Parkway Reports First Quarter 2013 Results PR Newswire ORLANDO, Fla., May 6, 2013 ORLANDO, Fla., May 6, 2013 /PRNewswire/ --Parkway Properties, Inc. (NYSE:PKY) today announced results for its first quarter ended March 31, 2013. oHighlights for First Quarter 2013 and Recent Events oFFO of $0.30 per share and recurring FFO of $0.33 per share oFAD of $0.22 per share oOccupancy of 88.7%, with portfolio 89.7% leased oCompleted a public offering of 12.65 million shares of common stock resulting in $209.1 million of net proceeds oCompleted or under contract to purchase $391.5 million, at share, of office properties in targeted submarkets oRevised outlook for 2013 to reflect investment and capital market activities (Logo: http://photos.prnewswire.com/prnh/20030513/PARKLOGO) "As we continue to achieve critical mass in our target markets and drive leasing gains, we are beginning to realize the value inherent in our portfolio, as evidenced by our strong first quarter results," stated James R. Heistand, President and Chief Executive Officer of Parkway."Occupancy is now at 88.7% and improvements in operating efficiencies led to a 200 basis point increase in our NOI margin over the first quarter of last year. Our portfolio of well-located assets is strongly positioned in key submarkets within some of the country's fastest growing cities, which should continue to drive value and improved cash flow for the remainder of 2013." For the first quarter 2013, funds from operations ("FFO") available to common shareholders was $17.3 million, or $0.30 per diluted share. Recurring FFO was $18.7 million, or $0.33 per diluted share, and funds available for distribution ("FAD") was $12.5 million, or $0.22 per diluted share. A reconciliation of FFO, recurring FFO and FAD to net income is included on page 12. Net income, FFO, recurring FFO, and FAD for the first quarter 2013, as well as a comparison to the prior year period, are as follows: (Amounts in thousands, except per share) Three Months Ended March 31 2013 2012 Per Per Amount Amount Share Share Net Income (Loss) $ (3,879) $ (0.07) $ 1,994 $ 0.09 Funds From Operations $ 17,282 $ 0.30 $ 10,135 $ 0.43 Recurring Funds From Operations $ 18,726 $ 0.33 $ 10,333 $ 0.44 Funds Available for Distribution $ 12,461 $ 0.22 $ 3,712 $ 0.16 Wtd. Avg. Diluted Shares/Units 56,880 23,378 On a year-over-year basis, FFO increased materially on a gross basis but decreased on a per share basis. This is primarily the result of: (i) a repositioning of the portfolio, with $1.0 billion in asset acquisitions and $663.8 million of asset dispositions since the end of 2011; (ii) significant capital markets activities, including the issuance of 45.1 million shares of common stock in public and private offerings since the beginning of 2012 for gross proceeds of $608.7 million; and (iii) significant deleveraging of the Company, reducing net debt to EBITDA from 6.2x at December 31, 2011 to 4.8x at March 31, 2013. Parkway's repositioned portfolio has resulted in improved asset quality and location, which in turn has led to greater average gross rent per square foot, less capital expenditures per square foot per lease year, higher operating margins and higher customer retention rates. Operational Results Occupancy at the end of the first quarter 2013 was 88.7%, compared to 88.0% at the end of the prior quarter. Including leases that have been signed but have yet to commence, the Company's leased percentage at the end of the first quarter 2013 was 89.7%. Parkway's share of recurring same-store net operating income ("NOI") was $16.1 million on a GAAP basis during the first quarter 2013, which was an increase of $259,000, or 1.6%, as compared to the same period of the prior year. On a cash basis, the Company's share of recurring same-store NOI increased 14.4% to $16.0 million as compared to the same period of the prior year. The Company's portfolio GAAP NOI margin was 62.2% during the first quarter 2013, as compared to 60.2% during the same period of the prior year. Leasing Activity During the first quarter 2013, Parkway signed a total of 501,000 square feet of leases at an average rent per square foot of $25.03 and an average cost of $3.42 per square foot per year. New & Expansion Leasing – During the first quarter 2013, the Company signed 61,000 square feet of new leases at an average rent per square foot of $22.18 and at an average cost of $6.41 per square foot per year. Expansion leases during the quarter totaled 86,000 square feet at an average rent per square foot of $25.48 and at an average cost of $5.37 per square foot per year. Renewal Leasing – Customer retention during the first quarter 2013 was 78.2%. The Company signed 354,000 square feet of renewal leases at an average rent per square foot of $25.42, representing