EX-99.1 3 e16859ex99_1.txt PRESS RELEASE Exhibit 99.1 Parkway Properties, Inc. Reports 2003 Fourth Quarter Results JACKSON, Miss., Feb. 9 /PRNewswire-FirstCall/ -- Parkway Properties, Inc. (NYSE: PKY) today announced results for its fourth quarter and twelve months ended December 31, 2003. Consolidated Financial Results * Net income available to common shareholders for the three months ended December 31, 2003 was $4,717,000 ($.43 per diluted share) compared to $2,197,000 ($.23 per diluted share) for the three months ended December 31, 2002. Net income available to common shareholders for the twelve months ended December 31, 2003 was $29,119,000 ($2.79 per diluted share) compared to $17,458,000 ($1.84 per diluted share) for the twelve months ended December 31, 2002. Gains on the sale of joint venture interests and real estate of $10,661,000 were included in net income available to common shareholders for the twelve months ended December 31, 2003. A net gain on the sale of a joint venture interest and real estate of $501,000, an impairment loss on an office property of $1,594,000 and an impairment loss on land of $205,000 was included in net income available to common shareholders for the twelve months ended December 31, 2002. A $2,619,000 non-cash charge for original issue costs related to the redemption of Series A Preferred Stock was recorded during the twelve months ended December 31, 2003. The Series A Preferred Stock was originally issued in April of 1998. * Funds from operations ("FFO") applicable to common shareholders totaled $12,612,000 ($1.08 per diluted share) for the three months ended December 31, 2003 compared to $9,275,000 ($.93 per diluted share) for the three months ended December 31, 2002. FFO totaled $48,857,000 ($4.38 per diluted share) for the twelve months ended December 31, 2003 compared to $45,243,000 ($4.43 per diluted share) for the twelve months ended December 31, 2002. FFO per diluted share for the three months and twelve months ended December 31, 2002 as originally reported of $1.14 and $4.64 has been revised and reduced to $.93 and $4.43, respectively. Please reference the footnote following the FFO and funds available for distribution ("FAD") table of the press release for further explanation of the decrease. * FAD totaled $8,705,000 for the three months ended December 31, 2003 compared to $4,618,000 for the three months ended December 31, 2002. FAD totaled $30,254,000 for the twelve months ended December 31, 2003 compared to $26,614,000 for the twelve months ended December 31, 2002. FAD as originally reported of $7,027,000 and $29,041,000 for the three months and twelve months ending December 31, 2002, respectively, has been revised to $4,618,000 and $26,614,000 for the three months and twelve months ending December 31, 2002, respectively. Please reference the footnote following the FFO and FAD table of the press release for further explanation of the decrease. Acquisitions and Sales * On November 24, 2003, the Company purchased Carmel Crossing, a 324,000 square foot, three-building office campus located in the 51 Perimeter submarket of Charlotte, North Carolina. Carmel Crossing is 94% leased and was purchased for $41 million plus $1.5 million in closing costs and anticipated capital expenditures and leasing commissions during the first two years of ownership. * On January 29, 2004, the Company purchased Maitland 200, a 206,000 foot, four-story office building located in the Maitland Center submarket of Orlando, Florida. Maitland 200 is 95% leased and was purchased for $26.3 million plus $1.4 million in closing costs and anticipated capital expenditures and leasing commissions during the first two years of ownership. * The Company has completed its due diligence for the $76.3 million acquisition of the 410,000 square foot, 92% leased Capital City Plaza in the Buckhead sub-market of Atlanta, Georgia. Parkway's request to assume an existing first mortgage in the amount of $43 million is under review by the lender. The proposed acquisition, which is projected for late March 2004, is subject to customary closing conditions, and there can be no assurance that this acquisition will occur. Operations