-----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, L1Qn5fNFfLtcWzOKaKOKsFEngUmygSQFRD4jAucdsliFHjlquiI0/QbE/Hm0o/39 790lx2vEJUoltKoLbkxr2w== 0000891092-03-001946.txt : 20030805 0000891092-03-001946.hdr.sgml : 20030805 20030804192724 ACCESSION NUMBER: 0000891092-03-001946 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030804 ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20030805 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PARKWAY PROPERTIES INC CENTRAL INDEX KEY: 0000729237 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 742123597 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11533 FILM NUMBER: 03821921 BUSINESS ADDRESS: STREET 1: ONE JACKSON PL STREET 2: 188 E CAPITOL ST STE 1000 CITY: JACKSON STATE: MS ZIP: 39225-4647 BUSINESS PHONE: 6019484091 MAIL ADDRESS: STREET 1: ONE JACKSON PL P O BOX 24647 STREET 2: 188 E CAPITOL ST STE 1000 CITY: JACKSON STATE: MS ZIP: 39225 FORMER COMPANY: FORMER CONFORMED NAME: PARKWAY CO DATE OF NAME CHANGE: 19951018 8-K 1 e15403_8k.txt FORM 8-K 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): August 4, 2003 PARKWAY PROPERTIES, INC. - -------------------------------------------------------------------------------- (Exact Name of registrant as specified in charter) Maryland 1-11533 74-2123597 - ---------------------------- ------------------------ -------------------- (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation Identification No.) One Jackson Place Suite 1000 188 East Capitol Street P.O. Box 24647 Jackson, MS 39225-4647 - -------------------------------------------------------------------------------- (Address of principal executive offices) (601) 948-4091 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable - -------------------------------------------------------------------------------- Former name or former address, if changed since last report Page 1 of 3 ITEM 7. Financial Statements and Exhibits. (c) Exhibits 99.1 Press Release of the Company dated August 4, 2003, announcing the results of operations of the Company for the quarter ended June 30, 2003. ITEM 9. Regulation FD Disclosure. This information set forth under "Item 9. Regulation FD Disclosure" is intended to be furnished under "Item 12. Results of Operations and Financial Condition" in accordance with SEC Release No. 33-8216. On August 4, 2003, Parkway Properties, Inc. issued a press release regarding its results of operations for the quarter ended June 30, 2003. A copy of this press release is attached hereto as Exhibit 99.1. On August 5, 2003, Parkway Properties, Inc. will hold its earnings conference call for the quarter ended June 30, 2003, at 10:00 a.m. Eastern Time. The information furnished to the SEC pursuant to this item is furnished pursuant to the public release of information in the press release on August 4, 2003 and on the Company's August 5, 2003 earnings conference call. The information set forth in this Form 8-K shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of Parkway Properties, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing. Page 2 of 3 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. Date: August 4, 2003 PARKWAY PROPERTIES, INC. By: /s/ Mandy M. Pope ------------------------------------ Mandy M. Pope Chief Accounting Officer Page 3 of 3 EX-99.1 3 e15403ex99_1.txt PRESS RELEASE Exhibit 99.1 Parkway Properties, Inc. Reports Second Quarter 2003 Results JACKSON, Miss., Aug. 4 /PRNewswire-FirstCall/ -- Parkway Properties, Inc. (NYSE: PKY) today announced results for its second quarter ended June 30, 2003. Consolidated Financial Results * Net income available to common shareholders for the three months ended June 30, 2003 was $7,523,000 ($.72 per diluted share) compared to $5,196,000 ($.55 per diluted share) for the three months ended June 30, 2002. Net income available to common shareholders for the six months ended June 30, 2003 was $13,623,000 ($1.36 per diluted share) compared to $10,706,000 ($1.13 per diluted share) for the six months ended June 30, 2002. Gains on sale of joint venture interests and real estate of $4,545,000 and $5,641,000 were included in net income available to common shareholders for the three months and six months ended June 30, 2003, respectively. A net gain on the sale of a joint venture interest and real estate of $501,000 was included in net income available to common shareholders for the three months and six months ended June 30, 2002. A $2,619,000 ($.21 per diluted share) non-cash adjustment for original issue costs related to the redemption of