Press Release: The Meditrust Companies
March 5, 2001
DALLAS, TX -- The Meditrust Companies (``Meditrust'' or ``the Companies'') (NYSE: MT) announced March 2 that its
funds from operations (FFO), on a diluted basis, for the three months and twelve months ended December 31, 2000
were $31.0 million or $0.21 per share and $162.6 million or $1.15 per share compared to $47.0 million or $0.33
per share and $241.4 million or $1.69 per share for the same periods of 1999, respectively. The decrease in FFO
is the result of the sale of certain healthcare assets and a decline in La Quinta's operating results. Meditrust
will hold a conference call today to discuss these results and other matters.
Total revenues for the Companies for the three and twelve month periods ended December 31, 2000 were $178.1 million
and $822.8 million, respectively, compared to $209.2 million and $912.0 million for the comparable periods in the
prior year. The decline in total revenues is principally the result of the sale of certain healthcare assets.
Recurring earnings before interest, taxes, depreciation and amortization (EBITDA) for the Companies was $77.1 million
for the fourth quarter and $422.3 million for the twelve months ended December 31, 2000, versus $120.3 million
and $556.9 million for the comparable periods in 1999. These results represent recurring EBITDA decreases of 36%
and 24%, respectively. The decline in recurring EBITDA for the quarter and the year is the result of the sale of
certain healthcare assets and a decline in La Quinta's operating results.
Interest expense was $34.3 million for the fourth quarter and $187.0 million for the twelve months ended December
31, 2000, versus $60.4 million and $245.0 million for the comparable periods in 1999. These results represent interest
expense decreases of 43% and 24%, respectively. The decline in interest expense for the quarter and the year is
the result of using healthcare asset sale proceeds and free cashflow to pay down debt.
Net losses from continuing operations for the three and twelve month periods ended December 31, 2000 were $44.6
million and $335.6 million, respectively, compared to a net loss from continuing operations of $49.8 million for
the fourth quarter of 1999 and net income from continuing operations of $59.4 million for the twelve months of
1999.
The loss from continuing operations for the three months ended December 31, 2000, includes significant non-recurring
expenses: $31.3 million in provisions for losses on real estate assets and mortgage loans and related receivables,
$11.2 million related to impairments of real estate securities, and $1.9 million in other expenses comprised of
provisions for rent and interest receivable reserves, severance, and other charges associated with the ongoing
Five Point Plan of Reorganization. The loss from continuing operations for the three months ended December 31,
1999, includes significant non-recurring expenses: $63.2 million in provisions for losses on real estate assets
and mortgage loans and related receivables, and $5.6 million in other expenses related to a restructuring plan
announced in November 1998 (the ``1998 Plan'') and provisions for rent receivable reserves.
The loss from continuing operations for the twelve months ended December 31, 2000, includes significant non-recurring
expenses: $130.5 million in losses on the sale of assets and mortgage repayments, $50.3 million related to impairments
of real estate securities, $183.7 million in provisions for losses on real estate assets and mortgage loans and
related receivables, and $32.9 million in other expenses comprised of provisions for rent and interest receivable
reserves, severance and other charges associated with the Five Point Plan, as well as costs related to the Companies'
separation with the former CEO of Meditrust Corporation. Other non-recurring expenses during the twelve months
ended December 31, 1999, include: $63.2 million in provisions for losses on real estate assets and mortgage loans
and related receivables, $4.6 million in provisions for rent receivable reserves, $16.2 million in other expenses
related to the 1998 Plan, and $25 million related to the Companies' separation agreement with the former Chairman
of Meditrust Corporation and CEO and Treasurer of Meditrust Operating Company, Abraham D. Gosman. Also, during
the twelve months ended December 31, 1999, the Companies realized a gain on asset sales of $12.0 million.
Five Point Plan Progress
Commenting on the Five Point Plan of Reorganization announced by the Board of Directors in January, 2000, Francis
W. (``Butch'') Cash, President and Chief Executive Officer, stated ``During the past year, the Companies made substantial
progress toward implementing the Plan. In the last 12 months we have:
* Sold certain healthcare assets or received early repayment of certain
healthcare related mortgages totaling approximately $1 billion.
* Repaid more than $1 billion in debt.
* Continued Meditrust's transition to a lodging focused company by:
-- Hiring an experienced senior management team. Six out of the nine
senior executives have joined La Quinta since mid 2000.
-- Refocusing La Quinta's operations organization to be closer to the
markets served by our Inns. We decentralized the Inn operations
organization, added 10 new Regional Vice Presidents of operations,
and placed them in their markets.
-- Implementing plans to outsource certain parts of La Quinta's
information systems.
-- Implementing new marketing and sales programs to drive business.
-- Initiating a franchise program to leverage the value of the La
Quinta brand.