a 1.2% rate decrease from the expiring rate. The average cost of renewal leases was $2.31 per square foot per year. The Company's leasing activity for the first quarter 2013 has led to greater revenue per square foot of total leases signed and greater customer retention. Customer retention is an important metric for the Company as renewal leases generally require less capital expenditure per square foot per year than new leases and no downtime to release a vacated space. Significant operational and leasing statistics for the quarter as compared to prior quarters is as follows: For the Three Months Ended 03/31/13 12/31/12 09/30/12 06/30/12 03/31/12 Ending Occupancy 88.7% 88.0% 89.6% 87.4% 85.9% Customer Retention 78.2% 68.9% 76.0% 63.2% 46.8% Square Footage of Total 501 413 439 394 368 Leases Signed (in thousands) Average Revenue Per Square $25.03 $25.35 $21.78 $19.60 $22.55 Foot of Total Leases Signed Average Cost Per Square Foot Per Year of Total Leases $3.42 $4.74 $3.68 $2.93 $4.72 Signed Acquisition and Disposition Activity On January 17, 2013, Parkway completed the purchase of Tower Place 200, a 258,000 square foot office tower located in the Buckhead submarket of Atlanta, Georgia, for a gross purchase price of $56.3 million. Tower Place 200 was built in 1998 and is a 13-story, Class A office tower that shares a parking garage with Parkway's neighboring 3344 Peachtree asset. The building was 82.7% occupied at April 1, 2013 and is unencumbered by debt. On March 7, 2013, Parkway completed the purchase of eight office properties totaling 1.0 million square feet located in the Deerwood submarket of Jacksonville, Florida for a gross purchase price of $130.0 million. The properties were developed in phases from 1996 through 2005 and were a combined 93.7% occupied at April 1, 2013. Parkway placed secured financing on the properties simultaneous with closing totaling $84.5 million that has a maturity date of April 1, 2023 and a fixed interest rate of 3.9%. On March 15, 2013, the Company entered into a purchase and sale agreement to acquire an approximately 75% interest in the US Airways Building, a 225,000 square foot office property located in the Tempe submarket of Phoenix, Arizona for a purchase price of $41.8 million. US Airways will retain the remaining approximately 25% interest in the property. The US Airways Building was built in 1999 and is LEED^® Gold Certified. It is located adjacent to Parkway's Hayden Ferry Lakeside and Tempe Gateway assets and shares a parking garage with Tempe Gateway. The property is 100% leased to US Airways through April 2024. US Airways has the option to terminate its lease on December 31, 2016 or December 31, 2021 with 12 months prior written notice. Closing is expected to occur by the end of the second quarter 2013, subject to customary closing conditions. On March 20, 2013, the Company sold Atrium at Stoneridge, a 108,000 square foot office property located in Columbia, South Carolina, for a gross sales prices of $3.1 million and recorded a gain of $542,000 during first quarter 2013. The Company received $3.0 million in net proceeds from the sale, which was used to reduce amounts outstanding under the Company's revolving credit facility. On March 25, 2013, the Company purchased its co-investor's 70% interest in three office properties totaling 788,000 square feet located in the Westshore submarket of Tampa, Florida owned by Parkway Properties Office Fund II, L.P. (the "Tampa Fund II Assets"). The agreed-upon gross valuation of the Tampa Fund II Assets was $139.3 million. Parkway's purchase price for its co-investor's 70% interest in the Tampa Fund II Assets was $97.5 million. Simultaneous with closing, the Company assumed $40.7 million of existing mortgage indebtedness that is secured by the properties, which represents its co-investor's 70% share of the approximately $58.1 million of existing mortgage indebtedness. The three assets include Corporate Center IV at International Plaza, Cypress Center I, II and III, and The Pointe. The Tampa Fund II Assets had a combined occupancy of 93.1% as of April 1, 2013. On April 26, 2013, the Company entered into a purchase and sale agreement to acquire Lincoln Place, a 140,000 square foot office building located in the South Beach submarket of Miami, Florida. Lincoln Place was built in 2002 and is comprised of 111,000 square feet of office space and 29,000 square feet of retail space on the ground floor. There is a five-story garage with 534 parking spaces adjacent to the property that provides parking for daytime office tenants as well as hourly parking on nights and weekends. The property is currently 100% leased to LNR Corporation through June 2021with no renewal or early termination option. Parkway is under contract to acquire