and Leasing * Parkway's customer retention rate for the three months ending December 31, 2003 was 48.4% compared to 58.8% for the quarter ending September 30, 2003 and 65.5% for the quarter ending December 31, 2002. Customer retention for the twelve months ending December 31, 2003 was 58.1% compared to 71.3% for the twelve months ending December 31, 2002. * As of January 1, 2004, occupancy of the office portfolio was 87.9% compared to 91.1% as of October 1, 2003 and 92.3% as of January 1, 2003. Not included in the January 1, 2004 occupancy rate are 38 signed leases totaling 288,000 square feet, which commence during the first through third quarter and raise our percentage leased to 90.7%. * As previously announced, Skytel vacated its 156,000 square foot lease at the Skytel Centre in Jackson, Mississippi leaving the building 25% occupied. Subsequent to December 31, 2003, the Company announced the renaming of the building to City Centre, the signing of leases which raise the building occupancy to approximately 92% and the development of a $6.5 million, 500-space parking facility to accommodate building customers. The largest lease was signed with Forman Perry Watkins Krutz & Tardy LLP subsequent to December 31, 2003 for 145,000 square feet, commencing upon completion of the improvements to the space in the third quarter of 2004. Forman Perry will occupy the space through December 31, 2011, subject to certain termination rights beginning July 31, 2008. The firm is consolidating employees from two buildings in Jackson and will vacate approximately 70,000 square feet in One Jackson Place, another Parkway-owned asset. The other large new customers include Entergy Mississippi, Inc. and Ross & Yerger, which leased 19,500 and 14,500 square feet, respectively. * As previously reported, Burlington Industries vacated 137,000 square feet at 400 North Belt in Houston, Texas effective December 31, 2003. Subsequent to December 31, 2003, the Company signed two leases for 58,800 square feet within the former Burlington space. One of the leases was with Merchant Metals, Inc., presently a 19,100 square foot Parkway customer at One Commerce Green, who is expanding and relocating into 39,400 square feet, for a net increase of 20,300 square feet. * During the quarter ending December 31, 2003, leases were renewed or expanded on 410,000 net rentable square feet at an average rental rate decrease of 11.2% and a cost of $1.68 per square foot per year of the lease term in committed tenant improvements and leasing commissions. New leases were signed during the quarter on 238,000 net rentable square feet at a cost of $3.77 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 $2,108,000 or 2.9% for the twelve months ended December 31, 2003 compared to the same period of the prior year. Same store assets produced a decrease in NOI of $1,550,000 or 8.5% during the quarter compared to the fourth quarter of 2002. Without the impact of straight line rents, the decrease in same store results for the fourth quarter and 2003 would have been 4.3% and 2.0%, respectively. The decrease of the twelve months ended December 31, 2003 compared to the same period of 2002 was primarily attributable to the fourth quarter 2003 write off of the Burlington straight line rent receivable in the amount of $485,000, lower rents and increased utilities and insurance expense. The decrease in same store net operating income for the fourth quarter 2003 was primarily attributable to lower rents and occupancy in addition to the Burlington straight line rent write off. Capital Markets and Financing * The Company's previously announced cash dividend of $.65 per share for the quarter ended December 31, 2003 represents a payout of approximately 60.1% of FFO per diluted share. The fourth quarter dividend was paid on December 29, 2003 and equates to an annualized dividend of $2.60 per share, a yield of 5.4% on the closing stock price on February 6, 2004 of $47.95. * The Company closed a $24,000,000 non-recourse first mortgage secured by three properties in Houston on December 18, 2003. The mortgage, which is interest only for the first year, has a fixed interest rate of 