Series A Preferred Stock was recorded in the second quarter. The Series A Preferred Stock was originally issued in April of 1998. * Funds from operations ("FFO") totaled $13,085,000 ($1.16 per diluted share) for the three months ended June 30, 2003 compared to $11,930,000 ($1.16 per diluted share) for the three months ended June 30, 2002. FFO totaled $25,850,000 ($2.38 per diluted share) for the six months ended June 30, 2003 compared to $24,411,000 ($2.37 per diluted share) for the six months ended June 30, 2002. FFO does not include the impact of the $2,619,000 ($.21 per diluted share) non-cash adjustment for original issue costs related to the redemption of Series A Preferred Stock during the quarter. * Funds available for distribution ("FAD") totaled $7,098,000 for the three months ended June 30, 2003 compared to $7,072,000 for the three months ended June 30, 2002. FAD totaled $13,461,000 for the six months ended June 30, 2003 compared to $15,457,000 for the six months ended June 30, 2002. Acquisitions and Sales * On May 28, 2003, the Company sold an 80% interest in two Jackson, Mississippi, assets, River Oaks Place and the IBM Building, to approximately 35 individual investors. Proceeds from the sale were used to reduce short-term borrowings under the Company's lines of credit pending reinvestment. The Company continues to provide management and leasing services for the building. The Company recognized a gain on this transaction of $4,183,000 in the second quarter. * On June 26, 2003, the Company sold .7407 acres of land in Houston Texas for cash proceeds of $451,000. Proceeds from the sale were used to reduce short-term borrowings under the Company's lines of credit. The Company recognized a gain on this sale of land of $362,000 in the second quarter. * On August 1, 2003, the Company sold its investment in the BB&T Financial Center in Winston-Salem, North Carolina, to Cabot Investment Properties for $27.5 million plus the assumption of future tenant improvements of approximately $500,000. Parkway Realty Services will continue to manage and lease the property under a ten-year management agreement and received an acquisition fee of $186,000, which will be included in income in the third quarter. The Company expects to record a gain on this sale of approximately $5 million in the third quarter. Proceeds from the sale were used to reduce amounts outstanding under bank lines of credit, pending the reinvestment in operating properties, and towards the early extinguishment of the $11,201,000 mortgage secured by the BB&T Financial Center. Operations and Leasing * Parkway's customer retention rate for the three months ending June 30, 2003 was 66% compared to 71% for the quarter ending Mach 31, 2003 and 58% for the quarter ending June 30, 2002. Customer retention for the six months ending June 30, 2003 was 69% compared to 71% for the six months ending June 30, 2002. * As of July 1, 2003, occupancy of the office portfolio was 91.8% compared to 92.1% as of April 1, 2003 and 92.3% as of July 1, 2002. * During the quarter ending June 30, 2003, leases were renewed or expanded on 264,000 net rentable square feet at an average rental rate decrease of .7% and a cost of $1.84 per square foot per year of the lease term in committed tenant improvements and leasing commissions. New leases were signed during the quarter on 106,000 net rentable square feet at a cost of $2.83 per square foot per year of the lease term in committed tenant improvements and leasing commissions. * Same store assets produced a decrease in net operating income ("NOI") of $527,000 or 3% during the quarter compared to the second quarter of 2002. The decrease in same store revenue was attributable mainly to a 1.8% decrease in occupancy and a rental rate decrease of $1.86 per square foot. The increase in same store operating expenses is mainly attributable to increases in repairs and maintenance, utilities, and insurance. Same store assets produced a decrease in NOI of $1,239,000 or 3.4% for the six months ended June 30, 2003 compared to the same period of the prior year. * During the second quarter and through August 1, 2003, the Company collected all rents from WorldCom, Inc. or its subsidiaries as called for under current leases. The Company currently recognizes rental income from these leases on the cash basis. Capital Markets and Financing * The Company's previously announced cash dividend of $.65 per share for the quarter ended June 30, 2003 represents a payout of approximately 56% of FFO per diluted share. The second