Lincoln Place in exchange for the assumption of the existing secured first mortgage, which has a current outstanding balance of approximately $49.6 million, a fixed interest rate of 5.9% and a maturity date of June 11, 2016, and the issuance of 900,000 shares of operating partnership units. Based on Parkway's closing stock price of $18.20 on May 3, 2013, the implied purchase price is approximately $66.0 million, or $472 per square foot. Based on this implied purchase price, the property is expected to generate an initial full-year cash net operating income yield of approximately 6.7%. Closing is expected to occur by the end of the third quarter 2013, subject to customary closing conditions, the successful assumption of the existing first mortgage and Parkway's satisfactory completion of due diligence. Capital Structure At March 31, 2013, the Company did not have any amounts outstanding under its revolving credit facility, had $125.0 million outstanding under its unsecured term loan and held $74.6 million in cash and cash equivalents, of which $46.2 million of cash and cash equivalents was Parkway's share. Parkway's share of secured debt totaled $537.1 million at March 31, 2013. On February 21, 2013, Parkway closed on an $80 million first mortgage secured by Phoenix Tower in Houston, Texas. Phoenix Tower is a 626,000 square foot office tower located in the Greenway Plaza submarket of Houston that was 83.9% occupied as of April 1, 2013. The mortgage has a maturity date of March 1, 2023 and a fixed interest rate of 3.9%. At March 31, 2013, the Company's net debt to EBITDA multiple was 4.8x, using the quarter's annualized EBITDA after adjusting for the impact of acquisitions and dispositions completed during the period, as compared to 5.3x at December 31, 2012, and 4.7x at March 31, 2012. At March 31, 2013, the Company's net debt plus preferred to EBITDA multiple was 5.9x, as compared to 6.7x at December 31, 2012, and 6.5x at March 31, 2012. On March 25, 2013, the Company completed an underwritten public offering of 12.65 million shares of its common stock for net proceeds of approximately $209.0 million. The Company used the net proceeds to redeem in full all of its outstanding 8.00% Series D Cumulative Redeemable Preferred Stock, to fund acquisitions, to repay amounts outstanding from time to time under its senior unsecured revolving credit facility and for general corporate purposes. On April 25, 2013, the Company redeemed all of its outstanding 8.00% Series D Cumulative Redeemable Preferred Stock (the "Series D Preferred") using proceeds from its underwritten public offering of common stock. The Company paid $136.3 million to redeem these shares, which includes a $135.5 million liquidation value and accrued dividends of $723,000. The Company expects to record a $6.6 million non-cash charge during the second quarter of 2013, which represents the difference between the costs associated with the issuance, including the price at which such shares were paid, and the redemption price. The redemption of the Series D Preferred will have a material impact on the Company's financial metrics beginning in the second quarter of 2013. As a result of this redemption, the Company will have a lower net debt plus preferred to EBITDA ratio, a greater fixed charge coverage ratio and fixed cash payment savings of approximately $10.8 million on an annual basis. Common Dividend The Company's previously announced first quarter cash dividend of $0.15 per share, which represents an annualized dividend of $0.60 per share, was paid on March 27, 2013 to shareholders of record as of March 13, 2013. 2013 Revised Outlook After considering the Company's March 2013 underwritten public common stock offering, April 2013 Series D Preferred redemption and recent and pending investment activity, Parkway is revising its 2013 FFO outlook from $1.17 to $1.27 per share to $1.10 to $1.20 and adjusting its earnings (loss) per share ("EPS") to ($0.29) to ($0.19). The Company's revised 2013 FFO outlook includes the negative impact of a one-time, non-cash charge related to the redemption of the Series D Preferred, totaling approximately $6.6 million, or $0.10 per share, which will be recognized during second quarter 2013. Excluding this one-time, non-cash charge, the Company's FFO outlook range would increase to $1.20 to $1.30 per share. The reconciliation of projected EPS to projected FFO per diluted share is as follows: Outlook for 2013 Range Fully diluted EPS ($0.29-$0.19) Parkway's share of depreciation and amortization $1.40-$1.40 Gain on sale of real estate ($0.01-$0.01) Reported FFO per diluted share $1.10-$1.20 The revised 2013 outlook is based on the core operating, financial and investment assumptions described below. These assumptions reflect