4.83% with a 5-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. * As of December 31, 2003 the Company's debt-to-total market capitalization ratio was 41.2% compared to 38.0% as of September 30, 2003. The Company anticipates that the debt-to-total market capitalization will increase to approximately 45% upon reinvestment of the remaining proceeds from the joint ventures and equity issuance completed in 2003. * On February 6, 2004, the Company closed a new $170,000,000 line of credit led by Wachovia Bank and syndicated to ten other banks. This line replaces its $135,000,000 line, which was to mature June 2004. The new line affords the Company greater financial flexibility at a lower interest cost. Outlook for 2004 The Company is forecasting FFO per diluted share of $4.30 to $4.50 and earnings per diluted share ("EPS") of $1.82 to $1.92 for 2004. The reconciliation of forecasted earnings per diluted share to forecasted FFO per diluted share is as follows: Guidance for 2004 Range Fully diluted EPS $1.82 - $1.92 Plus: Real estate depreciation and amortization $2.16 - $2.23 Plus: Depreciation on unconsolidated joint ventures $0.16 - $0.20 Plus: Diluted share adjustment for convertible preferred $0.16 - $0.15 Fully diluted FFO per share $4.30 - $4.50 The following assumptions were used in making this forecast: * Occupancy in the range of 87% to 91%, with average occupancy of 89%; * Due to the vacancies discussed earlier, same store net operating income growth in the range of negative 5% to negative 8%; * Average interest rate of 3% on short-term, floating rate debt; * Purchase of the Capital City Plaza in Atlanta in late March 2004. * No additional acquisitions or dispositions of property; * No equity offerings or redemptions; and * Placement of a fixed rate 6% $25 million mortgage on July 1, 2004. Steven G. Rogers, President and Chief Executive Officer stated, "We are encouraged by signs of a strengthening economy which should translate into better lease economics in the future. In the meantime, we are focused on backfilling our vacancies quickly to restore our retention and occupancy to normal levels. We anticipate that these efforts combined with significant investment activity will boost our 2004 profitability. We are making good progress on all aspects of our VALUE2 plan." 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 fourth quarter operations on Tuesday, February 10, 2004, at 10:00 a.m. ET. The number for the conference call is 800-474-8920. A taped replay of the call can be accessed 24 hours a day through February 20, 2004 by dialing 888- 203-1112 and using the pass code of 211059. 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 fourth 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 "4Q 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 fourth 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 59 office properties located in 11 states with an aggregate of approximately 10,683,000 square feet of leasable space as of February 9, 2004. 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. FOR FURTHER INFORMATION: Steven G. Rogers President & Chief Executive Officer Marshall A. Loeb Chief Financial Officer (601) 948-4091 PARKWAY PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) December 31 December 31 2003 2002 (Unaudited) Assets Real estate related investments: Office and parking properties $844,168 $806,000 Accumulated depreciation (115,473) (99,449) 728,695 706,551 Land available for sale 3,528 3,528 Note receivable from Moore Building Associates LP 5,926 5,996 Mortgage loans 861 869 Investment in unconsolidated joint ventures 20,026 15,640 759,036 732,584 Interest, rents receivable and other assets 42,804 29,759 Cash and cash equivalents 468 1,594 $802,308 $763,937 Liabilities Notes payable to banks $110,075 $141,970 Mortgage notes payable without recourse 247,190 209,746 Accounts payable and other liabilities 37,063 35,400 394,328 387,116 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, 1,942,857 and 2,142,857 shares issued and outstanding in 2003 and 2002, respectively 68,000 75,000 8.00% Series D Preferred stock, $.001 par value, 2,400,000 shares authorized, issued and