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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
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)
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Notes to pro forma condensed consolidated financial statements.
Pro forma condensed consolidated balance sheet as of June 30, 1999
Notes to pro forma condensed consolidated balance sheet as of June 30, 1999
Pro forma condensed consolidated statement of operations for the six months
ended June 30, 1999
Notes to pro forma condensed consolidated statement of operations
for the six months ended June 30, 1999
<PAGE>
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 merger (the "Merger")
of Duke and Weeks Corporation ("Weeks"), which occurred on
July 2, 1999.
Weeks Realty Limited Partnership ("Weeks Operating Partnership")
merged with Duke Realty Limited Partnership ("Duke Operating
Partnership") immediately preceding the merger of Duke and Weeks.
The Merger has been 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 six months ended June 30, 1999.
The following pro forma condensed consolidated balance sheet is
based upon the June 30, 1999 consolidated balance sheet of Duke
and the June 30, 1999 consolidated balance sheet of Weeks,
presented as if the Merger occurred on June 30, 1999.
The following pro forma condensed consolidated statement of
operations is based upon the consolidated statement of operations
for the six months ended June 30, 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.
<PAGE>
DUKE-WEEKS REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA DUKE-WEEKS
---------------------- MERGER POST-MERGER
ASSETS DUKE WEEKS ADJUSTMENTS PRO FORMA
- ------ ---- ----- ----------- -----------
<S> <C> <C> <C> <C>
Real estate $2,924,629 $1,475,379 $276,630 (a) $4,676,638
Land held for development 181,274 41,239 - (b) 222,513
Investment in unconsolidated
real estate companies 114,570 10,205 - (b) 124,775
Less accumulated
depreciation (204,750) (110,964) 110,964 (a) (204,750)
--------- --------- ------- ---------
Net real estate
investment 3,015,723 1,415,859 387,594 4,819,176
Cash and cash equivalents 172,744 346 (17,000)(d) 156,090
Accounts receivable 10,720 8,027 - 18,747
Straight-line rent receivable 23,581 7,259 (7,259)(c) 23,581
Investment in and notes
receivable from
unconsolidated service
companies - 43,025 - 43,025
Deferred financing costs 15,014 7,448 (7,448)(c) 15,014
Deferred other costs 57,720 21,009 (21,009)(c) 57,720
Other assets 132,210 12,471 - 144,681
--------- --------- ------- ---------
TOTAL ASSETS $3,427,712 $1,515,444 $334,878 $5,278,034
========= ========= ======= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Secured debt $ 341,556 $ 229,124 $ 10,942 (e) $ 581,622
Unsecured debt 890,000 285,000 1,908 (e) 1,176,908
Lines of credit 159,000 195,090 - 354,090
Accounts payable and other
liabilities 178,946 54,815 - 233,761
--------- --------- ------- ---------
Total liabilities 1,569,502 764,029 12,850 2,346,381
Minority interest
Common 109,248 135,332 85,308 (a) 329,888
Preferred - 100,000 2,955 (a) 102,955
--------- --------- -------- ---------
Total minority interest 109,248 235,332 88,263 432,843
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 897 199 76 (a) 1,172
Additional paid-in capital 1,358,586 435,696 163,877 (a) 1,958,159
Distributions in excess of
earnings (70,521) (69,812) 69,812 (f) (70,521)
--------- --------- ------- ---------
Total shareholders'
equity 1,748,962 516,083 233,765 2,498,810
--------- --------- ------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $3,427,712 $1,515,444 $334,878 $5,278,034
========= ========= ======= =========
</TABLE>
See accompanying notes to pro forma condensed consolidated balance sheet
<PAGE>
DUKE-WEEKS REALTY CORPORATION
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 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 $1.9
billion was computed as follows:
<TABLE>
<CAPTION>
WEEKS SHARES DUKE SHARES DUKE
AND UNITS EXCHANGE AND UNITS VALUE ACQUISITION
OUTSTANDING RATIO ISSUED PER SHARE COSTS
----------- -------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Common stock 19,882 1.38 27,437 $21.75 $ 596,758
Minority Operating
