| For Immediate Release January 29, 2003 2003-02 | For Investor Inquires, contact: Thomas K. Peck 317/808-6168 |
For Media Inquires, contact: Donna M. Hovey 317/808-6137 |
Duke Realty Announces Fourth Quarter Earnings
CEO Transition Plan Announced
Common and Preferred Stock Dividends Also Announced
Indianapolis—Duke Realty Corporation (DRE/NYSE) reported today that diluted funds from operations ("FFO") were $92.3 million for the fourth quarter of 2002 versus $98.8 million for the same period in 2001. On a per share basis, fourth quarter FFO decreased 6.4 percent to $0.59 compared to $0.63 for the fourth quarter of 2001. For the year ended December 31, 2002, FFO was $2.48 per share compared to $2.62 per share in 2001, a decrease of 5.3 percent. FFO is a supplemental non-GAAP financial measurement used as a standard in the real estate industry to measure and compare the operating performance of real estate companies. A reconciliation of FFO to GAAP net income is included in the financial tables accompanying this press release.
Net income available for common shareholders for the fourth quarter of 2002 was $28.3 million on revenues of $188.0 million, compared to $44.4 million on revenues of $190.0 million for the fourth quarter last year. On a per share basis, fourth quarter net income available for common shareholders was $0.21 per share compared with $0.34 per share for the fourth quarter of 2001, a 38.2 percent decrease. For all of 2002, net income available for common shareholders was $1.19 per share, compared with $1.75 per share in 2001, a 32.0 percent decrease. Approximately $0.29 per share of the decline in Duke's 2002 net income is attributable to $40.6 million of net gains on sales of depreciable property in 2001 compared to a $3.4 million net loss on such sales in 2002. Included in the $3.4 million net loss on sale of depreciable property in 2002 is a $9.4 million valuation allowance recorded in the fourth quarter for six of Duke's 910 in-service properties determined to have a permanent impairment of their book value. All per share amounts reported are diluted with basic per share information also included in the financial table accompanying this press release.
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Additionally, the Company's Board of Directors declared a quarterly dividend of $.455 per common share, or $1.82 per share on an annualized basis. The dividend is payable on February 28, 2003 to common shareholders of record on February 14, 2003.
The Board also declared today the following dividends on the Company's outstanding preferred stock:
| Class | NYSE Symbol | Quarterly Amount/Share | Record Date | Payment Date | |||||
|---|---|---|---|---|---|---|---|---|---|
| Series B | Not Listed | $ | .99875 | March 17, 2003 | March 31, 2003 | ||||
| Series D | DREPRD | $ | .46094 | March 17, 2003 | March 31, 2003 | ||||
| Series E | DREPRE | $ | .51563 | March 17, 2003 | March 31, 2003 | ||||
| Series I | DREPRI | $ | .52813 | March 17, 2003 | March 31, 2003 | ||||
Commenting on Duke's performance, Thomas L. Hefner, Chairman and Chief Executive Officer, stated,
"Although we are still concerned about the strength of the economy, the fourth quarter provided more evidence that the declining fundamentals that we experienced in the past two years may finally have bottomed out, setting the stage for resumed earnings growth beginning late 2003 and into 2004. Specifically, as we reported two weeks ago, development starts, acquisitions, and third-party constructions starts steadily improved throughout 2002. Also, while occupancy has yet to improve, we signed 6.6 million square feet of new leases and renewals during the fourth quarter and 22.1 million square feet for all of 2002. This compares to 18.7 million square feet in 2001. Building on this momentum and driving occupancy higher is clearly our highest priority in 2003."