outstanding in 2003 57,976 - Common stock, $.001 par value, 65,057,143 shares authorized, 10,808,131 and 9,385,420 shares issued and outstanding in 2003 and 2002, respectively 11 9 Common stock held in trust, at cost, 128,000 shares in 2003 (4,321) - Additional paid-in capital 252,695 199,979 Unearned compensation (4,634) - Accumulated other comprehensive loss - (170) Retained earnings 38,253 35,753 407,980 376,821 $802,308 $763,937 PARKWAY PROPERTIES, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) Three Months Ended December 31 2003 2002 (Unaudited) Revenues Income from office and parking properties $35,089 $36,684 Management company income 448 346 Interest on note receivable from Moore Building Associates LP 206 206 Incentive management fee from Moore Building Associates LP 79 72 Other income and deferred gains 48 39 35,870 37,347 Expenses Office and parking properties: Operating expense 15,754 15,968 Interest expense: Contractual 3,963 3,989 Prepayment expenses - 815 Amortization of loan costs 84 54 Depreciation and amortization 7,356 6,715 Operating expense for other real estate properties 6 8 Interest expense on bank notes: Contractual 696 1,535 Amortization of loan costs 137 174 Management company expenses 89 63 General and administrative 1,017 1,369 29,102 30,690 Income before equity in earnings, loss and minority interest 6,768 6,657 Equity in earnings of unconsolidated joint ventures 568 353 Loss on real estate - (205) Impairment loss on office property (1,594) Minority interest - unit holders (1) (1) Net Income 7,335 5,210 Dividends on preferred stock (1,200) (1,449) Dividends on convertible preferred stock (1,418) (1,564) Net income available to common stockholders $4,717 $2,197 Net income per common share: Basic $0.44 $0.23 Diluted $0.43 $0.23 Dividends per common share $0.65 $0.65 Weighted average shares outstanding: Basic 10,795 9,376 Diluted 11,030 9,520 PARKWAY PROPERTIES, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) Twelve Months Ended December 31 2003 2002 (Unaudited) Revenues Income from office and parking properties $142,196 $152,442 Management company income 2,136 1,197 Interest on note receivable from Moore Building Associates LP 819 895 Incentive management fee from Moore Building Associates LP 300 325 Other income and deferred gains 599 401 146,050 155,260 Expenses Office and parking properties: Operating expense 63,362 65,942 Interest expense: Contractual 16,026 18,766 Prepayment expenses - 833 Amortization of loan costs 293 240 Depreciation and amortization 28,030 27,412 Operating expense for other real estate properties 37 34 Interest expense on bank notes: Contractual 2,834 6,055 Amortization of loan costs 565 592 Management company expenses 391 416 General and administrative 4,201 5,029 115,739 125,319 Income before equity in earnings, gain (loss), minority interest and discontinued operations 30,311 29,941 Equity in earnings of unconsolidated joint ventures 2,212 824 Gain (loss) on sale of joint venture interests and real estate 10,661 (474) Impairment loss on office property - (1,594) Minority interest - unit holders (3) (2) Income from continuing operations 43,181 28,695 Discontinued operations: Income from discontinued operations - 47 Gain on sale of real estate from discontinued operations - 770 Net Income 43,181 29,512 Original issue costs associated with redemption of preferred stock (2,619) - Dividends on preferred stock (5,352) (5,797) Dividends on convertible preferred stock (6,091) (6,257) Net income available to common stockholders $29,119 $17,458 Net income per common share: Basic $2.85 $1.87 Diluted $2.79 $1.84 Dividends per common share $2.60 $2.56 Weighted average shares outstanding: Basic 10,224 9,312 Diluted 10,453 9,480 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 TWELVE MONTHS ENDED DECEMBER 31, 2003 AND 2002 (In thousands, except per share data) Three Months Ended Twelve Months Ended December 31 December 31 2003 2002 2003 2002 (Unaudited) (Unaudited) Net Income $7,335 $5,210 $43,181 $29,512 Adjustments to Net Income: Preferred Dividends (1,200) (1,449) (5,352) (5,797) Convertible Preferred Dividends (1,418) (1,564) (6,091) (6,257) Original Issue