Partnership units 7,351 1.38 10,144 $21.75 220,640
------ ------ ---------
27,233 37,581 817,398 (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 722,064 (6)
Other Weeks
Liabilities
assumed 54,815
Estimated
transaction
costs 17,000 (7)
---------
Total assumed purchase price $1,868,722
=========
</TABLE>
(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:
<TABLE>
<CAPTION>
<S> <C>
Value of Duke common stock issued $596,758
Less net book value of Weeks common
shareholders' equity at June 30, 1999 366,083
-------
Adjustments to common shareholders'
equity for Duke common shares issued 230,675
Less: Elimination of Weeks' distributions
in excess of earnings (see note (f)) (69,812)
Par value adjustment to shareholders'
equity (see note (a) (8)) (76)
-------
Total adjustment to additional paid-in
capital for Duke common shares issued 160,787
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 purchase accounting adjustment
to additional paid-in capital $163,877
=======
</TABLE>
The following purchase accounting adjustment will be made to
minority interest:
<TABLE>
<CAPTION>
<S> <C>
Value of Duke Operating Partnership
common units issued to minority interests $220,640
Less book value of Weeks common unitholder
minority interest at June 30, 1999 135,332
-------
Total purchase accounting adjustment to
minority interest $ 85,308
=======
</TABLE>
<PAGE>
DUKE-WEEKS REALTY CORPORATION
NOTES TO PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 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:
<TABLE>
<CAPTION>
<S> <C>
Value of Duke Series F Preferred
Stock issued $142,500
Less net book value of Weeks Series
A Preferred Stock at June 30, 1999 150,000
-------
Total purchase accounting adjustment
to additional paid-in capital $ (7,500)
=======
</TABLE>
(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 June
30, 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 June 30, 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:
<TABLE>
<CAPTION>
<S> <C>
Value of Duke Operating Partnership
Preferred Units $67,955
Less net book value of Weeks Operating
Partnership Series D Preferred Units
at June 30, 1999 65,000
------
Total purchase accounting adjustment
to minority interest $ 2,955
======
</TABLE>
(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:
<TABLE>
<CAPTION>
<S> <C>
Value of Duke issued stock options and warrants $11,990
Less book value of Weeks warrants at June 30, 1999 (1,400)
------
Total purchase accounting adjustment to
additional paid-in capital $10,590
======
</TABLE>
(6) The Weeks outstanding debt assumed is calculated as follows
(see note (e)):
<TABLE>
<CAPTION>
<S> <C>
Weeks outstanding debt $709,214
Fair value adjustment to secured debt 10,942
Fair value adjustment to unsecured debt 1,908
-------
$722,064
=======
</TABLE>
(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:
<TABLE>
<CAPTION>
<S> <C>
Duke common shares to be issued (see note (a)) 27,437
Par value of common shares $ .01
------
Total par value of Duke common shares issued 275
Less: Weeks common shares outstanding par
value at June 30, 1999 (199)
------
Total adjustment to par value of common shares $ 76
======
</TABLE>
(9) The total purchase accounting adjustment to net real estate
investments is calculated as follows:
<TABLE>
<CAPTION>
<S> <C>
Total adjustment for Duke common shares
issued per note (a) (1) $230,675
Total adjustment for Duke common units
issued per note (a) (1) 85,308
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 at fair
market value per note (a) (6) 12,850
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) 35,716
-------
Total adjustment to net real estate investments $387,594
=======
</TABLE>
(b) The book value of Weeks' land held for development and
investments in unconsolidated companies at June 30, 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 cash expenditures to fund the
following costs to be incurred with the merger:
<TABLE>
<CAPTION>
<S> <C>
Advisory Fees $13,000
Legal and Professional Fees 3,000
Other 1,000
------
$17,000
======
</TABLE>
(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 $69,812 of Weeks'
distributions in excess of net earnings to additional paid-in
capital in accordance with purchase accounting.