the Company's expectations based on its knowledge of current market conditions and historical experience. All dollar amounts presented for the revised 2013 outlook and the original 2013 outlook are at Parkway's share and dollars and shares are in thousands. Revised Original 2013 Core Operating Assumptions 2013 2013 Outlook Outlook Recurring cash NOI $121,500 - $115,500 - $117,500 $123,500 Straight-line rent and amortization $ 10,500 - $ $ 7,500 - $ of above market rent 11,500 8,500 Lease termination fee income $ 300 - $ 300 - $ $ 300 300 Management fee after-tax net income $ 7,500 - $ $ 7,000 - $ 8,500 8,000 Recurring capital expenditures for building improvements, tenant $ 18,000 - $ $ 17,800 - $ 18,000 improvements and leasing 19,000 commissions Total general and administrative $ 19,000 - $ $ 18,500 - $ 20,000 ("G&A") expense 20,500 Share based compensation included in $ 4,500 - $ $ 4,500 - $ G&A expense 5,500 5,500 Mortgage and credit facilities $ 33,500 - $ $ 32,000 - $ 32,500 interest expense 34,000 Original issue costs – redemption of $ 6,600 - $ Not Provided preferred stock 6,600 Portfolio ending occupancy 87.5% - 88.5% 87.5% - 88.5% Weighted average annual diluted 66,200 - 66,200 56,000 - 56,000 common shares/units Variance within the outlook range may occur due to variations in the recurring revenue and expenses of the Company, as well as certain non-recurring items. The earnings outlook does not include the impact of possible future gains or losses on early extinguishment of debt, possible future acquisitions or dispositions and related costs, the impact of fluctuations in the Company's stock price on share-based compensation, possible future impairment charges or other unusual charges that may occur during the year, except as noted. It has been and will continue to be the Company's policy to not issue quarterly earnings guidance or revise the annual earnings outlook unless a material event occurs that impacts our original reported FFO outlook range. This policy is intended to lessen the emphasis on short-term movements that do not have a material impact on earnings or long-term value of the Company. In particular, we have assumed a non-cash share-based compensation charge in G&A of $5 to $6 million. This assumed charge relates to recent grants under our 2013 Omnibus Equity Incentive Plan (the "Plan"), which will be voted on at our annual meeting of stockholders to be held on May 16, 2013. However, please note that we will begin to expense these grants only if and when we receive stockholder approval of the Plan. The actual expense associated with these grants is dependent on the public price for our common stock on the date of adoption of the Plan by our stockholders, which could exceed our assumed price and result in a share-based compensation charge that is greater than we have assumed above. Webcast and Conference Call The Company will conduct its first quarter earnings conference call on Tuesday, May 7, 2013 at 11:00 a.m. Eastern Time. To participate in the conference call, please dial 877-407-3982, or 1-201-493-6780 for international participants, at least five minutes prior to the scheduled start time. A live audio webcast will also be available on the Company's website (www.pky.com). A taped replay of the call can be accessed 24 hours a day through May 14, 2013, by dialing 877-870-5176, or 1-858-384-5517 for international callers, and using the passcode 411934. An audio replay will also be archived and indexed on the Company's website. Annual Meeting Parkway Properties, Inc. will host its 2013 Annual Meeting of Shareholders on May 16, 2013, at 2:00 p.m. Central Time. The meeting will be held on the ninth floor of Phoenix Tower located at 3200 Southwest Freeway in Houston, Texas. About Parkway Properties Parkway Properties, Inc. is a fully integrated, self-administered and self-managed real estate investment trust ("REIT") specializing in the acquisition, ownership and management of quality office properties in higher growth submarkets in the Sunbelt region of the United States. Parkway owns or has an interest in 45 office properties located in eight states with an aggregate of approximately 13.0 million square feet at April 1, 2013. Parkway also offers fee-based real estate services which manage and/or lease approximately 11.8 million square feet for third parties as of April 1, 2013. Additional information about Parkway is available on the Company's website at www.pky.com. Forward Looking Statement Certain statements in this press release that are not in the present or past tense or that discuss the Company's expectations (including any use of the words "anticipate," "assume," "believe," "estimate," "expect," "forecast," "guidance," "intend," "may," "might," "outlook," "project", "should" or