e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2010
OR
|
|
|
o |
|
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 001-32559
MEDICAL PROPERTIES TRUST, INC.
(Exact Name of Registrant as Specified in Its Charter)
|
|
|
MARYLAND
(State or other jurisdiction of
incorporation or organization)
|
|
20-0191742
(I. R. S. Employer
Identification No.) |
|
|
|
1000 URBAN CENTER DRIVE, SUITE 501
BIRMINGHAM, AL
(Address of principal executive offices)
|
|
35242
(Zip Code) |
REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE: (205) 969-3755
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
þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes
o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
|
|
|
|
|
|
|
Large accelerated filer o
|
|
Accelerated filer þ
|
|
Non-accelerated filer o
(Do not check if a smaller reporting company)
|
|
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
o No þ
As of
August 5, 2010, the registrant had 111,270,847 shares of common stock, par value $.001,
outstanding.
MEDICAL PROPERTIES TRUST, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2010
Table of Contents
2
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010 |
|
|
December 31, 2009 |
|
(In thousands, except per share amounts) |
|
(Unaudited) |
|
|
(Note 2) |
|
Assets |
|
|
|
|
|
|
|
|
Real estate assets |
|
|
|
|
|
|
|
|
Land, buildings and improvements, and intangible lease assets |
|
$ |
983,171 |
|
|
$ |
908,475 |
|
Mortgage loans |
|
|
205,641 |
|
|
|
200,164 |
|
Real estate held for sale |
|
|
|
|
|
|
69,646 |
|
|
|
|
|
|
|
|
Gross investment in real estate assets |
|
|
1,188,812 |
|
|
|
1,178,285 |
|
Accumulated depreciation and amortization |
|
|
(67,117 |
) |
|
|
(54,948 |
) |
|
|
|
|
|
|
|
Net investment in real estate assets |
|
|
1,121,695 |
|
|
|
1,123,337 |
|
Cash and cash equivalents |
|
|
121,637 |
|
|
|
15,307 |
|
Interest and rent receivable |
|
|
27,844 |
|
|
|
19,845 |
|
Straight-line rent receivable |
|
|
29,292 |
|
|
|
27,539 |
|
Other loans |
|
|
51,704 |
|
|
|
110,842 |
|
Assets of
discontinued operations |
|
|
875 |
|
|
|
1,185 |
|
Other assets |
|
|
29,238 |
|
|
|
11,843 |
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
1,382,285 |
|
|
$ |
1,309,898 |
|
|
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Debt, net |
|
$ |
382,302 |
|
|
$ |
576,678 |
|
Accounts payable and accrued expenses |
|
|
38,053 |
|
|
|
29,247 |
|
Deferred revenue |
|
|
21,366 |
|
|
|
15,350 |
|
Lease deposits and other obligations to tenants |
|
|
17,750 |
|
|
|
17,048 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
459,471 |
|
|
|
638,323 |
|
Equity |
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value. Authorized 10,000 shares; no
shares outstanding |
|
|
|
|
|
|
|
|
Common stock, $0.001 par value. Authorized 150,000 shares;
issued and outstanding 109,950 shares at June 30, 2010, and
78,725 shares at December 31, 2009 |
|
|
110 |
|
|
|
79 |
|
Additional paid in capital |
|
|
1,049,358 |
|
|
|
759,721 |
|
Distributions in excess of net income |
|
|
(123,343 |
) |
|
|
(88,093 |
) |
Accumulated
other comprehensive loss |
|
|
(3,160 |
) |
|
|
|
|
Treasury shares, at cost |
|
|
(262 |
) |
|
|
(262 |
) |
|
|
|
|
|
|
|
Total Medical Properties Trust, Inc. stockholders equity |
|
|
922,703 |
|
|
|
671,445 |
|
|
|
|
|
|
|
|
Non-controlling interests |
|
|
111 |
|
|
|
130 |
|
|
|
|
|
|
|
|
Total equity |
|
|
922,814 |
|
|
|
671,575 |
|
|
|
|
|
|
|
|
Total Liabilities and Equity |
|
$ |
1,382,285 |
|
|
$ |
1,309,898 |
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
3
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
(In thousands, except per share amounts) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rent billed |
|
$ |
24,843 |
|
|
$ |
21,424 |
|
|
$ |
46,623 |
|
|
$ |
42,297 |
|
Straight-line rent |
|
|
(177 |
) |
|
|
748 |
|
|
|
1,674 |
|
|
|
2,612 |
|
Interest and fee income |
|
|
6,541 |
|
|
|
7,168 |
|
|
|
14,475 |
|
|
|
14,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
31,207 |
|
|
|
29,340 |
|
|
|
62,772 |
|
|
|
59,500 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate depreciation and amortization |
|
|
5,905 |
|
|
|
6,031 |
|
|
|
12,169 |
|
|
|
11,597 |
|
Loan impairment charge |
|
|
|
|
|
|
|
|
|
|
12,000 |
|
|
|
|
|
Property-related |
|
|
1,111 |
|
|
|
1,176 |
|
|
|
1,841 |
|
|
|
2,039 |
|
General and administrative |
|
|
9,464 |
|
|
|
5,799 |
|
|
|
15,633 |
|
|
|
11,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
16,480 |
|
|
|
13,006 |
|
|
|
41,643 |
|
|
|
25,114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
14,727 |
|
|
|
16,334 |
|
|
|
21,129 |
|
|
|
34,386 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
29 |
|
|
|
54 |
|
|
|
13 |
|
|
|
54 |
|
Debt refinancing costs |
|
|
(6,214 |
) |
|
|
|
|
|
|
(6,214 |
) |
|
|
|
|
Interest expense |
|
|
(8,557 |
) |
|
|
(9,431 |
) |
|
|
(18,014 |
) |
|
|
(18,894 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other expense |
|
|
(14,742 |
) |
|
|
(9,377 |
) |
|
|
(24,215 |
) |
|
|
(18,840 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
(15 |
) |
|
|
6,957 |
|
|
|
(3,086 |
) |
|
|
15,546 |
|
Income from discontinued operations |
|
|
6,247 |
|
|
|
901 |
|
|
|
6,505 |
|
|
|
3,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
6,232 |
|
|
|
7,858 |
|
|
|
3,419 |
|
|
|
18,575 |
|
Net income attributable to
non-controlling interests |
|
|
(9 |
) |
|
|
(12 |
) |
|
|
(18 |
) |
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to
MPT common stockholders |
|
$ |
6,223 |
|
|
$ |
7,846 |
|
|
$ |
3,401 |
|
|
$ |
18,556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share basic and
diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
attributable to MPT common stockholders |
|
$ |
|
|
|
$ |
0.08 |
|
|
$ |
(0.04 |
) |
|
$ |
0.19 |
|
Income from discontinued operations
attributable to MPT common stockholders |
|
|
0.06 |
|
|
|
0.01 |
|
|
|
0.07 |
|
|
|
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to MPT common
stockholders |
|
$ |
0.06 |
|
|
$ |
0.09 |
|
|
$ |
0.03 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
103,498 |
|
|
|
78,616 |
|
|
|
91,337 |
|
|
|
77,524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share |
|
$ |
0.20 |
|
|
$ |
0.20 |
|
|
$ |
0.40 |
|
|
$ |
0.40 |
|
See accompanying notes to condensed consolidated financial statements.
4
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
Operating activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
3,419 |
|
|
$ |
18,575 |
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by operating
activities |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
13,183 |
|
|
|
13,151 |
|
Straight-line rent revenue |
|
|
(1,674 |
) |
|
|
(3,723 |
) |
Share-based compensation |
|
|
3,884 |
|
|
|
2,896 |
|
Gain on sale of real estate |
|
|
(6,162 |
) |
|
|
|
|
Straight-line rent write off/reserve |
|
|
|
|
|
|
1,111 |
|
Loan impairment |
|
|
12,000 |
|
|
|
|
|
Increase (decrease) in accounts payable and accrued liabilities |
|
|
(569 |
) |
|
|
(1,401 |
) |
Amortization and write-off of deferred financing costs and debt discount |
|
|
3,962 |
|
|
|
2,753 |
|
Premium paid
on extinguishment of debt |
|
|
3,490 |
|
|
|
|
|
Other adjustments |
|
|
(4,583 |
) |
|
|
(4,196 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
26,950 |
|
|
|
29,166 |
|
Investing activities |
|
|
|
|
|
|
|
|
Real estate acquired |
|
|
(73,851 |
) |
|
|
(499 |
) |
Principal received on loans receivable |
|
|
45,882 |
|
|
|
3,025 |
|
Proceeds from sale of real estate |
|
|
75,000 |
|
|
|
|
|
Investment in loans receivable |
|
|
(8,393 |
) |
|
|
(5,681 |
) |
Construction
in progress, equipment, and other |
|
|
(14,588 |
) |
|
|
(1,204 |
) |
|
|
|
|
|
|
|
Net cash
provided by (used in) investing activities |
|
|
24,050 |
|
|
|
(4,359 |
) |
Financing activities |
|
|
|
|
|
|
|
|
Revolving credit facilities, net |
|
|
(137,200 |
) |
|
|
(68,800 |
) |
Additions to debt |
|
|
148,500 |
|
|
|
|
|
Payments of debt |
|
|
(204,096 |
) |
|
|
(606 |
) |
Distributions paid |
|
|
(32,435 |
) |
|
|
(29,439 |
) |
Sale of common stock |
|
|
288,470 |
|
|
|
67,848 |
|
Other financing activities |
|
|
(7,909 |
) |
|
|
2,364 |
|
|
|
|
|
|
|
|
Net cash provided by
(used in) by financing activities |
|
|
55,330 |
|
|
|
(28,633 |
) |
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents for period |
|
|
106,330 |
|
|
|
(3,826 |
) |
Cash and cash equivalents at beginning of period |
|
|
15,307 |
|
|
|
11,748 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
121,637 |
|
|
$ |
7,922 |
|
|
|
|
|
|
|
|
Interest paid |
|
|
15,916 |
|
|
$ |
17,095 |
|
Supplemental schedule of non-cash financing activities: |
|
|
|
|
|
|
|
|
Distributions declared, unpaid |
|
|
22,326 |
|
|
|
16,050 |
|
Other non-cash financing activities |
|
|
|
|
|
|
5 |
|
See accompanying notes to condensed consolidated financial statements.