quarter dividend was paid on June 27, 2003 and equates to an annualized dividend of $2.60 per share, a yield of 6.0% on the closing stock price on August 1, 2003 of $43.60. * The Company closed an $18,800,000 non-recourse first mortgage secured by two properties in Houston and one property in Phoenix on April 18, 2003. The mortgage, which is interest only for the first three years, has a fixed interest rate of 5.27% with a 7-year term and a 25-year amortization. Proceeds from the mortgage were used to reduce amounts outstanding under the Company's lines of credit, pending future reinvestment in operating properties. * On May 8, 2003, the stockholders of the Company approved Parkway's 2003 Equity Incentive Plan that authorized the grant of restricted shares of Common Stock and deferred share units payable in Common Stock to employees of the Company. The stockholders approved the January 2, 2003 issuance of 132,000 shares of restricted stock to certain officers of the Company effective May 8, 2003. The stock price on the date of grant was $35.19, and the vesting period for the stock is 7 years or 36 months if certain operating results are achieved by the Company in the VALUE2 Plan. * Simultaneous with the closing of the sale of the Company's 80% interest in the IBM Building and River Oaks Place, the partnership that owns the properties closed an $11.525 million mortgage. The non-recourse first mortgage has a fixed interest rate of 5.84%, amortizes over 28 years and matures in ten years. * During the second quarter, the Company completed a public offering of 2,400,000 shares of 8.0% Series D Cumulative Redeemable Preferred Stock. The Series D Preferred Stock has a $25 liquidation value per share and will be redeemable at the option of the Company on or after June 27, 2008. The net proceeds from the offering of $58 million were used to redeem the Company's 2,650,000 shares of 8.75% Series A Cumulative Redeemable Preferred Stock. The Series A Preferred Stock also had a $25 per share liquidation value. In connection with the redemption of the Series A Preferred Stock, a $2,619,000 ($.21 per diluted share) non-cash adjustment for original issue costs was recorded in the second quarter. The non-cash adjustment for original issue costs does not impact FFO. * As of June 30, 2003 the Company's debt-to-total market capitalization ratio was 38.4% compared to 40.7% as of March 31, 2003. The Company anticipates that the debt-to-total market capitalization will increase to approximately 45% upon reinvestment of the proceeds from the joint ventures and equity issuance. Outlook for 2003 The Company is forecasting FFO per diluted share of $4.67 to $4.75 and earnings per diluted share ("EPS") of $2.92 to $2.97 for 2003. The reconciliation of forecasted earnings per diluted share to forecasted FFO per diluted share is as follows: Guidance for 2003 Range Fully diluted EPS $2.92 - $2.97 Plus: Real estate depreciation and amortization $2.21 - $2.23 Plus: Depreciation on unconsolidated joint ventures $0.16 - $0.17 Plus: Original issuance cost of redeemed preferred stock $0.21 - $0.21 Less: Gain on sale of joint ventures and real estate ($0.83 - $0.83) Fully diluted FFO per share $4.67 - $4.75 The following assumptions were used in making this forecast: * Occupancy of approximately 92% for the remainder of 2003. * Same store net operating income growth in the range of zero to a negative 3%. * Average interest rate of 2.9% on short-term, floating rate debt in the 3rd and 4th quarters. * Proceeds from the joint ventures, the equity offering, the issuance of common shares, and the BB&T sale were assumed to be reinvested at a 9.0% to 9.5% cap rate with $50 million to be invested on September 1st and $80 million on October 1st. No additional acquisitions or dispositions were assumed in the 2003 budget. Steven G. Rogers, President and Chief Executive Officer stated, "Operations for the second quarter were flat reflecting a continuation of the difficult office leasing environment. Occupancy held steady at 91.8% and tenant retention was slightly below our target at 66%. The VALUE2 Plan is off to a strong start with the joint ventures and recent asset sales. This, coupled with the other positive capital events, enables us to continue to profitably recycle the assets within our portfolio. For the balance of the year we will focus our energy on making sound investments with the proceeds from recent capital events, as well as continue our focus on occupancy and operations." Additional Information January 1, 2003 