similar expressions) are forward-looking statements within the meaning of the federal securities laws and as such are based upon the Company's current beliefs as to the outcome and timing of future events. There can be no assurance that actual future developments affecting the Company will be those anticipated by the Company. Examples of forward-looking statements include projected 2013 fully diluted EPS, share of depreciation and amortization, reported FFO per share, projected net operating income, cap rates, internal rates of return, future dividend payment rates, forecasts of FFO accretion, projected capital improvements, expected sources of financing, expectations as to the timing of closing of acquisitions, dispositions and other potential transactions and descriptions relating to these expectations. 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 ability of the Company to enter into new leases or renewal leases on favorable terms; 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; risks associated with joint venture partners; risks associated with the ownership and development of real property; termination of property management contracts; the bankruptcy or insolvency of companies for which Parkway provides property management services or the sale of these properties; the outcome of claims and litigation involving or affecting the Company; the ability to satisfy conditions necessary to close pending transactions and the ability to successfully integrate pending transactions; applicable regulatory changes; and other risks and uncertainties detailed from time to time in the Company's SEC filings. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, the Company's business, financial condition, liquidity, cash flows and financial results could differ materially from those expressed in the Company's forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict the occurrence of those matters or the manner in which they may affect us. The Company does not undertake to update forward-looking statements except as may be required by law. Company's Use of Non-GAAP Financial Measures FFO, FAD, NOI and EBITDA, including related per share amounts, are used by management, investors and industry analysts as supplemental measures of operating performance of equity REITs and should be evaluated along with GAAP net income and income per diluted share (the most directly comparable GAAP measures), as well as cash flow from operating activities, investing activities and financing activities, in evaluating the operating performance of the Company. Management believes that FFO, FAD, NOI and EBITDA are helpful to investors as supplemental performance measures because these measures exclude the effect of depreciation, amortization and gains or losses from sales of real estate, all of which are based on historical costs which implicitly assumes that the value of real estate diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, these non-GAAP measures can facilitate comparisons of operating performance between periods and among other equity REITs. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations determined in accordance with GAAP. FFO, FAD, NOI and EBITDA do not represent cash generated from operating activities in accordance with GAAP and are not necessarily indicative of cash available to fund cash needs as disclosed in the Company's Consolidated Statements of Cash Flows. FFO, FAD, NOI and EBITDA should not be considered as an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flows as a measure of liquidity. The Company's calculation of these non-GAAP measures may not be comparable to similarly titled measures reported by other companies. FFO – 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 GAAP, reduced by preferred dividends, excluding gains or losses on depreciable real estate, plus real estate related depreciation and amortization. Adjustments for Parkway's share of partnerships and joint ventures are included in the computation of FFO on the same basis. On October 31, 2011, NAREIT issued updated guidance on reporting FFO such that impairment losses on depreciable real estate should be excluded from the computation of FFO for current and prior periods presented. Recurring FFO – In addition to FFO, Parkway also discloses recurring FFO, which considers Parkway's share of adjustments for non-recurring lease termination fees, gains and losses on extinguishment of debt, gains and losses, acquisition costs, fair value adjustments or other unusual items. Although this is a non-GAAP measure that differs from NAREIT's definition of FFO, the Company believes it provides a meaningful presentation of operating performance. FAD – There is not a generally accepted definition established for