-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SftrcCNdUlYxo4Tyb/Iis9EI37JV1gJsQdw9BNkXf+J+ndSsM7lZNGGCMGFoy1LF scGbwPQeI2zC1OcaaksX5g== 0001047469-99-030022.txt : 19990809 0001047469-99-030022.hdr.sgml : 19990809 ACCESSION NUMBER: 0001047469-99-030022 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990702 ITEM INFORMATION: FILED AS OF DATE: 19990806 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DUKE WEEKS REALTY CORP CENTRAL INDEX KEY: 0000783280 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 351740409 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-09044 FILM NUMBER: 99679088 BUSINESS ADDRESS: STREET 1: 8888 KEYSTONE CROSSING STREET 2: STE 1200 CITY: INDIANAPOLIS STATE: IN ZIP: 46240 BUSINESS PHONE: 3178086000 MAIL ADDRESS: STREET 1: 8888 KEYSTONE CROSSING STREET 2: STE 1200 CITY: INDIANAPOLIS STATE: IN ZIP: 46240 FORMER COMPANY: FORMER CONFORMED NAME: DUKE REALTY INVESTMENTS INC DATE OF NAME CHANGE: 19920703 8-K/A 1 8-K/A =========================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A AMENDMENT NO. 1 TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): July 2, 1999 DUKE-WEEKS REALTY CORPORATION (Exact name of registrant as specified in its charter) Indiana 1-9044 35-1740409 (State or jurisdiction of (Commission (I.R.S. Employer incorporation or organization) File Number) Identification No.) 8888 KEYSTONE CROSSING, SUITE 1200 INDIANAPOLIS, INDIANA 46240 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (317) 808-6000 Not applicable (Former name or former address, if changed since last report) =========================================================================== ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS Pro forma condensed consolidated balance sheet as of March 31, 1999 Notes to pro forma condensed consolidated balance sheet as of March 31, 1999 Pro forma condensed consolidated statement of operations for the three months ended March 31, 1999 Notes to pro forma condensed consolidated statement of operations for the three months ended March 31, 1999 Pro forma condensed consolidated balance sheet as of December 31, 1998 Notes to pro forma condensed consolidated balance sheet as of December 31, 1998 Pro forma condensed consolidated statement of operations for the year ended December 31, 1998 Notes to pro forma condensed consolidated statement of operations for the year ended December 31, 1998 DUKE-WEEKS REALTY CORPORATION PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following pro forma condensed financial statements for Duke-Weeks Realty Corporation ("Duke-Weeks") include certain pro forma adjustments to the historical financial statements of Duke Realty Investments, Inc. ("Duke") to reflect the proposed merger (the "Merger") of Duke and Weeks Corporation ("Weeks"). Weeks Realty Limited Partnership ("Weeks Operating Partnership") will merge with Duke Realty Limited Partnership ("Duke Operating Partnership") immediately preceding the merger of Duke and Weeks. The Merger will be accounted for using the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16. These pro forma condensed consolidated financial statements should be read in conjunction with the Duke Form 10-Q as of and for the three months ended March 31, 1999, and also in conjunction with Weeks Form 10-Q as of and for the three months ended March 31, 1999. The following pro forma condensed consolidated balance sheet is based upon the March 31, 1999 consolidated balance sheet of Duke and the March 31, 1999 consolidated balance sheet of Weeks, presented as if the Merger occurred on March 31, 1999. The following pro forma condensed consolidated statement of operations is based upon the consolidated statement of operations for the three months ended March 31, 1999 of Duke and Weeks, presented as if the Merger occurred as of January 1, 1999. The pro forma condensed consolidated financial statements do not purport to be indicative of the actual financial position or results of operations which would have been obtained assuming that the Merger had been completed as set forth above, or which may be obtained in the future. DUKE-WEEKS REALTY CORPORATION PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET MARCH 31, 1999 (UNAUDITED) (IN THOUSANDS)
HISTORICAL PRO FORMA DUKE-WEEKS ------------------------------- MERGER POST-MERGER ASSETS DUKE WEEKS ADJUSTMENTS PRO FORMA ------ ---- ----- ----------- --------- Real estate $2,720,892 $1,412,983 $281,323 (a) $4,415,198 Land held for development 185,507 37,118 - (b) 222,625 Investment in unconsolidated real estate companies 115,527 7,676 - (b) 123,203 Less accumulated depreciation (188,856) (101,640) 101,640 (a) (188,856) ------------------- ----------- ----------------- --------------- Net real estate investment 2,833,070 1,356,137 382,963 4,572,170 Cash and cash equivalents 34,996 2,159 (17,000)(d) 20,155 Accounts receivable 8,562 8,807 - 17,369 Straight-line rent receivable 21,664 6,529 (6,529)(c) 21,664 Investment in and notes receivable from unconsolidated service companies - 42,926 - 42,926 Deferred