June 30, 1994, the Company funded
$11,389,000 for two long-term care facilities located in Connecticut and one
long-term care facility located in Massachusetts and funded $395,000 for
additions to certain facilities. The Company also acquired for $11,570,000
a long-term care facility located in Massachusetts which was substituted for
a long-term care facility located in Connecticut with a mortgage balance of
$10,232,000.
At June 30, 1994, the Company was committed to providing additional
financings of approximately $47,349,000 relating to five long-term care
facilities and five medical office buildings currently under construction
and additional funding for additions to three existing long-term care
facilities in the real estate portfolio.
4. Merger Between Sun Healthcare and Mediplex
------------------------------------------
In June 1994, the merger of Sun Healthcare Group, Inc. ("Sun") and The
Mediplex Group, Inc. ("Mediplex") was announced. The merged entities
comprise approximately 26% of the Company's $1.4 billion portfolio of gross
real estate investments. A condition of the Company's consent to this
merger was that all existing Mediplex lease and mortgage terms were extended
to between 2004 and 2008 and adjusted to include annual rate escalators.
In connection with this transaction, the Company (a) terminated its leases
with Mediplex on three properties (two alcohol and substance abuse treatment
facilities and one psychiatric hospital located in New York) with a net book
value of $101,537,000 and replaced these leases with mortgages from Sun
totaling $74,000,000, (b) loaned $11,000,000 to Sun which was secured by a
mortgage on a rehabilitation facility located in Colorado and (c) entered
into sale/leaseback transactions with Sun totaling $30,000,000 for two
rehabilitation facilities located in Kentucky and Massachusetts and for a
long-term care facility located in Connecticut. As a result of these
transactions, the Company recorded a non-cash gain of approximately
$13,463,000 which will be amortized over the term of the aforementioned New
York facility mortgages.
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<PAGE> 9
MEDITRUST
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
5. Indebtedness and Shareholders' Equity
-------------------------------------
In March 1994, the Company issued $90,000,000 of 7 1/2% convertible
debentures due 2001 which are convertible into Shares of the Company at
$36.18 per Share. The net proceeds from this debenture issuance were used
to repay bank debt outstanding under its unsecured credit facilities.
During the six months ended June 30, 1994, the Company also paid a principal
installment in the amount of $12,500,000 relating to its senior unsecured
notes.
During the six months ended June 30, 1994, $15,300,000 of principal amount
of 9% convertible debentures were converted into 566,654 Shares and
$22,492,000 of principal amount of 7% convertible debentures were converted
into 734,426 Shares.
The Company has a total of $177,000,000 in unsecured credit facilities
bearing interest at the lenders' prime rate or LIBOR plus 1.25% of
which approximately $80,700,000 is available at June 30, 1994.
6. Distributions Paid to Shareholders
----------------------------------
On May 13, 1994, the Company paid a dividend of $.6525 per Share to
shareholders of record on April 29, 1994. This dividend related to the
period from January 1, 1994 through March 31, 1994.
7. Subsequent Event
----------------
In July 1994, the Company declared a dividend of $.6575 per Share payable on
August 15, 1994 to shareholders of record on July 29, 1994. This
dividend relates to the period from April 1, 1994 through June 30,1994.
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<PAGE> 10
MEDITRUST
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
Revenues for the three months ended June 30, 1994 were $42,378,000 compared to
$37,312,000 for the three months ended June 30, 1993, an increase of $5,066,000
or 13.6%. Revenue growth resulted from increased rental income of $1,766,000 and
increased interest income of $3,300,000 as a result of additional real estate
investments made during the past twelve months.
For the three months ended June 30, 1994, total expenses increased by
$2,059,000. Interest expense increased by $1,019,000 and resulted primarily
from the issuance of $86,250,000 of 6 7/8% debentures in November 1993 and the
issuance of $90,000,000 of 7 1/2% debentures in March 1994 and was partially
offset from the reduction in interest from the conversion of $46,329,000 of
principal amount of 9% debentures and the conversion of $32,241,000 of principal
amount of 7% debentures during the past twelve months. Depreciation and
amortization increased by $546,000 primarily due to depreciation of the
additional real estate investments made during the previous twelve-month
period. General and administrative expenses increased by $494,000 principally
attributable to a higher level of operating expenses.
Revenues for the six months ended June 30, 1994 were $83,373,000 compared to
$73,936,000 for the six months ended June 30, 1993, an increase of $9,437,000 or
12.8%. Revenue growth resulted from increased rental income of $4,766,000 and
increased interest income of $4,671,000 as a result of additional real estate
investments made during the past twelve months.
For the six months ended June 30, 1994, total expenses increased by $3,563,000.