Costs - Redemption of Preferred Stock (2) - - (2,619) - Depreciation and Amortization 7,356 6,715 28,030 27,412 Depreciation and Amortization - Discontinued Operations - - - 22 Adjustments for Unconsolidated Joint Ventures 556 366 2,030 861 Amortization of Deferred Gains (18) (4) (26) (11) Minority Interest - Unit Holders 1 1 3 2 Gain on Sale of Joint Venture Interests and Real Estate - - (10,299) (501) Funds From Operations Applicable to Common Shareholders (1) $12,612 $9,275 $48,857 $45,243 (3) (3) Funds Available for Distribution (1) Funds From Operations Applicable to Common Shareholders $12,612 $9,275 $48,857 $45,243 Add (Deduct) : Adjustments for Unconsolidated Joint Ventures (316) (403) (2,147) (881) Straight-line Rents 233 (543) (1,385) (2,229) Amortization of Above/Below Market Leases (29) - (29) - Amortization of Restricted Stock Grants 194 548 694 2,190 Capital Expenditures: Building Improvements (960) (692) (4,606) (2,729) Tenant Improvements - New Leases (740) (1,515) (3,881) (6,251) Tenant Improvements - Renewal Leases (1,718) (1,433) (4,869) (3,979) Leasing Costs - New Leases (334) (445) (1,002) (3,305) Leasing Costs - Renewal Leases (237) (174) (1,378) (1,445) Funds Available for Distribution (1) $8,705 $4,618 $30,254 $26,614 Diluted Per Common Share/Unit Information (**) FFO per share $1.08 $0.93 $4.38 $4.43 Dividends paid $0.65 $0.65 $2.60 $2.56 Dividend payout ratio for FFO 60.11% 69.95% 59.33% 57.78% Weighted average shares/units outstanding 12,974 11,664 12,539 11,624 Other Supplemental Information Upgrades on Acquisitions $2,454 $750 $6,463 $2,354 Gain (Loss) on Land $- $(205) $362 $(205) Impairment Loss on Office Property $- $(1,594) $- $(1,594) **Information for Diluted Computations: Convertible Preferred Dividends $1,418 $1,564 $6,091 $6,257 Basic Common Shares/Units Outstanding 10,797 9,378 10,225 9,313 Convertible Preferred Shares Outstanding 1,943 2,143 2,085 2,143 Dilutive Effect of Stock Options and Warrants 235 144 229 168 (1) Funds from operations ("FFO") applicable to common shareholders and funds available for distribution ("FAD") are 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, 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 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. (2) In accordance with the FASB EITF Topic D-42 "The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock," the difference between the redemption value and carrying value attributable to issuance costs of the preferred shares that were redeemed must be treated as a preferred dividend and deducted from net income available to common shareholders. Accordingly, the amount treated as a preferred dividend must be deducted from FFO applicable to common shareholders. Therefore, FFO applicable to common shareholders for the twelve months ending December 31, 2003 has been reduced by original issue costs of $2,619,000 or $.21 per diluted share associated with the redemption of Series A Preferred Stock which occurred during the second quarter of 2003. The Series A Preferred Stock was originally issued in April of 1998. (3) In the 4th quarter of 2002, Parkway recorded an impairment loss on land of $205,000 and an impairment loss on an office property of $1,594,000. Consistent with NAREIT's current definition of FFO, Parkway excluded the impairment loss on the office property from FFO and included the impairment loss on land in FFO. In October, 2003, the SEC staff shared with NAREIT its position that all impairment write-downs must be included in FFO for all periods included in future filings. Therefore, FFO per diluted share for the three months and twelve months ended December 31, 2002 has been reduced by the impairment loss on the office property in the amount of $1,594,000 ($.14 per diluted share). Additionally, in accordance with SFAS 145, 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. The amounts recognized by Parkway for the three months ($815,000 or $.07 per diluted share) and the twelve months ($833,000 or $.07 per diluted share) ended December 31, 2002 have been reclassified to "Interest expense - prepayment expenses" and included in FFO. Considering the items discussed above, FFO per