SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): July 21, 2003
EASTGROUP PROPERTIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Maryland 1-7094 13-2711135
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
300 One Jackson Place, 188 East Capitol Street, Jackson, MS 39201
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(Address of Principal Executive Offices, including zip code)
(601)354-3555
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits.
The following exhibits are filed with this Form 8-K:
99.1 Press Release dated July 21, 2003
ITEM 9. Regulation FD Disclosure (Information provided under Item 12 -
Disclosure of Results of Operations and Financial Condition).
Pursuant to Securities and Exchange Commission Release No. 33-8216, dated March
27, 2003, the information provided herein required by Item 12 of Form 8-K is
being filed under Item 9 of Form 8-K.
On July 21, 2003, we issued a press release, which sets forth our results of
operations for the quarter ended June 30, 2003. A copy of the press release is
attached hereto as Exhibit 99.1 and is incorporated herein by reference. Such
information 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 the company, whether made before or after the date
hereof, regardless of any general incorporation language in such filing.
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: July 21, 2003
EASTGROUP PROPERTIES, INC.
By: /s/ N. KEITH MCKEY
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N. Keith McKey
Executive Vice President,
Chief Financial Officer, Secretary
and Treasurer
Exhibit Index
Exhibit 99.1 Press Release dated July 21, 2003.
Exhibit 99.1
FOR MORE INFORMATION, CONTACT:
David H. Hoster II, President and Chief Executive Officer
N. Keith McKey, Chief Financial Officer
(601) 354-3555
EASTGROUP PROPERTIES ANNOUNCES
SECOND QUARTER 2003 RESULTS
o Funds from Operations of $12.0 Million and $.61 Per Share
o Net Income Available to Common Shareholders of $3.5 Million and $.20 Per Share
o Paid 94th Consecutive Quarterly Dividend, $.475 Per Share
o Percentage Leased 92.4%, Occupancy 91.1%
o Development Projects of $28.2 Million Under Construction or In Lease-Up
o Debt-to-Total Market Capitalization of 36.0% at Quarter End
JACKSON, MISSISSIPPI, July 21, 2003 - EastGroup Properties, Inc. (NYSE-EGP)
announced today the results of its operations for the three and six months ended
June 30, 2003.
FUNDS FROM OPERATIONS
For the quarter ended June 30, 2003, funds from operations (FFO) was $.61 per
share compared with $.68 per share in the same period of 2002, a decrease of
10.3%. Included in these numbers are gains on securities of $.005 per share for
the second quarter of 2003 and $.054 per share for the same period in 2002.
For the six months ended June 30, 2003, FFO was $1.21 per share compared with
$1.31 per share in the same period of 2002, a decrease of 7.6% per share. Gains
on securities were $.02 per share in 2003 compared with $.08 per share in 2002.
Property net operating income (PNOI) (GAAP basis) from same properties held for
both the current and past reporting periods decreased 1.0% and .9% for the three
months and six months ended June 30, 2003, respectively. Rental decreases on new
and renewal leases averaged 8.8% for the quarter.
David H. Hoster II, President and CEO, stated, "During the second quarter, we
signed 83 leases for almost 1.2 million square feet (6.1% of the portfolio) for
both renewal and new leases. This is a definite positive given the continued
sluggishness in the U.S. economy."
EARNINGS PER SHARE
On a diluted per share basis, earnings per common share (EPS) was $.20 and $.38
for the three and six months ended June 30, 2003 compared with $.27 and $.50 for
the same periods in 2002.
DEVELOPMENT
The incremental growth of EastGroup's current development program and 2002
property transfers to the portfolio increased PNOI by $650,000 in the second
quarter of 2003. At June 30, 2003, EastGroup had seven development properties
containing 510,000 square feet with a projected total cost of approximately
$28.2 million either in lease-up or under construction. Of this total,
approximately 21% of the space has been leased as of July 21, 2003. No
properties were transferred from development to the portfolio during the second
quarter of 2003.
ACQUISITIONS
During the second quarter of 2003, EastGroup purchased in separate transactions
two industrial properties - one in Phoenix, Arizona and one in Orlando, Florida
- for a total price of $6,458,000. The 63,000 square foot central Phoenix
property, Airport Commons, has a projected stabilized cash yield of 10.0% and
the 62,400 square foot Orlando property, Altamonte Commerce Center II, has a
projected stabilized cash yield of 10.6%.