5
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization
Medical Properties Trust, Inc., a Maryland corporation, was formed on August 27, 2003 under the
General Corporation Law of Maryland for the purpose of engaging in the business of investing in,
owning, and leasing commercial real estate. Our operating partnership subsidiary, MPT Operating
Partnership, L.P. (the Operating Partnership), through which we conduct all of our operations,
was formed in September 2003. Through another wholly-owned subsidiary, Medical Properties Trust,
LLC, we are the sole general partner of the Operating Partnership. At present, we directly own
substantially all of the limited partnership interests in the Operating Partnership.
We have operated as a real estate investment trust (REIT) since April 6, 2004, and accordingly,
elected REIT status upon the filing in September 2005 of the calendar year 2004 federal income tax
return. Accordingly, we will not be subject to U.S. federal income tax, provided that we continue
to qualify as a REIT and our distributions to our stockholders equal or exceed our taxable income.
Certain activities we undertake must be conducted by entities which we elected to be treated as a
taxable REIT subsidiary (TRS). Our TRSs are subject to both federal and state income taxes.
Our primary business strategy is to acquire and develop real estate and improvements, primarily for
long-term lease to providers of healthcare services such as operators of general acute care
hospitals, inpatient physical rehabilitation hospitals, long-term acute care hospitals, surgery
centers, centers for treatment of specific conditions such as cardiac, pulmonary, cancer, and
neurological hospitals, and other healthcare-oriented facilities. We manage our business as a
single business segment.
2. Summary of Significant Accounting Policies
Unaudited Interim Condensed Consolidated Financial Statements: The accompanying unaudited interim
condensed consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States for interim financial information, including
rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been included. Operating
results for the three and six month periods ended June 30, 2010, are not necessarily indicative of
the results that may be expected for the year ending December 31, 2010. The condensed consolidated
balance sheet at December 31, 2009 has been derived from the audited financial statements at that
date but does not include all of the information and footnotes required by accounting principles
generally accepted in the United States for complete financial statements.
Reclassifications:
Certain reclassifications have been made to the condensed
consolidated financial statements to conform to the 2010 consolidated
financial statement presentation. These reclassifications had no
impact on stockholders equity or net income.
We evaluated all events or transactions that occurred after June 30, 2010, up through the date we
issued these financial statements.
For further information about significant accounting policies, refer to the consolidated financial
statements and footnotes thereto included in the Annual Report on Form 10-K, as amended, for the
year ended December 31, 2009.
6
3. Real Estate and Lending Activities
Acquisitions
On June 17, 2010, we acquired three inpatient rehabilitation hospitals in Texas for an aggregate
purchase price of $74 million. The properties acquired had existing leases in place, which we
assumed, that have initial terms expiring in 2033, provide for initial cash returns of 9.7% and
periodic escalation of up to 1.67% on an annualized basis. Each lease may, subject to conditions,
be renewed by the operator for two additional ten-year terms.
As part of this acquisition, we purchased the following assets: ($ amounts in thousands)
|
|
|
|
|
Land |
|
$ |
6,264 |
|
Building |
|
|
61,893 |
|
Intangible lease assets subject to amortization (weighted average useful life of 23.1
years) |
|
|
5,694 |
|
|
|
|
|
Total |
|
$ |
73,851 |
|
|
|
|
|
These three acquired hospitals contributed $0.3 million of revenue for the three and six months
ended June 30, 2010. In addition, we incurred approximately $0.6 million of acquisition related
costs during the same period.
Disposals
In April 2010, we sold the real estate of our Centinela Hospital, a 369-bed acute care medical
center located in Inglewood, California, to Prime Healthcare Services, Inc. (Prime), for $75
million resulting in a gain of approximately $6 million. Due to this sale, operating results of
our Inglewood facility have been included in discontinued operations for the current period and all
prior periods.
Leasing Operations
In the 2010 second quarter, Prime paid us $12 million in additional rent related to our
Shasta property, and we terminated our agreements with Prime concerning the additional rent, which could have paid us up to $20 million over the 10 year lease life.
Of this $12 million in additional rent,
$2 million has been
recognized in income from lease inception through June 30, 2010, and we expect to recognize the
other $10 million into income over the remainder of the lease life.
In April 2009, we terminated leases on two of our facilities in Louisiana (Covington and Denham
Springs) after the operator defaulted on the leases. As a result of the lease terminations, we
recorded a $1.1 million charge in order to fully reserve and write off, respectively, the related
straight-line rent receivables associated with the Covington and Denham Springs facilities. In
addition, we accelerated the amortization of the related lease intangibles resulting in $0.5
million of expense in the 2009 second quarter. In June 2009, we re-leased the Denham Springs
facility to a new operator under terms similar to the terminated lease.
In March 2010, we re-leased our Covington facility. The lease has a fixed term of 15 years with an
option, at the lessees discretion, to extend the term for three additional periods of five years
each. Rent during 2010 is based on an annual rate of $1.4 million and, commencing on January 1,
2011, increases annually by 2%. At the end of each term, the tenant has the right to purchase the
facility at a price generally equivalent to the greater of our undepreciated cost and fair market
value. Separately, we also obtained an interest in the operations of the tenant whereby we may
receive additional consideration based on the profitability of such operations.
At June 30, 2010, we had $3.8 million of receivables related to the former operator of our Bucks
County facility that were guaranteed by its parent company. We continue to pursue collection of
these receivables, and have instituted legal proceedings against the
operator and others. There is no assurance that we will receive all or any of the guaranteed amounts.
Since January 2007, we have advanced approximately $28 million to the operator/lessee of Monroe
Hospital in Bloomington, Indiana pursuant to a working capital loan
agreement, including additional advances of $0.7 million in April 2010. In addition, we have
accrued $15.6 million for rent, interest and other
charges including $1.0 million of rent in the 2010 second quarter. Because the operator has
not made all payments required by the working capital loan agreement and the related real estate
lease agreement, we consider the loan to be impaired.
During the first quarter of 2010, we evaluated alternative strategies for the recovery of our
advances and accruals. As part of these evaluations (which are still ongoing), we elected to reopen
negotiations with several large hospital systems that had previously expressed interest in
acquiring or otherwise managing the Monroe Hospital. We believe that the future cash flows of the current
tenant or a transaction with one of these large hospital systems would, more likely than not,
result in less than a full recovery of our loan advances, and, accordingly, we recorded a $12
million charge in the 2010 first quarter to recognize the estimated impairment of the working
capital loan. In making this estimate, we considered our first priority secured interest in
approximately (i) approximately $5 million in hospital patient receivables, (ii) cash balances of approximately
$4 million, and (iii) 100% of the membership interests of the operator/lessee and our assessment of
the realizable value of our other collateral. No additional impairment was needed in the 2010 second
quarter.
7
We have not committed to the adoption of a plan to transition ownership or management of the
hospital to any new operator, and there is no assurance that any such plan will be completed.
Moreover, there is no assurance that any plan that we ultimately pursue will not result in
additional charges for further impairment of our working capital loan.
We currently are recognizing income on the Monroe loan on a cash basis.
For the three months ended June 30, 2010 and 2009, revenue from affiliates of Prime (including rent
and interest from mortgage and working capital loans) accounted for 33.8% and 35.3%, respectively,
of total revenue. For the three months ended June 30, 2010 and 2009, revenue from Vibra Healthcare,
LLC (Vibra) (including rent and interest from working capital loans) accounted for 14.2% and
15.3%, respectively, of total revenue.
For the six months ended June 30, 2010 and 2009, revenue from affiliates of Prime (including rent
and interest from mortgage and working capital loans) accounted for
34.6% and 34.8%, respectively,
of total revenue. For the six months ended June 30, 2010 and 2009, revenue from Vibra (including
rent and interest from working capital loans) accounted for 14.0% and 15.1%, respectively, of total
revenue.
Loans
In April 2010, Prime repaid $40 million in other loans plus accrued interest.
4. Debt
The following is a summary of debt, net of discounts ($ amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, |
|
|
As of December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
Balance |
|
|
Interest Rate |
|
|
Balance |
|
|
Interest Rate |
|
Revolving credit facilities |
|
$ |
|
|
|
Variable |
|
$ |
137,200 |
|
|
Variable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior unsecured notes fixed
rate through July and October
2011 due July and October 2016 |
|
|
125,000 |
|
|
|
7.333% 7.871 |
% |
|
|
125,000 |
|
|
|
7.333% 7.871 |
% |
Exchangeable senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal amount |
|
|
103,675 |
|
|
|
6.125% 9.250 |
% |
|
|
220,000 |
|
|
|
6.125% 9.250 |
% |
Unamortized discount |
|
|
(3,469 |
) |
|
|
|
|
|
|
(8,265 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,206 |
|
|
|
|
|
|
|
211,735 |
|
|
|
|
|
Term loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal amount |
|
|
158,568 |
|
|
Various |
|
|
102,743 |
|
|
Various |
Unamortized discount |
|
|
(1,472 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
157,096 |
|
|
|
|
|
|
|
102,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
382,302 |
|
|
|
|
|
|
$ |
576,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2010, principal payments due for our debt (which exclude the effects of any
discounts recorded) are as follows:
|
|
|
|
|
2010 |
|
$ |
883 |
|
2011 |
|
|
31,611 |
|
2012 |
|
|
1,500 |
|
2013 |
|
|
83,500 |
|
2014 |
|
|
1,500 |
|
Thereafter |
|
|
268,249 |
|
|
|
|
|
Total |
|
$ |
387,243 |
|
|
|
|
|
In April 2010, we completed a public offering of common stock (the Offering) resulting in net proceeds, after
underwriting discount and commissions, of $279.1 million. See Note 5 to our condensed consolidated
financial statements in Item 1 to this Form 10-Q for further information. We used the net
proceeds from the Offering to fund a cash tender offer (Tender Offer) for 84% of the outstanding
6.125% exchangeable senior notes due 2011 at a price of 103% of the principal amount plus accrued
interest and unpaid interest (or $123.2 million). In addition, we paid off a $30
million term loan that was set to mature in November 2010.