financing costs 12,946 7,939 (7,939)(c) 12,946 Deferred other costs 52,642 20,466 (20,466)(c) 52,642 Other assets 104,975 14,781 - 119,756 ------------------- ----------- ----------------- --------------- TOTAL ASSETS $3,068,855 $1,459,744 $331,029 $4,859,628 =================== =========== ================= =============== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Liabilities: Secured debt $333,560 $243,764 $12,109 (e) $589,433 Unsecured debt 715,000 285,000 1,994 (e) 1,001,994 Lines of credit 65,000 140,140 - 205,140 Accounts payable and other liabilities 168,058 38,945 - 207,003 -------------------- ----------- ----------------- --------------- Total liabilities 1,281,618 707,849 14,103 2,003,570 Minority interest Common 107,429 135,762 84,098 (a) 327,289 Preferred - 100,000 2,955 (a) 102,955 -------------------- ----------- ----------------- --------------- Total minority interest 107,429 235,762 87,053 430,244 Shareholders' equity: Preferred shares: Series A at liquidation preference 75,000 150,000 (150,000)(a) 75,000 Series B at liquidation preference 150,000 - 150,000 Series D convertible at liquidation preference 135,000 - 135,000 Series E at liquidation preference 100,000 100,000 Series F at liquidation preference 150,000 (a) 150,000 Common shares 867 198 75 (a) 1,140 Additional paid-in capital 1,288,895 432,854 162,879 (a) 1,884,628 Distributions in excess of earnings (69,954) (66,919) 66,919 (f) (69,954) -------------------- ----------- ----------------- --------------- Total shareholders' equity 1,679,808 516,133 229,873 2,425,814 -------------------- ----------- ----------------- --------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,068,855 $1,459,744 $331,029 $4,859,628 ==================== =========== ================= ===============
See accompanying notes to pro forma condensed consolidated balance sheet DUKE-WEEKS REALTY CORPORATION NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET MARCH 31, 1999 (UNAUDITED) (IN THOUSANDS) (a) Represents adjustments to record Weeks' assets and liabilities at their respective purchase values based on the purchase method of accounting. The assumed purchase price of $1.8 billion was computed as follows:
WEEKS DUKE DUKE SHARES AND UNITS EXCHANGE SHARES AND UNITS VALUE ACQUISITION OUTSTANDING RATIO ISSUED PER SHARE COSTS ----------------- -------- ---------------- --------- ----------- Common stock 19,754 1.38 27,261 $21.75 $592,916 Minority Operating Partnership units 7,325 1.38 10,108 $21.75 219,860 ------- ------ ------- 27,079 37,369 812,776 (1) ====== Preferred Series A Stock 6,000 1.00 6,000 $23.75 142,500 (2) ====== Preferred Series C Units 1,400 1.00 1,400 $25.00 35,000 (3) ====== Preferred Series D Units 2,600 1.00 2,600 $26.14 67,955 (4) ====== Duke options and warrants issued 11,990 (5) Weeks outstanding debt assumed 683,007 (6) Other Weeks liabilities assumed 38,945 Estimated transaction costs 17,000 (7) ------- Total assumed purchase price $1,809,173 ==========
(1) Represents the value of the Duke common shares and Duke Operating Partnership units held by minority interests that will be exchanged for the assumed outstanding Weeks common shares and Weeks Operating Partnership units. The value of the Duke common shares and Duke Operating Partnership units is based upon the five day average of the closing price of Duke's common stock as listed on the New York Stock Exchange immediately before, during and after the date the terms of the Merger were agreed to and announced to the public on March 1, 1999. The following purchase accounting adjustments will be made to additional paid-in capital: Value of Duke common stock issued $592,916 Less net book value of Weeks common shareholders' equity at March 31, 1999 366,133 ------- Adjustments to common shareholders' equity for Duke common shares issued 226,783 Less: Elimination of Weeks' distributions in excess of earnings (see note (f)) (66,919) Par value adjustment to shareholders' equity (see note (a) (8)) (75) Total adjustment to additional paid-in capital for Duke common -------- shares issued 159,789 Adjustment for Duke Series F Preferred Shares issued (see note (a) (2)) (7,500) Adjustment for Duke options issued (see note (a) (5)) 10,590 -------- Total adjustment to additional paid-in capital $162,879 ======= The following purchase accounting adjustment will be made to minority interest: Value of Duke Operating Partnership common units issued to minority interests $219,860 Less book value of Weeks common unitholder minority interest at March 31, 1999 135,762 -------- Total adjustment to minority interest $ 84,098 ========