DIVIDENDS
EastGroup paid dividends of $.475 per share of common stock in the second
quarter of 2003, which represented 78% of funds from operations per diluted
share for the quarter. This dividend was the 94th consecutive quarterly
distribution to EastGroup's common stockholders and represents an annualized
dividend rate of $1.90 per share, which yields 6.7% on the closing stock price
of $28.40 on July 18, 2003.
EastGroup also paid quarterly dividends of $.51875 per share on its Series A
Preferred Stock at the redemption on July 7, 2003 (see below) and $.547 per
share on its Series B Preferred Stock on July 15, 2003 to stockholders of record
as of June 30, 2003.
CAPITAL TRANSACTIONS
On May 20, 2003, EastGroup closed on the sale of 571,429 shares of its common
stock at $26.25 per share. The shares were sold to an institutional buyer with
proceeds of approximately $14.6 million, net of related issuance expenses.
On July 2, 2003, EastGroup closed a public offering of 1,320,000 shares of 7.95%
Series D Cumulative Redeemable Preferred Stock with a liquidation preference of
$25 per share. The offering resulted in approximately $32.3 million of net
proceeds.
On July 7, 2003, EastGroup redeemed all of its outstanding 9.00% Series A
Cumulative Redeemable Preferred Stock. The redemption price of these shares
(excluding accrued dividends) was $43.125 million. The issuance costs of
$1,768,000 related to the original issuance of the Series A stock in 1998 will
be recorded as a preferred issuance cost similar to a preferred dividend in the
third quarter.
During the second quarter of 2003, 1,400,000 shares of 8.75% Series B Cumulative
Convertible Preferred Stock were converted into 1,590,960 shares of common
stock.
On May 14, 2003, EastGroup signed an application on a $45.5 million, nonrecourse
first mortgage loan secured by ten properties. The note will have a fixed
interest rate of 4.75%, a ten-year term, and an amortization schedule of 25
years. The loan is expected to close in August 2003, and the proceeds will be
used to reduce bank borrowings.
Mr. Hoster stated, "We have strengthened the balance sheet with the capital
transactions both completed and proposed during the second quarter.
Debt-to-total market capitalization was reduced to 36.0% at June 30, 2003,
preferred dividend costs were reduced, common shares outstanding increased by
13.4%, and floating rate debt will be significantly reduced with the funding of
the new mortgage loan. We are in a good position to take advantage of future
acquisition and development opportunities with these transactions."
OUTLOOK FOR 2003
FFO per share for 2003 is estimated to be in the range of $2.33 to $2.39. Our
estimate of FFO per share for the quarter ended September 30, 2003 and the year
ended December 31, 2003 has been reduced by $.09 per share because of the
original issuance costs of the Series A Preferred Stock on its redemption on
July 7, 2003. FFO per share projections are $.51 to $.54 for third quarter and
$2.33 to $2.39 for the year. Earnings per share for 2003 should be in the range
of $.65 to $.72, which includes $.10 per share of issuance costs on the
redemption of the preferred stock. The table below reconciles projected net
income to projected FFO.
Low Range High Range
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3rd Qtr 4th Qtr Y/E 2003 3rd Qtr 4th Qtr Y/E 2003
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(In thousands, except per share data)
Net income 4,917 5,069 20,509 5,526 5,678 21,727
Issuance costs - Preferred Stock - Series A (1,768) - (1,768) (1,768) - (1,768)
Dividends on preferred shares (1,491) (1,491) (7,220) (1,491) (1,491) (7,220)
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Net income available to common stockholders 1,658 3,578 11,521 2,267 4,187 12,739
Depreciation and amortization 7,974 8,088 31,493 7,974 8,088 31,493
Share of joint venture depreciation and amortization (40) (41) (156) (40) (41) (156)
Gain on sale of depreciable real estate assets - - (106) - - (107)
Dividends on Series B convertible preferred shares 766 766 3,830 766 766 3,830
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Funds from operations 10,358 12,391 46,582 10,967 13,000 47,799
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Diluted shares for earnings per share 18,718 18,722 17,737 18,718 18,722 17,737
Potential common shares: convertible preferred stock 1,591 1,591 2,234 1,591 1,591 2,234
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Diluted shares for funds from operations 20,309 20,313 19,971 20,309 20,313 19,971
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Per share data (diluted):
Net income available to common stockholders 0.09 0.19 0.65 0.12 0.22 0.72
Funds from operations 0.51 0.61 2.33 0.54 0.64 2.39
CONFERENCE CALL
EastGroup will host a conference call to discuss the results of its second
quarter and review the Company's current operations on Tuesday, July 22, 2003,
at 10:00 A.M. EDT. The number for the conference call is 1-800-521-5499, ID
#180618. A taped recording of the call can be accessed 24 hours a day through
Tuesday, July 29, 2003 by dialing 1-800-625-5288; the pass code is 180618.