In addition, in May 2010, we closed on a new $450 million secured credit facility with a syndicate of
banks, and the proceeds of such new credit facility and Offering were used to repay in full all
outstanding obligations under the old $220 million credit facility.
These refinancing activities resulted in a charge of approximately $6.2 million in the 2010 second
quarter related to the write-off of previously deferred financing costs and the premium we paid
associated with our Tender Offer.
The new credit facility includes a $150 million term loan facility (2010 Term
Loan) and a $300 million revolving loan facility (2010 Revolving Facility). We may increase
the 2010 Revolving Facility up to $375 million via an accordion
feature through November 2011, and in July 2010, we received a $30 million
binding commitment from an additional bank participant, increasing
our total availability to $330 million.
8
The 2010 Term Loan has a 6-year term that matures May 17, 2016 and has an interest rate option of
(1) LIBOR plus a spread of 3.5% or (2) the higher of the prime rate or federal funds rate plus
0.5%, plus a spread of 2.50%. This 2010 Term Loan is subject to a LIBOR floor of 1.5%.
The 2010 Revolving Facility has a 3-year term that matures on May 17, 2013 and has an interest rate
option of (1) the higher of the prime rate or federal funds rate plus 0.5%, plus a spread
initially set at 2.00% but that is adjustable from 2.00% to 2.75% based on current total leverage,
or (2) LIBOR plus a spread initially set at 3.00% but that is adjustable from 3.00% to 3.75%
based on current total leverage. In addition, we are required to pay a quarterly commitment fee on
the undrawn portion of the 2010 Revolving Facility, ranging from 0.375% to 0.500% per year.
During the second quarter 2010, we entered into an interest rate swap to fix $65 million of our
$125 million senior notes, starting July 31, 2011 (date on which the interest rate is scheduled to
turn variable) through maturity date (or July 2016), at a rate of 5.507%. We also entered into an interest rate
swap to fix $60 million of our senior notes starting
October 31, 2011 (date on which the related
interest rate is scheduled to turn variable) through the maturity
date (or October 2016) at a rate of 5.675%. At
June 30, 2010, the fair value of the interest rate swaps is $3.2 million, which is reflected in
accounts payable and accrued expenses on the condensed consolidated balance sheet.
We account for these swaps as cash flow hedges and expect any change
in the fair value of these swaps to be recorded in accumulated other
comprehensive income/loss on the balance sheet until the underlying
debt matures. We did not have any hedge ineffectiveness in the
periods, therefore, there was no income
statement effect recorded during the three or six month periods ending June 30, 2010.
Our debt facilities impose certain restrictions on us, including restrictions on our ability to:
incur debts; grant liens; provide guarantees in respect of obligations of any other entity; make
redemptions and repurchases of our capital stock; prepay, redeem or repurchase debt; engage in
mergers or consolidations; enter into affiliated transactions; dispose of real estate; and change
our business. In addition, these agreements limit the amount of dividends we can pay to 90% of
normalized adjusted funds from operations, as defined in the agreements, on a rolling four quarter
basis starting for the fiscal quarter ending March 31, 2012 and thereafter. Prior to March 31,
2012, a similar dividend restriction exists but at a higher percentage for transitional purposes. These
agreements also contain provisions for the mandatory prepayment of outstanding borrowings under
these facilities from the proceeds received from the sale of properties that serve as collateral,
except a portion may be reinvested subject to certain limitations, as defined in the credit
facility agreement.
In addition to these restrictions, the new credit facility contains customary financial and
operating covenants, including covenants relating to our total leverage ratio, fixed charge
coverage ratio, mortgage secured leverage ratio, recourse mortgage secured leverage ratio,
consolidated adjusted net worth, facility leverage ratio, and borrowing base interest coverage
ratio. This facility also contains customary events of default, including among others, nonpayment
of principal or interest, material inaccuracy of representations and failure to comply with our
covenants. If an event of default occurs and is continuing under the facility, the entire
outstanding balance may become immediately due and payable. At June 30, 2010, we were in compliance
with all such financial and operating covenants.
5. Common Stock
In April 2010, we completed a public offering of 26 million shares of common stock at $9.75 per
share. Including the underwriters purchase of 3.9 million additional shares to cover over
allotments, net proceeds from the Offering, after underwriting discount and commissions, were
$279.1 million. We used the net proceeds from the Offering to fund the Tender Offer as discussed in
Note 4 with any remaining proceeds to be used for general corporate purposes including funding the
acquisition in June 2010.
During the first quarter of 2010, we sold 0.9 million shares of our common stock under our
at-the-market equity offering program, at an average price of $10.77 per share, for total proceeds,
net of a 2% sales commission, of $9.5 million.
In January 2009, we completed a public offering of 12.0 million shares of our common stock at $5.40
per share. Including the underwriters purchase of 1.3 million additional shares to
cover over allotments, net proceeds from this offering, after underwriting discount and commissions
and fees, were $67.9 million. Proceeds from this offering were used to repay borrowings outstanding
under our revolving credit facilities.
On January 9, 2009, we filed Articles of Amendment to our charter with the Maryland State
Department of Assessments and Taxation increasing the number of authorized shares of common stock,
par value $0.001 per share, available for issuance from 100,000,000 to 150,000,000.
6. Stock Awards
Our Second Amended and Restated Medical Properties Trust, Inc. 2004 Equity Incentive Plan (the
Equity Incentive Plan) authorizes the issuance of common stock options, restricted stock,
restricted stock units, deferred stock units, stock appreciation rights, performance units and
awards of interests in our Operating Partnership. The Equity Incentive Plan is administered by the
Compensation Committee of the Board of Directors. We have reserved 7,441,180 shares of common stock
for awards under the Equity Incentive Plan for which 3,233,977 shares remain available for future
stock awards as of June 30, 2010. We awarded 277,680 and 441,134 shares in the six months ended June 30, 2010 and 2009, respectively, of time-based restricted stock to management, independent
directors, and employees. These awards vest quarterly based on service, over three years, in equal
amounts. In addition, our management team was awarded 182,600 performance-based awards in the first
quarter of 2010. These awards vest ratably over a three year period based on the achievement of
certain performance measures, with a carry-back and carryforward provision through December 31,
2014. Dividends on these awards are paid only upon achievement of the performance measures.
9
7. Fair Value of Financial Instruments
We have various assets and liabilities that are considered financial instruments. We estimate
that the carrying value of cash and cash equivalents, and accounts payable and accrued expenses
approximate their fair values. We estimate the fair value of our loans, interest, and other
receivables by discounting the estimated future cash flows using the current rates at which similar
receivables would be made to others with similar credit ratings and for the same remaining
maturities. We determine the fair value of our exchangeable notes based on quotes from securities
dealers and market makers. We estimate the fair value of our senior notes, revolving credit
facilities, and term loans based on the present value of future payments, discounted at a rate
which we consider appropriate for such debt.
The following table summarizes fair value information for our financial instruments: (amounts
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
Book |
|
|
Fair |
|
|
Book |
|
|
Fair |
|
Asset (Liability) |
|
Value |
|
|
Value |
|
|
Value |
|
|
Value |
|
Interest and Rent Receivables |
|
$ |
27,844 |
|
|
$ |
19,945 |
|
|
$ |
19,845 |
|
|
$ |
16,712 |
|
Loans |
|
|
257,345 |
|
|
|
244,080 |
|
|
|
311,006 |
|
|
|
299,133 |
|
Debt, net |
|
|
(382,302 |
) |
|
|
(356,512 |
) |
|
|
(576,678 |
) |
|
|
(547,242 |
) |
8. Discontinued Operations
In April 2010, we sold the real estate of our Centinela Hospital, a 369-bed acute care medical
center located in Inglewood, California, to Prime for $75 million resulting in a gain of
approximately $6 million.
In the fourth quarter of 2009, we sold the real estate of a general acute hospital in Encino,
California to Prime for proceeds of approximately $15 million, resulting in a gain on the sale of
$0.3 million.
In 2006, we terminated leases for a hospital and medical office building (MOB) complex in
Houston, Texas and repossessed the real estate. In January 2007, we sold the hospital and MOB
complex and recorded a gain on the sale of real estate of $4.1 million. We were defendants in
litigation related to this facility as described in Note 10 Contingencies, since we sold this
facility, which resulted in a significant amount of legal expenses in
the first half of 2010 and
2009. In the second quarter 2010, we settled the indemnification claim with
Stealth, L.P. (Stealth) resulting in $875,000 of proceeds
of which we recorded as a reduction of legal expenses in 2010.