DUKE-WEEKS REALTY CORPORATION NOTES TO PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET MARCH 31, 1999 (UNAUDITED) (IN THOUSANDS) (2) Each outstanding share of Preferred Series A Cumulative Redeemable Preferred Stock of Weeks will be converted into the right to receive one depositary share of Duke representing 1/1000 of a share of Series F Cumulative Redeemable Preferred Stock of Duke. The assumed value of the Duke Series F preferred shares is based upon the average closing price of the Weeks Series A Preferred Stock the two days immediately following the date the terms of the merger were agreed to and announced to the public. The following purchase accounting adjustment will be made to additional paid-in capital: Value of Duke Series F Preferred Stock issued $ 142,500 Less net book value of Weeks Series A Preferred Stock at March 31, 1999 150,000 ------- Total adjustment to additional paid-in capital $ (7,500) ========
(3) The Duke Operating Partnership will issue preferred units valued at the book value (which approximates estimated fair value), of Weeks Operating Partnership Preferred C Units at March 31, 1999. The Duke Operating Partnership Preferred Units will have the same economic attributes as the Weeks Operating Partnership Preferred C Units. (4) The Duke Operating Partnership will issue preferred units valued at the estimated fair value of the Weeks Operating Partnership Preferred D Units at March 31, 1999. The Duke Operating Partnership Preferred Units will have the same economic attributes as the Weeks Operating Partnership Preferred D Units. The adjustment to estimated fair value is based on the present value of amounts to be paid using pricing levels available to Duke for preferred securities with similar terms and features around March 1, 1999, the announced date of the Merger. The following purchase accounting adjustment will be made to minority interest: Value of Duke Operating Partnership Preferred Units $67,955 Less net book value of Weeks Operating Partnership Series D Preferred Units at March 31, 1999 65,000 ------ Total adjustment to minority interest $ 2,955 =======
(5) Represents the fair value (computed using an option pricing model) of Duke stock options and warrants to be issued to replace outstanding Weeks stock options and warrants. The Duke stock options and warrants will carry the same terms and remaining vesting schedule as the Weeks stock options and warrants being replaced and provide for the option to purchase up to 3,116,000 of Duke common shares. The following purchase accounting adjustment will be made to additional paid-in capital: Value of Duke issued stock options and warrants $11,990 Less book value of Weeks warrants at March 31, 1999 (1,400) ------- Total adjustment to additional paid-in capital $10,590 ======= (6) The Weeks outstanding debt assumed is calculated as follows (see note (e)): Weeks outstanding debt $668,904 Fair value adjustment to secured debt 12,109 Fair value adjustment to unsecured debt 1,994 ------- $683,007 ======= (7) Represents estimated costs to be incurred by Duke in connection with the Merger (see note (d)) (8) The adjustment to par value of common shares is calculated as follows: Duke common shares to be issued (see note (a)) 27,261 Par value of common shares $ .01 --------- Total par value of Duke common shares issued 273 Less: Weeks common shares outstanding par value at March 31, 1999 (198) ------- Total adjustment to par value of common shares $ 75 =========
DUKE-WEEKS REALTY CORPORATION NOTES TO PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET MARCH 31, 1999 (UNAUDITED) (IN THOUSANDS) (9) The total purchase accounting adjustment to net real estate investments is calculated as follows: Total adjustment for Duke common shares issued per note (a)(1) $226,783 Total adjustment for Duke common units issued per note (a)(1) 84,098 Total adjustment for Duke Series F Preferred Shares issued per note (a)(2) (7,500) Total adjustment for Duke Operating Partnership preferred units issued per note (a)(4) 2,955 Total adjustment for cash paid for closing costs per note (d) 17,000 Total adjustment to record Weeks debt to fair market value per note (a)(6) 14,103 Total adjustment to record Duke stock options issued per note (a)(5) 10,590 Total adjustment to eliminate assets of Weeks with no future value per note (c) 34,934 -------- Total adjustment to net real estate investments $382,963 ========
(b) The book value of Weeks' land held for development and investments in unconsolidated companies at March 31, 1999, was estimated to approximate the fair value because substantially all land acquisitions and investments in unconsolidated companies occurred within the last 24 months and the acquisition or investment cost is representative of current market conditions. (c) Represents the elimination of assets of Weeks that have no future value to the combined company. (d) Represents the expected incremental borrowings and cash expenditures to fund the following costs to be incurred with the merger: Advisory Fees $13,000 Legal and Professional Fees 3,000 Other 1,000 ------- $17,000 =======