diluted share as originally reported of $1.14 and $4.64 for the three months and twelve months ended December 31, 2002, respectively, has been revised to $.93 and $4.43 for the same periods. PARKWAY PROPERTIES, INC. CALCULATION OF EBITDA AND COVERAGE RATIOS FOR THE THREE MONTHS AND TWELVE MONTHS ENDED DECEMBER 31, 2003 AND 2002 (In thousands) Three Months Twelve Months Ended Ended December 31 December 31 2003 2002 2003 2002 (Unaudited) (Unaudited) Net Income $7,335 $5,210 $43,181 $29,512 Adjustments to Net Income: Interest Expense 4,659 5,524 18,860 24,821 Amortization of Financing Costs 221 228 858 832 Prepayment Expenses - Early Extinguishment of Debt - 815 - 833 Depreciation and Amortization 7,356 6,715 28,030 27,434 Amortization of Deferred Compensation 194 548 694 2,190 (Gain) Loss on Sale of Joint Venture Interests and Real Estate - 205 (10,661) (296) Impairment Loss on Office Property - 1,594 - 1,594 Tax Expenses (127) (65) 5 (23) EBITDA Adjustments - Unconsolidated Joint Ventures 1,433 1,078 5,455 2,550 EBITDA (1) $21,071 $21,852 $86,422 $89,447 Interest Coverage Ratio: EBITDA $21,071 $21,852 $86,422 $89,447 Interest Expense: Interest Expense $4,659 $5,524 $18,860 $24,821 Interest Expense - Unconsolidated Joint Ventures 717 570 2,796 1,353 Total Interest Expense $5,376 $6,094 $21,656 $26,174 Interest Coverage Ratio 3.92 3.59 3.99 3.42 Fixed Charge Coverage Ratio: EBITDA $21,071 $21,852 $86,422 $89,447 Fixed Charges: Interest Expense $5,376 $6,094 $21,656 $26,174 Preferred Dividends 2,618 3,013 11,443 12,054 Preferred Distributions - Unconsolidated Joint Ventures 123 133 499 314 Principal Payments (Excluding Early Extinguishment of Debt) 2,687 2,746 11,005 10,965 Principal Payments - Unconsolidated Joint Ventures 150 133 573 320 Total Fixed Charges $10,954 $12,119 $45,176 $49,827 Fixed Charge Coverage Ratio 1.92 1.80 1.91 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 DECEMBER 31, 2003 AND 2002 (In thousands, except number of properties data) Net Operating Income Occupancy Number of Percentage of Properties Portfolio (1) 2003 2002 2003 2002 Same store properties (2) 50 86.34% $16,693 $18,243 86.6% 92.2% 2003 Acquisitions 4 13.85% 2,678 - 90.8% N/A Assets sold - -0.19% (36) 2,473 N/A N/A Net Operating Income from Office and Parking Properties 54 100.00% $19,335 $20,716 (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 December 31, 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 Twelve Months Ended December 31 December 31 2003 2002 2003 2002 Net income $7,335 $5,210 $43,181 $29,512 Add (Deduct): Interest expense 4,880 6,567 19,718 26,486 Depreciation and amortization 7,356 6,715 28,030 27,412 Operating expense for other real estate properties 6 8 37 34 Management company expenses 89 63 391 416 General and administrative expenses 1,017 1,369 4,201 5,029 (Gain) loss on sale of joint venture interests and real estate - 205 (10,661) 474 Impairment loss on office property - 1,594 - 1,594 Minority interest - unit holders 1 1 3 2 Income from discontinued operations - - - (47) Gain on sale of real estate from discontinued operations - - - (770) Management company income (448) (346) (2,136) (1,197) Interest income (206) (206) (819) (895) Incentive management fee income (79) (72) (300) (325) Equity in earnings of unconsolidated joint ventures (568) (353) (2,212) (824) Other income and deferred gains (48) (39) (599) (401) Net operating income from office and parking properties 19,335 20,716 78,834 86,500 Less: Net operating income from non same store properties (2,642) (2,473) (8,927) (14,485) Same Store net operating income $16,693 $18,243 $69,907 $72,015 SOURCE Parkway Properties, Inc. -0- 02/09/2004 /CONTACT: Steven G. Rogers, President & Chief Executive Officer, or Marshall A. Loeb, Chief Financial Officer of Parkway Properties, Inc., +1-601-948-4091/ /Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20030513/PARKLOGO AP Archive: http://photoarchive.ap.org PRN Photo Desk, photodesk@prnewswire.com/ /Company News On-Call: http://www.prnewswire.com/comp/103115.html / /Web site: http://www.pky.com / (PKY) CO: Parkway Properties, Inc. ST: Mississippi, Texas, Illinois IN: RLT CST SU: ERN ERP CCA MAV DIV