FAD. Therefore, the Company's measure of FAD may not be comparable to FAD reported by other REITs. Parkway defines FAD as FFO, excluding the amortization of share-based compensation, amortization of above and below market leases, straight line rent adjustments, gains and losses, acquisition costs, fair value adjustments, gain or loss on extinguishment of debt, amortization of loan costs, non-cash charges and reduced by recurring non-revenue enhancing capital expenditures for building improvements, tenant improvements and leasing costs. Adjustments for Parkway's share of partnerships and joint ventures are included in the computation of FAD on the same basis. EBITDA – Parkway defines EBITDA, a non-GAAP financial measure, as net income before interest expense, amortization of financing costs, amortization of share-based compensation, income taxes, depreciation, amortization, acquisition costs, gains and losses on early extinguishment of debt, other gains and losses and fair value adjustments. Adjustments for Parkway's share of partnerships and joint ventures are included in the computation of EBITDA on the same basis. 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 GAAP, 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. NOI, Recurring NOI, Same-Store NOI and Recurring Same-Store NOI – NOI includes income from real estate operations less property operating expenses (before interest expense and depreciation and amortization). In addition to NOI, Parkway discloses recurring NOI, which considers adjustments for non-recurring lease termination fees or other unusual items. The Company's disclosure of same-store NOI and recurring same-store NOI includes those properties that were owned during the entire current and prior year reporting periods and excludes properties classified as discontinued operations. Contact: Parkway Properties, Inc. Thomas E. Blalock Vice President of Investor Relations Bank of America Center 390 N. Orange Ave., Suite 2400 Orlando, FL 32801 (407) 650-0593 www.pky.com PARKWAY PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) March 31 December 31 2013 2012 (Unaudited) Assets Real estate related investments: Office and parking properties $ $ 1,934,000 1,762,566 Accumulated depreciation (215,777) (199,849) 1,718,223 1,562,717 Land available for sale 250 250 1,718,473 1,562,967 Receivables and other assets: Rents and fees receivable, net 4,094 2,309 Straight line rents receivable 38,131 34,205 Other receivables 3,391 2,755 Unamortized lease costs 67,824 62,978 Unamortized loan costs 7,740 7,183 Escrows and other deposits 10,062 7,606 Prepaid assets 3,969 3,612 Investment in preferred interest 3,500 3,500 Other assets 710 543 Intangible assets, net 127,961 118,097 Management contracts, net 17,219 19,000 Cash and cash equivalents 74,560 81,856 Total assets $ $ 2,077,634 1,906,611 Liabilities Notes payable to banks $ $ 125,000 262,000 Mortgage notes payable 768,005 605,889 Accounts payable and other liabilities: Corporate payables 2,254 1,930 Deferred tax liability - non-current 1,392 1,959 Accrued payroll 1,533 2,980 Fair value of interest rate swaps 15,039 16,285 Interest payable 3,253 2,653 Property payables: Accrued expenses and accounts payable 13,538 13,111 Accrued property taxes 8,611 6,868 Prepaid rents 11,031 9,488 Deferred revenue 150 315 Security deposits 4,976 4,680 Unamortized below market leases 27,403 22,390 Other liabilities - 57 Total liabilities 982,185 950,605 Equity Parkway Properties, Inc. stockholders' equity: 8.00% Series D preferred stock, $.001 par value, 5,421,296 shares authorized, issued and outstanding in 2013 and 128,942 128,942 2012 Common stock, $.001 par value, 114,578,704 shares authorized in 2013 and 2012, 68,765,182 and 56,138,209 shares issued and outstanding in 2013 and 2012, respectively 69 56 Additional paid-in capital 1,096,423 907,254 Accumulated other comprehensive loss (6,279) (4,425) Accumulated deficit (350,089) (337,813) Total Parkway Properties, Inc. stockholders' 869,066 694,014 equity Noncontrolling interests 226,383 261,992 Total equity 1,095,449 956,006 Total liabilities and equity $ $ 2,077,634 1,906,611 PARKWAY PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Three Months Ended March 31 2013 2012 (Unaudited) Revenues Income from office and parking properties $ $ 67,760 45,157 Management company income 4,352 5,432 Total revenues 72,112 50,589 Expenses and other Property operating expense 25,617 17,955 Depreciation and amortization 29,515 17,690 Change in fair value of contingent - 216 consideration Management company expenses 4,390 4,534 General and administrative 4,215 3,599 Acquisition costs 1,135 826 Total expenses and other 64,872 44,820 Operating income 7,240 5,769 Other income and expenses Interest and other income 103 97 Interest