Interest expense increased by $1,316,000 and resulted primarily from the
issuance of $86,250,000 of 6 7/8% debentures in November 1993 and the issuance
of $90,000,000 of 7 1/2% debentures in March 1994 and was partially offset from
the reduction in interest from the conversion of $46,279,000 of principal amount
of 9% debentures and the conversion of $36,127,000 of principal amount of 7%
debentures during the past twelve months. Depreciation and amortization
increased by $1,361,000 primarily due to depreciation of the additional real
estate investments made during the previous twelve-month period. General and
administrative expenses increased by $886,000 principally attributable to a
higher level of operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
As of June 30, 1994, the Company's gross real estate investments totaled
approximately $1.4 billion including 193 long-term care facilities, 23
rehabilitation hospitals, two alcohol and substance abuse treatment facilities,
six psychiatric hospitals, four retirement living facilities and five
medical office buildings.
The Company had shareholders' equity of $620,222,000 and a debt to equity
ratio of approximately 1.2 to 1.0 as of June 30, 1994.
-10-
<PAGE> 11
MEDITRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, Continued
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
convertible debentures, the issuance of long-term secured and unsecured
notes and the assumption of mortgage notes. The Company obtains short-term
financing through the use of bank lines of credit which are replaced with
long-term financing as appropriate. 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 mortgage 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.
During the six-month period ended June 30, 1994, the Company issued $90,000,000
of 7 1/2% convertible debentures due 2001. The net proceeds to the Company from
this offering was used to repay amounts outstanding under its unsecured credit
facilities.
As of June 30, 1994, the Company's outstanding commitments for additional
financing totaled approximately $47,349,000 for the completion of ten facilities
under construction and additional funding for additions to three facilities in
the real estate portfolio. Under the Company's unsecured credit facilities, a
total of approximately $80,700,000 was available at June 30, 1994.
The Company believes that its various sources of capital are adequate to finance
its operations as well as pending property acquisitions, mortgage
financings, funding of existing development loans and future dividends. For the
balance of 1994, however, in the event that the Company identifies appropriate
investment opportunities, the Company may raise additional capital through the
sale of Shares of Beneficial Interest, by the issuance of additional long-term
debt or through a securitization transaction.
-11-
<PAGE> 12
MEDITRUST
PART II. OTHER INFORMATION
<TABLE>
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
At the Annual Meeting of Shareholders of the Company held on May 26,
1994, the recorded vote to fix the number of trustees at nine and to
vote for the election of all nominees as listed below was as follows:
<CAPTION>
For Against
--- -------
<S> <C> <C>
Abraham D. Gosman 27,496,351 144,940
David F. Benson 27,505,411 135,880
Edward W. Brooke 27,486,338 154,953
Hugh L. Carey 27,462,179 179,112
Robert Cataldo 27,499,866 141,425
Philip L. Lowe 27,480,338 160,953
Thomas J. Magovern 27,498,929 142,362
Gerald Tsai, Jr. 27,497,250 144,041
Frederick W. Zuckerman 27,499,256 142,035
</TABLE>
There were no abstentions or broker non-votes.
<TABLE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
<CAPTION>
Exhibit
No. Title Method of Filing
- - ------- ----- ----------------
<S> <C>
11 Statement Regarding Computation of Per Share
Earnings Filed herewith
</TABLE>
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter ended June 30, 1994.
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 1, 1994 By:/s/ Lisa M. Pavelka
---------------------------------------------
Lisa M. Pavelka, Vice President and Treasurer
(and Chief Accounting Officer)
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<PAGE> 1
<TABLE>
Exhibit 11
MEDITRUST
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(000 omitted except for per share amounts)
<CAPTION>
Quarter ended Six months ended
June 30, June 30,
--------------- ---------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary
- - -------
Weighted average shares 34,192 31,144 33,817 30,300
Dilutive effect of:
Stock options 107 115 105 122
Warrants 34 48 42 75
------- ------- ------- -------
Weighted average number of shares and
equivalent shares outstanding 34,333 31,307 33,964 30,497
======= ======= ======= =======
Net income $19,008 $16,001 $36,713 $30,839
======= ======= ======= =======
Net income per share (A) $.55 $0.51 $1.08 $1.01
==== ===== ===== =====
<FN>
(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%.
</TABLE>
<TABLE>
Fully Diluted
- - -------------
<S> <C> <C> <C> <C>
Weighted average number of shares used
in primary calculation 34,333 31,307 33,964 30,497
Assumed conversion of debentures 7,673 5,722 7,165 5,305
------- ------- ------- -------
Fully diluted weighted average shares
and equivalent shares outstanding 42,006 37,029 41,129 35,802
======= ======= ======= =======
Net income $19,008 $16,001 $36,713 $30,839
Interest and debt amortization on assumed
conversion of debentures 5,056 3,193 9,315 5,882
------- ------- ------- -------
Adjusted net income for fully diluted calculation $24,064 $19,194 $46,028 $36,721
======= ======= ======= =======
Net income per share (B) $.57 $.052 $1.12 $1.03
==== ===== ===== =====
<FN>
(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.
</TABLE>