(e) Represents adjustments to Weeks secured and unsecured debt to reflect the premium or discount to adjust these financial instruments to their estimated fair value. The adjustment is based on the present value of amounts to be paid using interest rates available to Duke for debt obligations with similar terms and features. The borrowing rates available to Duke are assumed to be comparable to the borrowing rates available to the combined company. The adjustments are based on current effective interest rates ranging from 6.29% to 7.45%. See note (a)(6). (f) Represents the reclassification of $66,919 of Weeks' distributions in excess of net earnings to additional paid-in capital in accordance with purchase accounting. DUKE-WEEKS REALTY CORPORATION PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL PRO FORMA DUKE-WEEKS ------------------------------- MERGER POST-MERGER DUKE WEEKS ADJUSTMENTS PRO FORMA ---- ----- ----------- --------- Revenues: Rental income $99,479 $44,421 $374(g) $144,274 Equity in earnings of unconsolidated real estate companies 2,508 89 - 2,597 -------------- --------------- -------------- ----------- Total income 101,987 44,510 374 146,871 -------------- --------------- -------------- ----------- Expenses: Rental expenses 18,626 6,341 - 24,967 Real estate taxes 10,817 3,912 - 14,729 Interest 15,991 9,103 (1,029)(h) 24,065 Depreciation and amortization 20,454 11,344 416 (i) 32,214 -------------- --------------- -------------- ----------- Total expenses 65,888 30,700 (613) 95,975 -------------- --------------- -------------- ----------- Earnings from rental operations 36,099 13,810 987 50,896 Earnings from service operations 5,036 - - 5,036 Equity in earnings from unconsolidated service companies - 503 - 503 General and administrative (3,615) (1,756) - (5,371) Other income and expenses 2,681 5,224 - 7,905 -------------- --------------- -------------- ----------- Earnings from continuing operations before minority interest 40,201 17,781 987 58,969 Minority interest in earnings of common unitholders (3,535) (3,432) (154)(j) (7,121) Other minority interest in earnings of subsidiaries (430) (2,102) (2,532) -------------- --------------- -------------- ----------- Net income from continuing operations 36,236 12,247 833 49,316 Less preferred share dividends (8,842) (3,000) - (11,842) -------------- --------------- -------------- ----------- Net income from continuing operations available for common shareholders $27,394 $9,247 $833 $37,474 ============== =============== ============== =========== Weighted average common shares outstanding- basic 86,370 19,728 113,595 ============== =============== =========== Weighted average common shares outstanding- diluted 98,094 27,177 135,599 ============== =============== =========== Net income from continuing operations per common share (note (k)): Basic $0.32 $0.47 $ 0.33 ============== =============== =========== Diluted $0.32 $0.47 $ 0.33 ============== =============== ===========
See accompanying notes to pro forma consolidated statement of operations DUKE-WEEKS REALTY CORPORATION NOTES TO PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) (g) Represents the net increase in rental income as a result of the re-setting of straight-line rents for Weeks under purchase accounting. (h) Represents the decrease in interest expense as a result of the following items for the three months ended March 31, 1999: Decrease based on the pro forma interest rates resulting from the adjustments of Weeks' debt to estimated fair market value as described in note (e) $(513) Decrease in Weeks' deferred finance cost amortization related to the elimination of Weeks deferred finance costs as described in note (c). (516) ------ $(1,029) ======
(i) Represents the net increase in depreciation of real estate as a result of the allocation of purchase price to record Weeks' real estate at estimated fair value for the three months ended March 31, 1999. Additional basis in real estate basis (see note (a)) $382,963 Less amount of step-up allocated to: Developments in progress (76,327) Land portion of operating facilities (43,512) -------- Depreciable portion of additional basis $263,124 ========
The depreciable portion of the additional basis is then allocated to properties placed in service prior to or during the first quarter of 1999 and depreciation expense is computed over the time in service for each property during 1999, based upon a 40 year estimated useful life. The depreciation expense attributable to the additional basis is $1,617, offset by a decrease in amortization expense of $1,201, which is related to the elimination of Weeks deferred costs as described in note (c). (j) Minority interest share of purchase adjustments. DUKE-WEEKS REALTY CORPORATION NOTES TO PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) (k) The following summarizes the calculation of basic and diluted pro forma earnings per share (EPS) for the three months ended March 31, 1999: Basic EPS Calculation: Weighted average common shares outstanding Duke prior to merger 86,370 Duke common shares issued to Weeks (1) 27,225 -------- Adjusted weighted average common shares outstanding - basic 113,595 ======= Pro forma net income from continuing operations available for common shareholders $ 37,474 ======== Basic pro forma EPS $ .33 ========= Diluted EPS Calculation: Adjusted weighted average common shares outstanding for Basic EPS 113,595 Weighted average dilutive potential common shares: Duke exchangeable partnership units 10,828 Duke dilutive potential securities 896 Duke exchangeable partnership units issued to Weeks (1) 10,106 Duke dilutive potential securities after Merger conversion (1) 174 ---------- Adjusted weighted average common and dilutive potential common shares 135,599 ========= Pro forma net income from continuing operations for Basic EPS $ 37,474 Add: minority interest of partnership units 7,121 --------- Pro forma net income from continuing operations for diluted EPS $ 44,595 ========= Diluted pro forma EPS $ .33 =========
