Restatement

The restatement of Piedmont's audited consolidated financial statements results from its subsequent accounting for goodwill resulting from the purchase of two property management companies in order to become a self-managed entity. Previously, Piedmont did not allocate goodwill to the disposal of real estate assets or held for sale real estate assets that met the definition of a business under GAAP, as required by Accounting Standards Codification 350 Intangibles - Goodwill and Other in order to determine gain on disposition of assets or impairments, if any, respectively. For the disposal of real estate assets that constituted a business, goodwill and gain on disposition of assets both should have been reduced by the proportionate amount of goodwill allocated to each disposed real estate asset. The amount of goodwill allocated is derived as the proportionate fair value of the real estate considered to be a business under GAAP at the time of sale to the fair value of Piedmont’s reporting unit. The restated amounts are reflected in the tables below. We have also revised the 2014 financial statements to correct the related immaterial error for that year and prior years. The revised consolidated statement of operations includes a reduction to gain on sale of real estate assets of approximately $1.2 million for the year ended December 31, 2014. Additionally, approximately $30.1 million related to disposals prior to 2014 has been recorded to increase cumulative distributions in excess of earnings as of December 31, 2013 on the accompanying consolidated statements of stockholders' equity. Further, in evaluating the impairment on held for sale real estate assets considered to be a business under GAAP, the proportionate amount of goodwill attributable to the real estate asset held for sale should be considered in determining the amount of impairment, if any. The amount of goodwill attributed is derived as the proportionate fair value of the real estate asset considered to be a business under GAAP held for sale at measurement date to the fair value of Piedmont’s reporting unit. As a result, the restated consolidated balance sheet includes a decrease in goodwill and resulting increase in other real estate assets held for sale of approximately $2.3 million as of December 31, 2015.

The consolidated financial statements included in this Form 10-K/A have been restated as of December 31, 2016 and 2015 and for the years then ended to reflect the adjustments described above. The following statements present the effect of the restatement on (i) Piedmont's consolidated balance sheets as of December 31, 2016 and December 31, 2015, (ii) Piedmont's consolidated statements of income for the years ended December 31, 2016 and 2015 and (iii) Piedmont's consolidated statements of cash flows for the years ended December 31, 2016, and 2015. As noted above, Piedmont has also revised the 2014 financial statements to correct the related immaterial error for that year and prior years. Piedmont did not present a summary of the effect of the restatement on the consolidated statement of stockholders' equity for any of the above referenced periods because the impact to stockholders' equity is reflected below in the restated consolidated balance sheets. Piedmont did not present a summary of the effect of the restatement on the consolidated statements of comprehensive income/(loss) for any of the above referenced periods because the impact to net income is reflected below in the restated consolidated statements of income and the restatement adjustments did not affect any other component of comprehensive income.

The following table presents the consolidated balance sheet as previously reported, restatement adjustments, and the consolidated balance sheet as restated as of December 31, 2016 (in thousands, except per share data):



	As Previously Filed			Restatement Adjustments			As Restated
Assets:
Real estate assets, at cost:
Land	$	669,848		$	—		$	669,848
Buildings and improvements, less accumulated depreciation	2,927,324			—			2,927,324
Intangible lease assets, less accumulated amortization	99,695			—			99,695
Construction in progress	34,825			—			34,825
Real estate assets held for sale, net	—			—			—
Total real estate assets	3,731,692						3,731,692
Investment in and amounts due from unconsolidated joint venture	7,360			—			7,360
Cash and cash equivalents	6,992			—			6,992
Tenant receivables, net of allowance for doubtful accounts	26,494			—			26,494
Straight-line rent receivables	165,848			—			165,848
Notes receivable	—			—			—
Restricted cash and escrows	1,212			—			1,212
Prepaid expenses and other assets	23,655			—			23,655
Goodwill	180,097			(81,179		)	98,918
Deferred lease costs, less accumulated amortization	305,997			—			305,997
Other assets held for sale, net	—			—			—
Total assets	$	4,449,347		$	(81,179	)	$	4,368,168
Liabilities:
Unsecured debt, net of discount and unamortized debt issuance costs	$	1,687,731		$	—		$	1,687,731
Secured debt, net of premiums and unamortized debt issuance costs	332,744			—			332,744
Accounts payable, accrued expenses, dividends payable, and accrued capital expenditures	165,410			—			165,410
Deferred income	28,406			—			28,406
Intangible lease liabilities, less accumulated amortization	48,005			—			48,005
Interest rate swaps	8,169			—			8,169
Total liabilities	2,270,465			—			2,270,465
Commitments and Contingencies	—			—			—
Stockholders’ Equity:
Shares-in-trust	—			—			—
Preferred stock	—			—			—
Common stock	1,452			—			1,452
Additional paid-in capital	3,673,128			—			3,673,128
Cumulative distributions in excess of earnings	(1,499,684		)	(81,179		)	(1,580,863		)
Other comprehensive income	2,104			—			2,104
Piedmont stockholders’ equity	2,177,000			(81,179		)	2,095,821
Noncontrolling interest	1,882			—			1,882
Total stockholders’ equity	2,178,882			(81,179		)	2,097,703
Total liabilities and stockholders’ equity	$	4,449,347		$	(81,179	)	$	4,368,168



