<PAGE>
===========================================================================
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)
===========================================================================
<PAGE>
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
<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 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.
<PAGE>
DUKE-WEEKS REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 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 $2,720,892 $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
==================== =========== ================= ===============
</TABLE>
See accompanying notes to pro forma condensed consolidated balance sheet
<PAGE>
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:
<TABLE>
<CAPTION>
WEEKS DUKE DUKE
SHARES AND UNITS EXCHANGE SHARES AND UNITS VALUE ACQUISITION
OUTSTANDING RATIO ISSUED PER SHARE COSTS
----------------- -------- ---------------- --------- -----------
<S> <C> <C> <C> <C> <C>
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
==========
</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>
<S> <C>
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
========
</TABLE>
<PAGE>
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:
<TABLE>
<S> <C>
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)
========
</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 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:
<TABLE>
<S> <C>
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
=======
</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>
<S> <C>
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
=========
</TABLE>
<PAGE>
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:
<TABLE>
<S> <C>
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
========
</TABLE>
(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:
<TABLE>
<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 $66,919 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 THREE MONTHS ENDED MARCH 31, 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 $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
============== =============== ===========
</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 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:
<TABLE>
<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) $(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)
======
</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 three months ended March 31, 1999.
<TABLE>
<S> <C>
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
========
</TABLE>
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.
<PAGE>
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:
<TABLE>
<S> <C>
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
=========
</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>
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.
<PAGE>
DUKE-WEEKS REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(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 $2,589,729 $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
================== ================== ================= =============
</TABLE>
See accompnaying notes to pro forma condensed consolidated balance sheet
<PAGE>
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:
<TABLE>
<CAPTION>
WEEKS DUKE DUKE
SHARES AND UNITS EXCHANGE SHARES AND UNITS VALUE ACQUISITION
OUTSTANDING RATIO ISSUED PER SHARE COSTS
---------------- -------- ---------------- --------- ------------
<S> <C> <C> <C> <C> <C>
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
=============
</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 were made to common
shareholders' equity:
<TABLE>
<S> <C>
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
=========
</TABLE>
The following purchase accounting adjustment was made to minority
interest:
<TABLE>
<S> <C>
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
=========
</TABLE>
<PAGE>
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:
<TABLE>
<S> <C>
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)
========
</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 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:
<TABLE>
<S> <C>
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
=======
</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>
<S> <C>
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
======
</TABLE>
(6) The Weeks outstanding debt assumed is calculated as follows (see note (e)):
<TABLE>
<S> <C>
Weeks outstanding debt $654,424
Fair value adjustment to secured debt 12,109
Fair value adjustment to unsecured debt 1,994
-------
$668,527
=======
</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>
<S> <C>
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
=========
</TABLE>
<PAGE>
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:
<TABLE>
<S> <C>
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
========
</TABLE>
(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:
<TABLE>
<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 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.
<PAGE>
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)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA DUKE-WEEKS
------------------------- MERGER POST-MERGER
DUKE WEEKS ADJUSTMENTS PRO FORMA
---- ---- ----------- ------------
<S> <C> <C> <C> <C>
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
============= ======== =============
</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 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:
<TABLE>
<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) $(1,931)
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)
========
</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 year ended December 31, 1998.
<TABLE>
<S> <C>
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
=========
</TABLE>
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.
<PAGE>
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:
<TABLE>
<S> <C>
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
=========
</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 limited
partnership 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: August 3, 1999 By: /s/ Matthew A. Cohoat
------------------------
Matthew A. Cohoat
Vice President and
Corporate Controller