(1) The Duke-Weeks pro forma weighted average common shares outstanding reflects adjustments based on the issuance of 1.38 Duke common shares for each weighted average share of Weeks common stock and each weighted average share of Weeks dilutive potential securities and the issuance of 1.38 Duke Operating Partnership units for each weighted average unit of Weeks Operating Partnership. DUKE-WEEKS REALTY CORPORATION PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following pro forma condensed financial statements for Duke-Weeks Realty Corporation ("Duke-Weeks") include certain pro forma adjustments to the historical financial statements of Duke Realty Investments, Inc. ("Duke") to reflect the proposed merger (the "Merger") of Duke and Weeks Corporation ("Weeks"). Weeks Realty Limited Partnership ("Weeks Operating Partnership") will merge with Duke Realty Limited Partnership ("Duke Operating Partnership") immediately preceding the merger of Duke and Weeks. The Merger will be accounted for using the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16. These pro forma condensed consolidated financial statements should be read in conjunction with the Duke Form 10-K as of and for the three years ended December 31, 1998, and also in conjunction with Weeks Form 10-K as of and for the three years ended December 31, 1998. The following pro forma condensed consolidated balance sheet is based upon the December 31, 1998 consolidated balance sheet of Duke and the December 31, 1998 consolidated balance sheet of Weeks presented as if the Merger occurred on December 31, 1998. The following pro forma condensed consolidated statement of operations is based upon the consolidated statement of operations for the year ended December 31, 1998 of Duke and Weeks, presented as if the Merger occurred as of January 1, 1998. The pro forma condensed consolidated financial statements do not purport to be indicative of the actual financial position or results of operations which would have been obtained assuming that the Merger had been completed as set forth above, or which may be obtained in the future. DUKE-WEEKS REALTY CORPORATION PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DECEMBER 31, 1998 (UNAUDITED) (IN THOUSANDS)
HISTORICAL PRO FORMA DUKE-WEEKS -------------------------------------- MERGER POST-MERGER ASSETS DUKE WEEKS ADJUSTMENTS PRO FORMA ------ ---- ----- ----------- -------- C> Real estate $2,589,729 $1,361,843 $287,642 (a) $4,239,214 Land held for development 146,911 42,438 - (b) 189,349 Investment in unconsolidated real estate companies 125,746 35,204 - (b) 160,950 Less accumulated depreciation (179,887) (96,383) 96,383 (a) (179,887) ------------------ ------------------ ----------------- ------------- Net real estate investment 2,682,499 1,343,102 384,025 4,409,626 Cash and cash equivalents 6,950 1,503 (8,453)(d) - Accounts receivable 9,641 9,483 - 19,124 Straight-line rent receivable 20,332 5,833 (5,833)(c) 20,332 Investment in and notes receivable from unconsolidated service companies - 43,639 - 43,639 Deferred financing costs 11,382 8,455 (8,455)(c) 11,382 Deferred other costs 53,281 20,708 (20,708)(c) 53,281 Other assets 69,568 14,869 - 84,437 ------------------ ------------------ ----------------- ------------- TOTAL ASSETS $2,853,653 $1,447,592 $340,576 $4,641,821 ================== ================== ================= ============= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Liabilities: Secured debt $326,317 $251,399 $12,109 (e) $589,825 Unsecured debt 590,000 285,000 1,994 (e) 876,994 Lines of credit 91,000 118,025 8,547 (d) 217,572 Accounts payable and other liabilities 169,495 42,603 - 212,098 ------------------ ------------------ ----------------- ------------- Total liabilities 1,176,812 697,027 22,650 1,896,489 Minority interest Common 106,729 135,653 84,207 (a) 326,589 Preferred - 100,000 2,955 (a) 102,955 ------------------ ------------------ ----------------- ------------- Total minority interest 106,729 235,653 87,162 429,544 Shareholders' equity: Preferred shares: Series A at liquidation preference 75,000 150,000 (150,000)(a) 75,000 Series B at liquidation preference 150,000 - 150,000 Series D convertible at liquidation preference 135,000 - 135,000 Series F at liquidation preference 150,000 (a) 150,000 Common shares 861 197 75 (a) 1,133 Additional paid-in capital 1,277,250 430,923 164,481 (a) 1,872,654 Distributions in excess of earnings (67,999) (66,208) 66,208 (f) (67,999) ------------------ ------------------ ----------------- ------------- Total shareholders' equity 1,570,112 514,912 230,764 2,315,788 ------------------ ------------------ ----------------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,853,653 $1,447,592 $340,576 $4,641,821 ================== ================== ================= =============