	As Previously Filed			Restatement Adjustments			As Restated
Assets:
Real estate assets, at cost:
Land	$	676,091		$	—		$	676,091
Buildings and improvements, less accumulated depreciation	2,837,463			—			2,837,463
Intangible lease assets, less accumulated amortization	84,663			—			84,663
Construction in progress	20,975			—			20,975
Real estate assets held for sale, net	76,614			—			76,614
Total real estate assets	3,695,806						3,695,806
Investment in and amounts due from unconsolidated joint venture	7,577			—			7,577
Cash and cash equivalents	5,441			—			5,441
Tenant receivables, net of allowance for doubtful accounts	26,339			—			26,339
Straight-line rent receivables	147,393			—			147,393
Notes receivable	45,400			—			45,400
Restricted cash and escrows	5,174			—			5,174
Prepaid expenses and other assets	24,777			—			24,777
Goodwill	180,097			(75,311		)	104,786
Deferred lease costs, less accumulated amortization	288,041			—			288,041
Other assets held for sale, net	8,490			2,287			10,777
Total assets	$	4,434,535		$	(73,024	)	$	4,361,511
Liabilities:
Unsecured debt, net of discount and unamortized debt issuance costs	$	1,528,221		$	—		$	1,528,221
Secured debt, net of premiums and unamortized debt issuance costs	501,289			—			501,289
Accounts payable, accrued expenses, dividends payable, and accrued capital expenditures	128,465			—			128,465
Deferred income	27,270			—			27,270
Intangible lease liabilities, less accumulated amortization	42,853			—			42,853
Interest rate swaps	9,993			—			9,993
Total liabilities	2,238,091						2,238,091
Commitments and Contingencies	—			—			—
Stockholders’ Equity:
Shares-in-trust	—			—			—
Preferred stock	—			—			—
Common stock	1,455			—			1,455
Additional paid-in capital	3,669,977			—			3,669,977
Cumulative distributions in excess of earnings	(1,477,674		)	(73,024		)	(1,550,698		)
Other comprehensive income	1,661			—			1,661
Piedmont stockholders’ equity	2,195,419			(73,024		)	2,122,395
Noncontrolling interest	1,025			—			1,025
Total stockholders’ equity	2,196,444			(73,024		)	2,123,420
Total liabilities and stockholders’ equity	$	4,434,535		$	(73,024	)	$	4,361,511

The following table presents the consolidated statement of income as previously reported, restatement adjustments, and the consolidated statement of income as restated for the year ended December 31, 2016 (in thousands, except share and per share data):