expense (10,470) (9,244) Loss before income taxes (3,127) (3,378) Income tax benefit (expense) 507 (161) Loss from continuing operations (2,620) (3,539) Discontinued operations: Income (loss) from discontinued (347) 3,291 operations Gain on sale of real estate from 542 5,575 discontinued operations Total discontinued operations 195 8,866 Net income (loss) (2,425) 5,327 Net (income) loss attributable to 2 (89) noncontrolling interests - unit holders Net (income) loss attributable to noncontrolling interests - real estate 1,255 (533) partnerships Net income (loss) for Parkway Properties, (1,168) 4,705 Inc. Dividends on preferred stock (2,711) (2,711) Net income (loss) attributable to common $ $ stockholders (3,879) 1,994 Net income (loss) per common share attributable to Parkway Properties, Inc.: Basic: Loss from continuing operations $ $ attributable to Parkway Properties, Inc. (0.07) (0.16) Discontinued operations - 0.25 Basic net income (loss) attributable to $ $ Parkway Properties, Inc. (0.07) 0.09 Diluted: Loss from continuing operations $ $ attributable to Parkway Properties, Inc. (0.07) (0.16) Discontinued operations - 0.25 Diluted net income (loss) attributable to $ $ Parkway Properties, Inc. (0.07) 0.09 Weighted average shares outstanding: Basic 56,849 21,568 Diluted 56,849 21,568 Amounts attributable to Parkway Properties, Inc. common stockholders: Loss from continuing operations $ $ attributable to Parkway Properties, Inc. (4,087) (3,517) Discontinued operations 208 5,511 Net income (loss) attributable to common $ $ stockholders (3,879) 1,994 PARKWAY PROPERTIES, INC. RECONCILIATION OF FUNDS FROM OPERATIONS AND FUNDS AVAILABLE FOR DISTRIBUTION TO NET INCOME AT PARKWAY'S SHARE (In thousands, except per share data) Three Months Ended March 31 2013 2012 (Unaudited) Net income (loss) for Parkway $ (1,168) $ 4,705 Properties, Inc. Adjustments to net income (loss) for Parkway Properties, Inc.: Preferred dividends (2,711) (2,711) Depreciation and amortization 21,705 10,385 Noncontrolling interest - unit (2) 89 holders Gain on sale of real estate (542) (2,333) FFO available to common stockholders $ 17,282 $ 10,135 Adjustments to derive recurring FFO: Change in fair value of contingent - 216 consideration Non-recurring lease termination fee (146) (596) income Gain on early extinguishment of debt - 288 Non-cash adjustment for interest rate - (138) swap Acquisition costs 1,130 248 Realignment expenses 460 180 Recurring FFO $ 18,726 $ 10,333 Funds available for distribution FFO available to common stockholders $ 17,282 $ 10,135 Add (Deduct) : Straight-line rents (2,718) (2,616) Amortization of above market leases 40 296 Amortization of share-based 89 157 compensation Acquisition costs 1,130 248 Amortization of loan costs 399 442 Non-cash adjustment for interest rate - (138) swap Gain on early extinguishment of debt - 288 Change in fair value of contingent - 216 consideration Recurring capital expenditures: Building improvements (1,511) (457) Tenant improvements - new leases (192) (2,900) Tenant improvements - renewal leases (1,340) (1,219) Leasing costs - new leases (56) (505) Leasing costs - renewal leases (662) (235) Total recurring capital expenditures (3,761) (5,316) Funds available for distribution $ 12,461 $ 3,712 Diluted per common share/unit information (**) FFO per share $ 0.30 $ 0.43 Recurring FFO per share $ 0.33 $ 0.44 FAD per share $ 0.22 $ 0.16 Dividends paid $ 0.15 $ 0.075 Dividend payout ratio for FFO 50.0% 17.4% Dividend payout ratio for recurring 45.5% 17.0% FFO Dividend payout ratio for FAD 68.2% 46.9% Other supplemental information Recurring capital expenditures $ 3,761 $ 5,316 Upgrades on acquisitions 3,626 1,332 Total real estate improvements and $ 7,387 $ 6,648 leasing costs **Information for diluted computations: Basic common shares/units outstanding 56,851 22,222 Dilutive effect of other share 29 1,156 equivalents Diluted weighted average shares/units 56,880 23,378 outstanding PARKWAY PROPERTIES, INC. EBITDA, COVERAGE RATIOS AND CAPITALIZATION INFORMATION (In thousands, except per share, percentage and multiple data) 03/31/13 12/31/12 09/30/12 06/30/12 03/31/12 Net income (loss) $ $ $ $ $ for Parkway (1,168) (49,002) 2,129 2,773 4,705 Properties, Inc. Adjustments at Parkway's share to net income (loss) for Parkway Properties, Inc.: Interest expense 6,638 4,830 4,661 5,035 6,206 Amortization of 399 523 347 402 442 financing costs Non-cash adjustment for - - - (77) (138) interest rate swap Loss on early extinguishment of - - 117 491 288 debt Acquisition costs 1,130 1,281 88 510 248 Depreciation and 21,705 14,625 13,783 11,566 10,385 amortization Amortization of share-based 89 61 167 47 157 compensation Gain on sale of real estate and (542) (3,172) (528) (2,601) (2,333) other assets