The following table presents the results of discontinued operations, which includes the revenue and
expenses of the three previously-owned facilities noted above, for the three and six months ended
June 30, 2010 and 2009 ($ amounts in thousands except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
For the Six Months |
|
|
|
Ended June 30, |
|
|
Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Revenues |
|
$ |
563 |
|
|
$ |
2,161 |
|
|
$ |
2,371 |
|
|
$ |
4,321 |
|
Gain on sale |
|
|
6,162 |
|
|
|
|
|
|
|
6,178 |
|
|
|
|
|
Net income |
|
|
6,247 |
|
|
|
901 |
|
|
|
6,505 |
|
|
|
3,029 |
|
Earnings per common share diluted |
|
$ |
0.06 |
|
|
$ |
0.01 |
|
|
$ |
0.07 |
|
|
$ |
0.04 |
|
9. Earnings Per Share
Our earnings per share were calculated based on the following (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
|
Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
Numerator: |
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
(15 |
) |
|
$ |
6,957 |
|
Non-controlling interests share in continuing operations |
|
|
(9 |
) |
|
|
(9 |
) |
Participating securities share in earnings |
|
|
(328 |
) |
|
|
(380 |
) |
|
|
|
|
|
|
|
Income (loss) from continuing operations, less participating securities
share in earnings |
|
|
(352 |
) |
|
|
6,568 |
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations |
|
|
6,247 |
|
|
|
901 |
|
Non-controlling interests share in discontinued operations |
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
Income from discontinued operations attributable to MPT common stockholders |
|
|
6,247 |
|
|
|
898 |
|
|
|
|
|
|
|
|
Net income, less participating securities share in earnings |
|
$ |
5,895 |
|
|
$ |
7,466 |
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
For the Six Months |
|
|
|
Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
Numerator: |
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
(3,086 |
) |
|
$ |
15,546 |
|
Non-controlling interests share in continuing operations |
|
|
(18 |
) |
|
|
(18 |
) |
Participating securities share in earnings |
|
|
(679 |
) |
|
|
(770 |
) |
|
|
|
|
|
|
|
Income (loss) from continuing operations, less participating securities share in earnings |
|
|
(3,783 |
) |
|
|
14,758 |
|
|
Income from discontinued operations |
|
|
6,505 |
|
|
|
3,029 |
|
Non-controlling interests share in discontinued operations |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
Income from discontinued operations attributable to MPT common stockholders |
|
|
6,505 |
|
|
|
3,028 |
|
|
|
|
|
|
|
|
Net income, less participating securities share in earnings |
|
$ |
2,722 |
|
|
$ |
17,786 |
|
|
|
|
|
|
|
|
For the three and six months ended June 30, 2010 and 2009, 0.1 million of options were
excluded from the diluted earnings per share calculation as they were not determined to be
dilutive. Shares that may be issued in the future in accordance with our convertible bonds were
excluded from the diluted earnings per share calculation as they were not determined to be
dilutive.
10. Contingencies
In November 2009, we reached an agreement to settle all of the claims asserted by Stealth in
previously disclosed litigation concerning the termination of leases of the Houston Town and
Country Hospital and medical office building in October 2006, with the exception of a single
contract claim for which Memorial Hermann Healthcare System had agreed to provide indemnification.
Claims separately asserted against us by six of Stealths limited partners were not affected
by the settlement.
In January 2010, Memorial Hermann settled all claims asserted by Stealth including the single
contract claim against us at no additional cost to us.
Also not affected by the settlement with Stealth were certain contract and tort claims asserted by
six of Stealths limited partners. As part of the settlement in November, however, Stealth
indemnified us for any judgment amount and certain defense costs that we incur related to these
claims. During the first quarter of 2010, these claims were tried in Harris County District Court
in Houston, Texas, and the jury found against the plaintiffs on all claims. In the second quarter
2010, we settled the indemnification claim with Stealth resulting in $875,000 of proceeds to cover
these defense costs, which we recorded as a reduction of legal
expenses in June 2010.
We are a party to various legal proceedings incidental to our business. In the opinion of
management, after consultation with legal counsel, the ultimate liability, if any, with respect to
those proceedings is not presently expected to materially affect our financial position, results of
operations or cash flows.
11. Comprehensive Income
The following table provides a summary of comprehensive income for the applicable periods (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
|
Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
Net income |
|
$ |
6,232 |
|
|
$ |
7,858 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
Unrealized gain (loss) on interest rate swap |
|
|
(3,160 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
3,072 |
|
|
|
7,858 |
|
Comprehensive income attributable to non-controlling interests |
|
|
(9 |
) |
|
|
(12 |
) |
|
|
|
|
|
|
|
Comprehensive income attributable to MPT common stockholders |
|
$ |
3,063 |
|
|
$ |
7,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months |
|
|
|
Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
Net income |
|
$ |
3,419 |
|
|
$ |
18,575 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
Unrealized gain (loss) on interest rate swap |
|
|
(3,160 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
259 |
|
|
|
18,575 |
|
Comprehensive income attributable to non-controlling interests |
|
|
(18 |
) |
|
|
(19 |
) |
|
|
|
|
|
|
|
Comprehensive income attributable to MPT common stockholders |
|
$ |
241 |
|
|
$ |
18,556 |
|
|
|
|
|
|
|
|
11
12. Income Taxes
With the early prepayment of working capital loans by Prime and the impairment of the Monroe loan
as more fully described in Note 3 to our condensed consolidated financial statements in Item
1 to this Form 10-Q, we do not believe, at this time, that our taxable REIT subsidiary will
generate enough taxable income to use the federal and state net operating losses within the
carryforward period specified by law. Therefore, in the 2010 second quarter, we have fully
reserved for the $1.5 million deferred tax asset, of which $1.2 million relates to discontinued operations. We will
continue to monitor this valuation allowance and if circumstances change (such as new loans or
other transactions), we will adjust this valuation allowance accordingly.
13. Executive Severance
On June
11, 2010, we announced the resignation of our general counsel
effective June 15, 2010. Pursuant to the
terms of his separation agreement, we accelerated the vesting of
certain previously awarded shares of restricted stock resulting in
additional stock compensation expense of $0.9 million. In addition,
we agreed to pay him a one time cash payment of $1.9 million on
December 16, 2010.
This total severance of $2.8 million is included in general and
administrative expense for the three and six month periods ended
June 30, 2010.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the consolidated financial condition and consolidated
results of operations should be read together with the condensed consolidated financial statements
of Medical Properties Trust, Inc. and notes thereto contained in this Form 10-Q and the financial
statements and notes thereto contained in our Annual Report on Form 10-K (as amended) for the year
ended December 31, 2009.
Forward-Looking Statements.
This report on Form 10-Q contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results or future performance,
achievements or transactions or events to be materially different from those expressed or implied
by such forward-looking statements, including, but not limited to, the risks described in our
Annual Report on Form 10-K for the year ended December 31, 2009, as amended, filed with the
Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934. Such factors
include, among others, the following:
|
|
national and local economic, business, real estate and other market conditions; |
|
|
|
the competitive environment in which we operate; |
|
|
|
the execution of our business plan; |
|
|
|
financing risks; |
|
|
|
acquisition and development risks; |
|
|
|
potential environmental contingencies, and other liabilities; |
|
|
|
other factors affecting real estate industry generally or the healthcare real estate industry in particular; |
|
|
|
our ability to maintain our status as a REIT for federal and state income tax purposes; |
|
|
|
our ability to attract and retain qualified personnel; |
|
|
|
federal and state healthcare regulatory requirements; and |
|
|
|
the impact of the recent credit crisis and global economic slowdown, which has had and may continue to have
a negative effect on the following, among other things: |
|
|
|
the financial condition of our tenants, our lenders,
counterparties to our capped call transactions and
institutions that hold our cash balances, which may expose
us to increased risks of default by these parties; |
|
|
|
|
our ability to obtain debt financing on attractive terms
or at all, which may adversely impact our ability to
pursue acquisition and development opportunities and our
future interest expense; and |
|
|
|
|
the value of our real estate assets, which may limit our
ability to dispose of assets at attractive prices or
obtain or maintain debt financing secured by our
properties or on an unsecured basis. |
12
Key Factors that May Affect Our Operations
Our revenues are derived from rents we earn pursuant to the lease agreements with our tenants and
from interest income from loans to our tenants and other facility owners. Our tenants operate in
the healthcare industry, generally providing medical, surgical and rehabilitative care to patients.
The capacity of our tenants to pay our rents and interest is dependent upon their ability to
conduct their operations at profitable levels. We believe that the business environment of the
industry segments in which our tenants operate is generally positive for efficient operators.
However, our tenants operations are subject to economic, regulatory and market conditions that may
affect their profitability. Accordingly, we monitor certain key factors, changes to which we
believe may provide early indications of conditions that may affect the level of risk in our lease
and loan portfolio.
Key factors that we consider in underwriting prospective tenants and borrowers and in monitoring
the performance of existing tenants and borrowers include the following:
|
|
the historical and prospective operating margins (measured by a
tenants earnings before interest, taxes, depreciation, amortization
and facility rent) of each tenant or borrower and at each facility; |
|
|
|
the ratio of our tenants and borrowers operating earnings both to
facility rent and to facility rent plus other fixed costs, including
debt costs; |
|
|
|
trends in the source of our tenants or borrowers revenue, including
the relative mix of Medicare, Medicaid/MediCal, managed care,
commercial insurance, and private pay patients; and |
|
|
|
the effect of evolving healthcare regulations on our tenants and
borrowers profitability. |
Certain business factors, in addition to those described above that directly affect our tenants and
borrowers, will likely materially influence our future results of operations. These factors
include:
|
|
trends in the cost and availability of capital, including market
interest rates, that our prospective tenants may use for their real
estate assets instead of financing their real estate assets through
lease structures; |
|
|
|
changes in healthcare regulations that may limit the opportunities for
physicians to participate in the ownership of healthcare providers and
healthcare real estate; |
|
|
|
reductions in reimbursements from Medicare, state healthcare programs,
and commercial insurance providers that may reduce our tenants
profitability and our lease rates; |
|
|
|
competition from other financing sources; and |
|
|
|
the ability of our tenants and borrowers to access funds in the credit
markets. |
CRITICAL ACCOUNTING POLICIES
Refer to our 2009 Annual Report on Form 10-K, as amended, for a discussion of our critical
accounting policies, which include revenue recognition, investment in real estate, purchase price
allocation, loans, losses from rent receivables, stock-based compensation, and accounting policy on
consolidation. During the three and six months ended June 30, 2010, there were no material changes
to these policies, except we have adopted the new accounting guidance on consolidation. The primary
changes to the consolidation guidance are that it (1) requires a more qualitative versus quantitative
approach in determining the primary beneficiary of a variable interest entity and (2) requires
continuous reassessment as to whether we should consolidate a variable interest entity whereas the
old guidance required reassessment only after the occurrence of certain reconsideration events.
Overview
We were incorporated under Maryland law on August 27, 2003 primarily for the purpose of investing
in and owning net-leased healthcare facilities across the United States. We have operated as a real
estate investment trust (REIT) since April 6, 2004, and accordingly, elected REIT status upon the
filing in September 2005 of our calendar year 2004 federal income tax return. We acquire and
develop healthcare facilities and lease the facilities to healthcare operating companies under
long-term net leases. We also make mortgage loans to healthcare operators collateralized by their
real estate assets. In addition, we selectively make loans to certain of our operators through our
taxable REIT subsidiaries, the proceeds of which are used for acquisitions and working capital.