	As Previously Filed			Restatement Adjustments			As Restated
Revenues:
Rental income	$	459,890		$	—		$	459,890
Tenant reimbursements	93,961			—			93,961
Property management fee revenue	1,864			—			1,864
	555,715			—			555,715
Expenses:
Property operating costs	218,934			—			218,934
Depreciation	127,733			—			127,733
Amortization	75,119			—			75,119
Impairment loss on real estate assets	30,898			3,003			33,901
General and administrative	29,244			—			29,244
	481,928			3,003			484,931
Real estate operating income	73,787			(3,003		)	70,784
Other income (expense):
Interest expense	(64,860		)	—			(64,860		)
Other income/(expense)	(13		)	—			(13		)
Net recoveries/(loss) from casualty events and litigation settlements	34			—			34
Equity in income/(loss) of unconsolidated joint ventures	362			—			362
	(64,477		)	—			(64,477		)
Income from continuing operations	9,310			(3,003		)	6,307
Discontinued operations:
Operating income	—			—			—
Gain/(loss) on sale of real estate assets	—			—			—
Income from discontinued operations	—			—			—
Gain on sale of real estate assets	98,562			(5,152		)	93,410
Net income	107,872			(8,155		)	99,717
Less: Net loss/(income) applicable to noncontrolling interest	15			—			15
Net income applicable to Piedmont	$	107,887		$	(8,155	)	$	99,732
Per share information— basic and diluted:
Income from continuing operations and gain on sale of real estate assets	$	0.74		$	(0.05	)	$	0.69
Income from discontinued operations	—			—			—
Net income applicable to common stockholders	$	0.74		$	(0.05	)	$	0.69
Weighted-average shares outstanding—basic	145,230,382						145,230,382
Weighted-average shares outstanding—diluted	145,634,953						145,634,953



	As Previously Filed			Restatement Adjustments			As Restated
Revenues:
Rental income	$	468,872		$	—		$	468,872
Tenant reimbursements	113,881			—			113,881
Property management fee revenue	2,016			—			2,016
	584,769			—			584,769
Expenses:
Property operating costs	242,022			—			242,022
Depreciation	134,503			—			134,503
Amortization	60,886			—			60,886
Impairment loss on real estate assets	40,169			3,132			43,301
General and administrative	30,346			—			30,346
	507,926			3,132			511,058
Real estate operating income	76,843			(3,132		)	73,711
Other income (expense):
Interest expense	(73,998		)	—			(73,998		)
Other income/(expense)	1,565			—			1,565
Net recoveries/(loss) from casualty events and litigation settlements	(278		)	—			(278		)
Equity in income/(loss) of unconsolidated joint ventures	553			—			553
	(72,158		)	—			(72,158		)
Income from continuing operations	4,685			(3,132		)	1,553
Discontinued operations:
Operating income	84			—			84
Gain/(loss) on sale of real estate assets	(1		)	—			(1		)
Income from discontinued operations	83			—			83
Gain on sale of real estate assets	168,237			(38,554		)	129,683
Net income	173,005			(41,686		)	131,319
Less: Net loss/(income) applicable to noncontrolling interest	(15		)	—			(15		)
Net income applicable to Piedmont	$	172,990		$	(41,686	)	$	131,304
Per share information— basic and diluted:
Income from continuing operations and gain on sale of real estate assets	$	1.15		$	(0.28	)	$	0.87
Income from discontinued operations	—			—			—
Net income applicable to common stockholders	$	1.15		$	(0.28	)	$	0.87
Weighted-average shares outstanding—basic	150,537,757						150,537,757
Weighted-average shares outstanding—diluted	150,880,116						150,880,116

The following table presents the consolidated statement of income as previously reported, revision adjustments, and the consolidated statement of income as revised for the year ended December 31, 2014 (in thousands, except share and per share data):



	As Previously Filed			Revision Adjustments			As Revised
Revenues:
Rental income	$	454,635		$	—		$	454,635
Tenant reimbursements	109,548			—			109,548
Property management fee revenue	2,069			—			2,069
	566,252			—			566,252
Expenses:
Property operating costs	239,431			—			239,431
Depreciation	138,596			—			138,596
Amortization	56,579			—			56,579
Impairment loss on real estate assets	—			—			—
General and administrative	23,825			—			23,825
	458,431			—			458,431
Real estate operating income	107,821			—			107,821
Other income (expense):
Interest expense	(74,446		)	—			(74,446		)
Other income/(expense)	62			—			62
Net recoveries/(loss) from casualty events and litigation settlements	6,992			—			6,992
Equity in income/(loss) of unconsolidated joint ventures	(350		)	—			(350		)
	(67,742		)	—			(67,742		)
Income from continuing operations	40,079			—			40,079
Discontinued operations:
Operating income	954			—			954
Gain/(loss) on sale of real estate assets	1,198			(936		)	262
Income from discontinued operations	2,152			(936		)	1,216
Gain on sale of real estate assets	1,132			(262		)	870
Net income	43,363			(1,198		)	42,165
Less: Net loss/(income) applicable to noncontrolling interest	(15		)	—			(15		)
Net income applicable to Piedmont	$	43,348		$	(1,198	)	$	42,150
Per share information— basic and diluted:
Income from continuing operations and gain on sale of real estate assets	$	0.27		$	(0.01	)	$	0.26
Income from discontinued operations	0.01			—			0.01
Net income applicable to common stockholders	$	0.28		$	(0.01	)	$	0.27
Weighted-average shares outstanding—basic	154,452,121						154,452,121
Weighted-average shares outstanding—diluted	154,585,273						154,585,273