See accompnaying notes to pro forma condensed consolidated balance sheet DUKE-WEEKS REALTY CORPORATION NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DECEMBER 31, 1998 (UNAUDITED) (IN THOUSANDS) (a) Represents adjustments to record Weeks' assets and liabilities at their respective purchase values based on the purchase method of accounting. The assumed purchase price of $1.8 billion was computed as follows:
WEEKS DUKE DUKE SHARES AND UNITS EXCHANGE SHARES AND UNITS VALUE ACQUISITION OUTSTANDING RATIO ISSUED PER SHARE COSTS ---------------- -------- ---------------- --------- ------------ Common stock 19,743 1.38 27,245 $21.75 $592,586 Minority Operating Partnership units 7,325 1.38 10,109 $21.75 219,860 ------- ------ ------- 27,068 37,354 812,446 (1) ====== ====== Preferred Series A Stock 6,000 1.00 6,000 $23.75 142,500 (2) ======= Preferred Series C Units 1,400 1.00 1,400 $25.00 35,000 (3) ======= Preferred Series D Units 2,600 1.00 2,600 $26.14 67,955 (4) ======= Duke options and warrants issued 11,990 (5) Weeks outstanding debt assumed 668,527 (6) Other Weeks liabilities assumed 42,603 Estimated transaction costs 17,000 (7) ------------- Total assumed purchase price $1,798,021 =============
(1) Represents the value of the Duke common shares and Duke Operating Partnership units held by minority interests that will be exchanged for the assumed outstanding Weeks common shares and Weeks Operating Partnership units. The value of the Duke common shares and Duke Operating Partnership units is based upon the five day average of the closing price of Duke's common stock as listed on the New York Stock Exchange immediately before, during and after the date the terms of the Merger were agreed to and announced to the public on March 1, 1999. The following purchase accounting adjustments were made to common shareholders' equity: Value of Duke common stock issued $592,586 Less net book value of Weeks common shareholders' equity at December 31, 1998 364,912 --------- Adjustments to common shareholders' equity for Duke common shares issued 227,674 Less: Elimination of Weeks' distributions in excess of earnings (see note (f)) (66,208) Par value adjustment to shareholders' equity (see note (a) (8)) (75) --------- Total adjustment to additional paid-in capital for Duke common shares issued 161,391 Adjustment for Duke Series F Preferred Shares issued (see note (a) (2)) (7,500) Adjustment for Duke options issued (see note (a) (5)) 10,590 --------- Total adjustment to additional paid-in capital $164,481 =========
The following purchase accounting adjustment was made to minority interest: Value of Duke Operating Partnership common units issued to minority interests $219,860 Less book value of Weeks common unitholder minority interest at December 31, 1998 135,653 --------- Total adjustment to minority interest $ 84,207 =========
DUKE-WEEKS REALTY CORPORATION NOTES TO PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET DECEMBER 31, 1998 (UNAUDITED) (IN THOUSANDS) (2) Each outstanding share of Preferred Series A Cumulative Redeemable Preferred Stock of Weeks will be converted into the right to receive one depositary share of Duke representing 1/1000 of a share of Series F Cumulative Redeemable Preferred Stock of Duke. The assumed value of the Duke Series F preferred shares is based upon the average closing price of the Weeks Series A Preferred Stock the two days immediately following the date the terms of the merger were agreed to and announced to the public. The following purchase accounting adjustment will be made to additional paid-in capital: Value of Duke Series F Preferred Stock issued $142,500 Less net book value of Weeks Series A Preferred Stock at December 31, 1998 150,000 ------- Total adjustment to additional paid-in capital $(7,500) ========
(3) The Duke Operating Partnership will issue preferred units valued at the book value (which approximates estimated fair value), of Weeks Operating Partnership Preferred C Units at December 31, 1998. The Duke Operating Partnership Preferred Units will have the same economic attributes as the Weeks Operating Partnership Preferred C Units. (4) The Duke Operating Partnership will issue preferred units valued at the estimated fair value of the Weeks Operating Partnership Preferred D Units at December 31, 1998. The Duke Operating Partnership Preferred Units will have the same economic attributes as the Weeks Operating Partnership Preferred D Units. The adjustment to estimated fair value is based on the present value of amounts to be paid using pricing levels currently available to Duke for preferred securities with similar terms and features. The following purchase accounting adjustment will be made to minority interest: Value of Duke Preferred Units $67,955 Less net book value of Weeks Operating Partnership Series D Preferred Units at December 31, 1998 65,000 ------ Total adjustment to minority interest $ 2,955 =======