SUPPLEMENTAL INFORMATION
Supplemental financial information is available by request by calling the
Company at 601-354-3555, or by accessing the report in the reports section of
the Company's website at www.eastgroup.net.
EastGroup Properties, Inc. is a self-administered equity real estate investment
trust focused on the acquisition, ownership and development of industrial
properties in major Sunbelt markets throughout the United States. Its strategy
for growth is based on its property portfolio orientation toward premier
distribution facilities clustered near major transportation centers. EastGroup's
portfolio currently includes 18.9 million square feet with an additional 510,000
square feet of properties under development. EastGroup Properties, Inc. press
releases are also available on the Company's website.
FORWARD-LOOKING STATEMENTS
In addition to historical information, certain statements in this release are
forward-looking, such as those pertaining to the Company's hopes, expectations,
intentions, beliefs, strategies regarding the future, the anticipated
performance of development and acquisition properties, capital resources,
profitability and portfolio performance. Forward-looking statements involve
numerous risks and uncertainties. The following factors, among others discussed
herein, could cause actual results and future events to differ materially from
those set forth or contemplated in the forward-looking statements: defaults or
nonrenewal of leases, increased interest rates and operating costs, failure to
obtain necessary outside financing, difficulties in identifying properties to
acquire and in effecting acquisitions, failure to qualify as a real estate
investment trust under the Internal Revenue Code of 1986, as amended,
environmental uncertainties, risks related to disasters and the costs of
insurance to protect from such disasters, financial market fluctuations, changes
in real estate and zoning laws and increases in real property tax rates. The
success of the Company also depends upon the trends of the economy, including
interest rates, income tax laws, governmental regulation, legislation,
population changes and those risk factors discussed elsewhere in this release.
Readers are cautioned not to place undue reliance on forward-looking statements,
which reflect management's analysis only as the date hereof. The Company assumes
no obligation to update forward-looking statements. See also the Company's
reports to be filed from time to time with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934.
EASTGROUP PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
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2003 2002 2003 2002
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REVENUES
Income from real estate operations $ 26,531 25,094 53,018 49,966
Interest 5 142 10 278
Gain on securities 107 1,050 389 1,471
Other 33 337 102 481
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26,676 26,623 53,519 52,196
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EXPENSES
Operating expenses from real estate operations 7,655 7,012 15,615 14,120
Interest 4,643 4,165 9,341 8,340
Depreciation and amortization 7,744 7,322 15,431 14,427
General and administrative 1,261 1,090 2,500 2,177
Minority interest in joint ventures 114 90 213 183
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21,417 19,679 43,100 39,247
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INCOME BEFORE GAIN ON SALE OF REAL ESTATE INVESTMENTS 5,259 6,944 10,419 12,949
Gain on sale of real estate investments - - - 93
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INCOME FROM CONTINUING OPERATIONS 5,259 6,944 10,419 13,042
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DISCONTINUED OPERATIONS
Loss from real estate operations - (16) (2) (4)
Gain on sale of real estate investments - - 106 -
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INCOME (LOSS) FROM DISCONTINUED OPERATIONS (A) - (16) 104 (4)
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NET INCOME 5,259 6,928 10,523 13,038
Preferred dividends-Series A 970 970 1,940 1,940
Preferred dividends-Series B 766 1,532 2,298 3,064
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NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 3,523 4,426 6,285 8,034
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BASIC PER COMMON SHARE DATA
Income from continuing operations $ 0.21 0.28 0.37 0.51
Income (loss) from discontinued operations 0.00 0.00 0.01 0.00
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Net income available to common stockholders $ 0.21 0.28 0.38 0.51
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Weighted average shares outstanding 16,864 15,892 16,397 15,833
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DILUTED PER COMMON SHARE DATA
Income from continuing operations $ 0.20 0.27 0.37 0.50
Income (loss) from discontinued operations 0.00 0.00 0.01 0.00
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Net income available to common stockholders $ 0.20 0.27 0.38 0.50
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Weighted average shares outstanding 17,225 16,254 16,758 16,210
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(A) In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets," income (loss) from discontinued operations
represents the operations and gain (loss) on disposal for properties
classified to held for sale subsequent to 12/31/01. Prior period amounts
have been reclassified to be consistent with the 2003 presentation.