Finally, from time to time, we acquire a profits interest in our tenants that gives us a limited
right to share in the tenants positive cash flow.
At June 30, 2010, our portfolio consisted of 53 properties: 48 facilities (of the 50 facilities
that we own) are leased to 15 tenants and the remaining assets are in the form of first mortgage
loans to two operators. Our owned facilities consisted of 20 general acute care hospitals, 13
long-term acute care hospitals, 9 inpatient rehabilitation hospitals, 2 medical office buildings,
and 6 wellness centers. The non-owned facilities on which we have made mortgage loans consist of
general acute care facilities.
All of our investments are located in the United States, and we have no present plans to invest in
non-U.S. markets in the foreseeable future. The following is our revenue by operating type (dollars
in thousands):
13
Revenue by property type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three |
|
|
|
|
|
|
For the Three |
|
|
|
|
|
|
Months Ended |
|
|
|
|
|
|
Months Ended |
|
|
|
|
|
|
June 30, |
|
|
% of |
|
|
June 30, |
|
|
% of |
|
|
|
2010 |
|
|
Total |
|
|
2009 |
|
|
Total |
|
General Acute Care Hospitals |
|
$ |
21,024 |
|
|
|
67.3 |
% |
|
$ |
19,908 |
|
|
|
67.8 |
% |
Long-term Acute Care Hospitals |
|
|
6,643 |
|
|
|
21.3 |
% |
|
|
5,505 |
|
|
|
18.8 |
% |
Rehabilitation Hospitals |
|
|
2,776 |
|
|
|
8.9 |
% |
|
|
2,539 |
|
|
|
8.6 |
% |
Medical Office Buildings |
|
|
426 |
|
|
|
1.4 |
% |
|
|
810 |
|
|
|
2.8 |
% |
Wellness Centers |
|
|
338 |
|
|
|
1.1 |
% |
|
|
578 |
|
|
|
2.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
31,207 |
|
|
|
100.0 |
% |
|
$ |
29,340 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six |
|
|
|
|
|
|
For the Six |
|
|
|
|
|
|
Months Ended |
|
|
|
|
|
|
Months Ended |
|
|
|
|
|
|
June 30, |
|
|
% of |
|
|
June 30, |
|
|
% of |
|
|
|
2010 |
|
|
Total |
|
|
2009 |
|
|
Total |
|
General Acute Care Hospitals |
|
$ |
42,533 |
|
|
|
67.8 |
% |
|
$ |
39,971 |
|
|
|
67.2 |
% |
Long-term Acute Care Hospitals |
|
|
13,128 |
|
|
|
20.9 |
% |
|
|
12,082 |
|
|
|
20.3 |
% |
Rehabilitation Hospitals |
|
|
5,583 |
|
|
|
8.9 |
% |
|
|
5,079 |
|
|
|
8.5 |
% |
Medical Office Buildings |
|
|
853 |
|
|
|
1.3 |
% |
|
|
1,226 |
|
|
|
2.1 |
% |
Wellness Centers |
|
|
675 |
|
|
|
1.1 |
% |
|
|
1,142 |
|
|
|
1.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
62,772 |
|
|
|
100.0 |
% |
|
$ |
59,500 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2010, two of our facilities, River Oaks and Sharpstown (located in Houston, Texas),
remained vacant due to tenant defaults in 2008. We have stopped accruing rent on both of these
facilities. We are currently working to re-lease or sell these facilities, but no assurances can be made that we will be able to sell or re-lease them in the near
future.
We have 29 employees as of August 1, 2010. We believe that any increase in the number of our
employees will have only immaterial effects on our operations and general and administrative
expenses. We believe that our relations with our employees are good. None of our employees are
members of any union.
Results of Operations
Three months Ended June 30, 2010 Compared to June 30, 2009
Net income for the three months ended June 30, 2010 was $6.2 million, compared to $7.8 million for
the three months ended June 30, 2009.
A comparison of revenues for the three month period ended June 30, 2010 and 2009, is as follows, as
adjusted in 2009 for discontinued operations ($ amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year over |
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
Year |
|
|
|
2010 |
|
|
Total |
|
|
2009 |
|
|
Total |
|
|
Change |
|
Base rents |
|
$ |
23,758 |
|
|
|
76.1 |
% |
|
$ |
20,830 |
|
|
|
71.0 |
% |
|
|
14.1 |
% |
Straight-line rents |
|
|
(177 |
) |
|
|
-0.5 |
% |
|
|
748 |
|
|
|
2.5 |
% |
|
|
-124 |
% |
Percentage rents |
|
|
1,085 |
|
|
|
3.5 |
% |
|
|
594 |
|
|
|
2.0 |
% |
|
|
82.7 |
% |
Fee income |
|
|
132 |
|
|
|
0.4 |
% |
|
|
48 |
|
|
|
0.2 |
% |
|
|
175 |
% |
Interest from loans |
|
|
6,409 |
|
|
|
20.5 |
% |
|
|
7,120 |
|
|
|
24.3 |
% |
|
|
-10.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
31,207 |
|
|
|
100.0 |
% |
|
$ |
29,340 |
|
|
|
100.0 |
% |
|
|
6.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base rents
for the 2010 second quarter increased 14.1% versus the prior year as a result of
the rental income from the previously vacant Bucks facility, additional rent generated from annual
escalation provisions in our leases and incremental revenue from the properties acquired in June
2010. In addition, $1.7 million of straight-line rent was reclassified as base rent in the 2010
second quarter upon the payment of $12 million by Prime pursuant
to the additional rent provisions of the lease related to our Shasta property See Note 3 to our condensed consolidated financial
statements in Item 1 to this Form 10-Q for further information.
In the 2009 second quarter, we wrote off or reserved $1.1 million of
straight-line rent receivables associated with the termination of two
leases in Louisiana.
Interest from loans is lower than the prior year due to the repayment of $40 million in loans from
Prime in the second quarter 2010.
Real estate depreciation and amortization during the second quarter of 2010 was $5.9 million, which
is consistent with the second quarter of the prior year.
Property-related
expenses in the second quarter of 2010 decreased from $1.2 million to $1.1
million. Of the property-related expenses in the second quarters of
2010 and 2009, $1.0 million and
$1.0 million, respectively, represented utility costs, repair and maintenance expense, legal,
insurance and property taxes associated with vacant properties.
General and administrative expenses in the second quarter of 2010 increased compared to the same
period in 2009 by $3.7 million, or 63.2%, from $5.8 million to $9.5 million. The majority of this
increase relates to executive severance of $2.8 million recorded during the second quarter of 2010 as
a result of the resignation of an executive officer. In addition, we incurred $0.6
million in legal and other closing costs related to the consummated acquisition in June 2010.
14
Interest expense for the quarters ended June 30, 2010 and 2009 totaled $8.6 million and $9.4
million, respectively. This decrease is primarily due to lower debt balances in 2010 as a result
of the debt refinancing during the second quarter of 2010. Associated with the debt
refinancing, we recorded a charge of $6.2 million related to the write-off of previously deferred
financing costs and the premium we paid associated with our Tender Offer.
In addition to the items noted above, net income for the quarters ended June 30, 2010 and 2009, was impacted by discontinued
operations. See Note 8 to our condensed consolidated financial statements in Item 1 to this Form
10-Q for further information.
Six Months Ended June 30, 2010 Compared to June 30, 2009
Net income for the six months ended June 30, 2010, was $3.4 million compared to net income of $18.6
million for the six months ended June 30, 2009.
A comparison of revenues for the six month periods ended June 30, 2010 and 2009, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year over |
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
Year |
|
|
|
2010 |
|
|
Total |
|
|
2009 |
|
|
Total |
|
|
Change |
|
Base rents |
|
$ |
45,009 |
|
|
|
71.7 |
% |
|
$ |
41,467 |
|
|
|
69.7 |
% |
|
|
8.5 |
% |
Straight-line rents |
|
|
1,674 |
|
|
|
2.6 |
% |
|
|
2,612 |
|
|
|
4.4 |
% |
|
|
-35.9 |
% |
Percentage rents |
|
|
1,614 |
|
|
|
2.6 |
% |
|
|
830 |
|
|
|
1.4 |
% |
|
|
94.5 |
% |
Fee income |
|
|
237 |
|
|
|
0.4 |
% |
|
|
176 |
|
|
|
0.3 |
% |
|
|
34.7 |
% |
Interest from loans |
|
|
14,238 |
|
|
|
22.7 |
% |
|
|
14,415 |
|
|
|
24.2 |
% |
|
|
-1.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
62,772 |
|
|
|
100.0 |
% |
|
$ |
59,500 |
|
|
|
100.0 |
% |
|
|
5.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base rents
for the 2010 first and second quarters increased 8.5% versus the prior year as a
result of the rental income from the previously vacant Bucks facility, additional rent generated
from annual escalation provisions in our leases, and to a lesser extent, incremental revenue from
the properties acquired in June 2010.
Interest from
loans is lower than the prior year due to the repayment of $40 million in loans from Prime in the
second quarter 2010.
Straight line rent for the 2010 first and second quarters decreased 35.9% versus the prior year due
to approximately $1.7 million of unbilled rent being reclassed to billed rent in the second quarter
of 2010, partially offset by the $1.1 million write-off/reserve of straight-line rent receivables
associated with the termination of two leases in 2009.
Real estate depreciation and amortization during the first half of 2010 was $12.2 million, compared
to $11.6 million during the same period of 2009, a 4.9% increase. All of this increase is related
to an adjustment made to the useful lives of one of our properties in the 2010 first quarter. No
such adjustment was made in 2009.
Property-related
expenses during the first six months
decreased from $2.0 million in 2009 to $1.8
million in 2010. Of the property-related expenses in the 2010 and
2009 first half, $1.6 million and $1.8
million, respectively, represented utility costs, repair and maintenance expense, legal, and
property taxes associated with vacant or previously vacant properties.
In the 2010 first quarter, we recognized a $12 million loan impairment charge related to our Monroe
facility. No such charge was recorded in 2009.