(5) Represents the fair value (computed using an option pricing model) of Duke stock options and warrants to be issued to replace outstanding Weeks stock options and warrants. The Duke stock options and warrants will carry the same terms and remaining vesting schedule as the Weeks stock options and warrants being replaced and provide for the option to purchase up to 3,116,000 of Duke common shares. The following purchase accounting adjustment will be made to additional paid-in capital: Value of Duke issued stock options and warrants $11,990 Less book value of Weeks warrants at December 31, 1998 (1,400) ------- Purchase adjustment to additional paid-in capital $10,590 ======
(6) The Weeks outstanding debt assumed is calculated as follows (see note (e)): Weeks outstanding debt $654,424 Fair value adjustment to secured debt 12,109 Fair value adjustment to unsecured debt 1,994 ------- $668,527 =======
(7) Represents estimated costs to be incurred by Duke in connection with the Merger (see note (d)) (8) The adjustment to par value of common shares is calculated as follows: Duke common shares to be issued (see note (a)) 27,245 Par value of common shares $ .01 --------- Total par value of Duke common shares issued 272 Less: Weeks common shares outstanding par value at December 31, 1998 (197) ------- Total adjustment to par value of common shares $ 75 =========
DUKE-WEEKS REALTY CORPORATION NOTES TO PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET DECEMBER 31, 1998 (UNAUDITED) (IN THOUSANDS) (9) The total purchase accounting adjustment to net real estate investments is calculated as follows: Total adjustment for Duke common shares issued per note (a) (1) $227,674 Total adjustment for Duke common units issued per note (a) (1) 84,207 Total adjustment for Duke Series F Preferred Shares issued per note (a) (2) (7,500) Total adjustment for Duke Operating Partnership preferred units issued per note (a) (4) 2,955 Total adjustment for cash paid for closing costs per note (d) 17,000 Total adjustment to record Weeks debt to fair market value per note (a) (6) 14,103 Total adjustment to record Duke stock options issued per note (a) (5) 10,590 Total adjustment to eliminate assets of Weeks with no future value per note (c) 34,996 -------- Total adjustment to net real estate investments $384,025 ========
(b) The book value of Weeks' land held for development and investments in unconsolidated companies at December 31, 1998, was estimated to approximate the fair value because substantially all land acquisitions and investments in unconsolidated companies occurred within the last 24 months and the acquisition or investment cost is representative of current market conditions. (c) Represents the elimination of assets of Weeks that have no future value to the combined company. (d) Represents the expected incremental borrowings and cash expenditures to fund the following costs to be incurred with the merger: Advisory Fees $13,000 Legal and Professional Fees 3,000 Other 1,000 ------- $17,000 =======
(e) Represents adjustments to Weeks secured and unsecured debt to reflect the premium or discount to adjust these financial instruments to their estimated fair value. The adjustment is based on the present value of amounts to be paid using interest rates currently available to Duke for debt obligations with similar terms and features. The borrowing rates available to Duke are assumed to be comparable to the borrowing rates available to the combined company. The adjustments are based on current effective interest rates ranging from 6.29% to 7.45%. See note (a)(6). (f) Represents the reclassification of $66,208 of Weeks' distributions in excess of net earnings to additional paid-in capital in accordance with purchase accounting. DUKE-WEEKS REALTY CORPORATION PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL PRO FORMA DUKE-WEEKS ------------------------- MERGER POST-MERGER DUKE WEEKS ADJUSTMENTS PRO FORMA ---- ---- ----------- ------------ Revenues: Rental income $337,768 $150,974 $2,102 (g) $490,844 Equity in earnings of unconsolidated real estate companies 10,857 329 - 11,186 ------------- ---------- --------------- ---------------- Total income 348,625 151,303 2,102 502,030 ------------- ---------- --------------- ---------------- Expenses: Rental expenses 59,769 22,494 - 82,263 Real estate taxes 33,906 12,824 - 46,730 Interest 60,217 30,782 (3,054)(h) 87,945 Depreciation and amortization 68,766 38,348 1,987 (i) 109,101 ------------- ---------- --------------- ---------------- Total expenses 222,658 104,448 (1,067) 326,039 ------------- ---------- --------------- ---------------- Earnings from rental operations 125,967 46,855 3,169 175,991 Earnings from service operations 7,195 - - 7,195 Equity in earnings from unconsolidated service companies - 2,535 - 