While we are pleased with the progress made toward meeting the objectives of the Five Point Plan and with the
positive direction of La Quinta, we will need to build upon this momentum during 2001.``
Lodging Results
Lodging related revenues for the fourth quarter of 2000 were $133.7 million compared to $130.9 million for the
same period of 1999, an increase of $2.8 million. Despite having three fewer inns open at year end 2000 compared
to year end 1999, revenues increased primarily as a result of an increase in occupancy from 57.1% during the three
months ended December 31, 1999 to 58.8% during the same period of 2000. As a result, revenue per available room
(RevPAR) increased 2.8% from $34.59 during the fourth quarter of 1999 to $35.55 during the same period of 2000.
Lodging related revenues for the twelve months ended December 31, 2000 were $595.0 million compared to $602.0 million
for the same period of 1999, a decrease of $7.0 million. The decrease in revenues is primarily attributable to
the decline in occupancy from 66.6% during the twelve months ended December 31, 1999 to 63.4% during the same period
of 2000. As a result, RevPAR declined 2.2% from $40.64 for the twelve months ended December 31, 1999 to $39.73
during the same period of 2000.
La Quinta incurred incremental expenses of $14.0 million during the quarter ended December 31, 2000 and $45.4 million
during the twelve months ended December 31, 2000. This increase for the fourth quarter primarily relates to increases
in salary and wage rates, information system related expenses, additional sales expenses, as well as certain other
realignment related expenses. EBITDA for the fourth quarter and twelve months of 2000 was $38.7 million and $222.0
million, respectively, compared to $49.9 million and $274.5 million for the comparable period of 1999.
Commenting on La Quinta's fourth quarter, Mr. Cash said, ``While we are not satisfied with La Quinta's EBITDA for
the quarter, we believe that the foundation for improved future results has been established. Key accomplishments
for the quarter were:
* RevPAR increased by 2.8%. This is the first time in almost two years
that La Quinta has had a quarterly increase in RevPAR.
* Hotel operating costs were reduced. Certain positions were eliminated
and a renewed focus on controllable labor expenses was implemented.
* The information systems department was strengthened. La Quinta hired a
new executive to lead the department and to outsource certain elements
of the IS operations.
* La Quinta initiated a capital reinvestment plan. The Board of Directors
has approved $20 million of additional capital to upgrade approximately
80 Inns in 2001.
* The franchising effort is off to an excellent start. The department is
staffed with 11 professionals and we have 21 approved contracts."
Healthcare Results
Revenues for the healthcare segment for the fourth quarter and twelve months of 2000 were $39.8 million and $211.3
million, respectively, compared to $73.8 million and $305.4 million for the comparable periods in the prior year.
Healthcare revenues for the fourth quarter and twelve months of 2000 decreased 46% and 31%, respectively, from
the same periods in 1999 as a result of the sale of certain healthcare assets. Fourth quarter 2000 revenues include
$2.3 million of payments from bankrupt operators related to prior period obligations and $2.3 million in recoveries
of amounts previously written off.
EBITDA for the healthcare segment for the three and twelve month periods ended December 31, 2000, was $37.8 million
and $197.9 million, respectively, compared to EBITDA of $69.5 million and $281.4 million for the same periods in
1999. Healthcare EBITDA for the fourth quarter and twelve month period ended December 31, 2000 decreased as a result
of the impact of the sale of certain healthcare assets.
During 2000, Meditrust sold certain healthcare properties and received mortgage repayments totaling approximately
$959 million. The Companies recorded losses, including previously recorded provisions for ``assets held for sale,''
of approximately $244 million related to these transactions. During the fourth quarter of 2000, Meditrust received
a mortgage repayment of $4.3 million related to a long term care facility.
At December 31, 2000, the remaining healthcare portfolio had a net book value of $904.3 million after provisions
for losses on real estate assets and provisions for losses on mortgage loan receivables, and an operator coverage
ratio of 1.5X (for the nine months ended September 30, 2000). The portfolio now consists of $681.7 million of leased
assets and $222.6 million of mortgages as measured by net book value. Five of the remaining operators are public
companies that have filed for bankruptcy protection under Chapter 11. A supplemental schedule is included (Schedule
E) that describes the number of facilities, net assets by lease/mortgage, and the lease/mortgage income by each
of the five operators that have filed for Chapter 11 bankruptcy protection. Meditrust continues to monitor its
operators that have filed for Chapter 11 bankruptcy protection. To date, the Companies have not come to any definitive
agreement with any of these operators. In the event any of its leases are successfully rejected through the course
of the bankruptcy proceedings, Meditrust intends to transition the operations of these facilities to other operators.
Financial Position
During the three months ended December 31, 2000, Meditrust reduced debt by $56 million, primarily reflecting the
generation of cash flow from operations. During the quarter, the Companies prepaid $50 million of its term bank
loan. As of December 31, 2000, Meditrust had approximately $366 million available under the existing line of credit
(net of outstanding letters of credit) and $400 million outstanding of term bank debt.