<PAGE>
DUKE-WEEKS REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION> HISTORICAL PRO FORMA DUKE-WEEKS
----------------------- MERGER POST-MERGER
DUKE WEEKS ADJUSTMENTS PRO FORMA
---- ----- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Rental income $203,848 $90,207 $ 876 (g) $294,931
Equity in earnings of
unconsolidated real 5,287 157 - 5,444
------- ------ ----- -------
Total income 209,135 90,364 876 300,375
------- ------ ----- -------
Expenses:
Rental expenses 36,127 13,297 - 49,424
Real estate taxes 22,491 8,083 - 30,574
Interest 33,120 18,564 (2,202)(h) 49,482
Depreciation and
amortization 41,389 23,333 534 (i) 65,256
------- ------ ------ -------
Total expenses 133,127 63,277 (1,668) 194,736
------- ------ ------ -------
Earnings from rental
operations 76,008 27,087 2,544 105,639
Earnings from service
operations 8,618 - - 8,618
Equity in earnings from
unconsolidated service
companies - 2,310 - 2,310
General and administrative (7,111) (3,731) - (10,842)
Other income and expenses 5,092 6,981 - 12,073
------- ------ ------ -------
Earnings from continuing
operations before minority
interest 82,607 32,647 2,544 117,798
Minority interest in
earnings of common
unitholders (6,641) (6,084) (383)(j) (13,108)
Other minority interest
in earnings of
subsidiaries (880) (4,204) - (5,084)
------- ------ ----- -------
Net income from
continuing
operations 75,086 22,359 2,161 99,606
Less preferred share
dividends (18,096) (6,000) - (24,096)
------- ------ ----- -------
Net income from continuing
operations available
for common shareholders
before extraordinary
loss (note (k)) $ 56,990 $16,359 $2,161 $ 75,510
======= ====== ===== =======
Weighted average common
shares outstanding -
basic 87,367 19,770 114,650
======= ====== =======
Weighted average common
shares outstanding -
diluted 98,477 27,304 136,157
======= ====== =======
Net income from
continuing opera-
tions per common
share (note (l)):
Basic $ 0.65 $ 0.83 $ 0.66
======= ====== =======
Diluted $ 0.65 $ 0.82 $ 0.65
======= ====== =======
</TABLE>
See accompanying notes to pro forma consolidated statement of operations
<PAGE>
DUKE-WEEKS REALTY CORPORATION
NOTES TO PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 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 six months ended June 30, 1999:
<TABLE>
<CAPTION>
<S> <C>
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) $(1,181)
Decrease in Weeks' deferred finance cost
amortization related to the elimination
of Weeks deferred finance costs as described
in note (c). (1,021)
------
$(2,202)
======
</TABLE>
(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 six months ended
June 30, 1999.
<TABLE>
<CAPTION>
<S> <C>
Additional basis in real estate investment
(see note (a)) $387,594
Less amount of step-up allocated to:
Developments in progress (91,990)
Land portion of operating facilities (42,290)
-------
Depreciable portion of additional basis $253,314
=======
</TABLE>
The depreciable portion of the additional basis is then
allocated to properties placed in service prior to or during
the first two quarters 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
$3,034, offset by a decrease in amortization expense of
$2,500, which is related to the elimination of Weeks deferred
costs as described in note (c).
(j) Minority interest share of purchase adjustments.
(k) The indicated operations for Weeks exclude a $490
extraordinary loss (net of minority interests) incurred in the
second quarter of 1999 related to the early extinguishment of
certain debt obligations in connection with the Merger. These
costs would have no effect on the pro-forma financial
statements of Duke-Weeks.
<PAGE>
DUKE-WEEKS REALTY CORPORATION
NOTES TO PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(l) The following summarizes the calculation of basic and diluted
pro forma earnings per share (EPS) for the six months ended
June 30, 1999:
<TABLE>
<CAPTION>
<S> <C>
Basic EPS Calculation
Weighted average common shares outstanding:
Duke prior to merger 87,367
Duke common shares issued to Weeks (1) 27,283
-------
Adjusted weighted average common shares
outstanding - basic 114,650
=======
Pro forma net income from continuing operations
available for common shareholders $ 75,510
=======
Basic pro forma EPS $ .66
=======
Diluted EPS Calculation
Adjusted weighted average common shares
outstanding for Basic EPS 114,650
Weighted average dilutive potential
common shares:
Duke exchangeable partnership units 10,181
Duke dilutive potential securities 929
Duke exchangeable partnership units issued
to Weeks (1) 10,149
Duke dilutive potential securities after
Merger conversion (1) 248
-------
Adjusted weighted average common and dilutive
potential common shares 136,157
=======
Pro forma net income from continuing
operations for Basic EPS $ 75,510
Add: minority interest of
partnership units 13,108
-------
Pro forma net income from continuing
operations for diluted EPS 88,618
=======
Diluted pro forma EPS $ .65
=======
</TABLE>
(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.
<PAGE>
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: September 15, 1999 By: /s/ Matthew A. Cohoat
----------------------------
Matthew A. Cohoat
Vice President and
Corporate Controller