General and administrative expenses in the first two quarters of 2010 and 2009 totaled $15.6
million and $11.5 million, respectively, an increase of 36.2%. In the second quarter of 2010,
compensation expense was higher due to executive severance of $2.8
million. In addition, we incurred $0.6 million in legal and other closing costs related to the consummated acquisition
in June 2010.
Interest expense for the first half of 2010 and 2009 totaled $18.0 million and $18.9 million,
respectively. This decrease is primarily due to lower debt balances in 2010 as a result of the
debt refinancing during the second quarter.
In regards to the debt refinancing, we recorded a charge of $6.2 million related to the write-off of
previously deferred financing costs and the premium we paid associated with our Tender Offer.
In addition to the items noted above, net income for the six month periods was impacted by
discontinued operations. See Note 8 to our condensed consolidated financial statements in Item 1 to
this Form 10-Q for further information.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 2010, operating cash flows, which primarily consist of rent
and interest from mortgage and working capital loans, were $27.0 million, which, along with
cash on-hand, proceeds from the sale of stock
and our Centinela property and the early loan prepayments by Prime,
were principally used to fund our dividends of $32.4
million, real estate acquisitions of $74 million and our debt refinancing activities.
During the first quarter of 2010, we sold 0.9 million shares of our common
stock under our at-the-market equity offering program, at an average
price of $10.77 per share, for total proceeds, net of a 2% sales
commission, of $9.5 million.
In April 2010, we completed a public offering (the Offering) of 26 million shares of common stock
at $9.75 per share. Including the underwriters purchase of 3.9 million additional shares to cover
over-allotments, net proceeds from this offering, after underwriters discounts and commissions,
were $279.1 million. We have used the net proceeds from the Offering to pay off our $30 million
term loan that was due this year and to fund our Tender Offer for 84% of the outstanding 6.125%
exchangeable senior notes due 2011 at a price of 103% of the principal amount plus accrued and
unpaid interest (or $123.2 million).
15
In May 2010, we entered into a new $450 million secured credit facility with a syndicate of banks,
and the proceeds of which along with the Offering proceeds were used to repay in full all outstanding obligations
under the old $220 million credit facility. The new facility includes a $300 million three-year term
revolving facility and $150 million six-year term loan. We may increase the revolving facility up to
$375 million through an accordion feature through
November 2011, and in July 2010, we received a $30 million
binding commitment from an additional bank participant, increasing
our total availability to $330 million.
During the second quarter 2010, we entered into an interest rate swap to fix $65 million of our
$125 million senior notes, starting July 31, 2011 (date on which the interest rate is scheduled to
turn variable) through maturity date, at a rate of 5.507%. We also entered into an interest rate
swap to fix $60 million of our senior notes starting
October 31, 2011 (date on which the related
interest rate is scheduled to turn variable) through the maturity date at a rate of 5.675%.
We are currently
paying a weighted average rate of 7.70% on those notes, so we expect
to save $2.5 million annually on
interest expense once the swaps become effective in July and October 2011.
Finally, in April 2010, we sold the real estate of our Centinela Hospital to Prime for $75 million.
Separately, Prime also repaid $40 million in outstanding loans plus accrued interest in April 2010.
In addition, Prime paid us $12 million in additional rent related to our
Shasta property.
During the
six months ended June 30, 2009, operating cash flows were $29.2 million, which,
along with borrowings from our revolving credit facility, were used to fund our dividends of $29.4
million and investing activities of $4.4 million. In January 2009, we completed a public offering
of 12.0 million shares of our common stock at $5.40 per share. Including the underwriters purchase
of 1.3 million additional shares to cover over-allotments, net proceeds from this
offering, after underwriting discount and commissions and fees, were $67.9 million.
The net proceeds of this offering were generally used to repay borrowings outstanding under our
revolving credit facilities.
Short-term
Liquidity Requirements: At August 1, 2010, our availability under our revolving
credit facilities plus cash on-hand approximated $447.1 million. We have only nominal principal
payments due and no significant maturities in 2010. In addition,
currently we have only $11.5 million in firm
commitments for acquisitions or other capital expenditures. We believe that the liquidity available to us, along with our current monthly cash
receipts from rent and loan interest, is sufficient to provide the resources necessary for
operations, debt and interest obligations, our firm commitments, distributions in compliance with
REIT requirements, and to fund our current investment strategies for the next 12 months.
Long-term
Liquidity Requirements: With current availability,
as discussed above,
along with our current monthly cash receipts from rent and loan interest, we believe we have the
liquidity available to us to fund our operations, debt and interest obligations, and distributions in
compliance with REIT requirements and investment strategies for the foreseeable future.
Distribution Policy
We have elected to be taxed as a REIT commencing with our taxable year that began on April 6, 2004
and ended on December 31, 2004. To qualify as a REIT, we must meet a number of organizational and
operational requirements, including a requirement that we distribute at least 90% of our REIT
taxable income, excluding net capital gain, to our stockholders. It is our current intention to
comply with these requirements and maintain such status going forward.
The table below is a summary of our distributions declared during the two-year period ended June
30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution per |
|
Declaration Date |
|
Record Date |
|
Date of Distribution |
|
Share |
|
May 20, 2010 |
|
June 17, 2010 |
|
July 15, 2010 |
|
$ |
0.20 |
|
February 18, 2010 |
|
March 18, 2010 |
|
April 14, 2010 |
|
$ |
0.20 |
|
November 19, 2009 |
|
December 17, 2009 |
|
January 14, 2010 |
|
$ |
0.20 |
|
August 20, 2009 |
|
September 17, 2009 |
|
October 15, 2009 |
|
$ |
0.20 |
|
May 21, 2009 |
|
June 11, 2009 |
|
July 14, 2009 |
|
$ |
0.20 |
|
February 24, 2009 |
|
March 19, 2009 |
|
April 9, 2009 |
|
$ |
0.20 |
|
December 4, 2008 |
|
December 23, 2008 |
|
January 22, 2009 |
|
$ |
0.20 |
|
August 21, 2008 |
|
September 18, 2008 |
|
October 16, 2008 |
|
$ |
0.27 |
|
We intend to pay to our stockholders, within the time periods prescribed by the Internal Revenue
Code (Code), all or substantially all of our annual taxable income, including taxable gains from
the sale of real estate and recognized gains on the sale of securities. It is our policy to make
sufficient cash distributions to stockholders in order for us to maintain our status as a REIT
under the Code and to avoid corporate income and excise taxes on undistributed income. See Note 4
to our condensed consolidated financial statements in Item 1 to this Form 10-Q
for any restrictions placed on dividends by our new credit facility.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market risk includes risks that arise from changes in interest rates, foreign currency
exchange rates, commodity prices, equity prices and other market changes that affect market
sensitive instruments. In addition, the value of our facilities will be subject to fluctuations
based on changes in local and regional economic conditions and changes in the ability of our
tenants to generate profits, all of which may affect our ability to refinance our debt if
necessary. The changes in the value of our facilities would be reflected also by changes in cap
rates, which is measured by the current base rent divided by the current market value of a
facility.
Our primary exposure to market risks relates to fluctuations in interest rates and equity
prices. To manage these risks, we may use various instruments such as the interest rate swaps we
entered into in June 2010 or the capped call transaction we entered into in 2009. The following
analyses present the sensitivity of the market value, earnings and cash flows of our significant
financial instruments to hypothetical changes in interest rates and equity prices as if these
changes had occurred. The hypothetical changes chosen for these analyses reflect our view of
changes that are reasonably possible over a one-year period. These forward looking disclosures are
selective in nature and only address the potential impact from financial instruments. They do not
include other potential effects which could impact our business as a result of changes in market
conditions.
Interest Rate Sensitivity
For fixed rate debt, interest rate changes affect the fair market value but do not impact
net income to common stockholders or cash flows. Conversely, for floating rate debt, interest rate
changes generally do not affect the fair market value but do impact net income to common
stockholders and cash flows, assuming other factors are held constant. At June 30, 2010, our
outstanding debt totaled $382.3 million, which consisted of fixed-rate debt of $233.8 million and
variable rate debt of $148.5 million.
If market interest rates increase by one-percentage point, the fair value of our fixed
rate debt, after considering the effects of the interest rate swaps, would decrease by
$12.9 million. Changes in the fair value of our fixed rate debt will not have any impact on us
unless we decided to repurchase the debt in the open markets.
If market rates of interest on our variable rate debt increase by 1%, the increase in
annual interest expense on our variable rate debt would decrease future earnings and cash flows by
$1.5 million per year. If market rates of interest on our variable rate debt decrease by 1%, the
decrease in interest expense on our variable rate debt would increase future earnings and cash
flows by $1.5 million per year. This assumes that the average amount outstanding under our variable
rate debt for a year approximates $150 million, the balance at June 30, 2010.
Share Price Sensitivity
During the second quarter 2010, we funded a cash tender offer (Tender Offer) for 84% of
the outstanding 6.125% exchangeable senior notes due 2011 at a price of 103% of the principal
amount plus accrued interest and unpaid interest (or approximately $123.2 million). At June 30,
2010, only $21.7 million of these notes remain outstanding.
Our 2006 exchangeable notes were initially exchangeable into 60.3346 shares of our stock for
each $1,000 note. This equates to a conversion price of $16.57 per share. This conversion price
adjusts based on a formula which considers increases to our dividend subsequent to the issuance of
the notes in November 2006. Our dividends declared since we sold the 2006 exchangeable notes have
adjusted our conversion price to $16.47 per share which equates to 60.7095 shares per $1,000 note.
Future changes to the conversion price will depend on our level of dividends which cannot be
predicted at this time. Any adjustments for dividend increases until the notes are settled in 2011
will affect the price of the notes and the number of shares for which they will eventually be
settled.
At the time we issued the 2006 exchangeable notes, we also entered into a capped call, or call
spread, transaction. The effect of this transaction was to increase the conversion price from
$16.57 to $18.94. As a result, our shareholders will not experience any dilution until our share
price exceeds $18.94. Based on the remainder of the notes still outstanding at June 30, 2010 and if
our share price exceeds that price, the result would be that we would issue additional shares of
common stock. Assuming a price of $20 per share, we would be required to issue an additional
0.2 million shares. At $25 per share, we would be required to issue an additional 0.4 million
shares.
