UNITED STATES
SECURITIES and EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 11, 2003
------------------
KOGER EQUITY, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA
--------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
1-9997 59-2898045
--------------------------------------------------------------------------------
(Commission File Number) (IRS Employer Identification No.)
225 NE Mizner Boulevard, Suite 200
Boca Raton, Florida 33432
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(561) 395-9666
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------------
N/A
--------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
Koger Equity, Inc. (the "Company") is amending its Form 8-K filed on September
15, 2003, to include (i) a Statement of Revenues and Certain Expenses for the
Rosemeade Building and CIGNA Plaza (the "Properties") for the year ended
December 31, 2002 as required by Rule 3-14 of Regulation S-X of the Securities
and Exchange Commission and (ii) unaudited pro forma financial statements
including (a) the Company's pro forma statement of operations for the year ended
December 31, 2002, as if the acquisition of the Properties occurred on January
1, 2002, (b) the Company's pro forma statement of operations for the nine months
ended September 30, 2003, as if the acquisition of the Properties occurred on
January 1, 2003, and (c) a pro forma statement of estimated taxable operating
results and estimated cash to be made available by operations of the Company for
the year ended December 31, 2002, as if the acquisition of the Properties
occurred on January 1, 2002.
Item 2. Acquisition or Disposition of Assets.
On September 11, 2003, the Company acquired the Properties in Dallas, Texas for
approximately $33.1 million. The Properties are comprised of two office
buildings which contain approximately 280,000 square feet of rentable space. The
Rosemeade Building is located at the intersection of the George Bush Turnpike
and the Dallas North Tollway in the Far North Dallas submarket. CIGNA Plaza is
located at the intersection of State Highway 114 and the George Bush Turnpike,
in Las Colinas and adjacent to the Dallas/Ft. Worth International Airport. The
Company utilized a portion of the proceeds from the Company's issuance of Series
A preferred stock to fund the acquisition. The Properties were acquired from the
State Teachers Retirement System of Ohio, an unrelated third party.
The Company considered various factors in determining the price to be paid for
this acquisition. Factors considered included the nature of the tenants and
terms of leases in place, opportunities for alternative and new tenancies,
historical and expected cash flows, occupancy rates, current operating costs on
the Properties and anticipated changes therein under Company ownership, the
physical condition and location of the Properties, the need for capital
improvements, the anticipated effect on the Company's financial results, and
other factors. The Company took into consideration capitalization rates at which
it believed other comparable properties had recently sold. However, the Company
determined the price it was willing to pay primarily on the factors discussed
above relating to the Properties and their fit into the Company's existing
operations. No separate independent appraisal was obtained in connection with
this acquisition. The Company, after investigation, is not aware of any material
factors, other than those discussed above, that would cause the financial
information reported not to be necessarily indicative of future operating
results. The Company intends to lease office space in the Properties to tenants
as it does the other office buildings contained in its portfolio. The Properties
will be managed and leasing operations will be conducted by a third party
management company.
1
Item 7. Financial Statements and Exhibits
The following financial statements and pro forma financial information are filed
as part of this report.
(a) Financial Statements of Real Estate Acquired.
Statement of Revenues and Certain Expenses of the Rosemeade Building
and CIGNA Plaza for the year ended December 31, 2002.
(b) Pro Forma Financial Statements
The following unaudited pro forma financial statements set forth (i)
the pro forma statement of operations for the year ended December 31,
2002, as if the acquisition occurred on January 1, 2002 and (ii) the
pro forma statement of operations for the nine months ended September
30, 2003, as if the acquisition occurred on January 1, 2003. The pro
forma financial statements are based upon assumptions contained in the
notes thereto and should be read in conjunction with such notes.
The following unaudited pro forma financial statements may not
necessarily reflect the results of operations or financial position of
the Company which would have actually resulted had the acquisition
occurred as of the date and for the periods indicated, nor should they
be taken as indicative of the future results of operations or the
future financial position of the Company. Differences would result
from various factors, including but not limited to changes in the
Properties' occupancy, rental rates and rental expenses.
2
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Koger Equity, Inc.
Boca Raton, Florida:
We have audited the accompanying statement of revenues and certain expenses of
the properties known as the Rosemeade Building and CIGNA Plaza (the
"Properties") for the year ended December 31, 2002. This financial statement is
the responsibility of the Properties. Our responsibility is to express an
opinion on the financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
the significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission (for inclusion in the filing of a Form 8-K/A of Koger
Equity, Inc. dated September 11, 2003 as a result of the acquisition of the
Properties). Material amounts, described in Note 1 to the statement of revenues
and certain expenses, that would not be comparable to those resulting from
future operations of the Properties are excluded and, accordingly, the statement
is not intended to be a complete presentation of the Properties' revenues and
expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenues and certain expenses of the Properties for
the year ended December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Certified Public Accountants
West Palm Beach, Florida
November 21, 2003
3
THE ROSEMEADE BUILDING AND CIGNA PLAZA
STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 2002
REVENUES:
Base rental income $ 6,024,056
Operating expense recovery 1,052,665
Parking, antennae, and other income 4,714
-----------
Total revenues 7,081,435
-----------
CERTAIN EXPENSES:
Properties' operating 1,322,110
Real estate and other taxes 1,052,160
Management costs and fees 268,235
-----------
Total certain expenses 2,642,505
-----------
REVENUES IN EXCESS OF CERTAIN EXPENSES $ 4,438,930
===========
See notes to statement of revenues and certain expenses.