marked the beginning of Parkway's VALUE2 Operating Plan, which will span the three-year period ending December 31, 2005. This plan reflects the employees' commitment to create Value for its shareholders while holding firm to the core Values as espoused in the Parkway Commitment to Excellence. The Company plans to create value by Venturing with best partners, Asset recycling, Leverage neutral growth, Uncompromising focus on operations, and providing an Equity return to its shareholders that is 10% greater than that of its peer group, the NAREIT Office Index. Equity return is defined as growth in FFO per diluted share. Parkway will conduct a conference call to discuss the results of its second quarter operations on Tuesday, August 5, 2003, at 10:00 am ET. The number for the conference call is 1-800-478-6251. A taped replay of the call can be accessed 24 hours a day through August 15, 2003 by dialing 1-888-203-1112, and using the pass code of 520642. An audio replay will be archived and indexed in the investor relations section of Parkway's website at www.pky.com. A copy of the Company's 2003 second quarter supplemental financial and property information package is available by accessing the Company's website, emailing your request to rjordan@pky.com or calling Rita Jordan at 601-948-4091. Please participate in the visual portion of the conference call by accessing the Company's website and clicking on the "2Q Call" Icon. By clicking on topics in the left margin, you can follow visual representations of the presentation. Additional information on Parkway Properties, Inc., including an archive of corporate press releases and conference calls, is available on the Company's website. The Company's second quarter 2003 Supplemental Operating and Financial Data, which includes a reconciliation of GAAP to Non-GAAP financial measures, will be available on the Company's website prior to the start of the conference call. About Parkway Properties Parkway Properties, Inc. is a self-administered real estate investment trust specializing in the operations, acquisition, ownership, management, and leasing of office properties. The Company is geographically focused on the Southeastern and Southwestern United States and Chicago. Parkway owns or has an interest in 55 office properties located in 11 states with an aggregate of approximately 9,648,000 square feet of leasable space as of August 4, 2003. The Company also offers fee based real estate services through its wholly owned subsidiary, Parkway Realty Services. Certain statements in this release that are not in the present tense or discuss the Company's expectations (including the use of the words anticipate, forecast or project) are forward-looking statements within the meaning of the federal securities laws and as such are based upon the Company's current belief as to the outcome and timing of future events. There can be no assurance that future developments affecting the Company will be those anticipated by the Company. These forward-looking statements involve risks and uncertainties (some of which are beyond the control of the Company) and are subject to change based upon various factors, including but not limited to the following risks and uncertainties: changes in the real estate industry and in performance of the financial markets; the demand for and market acceptance of the Company's properties for rental purposes; the amount and growth of the Company's expenses; tenant financial difficulties and general economic conditions, including interest rates, as well as economic conditions in those areas where the Company owns properties; the risks associated with the ownership of real property; and other risks and uncertainties detailed from time to time on the Company's SEC filings. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, the Company's results could differ materially from those expressed in the forward-looking statements. The Company does not undertake to update forward-looking statements. PARKWAY PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) June 30 December 31 2003 2002 (Unaudited) Assets Real estate related investments: Office and parking properties $778,837 $806,000 Accumulated depreciation (107,772) (99,449) 671,065 706,551 Land available for sale 3,528 3,528 Note receivable from Moore Building Associates LP 5,996 5,996 Mortgage loans 866 869 Investment in unconsolidated joint ventures 20,036 15,640 701,491 732,584 Interest, rents receivable and other assets 30,221 29,759 Cash and cash equivalents 2,955 1,594 $734,667 $763,937 Liabilities Notes payable to banks $67,918 $141,970 Mortgage notes payable without recourse 239,822 209,746 Accounts payable and other liabilities 31,117 35,400 338,857 387,116 Stockholders' Equity 8.75% Series A Preferred stock, $.001 par value, 2,760,000 shares authorized and 2,650,000 shares issued and outstanding in 2002 --- 66,250 8.34% Series B Cumulative Convertible Preferred stock, $.001 par value, 2,142,857 shares authorized, issued and outstanding 75,000 75,000 8.00% Series D Preferred stock, $.001 par value, 2,400,000 shares authorized, issued and outstanding in 2003 58,094 --- Common stock, $.001 par value, 65,057,143 shares authorized, 10,327,395 and 9,385,420 shares issued and outstanding in 2003 and 2002, respectively 10 9 Common stock held in trust, at cost, 128,000 shares in 2003 (4,321) --- Additional paid-in capital 234,889 199,979 Unearned compensation (4,313) --- Accumulated other comprehensive loss (110) (170) Retained earnings 36,561 35,753 395,810 376,821 $734,667 $763,937 PARKWAY PROPERTIES, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) Three Months Ended June 30 2003 2002 (Unaudited) Revenues Income from office and parking properties $35,162 $38,419 Management company income 681 358 Interest on note receivable from Moore Building Associates LP 204 245 Incentive management fee from Moore Building Associates LP 87 100 Other income and deferred gains 281 274 36,415 39,396 Expenses Office and parking properties: Operating expense 15,817 16,534 Interest expense: Contractual 4,056 5,173 Amortization of loan costs 75 57 Depreciation and amortization 6,598 7,081 Operating expense for other real estate properties 10 8 Interest expense on bank notes: Contractual 494 1,456 Amortization of loan costs 187 137 Management company expenses 175 155 General and administrative 962 1,265 28,374 31,866 Income before equity in earnings, gain (loss), minority interest and discontinued operations 8,041 7,530 Equity in earnings of unconsolidated joint ventures 623 133 Gain (loss) on sale of joint venture interests and real estate 4,545 (269) Minority interest - unit holders --- (1) Income from continuing operations 13,209 7,393 Discontinued operations: Income from discontinued operations --- 47 Gain on sale of real estate from discontinued operations --- 770 Net Income 13,209 8,210 Original issue costs associated with redemption of preferred stock (2,619) - Dividends on preferred stock (1,503) (1,449) Dividends on convertible preferred stock (1,564) (1,565) Net income available to common stockholders $7,523 $5,196 Net income per common share: Basic $0.74 $0.56 Diluted $0.72 $0.55 Dividends per common share $0.65 $0.63 Weighted average shares outstanding: Basic 10,224 9,285 Diluted 10,457 9,502 PARKWAY PROPERTIES, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) Six Months Ended June 30 2003 2002 (Unaudited) Revenues Income from office and parking properties $72,219 $79,011 Management company income 1,142 484 Interest on note receivable from Moore Building Associates LP 406 482 Incentive management fee from Moore Building Associates LP 155 160 Other income and deferred gains 487 323 74,409 80,460 Expenses Office and parking properties: Operating expense 32,379 33,462 Interest expense: Contractual 8,026 10,717 Prepayment expenses --- 18 Amortization of loan costs 132 140 Depreciation and amortization 13,952 14,053 Operating expense for other real estate properties 20 17 Interest expense on bank notes: Contractual 1,523 2,935 Amortization of loan costs 364 249 Management company expenses 241 251 General and administrative 2,144 2,581 58,781 64,423 Income before equity in earnings, gain (loss), minority interest and discontinued operations 15,628 16,037 Equity in earnings of unconsolidated joint ventures 1,054 149 Gain (loss) on sale of joint venture interests and real estate 5,641 (269) Minority interest - unit holders (1) (1) Income from continuing operations 22,322 15,916 Discontinued operations: Income from discontinued operations --- 47 Gain on sale of real estate from discontinued operations --- 770 Net Income 22,322 16,733 Original issue costs associated with redemption of preferred stock (2,619) --- Dividends on preferred stock (2,952) (2,898) Dividends on convertible preferred stock (3,128) (3,129) Net income available to common stockholders $13,623 $10,706 Net income per common share: Basic $1.38 $1.15 Diluted $1.36 $1.13 Dividends per common share $1.30 $1.26 Weighted average shares outstanding: Basic 9,839 9,270 Diluted 10,039 9,453 In accordance