Our 2008 exchangeable notes have a similar conversion adjustment feature which could affect its
stated exchange ratio of 80.8898 common shares per $1,000 principal amount of notes, equating to an
exchange price of $12.36 per common share. Our dividends declared since we sold the 2008
exchangeable notes have not adjusted our conversion price as of June 30, 2010. Future changes to
the conversion price will depend on our level of dividends which cannot be predicted at this time.
Any adjustments for dividend increases until the 2008 exchangeable notes are settled in 2013 will
affect the price of the notes and the number of shares for which they may eventually be settled.
Assuming a price of $20 per share, we would be required to issue an additional 2.5 million shares.
At $25 per share, we would be required to issue an additional 3.4 million shares.
16
Item 4. Controls and Procedures.
We have adopted and maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports under the Securities Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported within the time periods specified in the
SECs rules and forms and that such information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for
timely decisions regarding required disclosure. In designing and evaluating the disclosure controls
and procedures, management recognizes that any controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired control objectives,
and management is required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.
As required by Rule 13a-15(b), under the Securities Exchange Act of 1934, as amended, we have
carried out an evaluation, under the supervision and with the participation of management,
including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of the quarter covered
by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective in timely alerting them to
material information required to be disclosed by us in the reports that we file with the SEC.
There has been no change in our internal control over financial reporting during our most recent
fiscal quarter that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
In November 2009, we reached an agreement to settle all of the claims asserted by Stealth, L.P. in
previously disclosed litigation concerning the termination of leases of the Houston Town and
Country Hospital and medical office building in October 2006, with the exception of a single
contract claim for which Memorial Hermann Healthcare System had agreed to provide indemnification.
Claims separately asserted against us by six of Stealth L.P.s limited partners were not affected
by the settlement.
In January 2010, Memorial Hermann settled all claims asserted by Stealth including the single
contract claim against us at no additional cost to us.
The settlement with Stealth did not affect certain contract and tort claims asserted by
six of Stealths limited partners. As part of the settlement in November, however, Stealth
indemnified us for any judgment amount and certain defense-related costs that we incurred. During the first quarter of 2010, these claims were tried in Harris County District Court
in Houston, Texas, and the jury found against the plaintiffs on all claims. In the second quarter
2010, we settled the indemnification claim with Stealth resulting in $875,000 of proceeds to cover
these defense costs, which we recorded as a reduction of legal
expenses in June 2010.
Item 1A. Risk Factors.
There have been no material changes to the Risk Factors as presented in our Annual Report on Form
10-K, as amended, for the year ended December 31, 2009.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) None.
(b) Not
applicable.
(c) None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. (Removed and Reserved).
Item 5. Other Information.
(a) None.
(b) None.
17
Item 6. Exhibits.
The following exhibits are filed as a part of this report:
|
|
|
Exhibit |
|
|
Number |
|
Description |
10.1.1
|
|
Revolving Credit and Term Loan
Agreement, dated as of May 17, 2010, among Medical Properties Trust,
Inc, MPT Operating Partnership, L.P., KeyBank National Association and Royal Bank of Canada as syndication agents,
and JPMorgan Chase, N.A., as administrative agent (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Medical Properties Trust, Inc., filed on May 20, 2010.) |
|
|
|
10.1.2
|
|
Separation Agreement, dated June 11, 2010, between Medical Properties Trust, Inc. and Michael G. Stewart (Incorporated by
reference to Exhibit 10.1 to the Current Report on Form 8-K of Medical Properties Trust, Inc., filed on June 11, 2010.) |
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. |
|
|
|
32
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the
Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
99.1
|
|
Consolidated Financial Statements of Prime
Healthcare Services, Inc. as of March 31,
2010. Since affiliates of Prime Healthcare
Services, Inc. lease more than 20% of our
total assets under triple net leases, the
financial status of Prime may be considered
relevant to investors. Primes most recently
available financial statements (unaudited, as
of and for the period ended March 31, 2010)
are attached as exhibit 99.1 to this
Quarterly Report on Form 10-Q. We have not
participated in the preparation of Primes
financial statements nor do we have the right
to dictate the form of any financial
statements provided to us by Prime. |
18
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 thereunto duly authorized.
|
|
|
|
|
|
MEDICAL PROPERTIES TRUST, INC.
|
|
|
By: |
/s/ R. Steven Hamner
|
|
|
|
R. Steven Hamner |
|
|
|
Executive Vice President and Chief Financial Officer
(On behalf of the Registrant and as the Registrants Principal
Financial and Accounting Officer) |
|
|
Date:
August 6, 2010
19
INDEX TO EXHIBITS
|
|
|
Exhibit |
|
|
Number |
|
Description |
10.1.1
|
|
Revolving Credit and Term Loan
Agreement, dated as of May 17, 2010, among Medical Properties Trust,
Inc, MPT Operating Partnership, L.P., KeyBank National Association and Royal Bank of Canada as syndication agents,
and JPMorgan Chase, N.A., as administrative agent (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Medical Properties Trust, Inc., filed on May 20, 2010.) |
|
|
|
10.1.2
|
|
Separation Agreement, dated June 11, 2010, between Medical Properties Trust, Inc. and Michael G. Stewart (Incorporated by
reference to Exhibit 10.1 to the Current Report on Form 8-K of Medical Properties Trust, Inc., filed on June 11, 2010.) |
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 |
|
|
|
32
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the
Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 |
|
|
|
99.1
|
|
Consolidated Financial Statements of Prime Healthcare Services, Inc. as of March 31, 2010. Since affiliates
of Prime Healthcare Services, Inc. lease more than 20% of our total assets under triple net leases, the
financial status of Prime may be considered relevant to investors. Primes most recently available financial
statements (unaudited, as of and for the period ended March 31, 2010) are attached as exhibit 99.1 to this
Quarterly Report on Form 10-Q. We have not participated in the preparation of Primes financial statements
nor do we have the right to dictate the form of any financial statements provided to us by Prime. |
20
exv31w1
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF
1934
I, Edward K. Aldag, Jr., certify that:
1) |
|
I have reviewed this quarterly report on Form 10-Q of Medical
Properties Trust, Inc. |
|
2) |
|
Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report; |
|
3) |
|
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report; |
|
4) |
|
The registrants other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a. |
|
Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this
report is being prepared; |
|
|
b. |
|
Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting
and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles; |
|
|
c. |
|
Evaluated the effectiveness of the registrants disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period
covered by this report based on such evaluation; and |
|
|
d. |
|
Disclosed in this report any change in the registrants
internal control over financial reporting that occurred
during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably
likely to materially affect, the registrants internal
control over financial reporting; and |
5) |
|
The registrants other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrants auditors and the audit committee of the
registrants board of directors (or persons performing the equivalent
functions): |
|
a. |
|
All significant deficiencies and material
weaknesses in the design or operation of internal
control over financial reporting which are
reasonably likely to adversely affect the
registrants ability to record, process, summarize
and report financial information; and |
|
|
b. |
|
Any fraud, whether or not material, that involves
management or other employees who have a
significant role in the registrants internal
control over financial reporting. |
|
|
|
|
|
|
|
|
Date: August 6, 2010 |
/s/ Edward K. Aldag, Jr.
|
|
|
Edward K. Aldag, Jr. |
|
|
Chairman, President and Chief
Executive Officer |
|
exv31w2
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF
1934
I, R. Steven Hamner, certify that:
1) |
|
I have reviewed this quarterly report on Form 10-Q of Medical
Properties Trust, Inc. |
|
2) |
|
Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report; |
|
3) |
|
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report; |
|
4) |
|
The registrants other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a. |
|
Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this
report is being prepared; |
|
|
b. |
|
Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting
and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles; |
|
|
c. |
|
Evaluated the effectiveness of the registrants disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period
covered by this report based on such evaluation; and |
|
|
d. |
|
Disclosed in this report any change in the registrants
internal control over financial reporting that occurred
during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably
likely to materially affect, the registrants internal
control over financial reporting; and |
5) |
|
The registrants other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrants auditors and the audit committee of the
registrants board of directors (or persons performing the equivalent
functions): |
|
a. |
|
All significant deficiencies and material
weaknesses in the design or operation of internal
control over financial reporting which are
reasonably likely to adversely affect the
registrants ability to record, process, summarize
and report financial information; and |
|
|
b. |
|
Any fraud, whether or not material, that involves
management or other employees who have a
significant role in the registrants internal
control over financial reporting. |
|
|
|
|
|
|
|
|
Date: August 6, 2010 |
/s/ R. Steven Hamner
|
|
|
R. Steven Hamner |
|
|
Executive Vice President and Chief
Financial Officer |
|
exv32
Exhibit 32
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934 AND 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this quarterly report on Form 10-Q of Medical Properties Trust, Inc. (the
Company) for the quarter ended June 30, 2010 (the Report), each of the undersigned, Edward K.
Aldag, Jr. and R. Steven Hamner, certifies, pursuant to Section 18 U.S.C. Section 1350, that:
1. |
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
2. |
|
The information contained in the Report fairly
presents, in all material respects, the financial
condition and results of operations of the
Company. |
|
|
|
|
|
|
|
|
Date: August 6, 2010 |
/s/ Edward K. Aldag, Jr.
|
|
|
Edward K. Aldag, Jr. |
|
|
Chairman, President and Chief
Executive Officer |
|
|
|
|
|
|
/s/ R. Steven Hamner
|
|
|
R. Steven Hamner |
|
|
Executive Vice President and Chief
Financial Officer |
|
|
exv99w1
Exhibit 99.1
PRIME HEALTCARE SERVICES INC.