4
THE ROSEMEADE BUILDING AND CIGNA PLAZA
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 2002
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Rosemeade Building and CIGNA Plaza (the "Properties"), two office
buildings containing approximately 280,000 square feet of rentable space and
located in Dallas, Texas, were acquired from the State Teachers Retirement
System of Ohio, an unrelated third party, on September 11, 2003. The statement
of revenues and certain expenses includes information related to the operations
of the Properties for the year ended December 31, 2002 as recorded by the
Properties' previous owners, subject to the adjustments described below.
The accompanying historical financial statement information is presented in
conformity with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission. Accordingly, the financial statement is not representative of the
actual operations for the year ended December 31, 2002 as certain expenses,
which may not be comparable to the expenses expected to be incurred in the
future operations of the Properties, have been excluded. Expenses excluded
consist of interest, depreciation and amortization, and other costs not directly
related to the future operations of the acquired Properties.
Management's Use of Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Rental Income - Rental income is recognized on a straight-line basis over
the terms of the related leases.
Properties Operating Expenses - The Properties' operating expenses consist
primarily of utilities, insurance, repairs and maintenance, security and safety,
cleaning, bad debts and other administrative expenses.
Management Costs and Fees - At the date of acquisition, the Properties were
being managed by a third party manager for a management fee of approximately two
percent of rental and other revenues plus reimbursement of personnel expenses
and other costs related to management of the properties.
5
THE ROSEMEADE BUILDING AND CIGNA PLAZA
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 2002
2. OPERATING LEASES
Operating revenue is principally obtained from business tenant rentals
under operating leases. Future minimum base rental income under all tenant
operating leases as of December 31, 2002 are as follows:
Year ending December 31, Amount
------------------------ ------------
2003 $ 5,997,385
2004 6,138,750
2005 6,167,854
2006 5,449,506
2007 4,523,722
Thereafter 4,625,874
------------
Total $ 32,903,091
============
For the year ended December 31, 2002, CIGNA General Life Insurance Co. and
Nortel Networks Inc. contributed approximately 46% and 24% of the Properties'
base rental income, respectively.
6
KOGER EQUITY, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the year ended December 31, 2002
(In Thousands except per Share Data)
Historical Pro Forma Pro Forma
2002 Adjustments 2002
---------- ----------- ---------
REVENUES
Rental and other rental services $126,404 $ 7,081 (a) $133,485
Management fees 3,347 3,347
Interest 405 405
--------- ---------- ---------
Total revenues 130,156 7,081 137,237
--------- ---------- ---------
EXPENSES
Properties operations 46,235 2,643 (a) 48,878
Depreciation and amortization 27,908 694 (b) 28,602
Mortgage and loan interest 25,145 25,145
General and administrative 11,381 11,381
Direct cost of management fees 3,335 3,335
Other 143 143
--------- ---------- ---------
Total expenses 114,147 3,337 117,484
--------- ---------- ---------
INCOME BEFORE GAIN ON SALE OF ASSETS,
INCOME TAXES AND MINORITY INTEREST 16,009 3,744 19,753
Gain on sale of assets 21 21
--------- ---------- ---------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 16,030 3,744 19,774
Income tax (benefit) provision (413) 176 (c) (237)
--------- ---------- ---------
INCOME BEFORE MINORITY INTEREST 16,443 3,568 20,011
Minority interest (20) (20)
--------- ---------- ---------
NET INCOME 16,423 3,568 19,991
Dividends on Preferred Stock (2,665) (2,665) (d)
--------- ---------- ---------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 16,423 $ 903 $ 17,326
--------- ---------- ---------
EARNINGS PER COMMON SHARE:
Basic $ .77 $ .81
========= =========
Diluted $ .77 $ .81
========= =========
WEIGHTED AVERAGE COMMON SHARES:
Basic 21,269 21,269
========= =========
Diluted 21,378 21,378
========= =========
See accompanying notes to unaudited pro forma financial statements.