2,535 General and administrative (11,573) (5,809) - (17,382) Other income and expenses 2,608 1,018 - 3,626 ------------- ---------- --------------- ---------------- Earnings from continuing operations before minority interest 124,197 44,599 3,169 171,965 Minority interest in earnings of common unitholders (12,241) (8,267) (506)(j) (21,014) Other minority interest in earnings of subsidiaries (1,252) (1,191) - (2,443) ------------- ---------- --------------- ---------------- Net income from continuing operations 110,704 35,141 2,663 148,508 Less preferred share dividends (19,833) (12,000) (31,833) ------------- ---------- --------------- ---------------- Net income from continuing operations available for common shareholders $90,871 $23,141 $2,663 $116,675 ============= ========= =============== ================ Weighted average common shares outstanding- basic 80,704 19,256 107,277 ============= ========= ================ Weighted average common shares outstanding- diluted 92,468 26,299 128,761 ============= ========= =============== Net income from continuing operations per share (note (k)): Basic $1.13 $1.20 $ 1.09 ============= ======== ============= Diluted $1.12 $1.19 $ 1.07 ============= ======== =============
See accompanying notes to pro forma consolidated statement of operations DUKE-WEEKS REALTY CORPORATION NOTES TO PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) (g) Represents the net increase in rental income as a result of the re-setting of straight-line rents for Weeks under purchase accounting. (h) Represents the net change in interest expense as a result of the following items for the year ended December 31, 1998: Decrease based on the pro forma interest rates resulting from the adjustments of Weeks' debt to estimated fair market value as described in note (e) $(1,931) Decrease in Weeks' deferred finance cost amortization related to the elimination of Weeks deferred finance costs as described in note (c). (1,686) Increase related to additional borrowings on the line of credit to fund Merger related costs identified in note (d) 563 -------- $(3,054) ========
(i) Represents the net increase in depreciation of real estate as a result of the allocation of purchase price to record Weeks' real estate at estimated fair value for the year ended December 31, 1998. Additional basis in real estate basis (see note (a)) $384,025 Less amount of step-up allocated to: Developments in progress (85,487) Land portion of operating facilities (42,118) --------- Depreciable portion of additional basis $256,420 =========
The depreciable portion of the additional basis is then allocated to properties placed in service prior to or during 1998 and depreciation expense is computed over the time in service for each property during 1998, based upon a 40 year estimated useful life. The depreciation expense attributable to the additional basis is $5,586, offset by a decrease in amortization expense of $3,599, which is related to the elimination of Weeks deferred leasing costs as described in note (c). (j) Minority interest share of purchase adjustments. DUKE-WEEKS REALTY CORPORATION NOTES TO PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) (k) The following summarizes the calculation of basic and diluted pro forma earnings per share (EPS) for the year ended December 31, 1998: Basic EPS Calculation: Weighted average common shares outstanding Duke prior to merger 80,704 Duke common shares issued to Weeks (1) 26,573 -------- Adjusted weighted average common shares outstanding - basic 107,277 ======= Pro forma net income from continuing operations available for common shareholders $ 116,675 ========= Basic pro forma EPS $ 1.09 ========= Diluted EPS Calculation: Adjusted weighted average common shares outstanding for Basic EPS 107,277 Weighted average dilutive potential common shares: Duke exchangeable partnership units 10,872 Duke dilutive potential securities 892 Duke exchangeable partnership units issued to Weeks (1) 9,492 Duke dilutive potential securities after Merger conversion (1) 228 ---------- Adjusted weighted average common and dilutive potential common shares 128,761 ========= Pro forma net income from continuing operations for Basic EPS $ 116,675 Add: minority interest of partnership units 21,014 --------- Pro forma net income from continuing operations for diluted EPS $ 137,689 ========= Diluted pro forma EPS $ 1.07 =========
(1) The Duke-Weeks pro forma weighted average common shares outstanding reflects adjustments based on the issuance of 1.38 Duke common shares for each weighted average share of Weeks common stock and each weighted average share of Weeks dilutive potential securities and the issuance of 1.38 Duke Operating Partnership units for each weighted average limited partnership unit of Weeks Operating Partnership. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. DUKE-WEEKS REALTY CORPORATION Date: August 3, 1999 By: /s/ Matthew A. Cohoat ------------------------ Matthew A. Cohoat Vice President and Corporate Controller -----END PRIVACY-ENHANCED MESSAGE-----