The following table presents the consolidated statement of cash flows as previously reported, restatement adjustments, and the consolidated statement of cash flows as restated for the year ended December 31, 2016 (in thousands):



	As Previously Filed			Restatement Adjustments			As Restated
Cash Flows from Operating Activities:
Net income	$	107,872		$	(8,155	)	$	99,717
Operating distributions received from unconsolidated joint ventures	579			—			579
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	127,733			—			127,733
Amortization of debt issuance costs	1,702			—			1,702
Other amortization	74,373			—			74,373
Impairment loss on real estate assets	30,898			3,003			33,901
Stock compensation expense	7,928			—			7,928
Equity in loss/(income) of unconsolidated joint ventures	(362		)	—			(362		)
Gain on sale of real estate assets, net	(98,562		)	5,152			(93,410		)
Changes in assets and liabilities:
Increase in tenant and straight-line rent receivables, net	(26,747		)	—			(26,747		)
Decrease/(increase) in restricted cash and escrows	3,229			—			3,229
Decrease/(increase) in prepaid expenses and other assets	1,996			—			1,996
Increase/(decrease) in accounts payable and accrued expenses	3,729			—			3,729
Increase/(decrease) in deferred income	1,441			—			1,441
Net cash provided by operating activities	235,809			—			235,809
Cash Flows from Investing Activities:
Acquisition of real estate assets, net of related debt assumed, and intangibles	(349,668		)	—			(349,668		)
Capitalized expenditures, net of accruals	(110,228		)	—			(110,228		)
Net sale proceeds from wholly-owned properties	365,918			—			365,918
Deferred lease costs paid	(25,896		)	—			(25,896		)
Net cash provided by/(used in) investing activities	(119,874		)	—			(119,874		)
Cash Flows from Financing Activities:
Debt issuance costs paid	(264		)	—			(264		)
Proceeds from debt	695,000			—			695,000
Repayments of debt	(706,875		)	—			(706,875		)
Costs of issuance of common stock	(342		)	—			(342		)
Shares withheld to pay tax obligations related to employee stock compensation	(2,344		)	—			(2,344		)
Repurchases of common stock as part of announced plan	(7,943		)	—			(7,943		)
Dividends paid and discount on dividend reinvestments	(91,616		)	—			(91,616		)
Net cash provided by/(used in) financing activities	(114,384		)	—			(114,384		)
Net increase/(decrease) in cash and cash equivalents	1,551			—			1,551
Cash and cash equivalents, beginning of year	5,441			—			5,441
Cash and cash equivalents, end of year	$	6,992		$	—		$	6,992