7
KOGER EQUITY, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the nine months ended September 30, 2003
(In Thousands except per Share Data)
Historical Pro Forma Pro Forma
2003 Adjustments 2003
----------- ------------ ----------
REVENUES
Rental and other rental services
$107,407 $ 5,620 (a) $113,027
Management fees 331 331
Interest 184 184
--------- --------- ---------
Total revenues 107,922 5,620 113,542
--------- --------- ---------
EXPENSES
Properties operations 41,949 2,429 (a) 44,378
Depreciation and amortization 24,537 521 (b) 25,058
Mortgage and loan interest 22,059 22,059
General and administrative 8,415 8,415
Direct cost of management fees 88 88
Other 103 103
--------- --------- ---------
Total expenses 97,151 2,950 100,101
--------- --------- ---------
INCOME BEFORE GAIN ON SALE OF ASSETS,
INCOME TAXES AND MINORITY INTEREST 10,771 2,670 13,441
Gain on sale of assets 589 589
--------- --------- ---------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 11,360 2,670 14,030
Income tax (benefit) provision (22) 140 (c) 118
--------- --------- ---------
INCOME BEFORE MINORITY INTEREST 11,382 2,530 13,912
Minority interest
--------- --------- ---------
NET INCOME 11,382 2,530 13,912
Dividends on Preferred Stock (371) (2,021) (d) (2,392)
--------- --------- ---------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 11,011 $ 509 $ 11,520
--------- --------- ---------
EARNINGS PER COMMON SHARE:
Basic $ .52 $ .54
========= =========
Diluted $ .52 $ .54
========= =========
WEIGHTED AVERAGE COMMON SHARES:
Basic 21,314 21,314
========= =========
Diluted 21,377 21,377
========= =========
See accompanying notes to unaudited pro forma financial statements.
8
KOGER EQUITY, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. Basis of Presentation
On September 11, 2003, Koger Dallas I Limited Partnership and Koger Dallas
II Limited Partnership, wholly-owned subsidiaries of Koger Equity, Inc. (the
"Company"), acquired the CIGNA Plaza and the Rosemeade Building (the
"Properties"), respectively. The Properties consist of two office buildings
containing approximately 280,000 square feet of rentable space located in
Dallas, Texas and were acquired from the State Teachers Retirement System of
Ohio, an unrelated third party. The unaudited pro forma financial statements
include information related to the operations of the Properties for the year
ended December 31, 2002 as recorded by the Properties' previous owner, subject
to the adjustments described below.
2. Unaudited Pro Forma Statements of Operations
The unaudited pro forma statement of operations for the year ended December
31, 2002 includes adjustments assuming that the acquisition of the Properties
occurred as of January 1, 2002, and is based on the historical statement of
operations for the Company presented in the Annual Report on Form 10-K for the
year ended December 31, 2002. The unaudited pro forma statement of operations
for the nine months ended September 30, 2003, includes adjustments assuming that
the acquisition of the Properties occurred as of January 1, 2003 and is based on
the historical statement of operations for the Company presented in its
Quarterly Report on Form 10-Q for the period ended September 30, 2003.
Significant pro forma adjustments in the unaudited pro forma statement of
operations include the following:
(a) Adjustment required for the historical rental revenues and operating
expenses for the Properties. Operating expenses include management
costs and fees calculated using the historical management costs of the
Properties. The Properties were managed by a third party manager for a
management fee of approximately two percent of rental and other
revenues plus reimbursement of personnel and other costs related to
management of the properties.
(b) Adjustment required to reflect depreciation on the Properties, based
on the total cost of the acquisition. The Company uses the
straight-line method for depreciation with an estimated life of 39
years for the Properties.
(c) Adjustment required to reflect applicable federal income and state
franchise taxes on the Properties's taxable income. The Properties's
taxable income has been reduced by ninety percent for dividends paid
to the Company's shareholders.
(d) Adjustment required to reflect dividends accrued on shares of 8-1/2%
Series A Cumulative Redeemable Preferred Stock issued to finance the
acquisition of the Properties.
9
KOGER EQUITY, INC.
UNAUDITED STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
AND ESTIMATED CASH TO BE MADE AVAILABLE BY OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2002
(In Thousands)
Revenues
Rental and other rental services $ 131,788
Management fees 3,347
Interest 405
---------
Total revenues 135,540
---------
Expenses
Properties operations 49,237
Depreciation and amortization 23,983
Mortgage and loan interest 25,145
General and administrative 9,111
Direct cost of management fees 3,335
Other 143
Compensation - exercise of stock options 677
---------
Total expenses 111,631
---------
Estimated Taxable Operating Income 23,909
Add Back: Depreciation and Amortization 23,983
---------
Estimated Cash To Be Made Available By Operations $ 47,892
=========
Note 1: This statement of estimated taxable operating results and
estimated cash to be made available by operations is an
estimate of operating results of the Company for the twelve
month period ended December 31, 2002 assuming that the
acquisition of the Rosemeade Building and CIGNA Plaza
occurred on the first day of the twelve month period.
However, this statement does not purport to reflect actual
taxable results for any period.
Note 2: Tax depreciation was determined based upon the actual tax
depreciation for the Company's existing portfolio and based
upon the assumption that the acquisition of the Rosemeade
Building and CIGNA Plaza occurred on the first day of the
twelve month period.
10
(c) Exhibits
EXHIBIT INDEX
The following designated exhibits are filed herewith:
Exhibit
Number Description of Exhibit
------- ----------------------
23 Consent of Deloitte and Touche LLP
99 Koger Equity, Inc. News Release dated August 4, 2003 which
is Exhibit 99 to the Company's current report on Form 8-K
dated August 4, 2003 which Exhibit is incorporated herein by
reference.
11
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, thereunto duly authorized.
KOGER EQUITY, INC.
Dated: November 21, 2003 By: /s/ Steven A. Abney
-------------------
Steven A. Abney
Title: Vice President, Finance and Chief
Accounting Officer
(Principal Financial Officer)
12