Property information at December 31, 2002 was as follows:
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The Company also disclosed the following information for the fourth quarter of 2002:
Duke also announced today that its Board of Directors, along with Senior Management, is actively involved in succession planning for the leadership of the Company. Tom Hefner will relinquish his role as Chief Executive Officer by April 30, 2004. He will then retire as Chairman of the Board of Directors by April 30, 2005. Consistent with Tom's transition, the following organizational changes are effective immediately:
Commenting on this transition plan, Bill Cavanaugh, Chairman of the Company's Governance Committee and its Lead Director, said:
"Duke has long been at the forefront of good Corporate Governance. This transition plan is the result of thoughtful discussions among Senior Management and the Board of Directors. Tom, Gene and Gary have all been with Duke for nearly 25 years. This evolving transition plan will insure that the Duke Management Team continues to be one of the strongest in the industry for the next 25 years and beyond."
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When used in this press release, the word "believes," "expects," "estimates" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially. In particular, among the factors that could cause actual results to differ materially are continued qualification as a real estate investment trust, general business and economic conditions, competition, increases in real estate construction costs, interest rates, accessibility of debt and equity capital markets and other risks inherent in the real estate business including tenant defaults, potential liability relating to environmental matters and liquidity of real estate investments. Readers are advised to refer to Duke's Form 8-K Report as filed with the Securities and Exchange Commission on December 6, 2001 for additional information concerning these risks.
Duke Realty Corporation is the largest publicly traded office and industrial real estate company in the United States and a member of theForbes Super 500. Offering a complete range of real estate products and services, Duke produces approximately $800 million in annual revenue from more than 4,000 tenants and focuses on building dominant market positions in each of its 13 geographic platforms across the Midwest and the Sunbelt. Duke owns interests in more than 108 million square feet of properties, has approximately 1,050 employees and owns or controls approximately 3,800 acres of undeveloped land that can support approximately 59 million square feet of future development. Visit Duke on the web at www.dukerealty.com.
A copy of the Company's December 31, 2002 supplemental information fact book will be available after 7:00 p.m. EST today in theInvestor Information section of the Company's web site atwww.dukerealty.com. Duke is also hosting a conference call tomorrow at 2:30 p.m. EST to discuss its fourth quarter operating results. All investors are invited to listen to this call, which can be accessed through the Company's web site atwww.dukerealty.com.
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Financial Highlights
(in thousands, except per share data)
| | Three Months Ended December 31 | Year Ended December 31 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2002 | 2001 | 2002 | 2001 | ||||||||||
| Operating Results | ||||||||||||||
| Revenues | $ | 187,969 | $ | 190,023 | $ | 780,071 | $ | 795,198 | ||||||
| Earnings from rental operations | 50,011 | 63,367 | 219,076 | 254,103 | ||||||||||
| Earnings from service operations | 3,671 | 4,760 | 30,270 | 35,115 | ||||||||||
| Net income for common shareholders—Basic | 28,294 | 44,420 | 161,272 | 229,967 | ||||||||||
| Net income for common shareholders—Diluted | 31,328 | 50,130 | 179,840 | 265,853 | ||||||||||
| Funds from operations—Basic | 80,888 | 84,520 | 337,651 | 346,747 | ||||||||||