EASTGROUP PROPERTIES, INC.
RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
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2003 2002 2003 2002
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RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME:
Income from real estate operations $ 26,531 25,094 53,018 49,966
Operating expenses from real estate operations (7,655) (7,012) (15,615) (14,120)
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PROPERTY NET OPERATING INCOME (PNOI) (A) 18,876 18,082 37,403 35,846
Interest income 5 142 10 278
Gain on securities 107 1,050 389 1,471
Other income 33 337 102 481
General and administrative expense (1,261) (1,090) (2,500) (2,177)
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EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) 17,760 18,521 35,404 35,899
Income (loss) from discontinued operations
(before depreciation and amortization) - 6 (2) 38
Interest expense (B) (4,643) (4,165) (9,341) (8,340)
Minority interest in earnings (before depreciation and amortization) (150) (140) (289) (276)
Dividends on Series A preferred shares (970) (970) (1,940) (1,940)
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FUNDS FROM OPERATIONS (FFO) (A) 11,997 13,252 23,832 25,381
Depreciation and amortization from continuing operations (7,744) (7,322) (15,431) (14,427)
Depreciation and amortization from discontinued operations - (22) - (42)
Share of joint venture depreciation and amortization 36 50 76 93
Gain on sale of depreciable real estate investments - - 106 93
Dividends on Series B convertible preferred shares (766) (1,532) (2,298) (3,064)
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NET INCOME AVAILABLE TO COMMON STOCKHOLDERS 3,523 4,426 6,285 8,034
Dividends on preferred shares 1,736 2,502 4,238 5,004
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NET INCOME $ 5,259 6,928 10,523 13,038
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DILUTED PER COMMON SHARE DATA: (C)
Income from continuing operations $ 0.20 0.27 0.37 0.50
Income from discontinued operations 0.00 0.00 0.01 0.00
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Net income available to common stockholders $ 0.20 0.27 0.38 0.50
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Weighted average shares outstanding 17,225 16,254 16,758 16,210
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Funds from operations $ 0.61 0.68 1.21 1.31
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Weighted average shares outstanding for FFO purposes 19,797 19,436 19,634 19,392
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(A) The Company's chief decision makers use two primary measures of operating
results in making decisions: property net operating income (PNOI), defined as
income from real estate operations less property operating expenses (before
interest expense and depreciation and amortization), and funds from operations
(FFO). EastGroup defines FFO consistent with the National Association of Real
Estate Investment Trusts' (NAREIT) definition, as net income (loss) (computed in
accordance with accounting principles generally accepted in the United States of
America (GAAP)), excluding gaines or losses from sales of depreciable real
estate property, plus real estate related depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures.
PNOI and FFO are supplemental industry reporting measurements used to evaluate
the performance of the Company's investments in real estate assets and its
operating results. The Company believes that the exclusion of depreciation and
amortization in the industry's calculations of PNOI and FFO provide supplemental
indicators of the properties' performance since real estate values have
historically risen or fallen with market conditions. PNOI and FFO as calculated
by the Company may not be comparable to similarly titled but differently
calculated measures for other REITs. Investors should be aware that items
excluded from or added back to FFO are significant components in understanding
and assessing the Company's financial performance.
(B) Net of capitalized interest of $516,000 and $556,000 for the three months
ended June 30, 2003 and 2002, respectively; and $1,002,000 and $1,088,000 for
the six months ended June 30, 2003 and 2002, respectively.
(C) Assumes dilutive effect of common stock equivalents.