Total debt maturing in the year 2001 is $628 million, including approximately $90 million that was due on March
1, 2001 and which has been paid off through borrowings under the line of credit. In addition, on July 15, 2001,
the Companies have approximately $75 million of debt maturing. The $400 million outstanding bank term loan and
the $400 million commitment on the line of credit matures on July 17, 2001. Meditrust is reviewing various alternatives
with respect to the bank term loan and line of credit, however, there can be no assurances that the Companies will
be able to refinance or pay down this debt prior to its maturity. The remaining $63 million of 2001 debt maturities
are primarily in October 2001. Total indebtedness at December 31, 2000 has been reduced to $1.59 billion from $2.60
billion at December 31, 1999.
Outlook for 2001
Mr. Cash stated ``We expect to make continued progress toward meeting the objectives of the Five Point Plan during
2001.
* We will continue our focus on selling a significant portion of our
healthcare assets. There are ongoing signs that the healthcare industry
is recovering and we are cautiously optimistic about the prospects for
future asset sales.
* We will continue to work on refinancing the $628 million of debt which
comes due in 2001. Debt reduction and a restructure of our 2001 debt
maturities are top priorities.
* The Board of Directors intends to review the common stock dividend
policy quarterly in conjunction with its review of Meditrust's progress
toward meeting the objectives of the Five Point Plan. The current common
stock dividend policy is to declare the minimum dividend required to
maintain REIT status. Any common stock dividends in 2001 will be
dependent upon, among other things, factors such as further healthcare
asset sales, the refinancing of the 2001 debt maturities, continued
progress at La Quinta, and the amount of progress made in reducing
indebtedness.
* Our lodging business should continue to improve.
-- We have turned the corner on RevPAR growth and expect to continue to
see positive RevPAR trends.
-- We also expect to see positive increases in EBITDA for the year. It
may, however, be mid-year before we see a month over month
improvement.
-- We will open our first franchise property this Spring and expect to
open a total of 15 franchise hotels during the year."
Conference Call and Where You Can Find Additional Information
As previously announced, at 11:00AM (EST) on March 2, 2001, the Companies will hold a conference call and audio
web cast to discuss the financial results and the operating strategy of the Companies. In addition, as previously
announced, the Companies may answer one or more questions concerning business and financial matters affecting the
Companies. Some of the Companies responses may contain information that has not been previously disclosed.
Simultaneous with the conference call, an audio web cast of the call will be available via a link on the Meditrust
website, http://www.reit.com, in the Company Overview section. The conference
call can be accessed by dialing 888-209-3772 (International: 212-271-4767). An access code is not required. A replay
of the call will be available at the same Internet address or by dialing 800-633-8284 (International: 858-812-6440)
and entering the access code of 18097908. The replay will be available from 1:00 PM (EST) on March 2, 2001 through
12:00 PM on March 8, 2001.
About The Meditrust Companies
The Meditrust Companies, (NYSE: MT - news), a real estate investment trust headquartered in Dallas, Texas, consists
of Meditrust Corporation, a REIT, and Meditrust Operating Company. Meditrust Corporation's portfolio consists of
299 lodging facilities, 93 long-term care facilities, 94 assisted living facilities, five medical office buildings,
and seven other healthcare facilities. Meditrust Operating Company operates all of the lodging facilities under
the La Quinta brand name. This news release as well as other news about The Meditrust Companies is available on
the Internet at http://www.reit.com.
About La Quinta Inns, Inc.
La Quinta Inns, Inc. owns and operates 229 Inns and 70 Inn & Suites in 28 states. La Quinta is the lodging
division of The Meditrust Companies and is also headquartered in Dallas. For more information about La Quinta,
please visit its Web site at http://www.laquinta.com.
Certain matters discussed herein may constitute ``forward-looking statements'' within the meaning of the federal
securities laws. The Meditrust Companies (the ``Companies''), consisting of Meditrust Corporation (``Realty'')
and Meditrust Operating Company (``Operating''), intend such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements, and are including this statement for purposes of complying with
these safe harbor provisions. Although the Companies believe the forward-looking statements are based on reasonable
assumptions, the Companies can give no assurance that their expectations will be attained. Actual results and the
timing of certain events could differ materially from those projected in or contemplated by the forward-looking
statements due to a number of factors, including, without limitation, general economic and real estate conditions,
the conditions of the capital markets in general, the ability of the Companies to refinance and/or pay off near
term debt maturities, the identification of satisfactory prospective buyers for healthcare related assets of the
Companies' and the availability of financing for such prospective buyers, the availability of financing for the
Companies' capital investment program, interest rates, competition for hotel services and healthcare facilities
in a given market, the enactment of legislation further impacting the Companies' status as a paired share real
estate investment trust (``REIT'') or Realty's status as a REIT, the further implementation of regulations governing
payments to, as well as the financial conditions of, operators of Realty's healthcare related assets, including
the filing for protection under the US Bankruptcy Code by any operators of the Companies healthcare assets, the
impact of the protection offered under the US Bankruptcy Code for those operators who have already filed for such
protection, and other risks detailed from time to time in the filings of Realty and Operating with the Securities
and Exchange Commission (``SEC''), including, without limitation, the risks described in Item 7 of the Joint Annual
Report on Form 10-K entitled ``Certain Factors You Should Consider.''
SOURCE: The Meditrust Companies