| Funds from operations—Diluted | 92,259 | 98,822 | 388,357 | 408,361 | ||||||||||
| Per Share: | ||||||||||||||
| Funds from operations—Basic | $ | 0.60 | $ | 0.65 | $ | 2.52 | $ | 2.67 | ||||||
| Funds from operations—Diluted | $ | 0.59 | $ | 0.63 | $ | 2.48 | $ | 2.62 | ||||||
| Net income—common shareholders—Basic | $ | 0.21 | $ | 0.34 | $ | 1.20 | $ | 1.77 | ||||||
| Net income—common shareholders—Diluted | $ | 0.21 | $ | 0.34 | $ | 1.19 | $ | 1.75 | ||||||
| Dividend payout ratio of funds from operations | 77.1 | % | 71.4 | % | 73.2 | % | 67.9 | % | ||||||
| Weighted average shares outstanding | ||||||||||||||
| Basic—Net income and Funds from operations | 134,935 | 130,970 | 133,981 | 129,660 | ||||||||||
| Diluted—Net income | 150,692 | 149,842 | 150,839 | 151,710 | ||||||||||
| Diluted—Funds from operations | 155,700 | 156,296 | 156,854 | 156,075 | ||||||||||
| | December 31 2002 | December 31 2001 | ||||
|---|---|---|---|---|---|---|
| Balance Sheet Data | ||||||
| Net real estate investments | $ | 4,702,788 | $ | 4,703,746 | ||
| Total assets | 5,348,823 | 5,330,033 | ||||
| Total debt | 2,106,285 | 1,814,856 | ||||
| Shareholders' equity | 2,616,180 | 2,785,009 | ||||
| Common shares outstanding at end of period | 135,007 | 131,416 | ||||
Reconciliation of Net Income to Funds From Operations
(in thousands, except per share data)
| | Three Months Ended December 31, | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2002 | 2001 | |||||||||||||||
| | Amount | Wtd. Avg. Shares | Per Share | Amount | Wtd. Avg. Shares | Per Share | |||||||||||
| Net Income Available for Common Shares | $ | 28,294 | 134,935 | $ | 0.21 | $ | 44,420 | 130,970 | $ | 0.34 | |||||||
| Add back: | |||||||||||||||||
| Minority interest in earnings of unitholders | 3,034 | 14,949 | 5,710 | 17,319 | |||||||||||||
| Other common stock equivalents | 808 | 1,553 | |||||||||||||||
| Fully Diluted Net Income | 31,328 | 150,692 | $ | 0.21 | 50,130 | 149,842 | $ | 0.34 | |||||||||
| Adjustments: | |||||||||||||||||
| Depreciation and Amortization | 44,735 | 41,182 | |||||||||||||||
| Company Share of Joint Venture Depreciation and amortization | 4,375 | 4,258 | |||||||||||||||
| (Earnings) loss from depreciable property sales | 9,358 | 87 | |||||||||||||||
| Dilutive effect of Convertible Preferred D Shares | 2,463 | 5,008 | 2,465 | 5,009 | |||||||||||||
| Dilutive effect of Convertible Preferred G Units | 0 | 0 | 700 | 1,445 | |||||||||||||
| Fully Diluted Funds From Operations | $ | 92,259 | 155,700 | $ | 0.59 | $ | 98,822 | 156,296 | $ | 0.63 | |||||||
| | Year Ended December 31, | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2002 | 2001 | |||||||||||||||
| | Amount | Wtd. Avg. Shares | Per Share | Amount | Wtd. Avg. Shares | Per Share | |||||||||||
| Net Income Available for Common Shares | $ | 161,272 | 133,981 | $ | 1.20 | $ | 229,967 | 129,660 | $ | 1.77 | |||||||
| Add back: | |||||||||||||||||
| Minority interest in earnings of unitholders | 18,568 | 15,442 | 32,463 | 18,301 | |||||||||||||
| Joint venture partner convertible ownership (1) | 3,423 | 2,092 | |||||||||||||||
| Other common stock equivalents | 1,416 | 1,657 | |||||||||||||||
| Fully Diluted Net Income | 179,840 | 150,839 | $ | 1.19 | 265,853 | 151,710 | $ | 1.75 | |||||||||
| Adjustments: | |||||||||||||||||
| Depreciation and Amortization | 175,621 | 159,714 | |||||||||||||||
| Company Share of Joint Venture Depreciation and amortization | 17,657 | 14,177 | |||||||||||||||
| (Earnings) loss from depreciable property sales | 3,430 | (40,628 | ) | ||||||||||||||
| Joint venture partner convertible ownership (1) | (3,423 | ) | (2,092 | ) | |||||||||||||
| Dilutive effect of Convertible Preferred D Shares | 9,856 | 5,008 | 9,866 | 5,012 | |||||||||||||
| Dilutive effect of Convertible Preferred G Units | 1,953 | 1,007 | 2,802 | 1,445 | |||||||||||||
| Fully Diluted Funds From Operations | $ | 388,357 | 156,854 | $ | 2.48 | $ | 408,361 | 156,075 | $ | 2.62 | |||||||