Non-cash losses - 51,167 - - - Change in fair value of - - - - 216 contingent consideration Tax expense (507) 118 (7) (11) 161 (benefit) EBITDA $ $ $ $ $ 27,744 20,431 20,757 18,135 20,337 Interest coverage 4.2 4.2 4.5 3.6 3.3 ratio Fixed charge coverage ratio 2.5 2.2 2.3 2.0 2.0 (1) Modified fixed charge coverage 3.0 2.7 2.8 2.3 2.3 ratio (1) Capitalization information Mortgage notes $ $ $ $ $ payable 768,005 605,889 549,429 551,564 553,674 Mortgage notes payable-held for - - - 29,597 90,710 sale Notes payable to 125,000 262,000 125,000 111,267 48,000 banks Adjustments for noncontrolling interest in real estate partnerships: Mortgage (230,885) (272,215) (272,880) (295,740) (320,107) notes payable Parkway's share 662,120 595,674 401,549 396,688 372,277 of total debt Less: Parkway's (46,235) (55,968) (30,096) (12,669) (12,522) share of cash Parkway's share 615,885 539,706 371,453 384,019 359,755 of net debt Series D Preferred stock 135,532 135,532 135,532 135,532 135,532 (liquidation value) Parkway's share of net debt plus $ $ $ $ $ preferred stock 751,417 675,238 506,985 519,551 495,287 (1) Shares of common stock and 68,767 56,140 41,499 28,037 23,758 operating units outstanding Stock price per $ $ $ $ $ share at period 18.55 13.99 13.37 11.44 10.48 end Market value of $ $ $ $ $ common equity 1,275,628 785,399 554,842 320,743 248,984 Series D preferred stock 135,532 135,532 135,532 135,532 135,532 (liquidation value) Series E convertible preferred stock - - - 151,700 - (liquidation value) Total market capitalization $ $ $ $ $ (including net 2,027,045 1,460,637 1,061,827 991,994 744,271 debt) Net debt as a % of market 30.4% 37.0% 35.0% 38.7% 48.3% capitalization EBITDA - $ $ $ $ $ annualized 110,976 81,724 83,028 72,540 81,348 Adjustment to annualize 16,490 19,368 (141) 11,824 (5,132) investment activities (2) EBITDA - adjusted $ $ $ $ $ annualized 127,466 101,092 82,887 84,364 76,216 Net debt to 4.8 5.3 4.5 4.6 4.7 EBITDA multiple Net debt plus preferred to 5.9 6.7 6.1 6.2 6.5 EBITDA multiple (1) Impact of Series E Cumulative Convertible Preferred Stock is not included in the fixed charge coverage ratio, modified fixed charge coverage ratio or Parkway's share of net debt plus preferred at June 30, 2012, as the shares were converted to common stock on July 31, 2012. Had the Series E Cumulative Convertible Preferred Stock been included in these ratios then the fixed charge coverage ratio, modified fixed charge coverage ratio and Parkway's share of net debt plus preferred for the second quarter of 2012 would have been 1.8, 2.1 and 8.3 times, respectively. (2) Adjustment to annualized EBITDA represents the implied annualized impact of any acquisition or disposition activity for the period. PARKWAY PROPERTIES, INC. SAME-STORE NET OPERATING INCOME THREE MONTHS ENDED MARCH 31, 2013 AND 2012 (In thousands, except number of properties) Average Net Operating Occupancy Income Number of Percentage Square of Feet Properties Portfolio 2013 2012 2013 2012 (1) Same-store properties: Wholly-owned 5,280 25 30.21% $ $ 87.9% 87.0% 12,732 12,844 Fund II 3,072 8 31.26% 13,175 12,772 90.4% 87.1% Total $ $ same-store 8,352 33 61.47% 25,907 25,616 88.8% 87.0% properties Net operating income from all office and $ $ parking 13,038 45 100.00% 42,143 27,202 properties (1) Percentage of portfolio based on 2013 net operating income. The following table is a reconciliation of net income (loss) to SSNOI and Recurring SSNOI: Three Months Ended March 31 2013 2012 Net income (loss) for $ $ Parkway Properties, (1,168) 4,705 Inc. Add (deduct): Interest 10,470 9,244 expense Depreciation and 29,515 17,690 amortization Management company 4,390 4,534 expenses Income tax (benefit) (507) 161 expense General and 4,215 3,599 administrative expenses Acquisition 1,135 826 costs Change in fair value of contingent - 216 consideration Net income (loss) attributable to noncontrolling interests - real estate (1,255) 533 partnerships Net income (loss) attributable to (2) 89 noncontrolling interests - unit holders (Income) loss from 347 (3,291) discontinued operations Gain on sale of real estate from (542) (5,575) discontinued operations Management (4,352) (5,432) company income Interest and (103) (97) other income Net operating income from consolidated office and parking 42,143 27,202 properties Less: Net operating income from (16,236) (1,586) non same-store properties Same-store net operating income 25,907 25,616 (SSNOI) Less: non-recurring lease termination fee (199) (644) income Recurring SSNOI $ $ 25,708 24,972 Parkway's share $ $ of SSNOI 16,242 16,363 Parkway's share of $ $ recurring SSNOI 16,122 15,863 SOURCE Parkway Properties, Inc. Website: http://www.pky.com
Parkway Reports First Quarter 2013 Results
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