with SFAS 145 "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections," effective for fiscal years beginning after May 15, 2002, any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods shall be reclassified. All such amounts recognized by Parkway have been reclassified to "Interest expense - prepayment expenses." PARKWAY PROPERTIES, INC. FUNDS FROM OPERATIONS AND FUNDS AVAILABLE FOR DISTRIBUTION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (In thousands, except per share data) Three Months Ended Six Months Ended June 30 June 30 2003 2002 2003 2002 (Unaudited) (Unaudited) Net Income $13,209 $8,210 $22,322 $16,733 Adjustments to Net Income: Preferred Dividends (1,503) (1,449) (2,952) (2,898) Convertible Preferred Dividends (1,564) (1,565) (3,128) (3,129) Depreciation and Amortization 6,598 7,081 13,952 14,053 Depreciation and Amortization - Discontinued Operations --- 22 --- 22 Adjustments for Unconsolidated Joint Ventures 529 133 938 135 Amortization of Deferred Gains (1) (2) (4) (5) Minority Interest - Unit Holders --- 1 1 1 Gain on Sale of Joint Venture Interests and Real Estate (4,183) (501) (5,279) (501) Funds From Operations (1) $13,085 $11,930 $25,850 $24,411 Funds Available for Distribution Funds From Operations $13,085 $11,930 $25,850 $24,411 Add (Deduct): Adjustments for Unconsolidated Joint Ventures (1,191) (32) (1,637) (32) Straight-line rents (513) (487) (1,029) (1,185) Amortization of Restricted Stock Grants 332 547 332 1,095 Capital Expenditures: Building Improvements (992) (977) (2,734) (1,349) Tenant Improvements - New Leases (2,028) (2,136) (3,071) (3,056) Tenant Improvements - Lease Renewals (1,057) (653) (2,805) (1,379) Leasing Commissions - New Leases (273) (705) (495) (2,401) Leasing Commissions - Lease Renewals (265) (415) (950) (647) Funds Available for Distribution (1) $7,098 $7,072 $13,461 $15,457 Diluted Per Common Share/ Unit Information (**) FFO per share $1.16 $1.16 $2.38 $2.37 Dividends paid $0.65 $0.63 $1.30 $1.26 Dividend payout ratio for FFO 55.92% 54.37% 54.65% 53.06% Weighted average shares/units outstanding 12,602 11,646 12,183 11,598 Other Supplemental Information Upgrades on Acquisitions $2,202 $(303) $2,688 $785 Gain on Sale of Land $362 $--- $362 $--- **Information for Diluted Computations: Convertible Preferred Dividends $1,564 $1,565 $3,128 $3,129 Basic Common Shares/Units Outstanding 10,226 9,286 9,840 9,271 Convertible Preferred Shares Outstanding 2,143 2,143 2,143 2,143 Dilutive Effect of Stock Options and Warrants 233 217 200 184 (1) FFO and FAD is included herein because we believe that these measures are helpful to investors and our management as measures of the performance of an equity REIT. These measures, along with cash flow from operating activities, financing and investing activities, provide investors with an indication of our ability to incur and service debt, to make capital expenditures and to fund other cash needs. Parkway believes it computes FFO in accordance with standards established by the National Association of Real Estate Investment Trusts ("NAREIT"), which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition. FFO is defined as net income, computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains or losses from the sales of properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. There is not a standard definition established for FAD. Therefore, our measure of FAD may not be comparable to FAD reported by other REITs. We define FAD as FFO increased by amortization of restricted stock grants and reduced by straight line rents, non-revenue enhancing capital expenditures for building improvements, tenant improvements and leasing costs. Adjustments for unconsolidated partnerships and joint ventures are included in the computation of FAD on the same basis. PARKWAY PROPERTIES, INC. CALCULATION OF EBITDA AND COVERAGE RATIOS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (In thousands) Three Months Ended Six Months Ended June 30 June 30 2003 2002 2003 2002 (Unaudited) (Unaudited) Net Income $13,209 $8,210 $22,322 $16,733 Adjustments to Net Income: Interest Expense 4,550 6,629 9,549 13,652 Amortization of Financing Costs 262 194 496 389 Prepayment Expenses - Early Extinguishment of Debt --- --- --- 18 Depreciation and Amortization 6,598 7,103 13,952 14,075 Amortization of Deferred Compensation 332 547 332 1,095 Gain on Sale of Joint Venture Interests and Real Estate (4,545) (501) (5,641) (501) Tax Expenses 48 30 88 61 EBITDA - Unconsolidated Joint Ventures 1,400 387 2,564 396 EBITDA (1) $21,854 $22,599 $43,662 $45,918 Interest Coverage Ratio: EBITDA $21,854 $22,599 $43,662 $45,918 Interest Expense: Interest Expense $4,550 $6,629 $9,549 $13,652 Interest Expense - Unconsolidated Joint Ventures 708 205 1,317 212 Total Interest Expense $5,258 $6,834 $10,866 $13,864 Interest Coverage Ratio 4.16 3.31 4.02 3.31 Fixed Charge Coverage Ratio: EBITDA $21,854 $22,599 $43,662 $45,918 Fixed Charges: Interest Expense $5,258 $6,834 $10,866 $13,864 Preferred Dividends 3,067 3,014 6,080 6,027 Preferred Distributions - Unconsolidated Joint Ventures 125 45 253 45 Principal Payments (Excluding Early Extinguishment of Debt) 2,987 2,897 5,692 5,463 Principal Payments - Unconsolidated Joint Ventures 141 48 277 56 Total Fixed Charges $11,578 $12,838 $23,168 $25,455 Fixed Charge Coverage Ratio 1.89 1.76 1.88 1.80 (1) EBITDA, a non-GAAP financial measure, means operating income before mortgage and other interest expense, income taxes, depreciation and amortization. We believe that EBITDA is useful to investors and Parkway's management as an indication of the Company's ability to service debt and pay cash distributions. EBITDA, as calculated by us, is not comparable to EBITDA reported by other REITs that do not define EBITDA exactly as we do. EBITDA does not represent cash generated from operating activities in accordance with generally accepted accounting principles, and should not be considered an alternative to operating income or net income as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of liquidity. PARKWAY PROPERTIES, INC. NET OPERATING INCOME FROM OFFICE AND PARKING PROPERTIES THREE MONTHS ENDED JUNE 30, 2003 AND 2002 (In thousands, except number of properties data) Net Operating Income Occupancy Number of % of Properties Portfolio (1) 2003 2002 2003 2002 Same store properties (2) 47 88.74% $17,166 $17,693 91.3% 93.1% 2002 Acquisitions 4 5.45% 1,055 310 92.2% 84.3% 2003 Acquisitions 1 4.75% 918 --- 95.2% N/A Assets sold --- 1.06% 206 3,882 N/A N/A Net Operating Income from Office and Parking Properties 52 100.00% $19,345 $21,885 (1) Percentage of portfolio based on 2003 net operating income. (2) Parkway defines Same Store Properties as those properties that were owned for the entire three-month periods ended June 30, 2003 and 2002. Same Store net operating income ("SSNOI") includes income from real estate operations less property operating expenses (before interest and depreciation and amortization) for Same Store Properties. SSNOI as computed by Parkway may not be comparable to SSNOI reported by other REITs that do not define the measure exactly as we do. SSNOI is a supplemental industry reporting measurement used to evaluate the performance of the Company's investments in real estate assets. The following table is a reconciliation of net income to SSNOI: Three Months Ended Six Months Ended June 30 June 30 2003 2002 2003 2002 Net income $13,209 $8,210 $22,322 $16,733 Add (Deduct): Interest expense 4,812 6,823 10,045 14,059 Depreciation and amortization 6,598 7,081 13,952 14,053 Operating expense for other real estate properties 10 8 20 17 Management company expenses 175 155 241 251 General and administrative expenses 962 1,265 2,144 2,581 (Gain) loss on sale of joint venture interests and real estate (4,545) 269 (5,641) 269 Minority interest - unit holders --- 1 1 1 Income from discontinued operations --- (47) --- (47) Gain on sale of real estate from discontinued operations --- (770) --- (770) Management company income (681) (358) (1,142) (484) Interest income (204) (245) (406) (482) Incentive management fee income (87) (100) (155) (160) Equity in earnings of unconsolidated joint ventures (623) (133) (1,054) (149) Other income and deferred gains (281) (274) (487) (323) Net operating income from office and parking properties 19,345 21,885 39,840 45,549 Less: Net operating income from non same store properties (2,179) (4,192) (4,643) (9,113) Same Store net operating income $17,166 $17,693 $35,197 $36,436 FOR FURTHER INFORMATION: Steven G. Rogers, President & Chief Executive Officer Marshall A. Loeb, Chief Financial Officer (601) 948-4091 SOURCE Parkway Properties, Inc. -0- 08/04/2003 /CONTACT: Steven G. Rogers, President & Chief Executive Officer, or Marshall A. Loeb, Chief Financial Officer, both of Parkway Properties, Inc., +1-601-948-4091/ /Company News On-Call: http://www.prnewswire.com/gh/cnoc/comp/103115.html/ /Web site: http://www.pky.com/ (PKY) CO: Parkway Properties, Inc. ST: Mississippi, Texas, Illinois IN: RLT SU: ERN CCA ERP -----END PRIVACY-ENHANCED MESSAGE-----