BALANCE SHEET
As of March 31, 2010
|
|
|
|
|
|
|
Prime |
|
|
|
Total |
|
ASSETS: |
|
|
|
|
|
|
|
|
|
Cash and Equivalents |
|
$ |
76,365,323 |
|
|
|
|
|
|
|
|
|
|
Accounts Receivable |
|
$ |
938,218,613 |
|
Allowance for Bad Debt |
|
|
(81,891,022 |
) |
Allowance for Contractuals & Oth Adj |
|
|
(662,476,061 |
) |
|
|
|
|
Patient Accounts Receivable |
|
$ |
193,851,530 |
|
|
|
|
|
|
|
|
|
|
Other Receivables |
|
$ |
4,755,497 |
|
Inventories |
|
|
5,441,904 |
|
Other Current Assets |
|
|
3,990,071 |
|
Current Portion of Long-Term Notes Receivable |
|
|
(0 |
) |
Prepaid Insurance |
|
|
53,423,354 |
|
Other Pre-Paid Expenses |
|
|
5,439,772 |
|
|
|
|
|
Total Current Assets |
|
$ |
343,267,451 |
|
|
|
|
|
|
|
|
|
|
Land and Improvements |
|
$ |
38,515,973 |
|
Buildings and Improvements |
|
|
66,506,814 |
|
Leaseholds |
|
|
13,309,597 |
|
Equipment |
|
|
154,196,709 |
|
Construction-In-Progress |
|
|
11,059,621 |
|
|
|
|
|
Property and Equipment |
|
$ |
283,588,713 |
|
|
|
|
|
Less: Accumulated Depreciation |
|
|
(76,151,285 |
) |
|
|
|
|
Net Property and Equipment |
|
$ |
207,437,429 |
|
|
|
|
|
|
|
|
|
|
Investments in Property Plant & Equipment |
|
$ |
11,813,481 |
|
Less: Accumulated Depreciation |
|
|
0 |
|
|
|
|
|
Net Investments in Property, Plant & Equip |
|
$ |
11,813,481 |
|
|
|
|
|
|
|
|
|
|
Long-term notes |
|
$ |
0 |
|
Net goodwill |
|
|
13,707,802 |
|
Other intangible assets |
|
|
0 |
|
|
|
|
|
|
|
|
|
|
Total Long-Term Assets |
|
$ |
232,958,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
576,226,163 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES: |
|
|
|
|
Accounts Payable |
|
$ |
40,323,930 |
|
Notes Payable |
|
|
0 |
|
Capital Leases |
|
|
5,833,621 |
|
Accrued Payroll |
|
|
14,579,798 |
|
Accrued PTO |
|
|
24,812,740 |
|
Accrued Payroll Taxes |
|
|
6,210,627 |
|
IBNR |
|
|
5,208,029 |
|
Other Accrued Expenses |
|
|
2,310,499 |
|
Third-Party Settlements |
|
|
(7,888,358 |
) |
Lines of Credit & Other Short-Term Debt |
|
|
17,297,377 |
|
Current Portion of Long-Term Debt |
|
|
1,189,267 |
|
Other Liabilities |
|
|
3,642,961 |
|
|
|
|
|
Total Current Liabilities |
|
$ |
113,520,492 |
|
|
|
|
|
|
|
|
|
|
Mortgages and Long-Term Notes Payable |
|
$ |
213,517,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Intracompany |
|
$ |
(3,324,017 |
) |
|
|
|
|
|
|
|
|
|
Deferred Credits |
|
$ |
6,537,716 |
|
Deferred Taxes |
|
|
0 |
|
Other Long-Term Liabilities |
|
|
16,291,258 |
|
|
|
|
|
|
|
|
|
|
Total Long-Term Liabilities |
|
$ |
233,022,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
$ |
346,542,686 |
|
|
|
|
|
|
|
|
|
|
EQUITY: |
|
|
|
|
Common Stock |
|
$ |
2,130,000 |
|
Additional Paid-in Capital |
|
|
13,027,889 |
|
Other Equity |
|
|
0 |
|
Retained Earnings PY |
|
|
159,210,350 |
|
Distributions |
|
|
0 |
|
Net Income |
|
|
22,713,898 |
|
Non Controlling Interest |
|
|
32,601,341 |
|
|
|
|
|
TOTAL EQUITY |
|
$ |
229,683,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY |
|
$ |
576,226,163 |
|
|
|
|
|
PRIME HEALTHCARE SERVICES INC.
CONSOLIDATED INCOME STATEMENT
YEAR TO DATE MARCH 31, 2010
|
|
|
|
|
|
|
|
|
|
|
Qtr 1 - March 31, 2010 |
|
|
Qtr 1 - March 31, 2009 |
|
REVENUE |
|
|
|
|
|
|
|
|
NET PATIENT REVENUE |
|
$ |
367,540,580 |
|
|
$ |
400,410,830 |
|
CAPITATION REVENUE |
|
|
5,999,452 |
|
|
|
5,522,210 |
|
OTHER REVENUE |
|
|
2,278,136 |
|
|
|
3,423,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OPERATING REVENUE |
|
|
375,818,168 |
|
|
|
409,356,620 |
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPENSATION AND EMPLOYEE BENEFITS |
|
|
136,986,436 |
|
|
|
149,353,064 |
|
PROVISION FOR DOUBTFUL ACCOUNTS |
|
|
80,083,895 |
|
|
|
129,880,817 |
|
GENERAL AND ADMINISTRATIVE |
|
|
29,912,355 |
|
|
|
41,758,368 |
|
SUPPLIES |
|
|
33,171,756 |
|
|
|
34,376,926 |
|
PROFESSIONAL SERVICES |
|
|
26,627,302 |
|
|
|
8,231,922 |
|
DEPRECIATION / AMORTIZATION |
|
|
7,129,389 |
|
|
|
5,486,707 |
|
MEDICAL CLAIMS |
|
|
80,498 |
|
|
|
1,524,379 |
|
|
|
|
|
|
|
|
TOTAL OPERATING EXPENSES |
|
|
313,991,631 |
|
|
|
370,612,182 |
|
|
|
|
|
|
|
|
|
|
NET OPERATING INCOME (LOSS) |
|
|
61,826,537 |
|
|
|
38,744,437 |
|
|
|
|
|
|
|
|
|
|
INTEREST |
|
|
6,331,298 |
|
|
|
5,797,567 |
|
INCOME TAX EXPENSE |
|
|
180,000 |
|
|
|
713,320 |
|
|
|
|
|
|
|
|
|
|
Income Before Allocation to Non-Controlling |
|
|
55,315,239 |
|
|
|
32,233,551 |
|
Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of Income to Non-Controlling |
|
|
(32,601,341 |
) |
|
|
(18,095,803 |
) |
Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
|
22,713,898 |
|
|
|
14,137,748 |
|
|
|
|
|
|
|
|
Page 2
PRIME HEALTHCARE SERVICES INC.
CONSOLIDATED CASH FLOWS STATEMENT
YTD FOR THE PERIOD ENDED 3/31/10
|
|
|
|
|
|
|
|
|
|
|
March YTD 2009 |
|
|
March YTD 2010 |
|
|
|
Prime |
|
|
Prime |
|
|
|
Total |
|
|
Total |
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Net Income |
|
$ |
32,233,550 |
|
|
$ |
55,315,239 |
|
|
|
|
|
|
|
|
|
|
Adj from Operating Activities: |
|
|
|
|
|
|
|
|
Depreciation and Amortization |
|
$ |
5,489,229 |
|
|
$ |
6,919,460 |
|
Other Deferred Income/Expense |
|
|
(799,304 |
) |
|
|
218,983 |
|
|
|
|
|
|
|
|
|
|
(Increase)/Decrease in Assets: |
|
|
|
|
|
|
|
|
Patient Accounts Receivable |
|
$ |
(25,964,396 |
) |
|
$ |
(3,908,689 |
) |
Supplies Inventory |
|
|
(463,193 |
) |
|
|
(292,514 |
) |
Pre-Paid Expenses & Oth Current Assets |
|
|
3,326,089 |
|
|
|
4,750,967 |
|
Other Receivables |
|
|
460,148 |
|
|
|
(42,807 |
) |
Long-Term Receivables |
|
|
726,669 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
Increase/(Decrease) in Liabilities: |
|
|
|
|
|
|
|
|
Accounts and Notes Payable |
|
$ |
(5,667,725 |
) |
|
$ |
(7,322,217 |
) |
Accrued Payroll Costs |
|
|
(7,079,419 |
) |
|
|
7,891,081 |
|
IBNR |
|
|
(1,071,166 |
) |
|
|
(186,298 |
) |
Other Accrued Liabilities |
|
|
2,663,118 |
|
|
|
(111,495 |
) |
Estimated 3rd Party Settlements |
|
|
3,217,702 |
|
|
|
(1,131,460 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash From (For) Operating Activities |
|
$ |
7,071,304 |
|
|
$ |
62,100,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Capital Expenditures |
|
$ |
(6,327,459 |
) |
|
$ |
(8,864,506 |
) |
Payments to Acquire Other Assets |
|
|
0 |
|
|
|
13,889 |
|
|
|
|
|
|
|
|
Net Cash From (For) Investing Activities |
|
$ |
(6,327,459 |
) |
|
$ |
(8,850,617 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Funds Provided (to) from Intercompany |
|
$ |
5,571,607 |
|
|
$ |
(16,365,882 |
) |
Funds Provided (to) from Related Party |
|
|
(10,120,670 |
) |
|
|
13,850,587 |
|
Borrow (Re-Payment) of Debt |
|
|
(8,604,084 |
) |
|
|
(18,901,882 |
) |
Capital Lease Obligations (Re-Payment) |
|
|
1,627,529 |
|
|
|
(1,470,595 |
) |
Parent Contributions / (Distributions) |
|
|
(9,750,001 |
) |
|
|
(0 |
) |
Payments for Acquisition |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
Net Cash From (For) Financing Activities |
|
$ |
(21,275,620 |
) |
|
$ |
(22,887,772 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents |
|
$ |
(20,531,775 |
) |
|
$ |
30,361,860 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Cash Balance |
|
$ |
44,876,687 |
|
|
$ |
46,003,463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Cash Balance |
|
$ |
24,344,912 |
|
|
$ |
76,365,323 |
|
|
|
|
|
|
|
|
Page 3