	As Previously Filed			Restatement Adjustments			As Restated
Cash Flows from Operating Activities:
Net income	$	173,005		$	(41,686	)	$	131,319
Operating distributions received from unconsolidated joint ventures	774			—			774
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	134,503			—			134,503
Amortization of debt issuance costs	1,768			—			1,768
Gain/(loss) on settlement of forward starting interest rate swaps	(1,284		)	—			(1,284		)
Other amortization	61,221			—			61,221
Impairment loss on real estate assets	40,169			3,132			43,301
Stock compensation expense	8,789			—			8,789
Equity in loss/(income) of unconsolidated joint ventures	(553		)	—			(553		)
Gain on sale of real estate assets, net	(168,237		)	38,554			(129,683		)
Changes in assets and liabilities:
Increase in tenant and straight-line rent receivables, net	(29,478		)	—			(29,478		)
Decrease/(increase) in restricted cash and escrows	(5,256		)	—			(5,256		)
Decrease/(increase) in prepaid expenses and other assets	(828		)	—			(828		)
Increase/(decrease) in accounts payable and accrued expenses	(162		)	—			(162		)
Increase/(decrease) in deferred income	4,613			—			4,613
Net cash provided by operating activities	219,044			—			219,044
Cash Flows from Investing Activities:
Acquisition of real estate assets, net of related debt assumed, and intangibles	(382,773		)	—			(382,773		)
Capitalized expenditures, net of accruals	(118,671		)	—			(118,671		)
Redemption of noncontrolling interest in unconsolidated variable interest entity	(4,000		)	—			(4,000		)
Net sale proceeds from wholly-owned properties	848,169			—			848,169
Deferred lease costs paid	(37,683		)	—			(37,683		)
Net cash provided by/(used in) investing activities	305,042			—			305,042
Cash Flows from Financing Activities:
Debt issuance costs paid	(1,081		)	—			(1,081		)
Proceeds from debt	1,301,858			—			1,301,858
Repayments of debt	(1,544,301		)	—			(1,544,301		)
Costs of issuance of common stock	(326		)	—			(326		)
Shares withheld to pay tax obligations related to employee stock compensation	(1,710		)	—			(1,710		)
Repurchases of common stock as part of announced plan	(158,860		)	—			(158,860		)
Dividends paid and discount on dividend reinvestments	(126,531		)	—			(126,531		)
Net cash provided by/(used in) financing activities	(530,951		)	—			(530,951		)
Net increase/(decrease) in cash and cash equivalents	(6,865		)	—			(6,865		)
Cash and cash equivalents, beginning of year	12,306			—			12,306
Cash and cash equivalents, end of year	$	5,441		$	—		$	5,441

The following table presents the consolidated statement of cash flows as previously reported, revision adjustments, and the consolidated statement of cash flows as revised for the year ended December 31, 2014 (in thousands):



	As Previously Filed			Revision Adjustments			As Revised
Cash Flows from Operating Activities:
Net income	$	43,363		$	(1,198	)	$	42,165
Operating distributions received from unconsolidated joint ventures	266			—			266
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	138,679			—			138,679
Amortization of debt issuance costs	1,578			—			1,578
Gain/(loss) on settlement of forward starting interest rate swaps	14,960			—			14,960
Other amortization	56,327			—			56,327
Stock compensation expense	5,250			—			5,250
Equity in loss/(income) of unconsolidated joint ventures	350			—			350
Gain on sale of real estate assets, net	(2,330		)	1,198			(1,132		)
Retirement of shares returned from escrow	(1,479		)	—			(1,479		)
Changes in assets and liabilities:
Increase in tenant and straight-line rent receivables, net	(40,505		)	—			(40,505		)
Decrease/(increase) in restricted cash and escrows	(135		)	—			(135		)
Decrease/(increase) in prepaid expenses and other assets	(1,884		)	—			(1,884		)
Increase/(decrease) in accounts payable and accrued expenses	2,995			—			2,995
Increase/(decrease) in deferred income	(277		)	—			(277		)
Net cash provided by operating activities	217,158			—			217,158
Cash Flows from Investing Activities:
Acquisition of real estate assets, net of related debt assumed, and intangibles	(117,418		)	—			(117,418		)
Net cash held in escrow for acquisitions	(5,150		)	—			(5,150		)
Capitalized expenditures, net of accruals	(168,891		)	—			(168,891		)
Net sale proceeds from wholly-owned properties	46,232			—			46,232
Net sale proceeds received from unconsolidated joint ventures	6,017			—			6,017
Investments in unconsolidated joint ventures	(42		)	—			(42		)
Deferred lease costs paid	(27,694		)	—			(27,694		)
Net cash provided by/(used in) investing activities	(266,946		)	—			(266,946		)
Cash Flows from Financing Activities:
Debt issuance costs paid	(1,294		)	—			(1,294		)
Proceeds from debt	1,052,527			—			1,052,527
Repayments of debt	(813,702		)	—			(813,702		)
Discount paid due to loan modification	(1,135		)	—			(1,135		)
Shares withheld to pay tax obligations related to employee stock compensation	(1,275		)	—			(1,275		)
Repurchases of common stock as part of announced plan	(54,802		)	—			(54,802		)
Dividends paid and discount on dividend reinvestments	(125,198		)	—			(125,198		)
Net cash provided by/(used in) financing activities	55,121			—			55,121
Net increase/(decrease) in cash and cash equivalents	5,333			—			5,333
Cash and cash equivalents, beginning of year	6,973			—			6,973
Cash and cash equivalents, end of year	$	12,306		$	—		$	12,306