U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
AMENDMENT TO FORM 10-QSB/A
Filed Pursuant to
THE SECURITIES EXCHANGE ACT OF 1934
THE PARKWAY COMPANY
(Exact name of registrant as specified in its charter)
AMENDMENT NO. 2
The undersigned registrant hereby amends the following items,
financial statements, exhibits or other portions of its Form 10-QSB
for the quarter ended September 30, 1994 as set forth in the pages
attached hereto:
Item 1. Consolidated Financial Statements
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this amendment to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 8, 1995 THE PARKWAY COMPANY
By /s/ Sarah P. Clark
Sarah P. Clark
Vice President,
Chief Financial Officer,
and Secretary
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30 June 30
1994 1994
------------ ------------
(Unaudited)
Assets
Real estate related investments
Operating real estate (net of
accumulated depreciation of
$5,911 and $5,663)............... $ 27,296 $ 27,400
Real estate held for sale.......... 12,067 10,630
Real estate companies.............. 16,371 14,689
Mortgage loans..................... 3,600 3,482
Real estate partnerships and
corporate joint venture.......... 931 1,022
-------- --------
60,265 57,223
Notes receivable from affiliates..... 385 413
Interest and rents receivable and
other assets....................... 1,283 1,687
Cash and cash equivalents............ 175 217
Restricted cash...................... 346 195
-------- --------
$ 62,454 $ 59,735
======== ========
Liabilities
Notes payable to banks............... $ 4,345 $ 3,631
Mortgage notes payable without
recourse........................... 22,865 22,902
Accounts payable and other
liabilities........................ 1,611 1,332
Deferred gain........................ 242 141
-------- --------
29,063 28,006
-------- --------
Shareholders' Equity
Common stock, $1.00 par value,
10,000,000 shares authorized,
1,542,942 shares issued............ 1,543 1,543
Additional paid-in capital........... 27,134 27,134
Retained earnings.................... 2,508 2,400
Unrealized gains on securities....... 2,206 652
-------- --------
33,391 31,729
-------- --------
$ 62,454 $ 59,735
======== ========
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
September 30
--------------------
1994 1993
-------- --------
(In thousands,
except per share data)
Revenues
Income from real estate properties........ $ 1,842 $ 1,551
Interest on mortgage loans................ 141 35
Gain on sale of real estate partnership... - 280
Equity in earnings:
Real estate companies................... 252 81
Real estate partnerships and corporate
joint venture......................... 106 58
Gain on securities........................ - 104
Interest on investments................... 14 83
Deferred gains and other income........... 34 270
Gain on real estate and mortgage loans.... 130 -
-------- --------
2,519 2,462
-------- --------
Expenses
Interest expense.......................... 61 -
Real estate owned:
Operating expense....................... 977 923
Interest expense........................ 539 610
Depreciation and amortization........... 273 247
Minority interest....................... (123) (158)
Shared general and administrative
expenses................................ 124 92
Other expenses............................ 313 171
-------- --------
2,164 1,885
-------- --------
Income before discontinued operations..... 355 577
-------- --------
Equity in earnings from discontinued
operations of equity method investees:
Income from discontinued operations... - 51
-------- --------
- 51
-------- --------
Net income................................ $ 355 $ 628
======== ========
Income per share:
From continuing operations.............. $ .23 $ .46
From discontinued operations............ - .04
-------- --------
Net income.............................. $ .23 $ .50
======== ========
Weighted average shares outstanding....... 1,543 1,260
======== ========
Dividends declared per share.............. $ .16 $ .15
======== ========
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30
--------------------
1994 1993
-------- --------
(In thousands)
Operating Activities
Net income............................... $ 355 $ 628
Adjustments to reconcile net income to
net cash provided by operating
activities:
Equity in earnings..................... (358) (190)
Dividends received..................... 123 65
Distributions from operations of real
estate partnership and corporate
joint venture........................ 196 118
Depreciation and amortization.......... 273 247
Amortization of discounts, deferred
gains and other...................... (32) (258)
Gain on sale of real estate partnership - (280)
Gain on real estate and mortgage loans. (130) -
Gain on securities..................... - (104)
Changes in operating assets and
liabilities:
Decrease (increase) in receivables... 76 (338)
Increase in accounts payable and
accrued expenses................... 264 236
-------- --------
Cash provided by operating activities..... 767 124
-------- --------
Investing Activities
Payments received on mortgage loans...... 124 36
Purchases of investments in real estate
companies.............................. - (328)
Purchase of real estate properties....... (1,502) (72)
Purchase of mortgages.................... - (907)
Proceeds from sale of real estate owned.. 178 -
Proceeds from sale of investments in real
estate companies....................... - 212
Improvements to real estate owned........ (82) (41)
Proceeds from sale of real estate
partnership owned...................... - 296
Payments (advances) on notes receivable
from affiliates........................ 28 (43)
-------- --------
Cash used in investing activities......... (1,254) (847)
-------- --------
Financing Activities
Principal payments on long-term debt..... (37) (762)
Proceeds from bank borrowings............ 1,945 -
Principal payments on bank borrowings.... (1,231) (75)
Dividends paid........................... (231) (252)
Exercise of stock options................ (1) -
-------- --------
Cash provided by (used in) financing
activities.............................. 445 (1,089)
-------- --------
Decrease in cash.......................... (42) (1,812)
Cash and cash equivalents at beginning of
period.................................. 217 8,547
-------- --------
Cash and cash equivalents at end of period $ 175 $ 6,735
======== ========
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
Three Months Ended
September 30
--------------------
1994 1993
-------- --------
(In thousands)
Common stock, $1.00 par value
Balance at beginning and end of period.. $ 1,543 $ 2,333
-------- --------
Additional paid-in capital
Balance at beginning and end of period.. 27,134 39,271
-------- --------
Retained Earnings (Deficit)
Balance at beginning of period.......... 2,400 1,899
Net income.............................. 355 628
Cash dividends declared................. (247) (189)
-------- --------
Balance at end of period................ 2,508 2,338
-------- --------
Treasury shares, at cost
Balance at beginning and end of period.. - (16,320)
-------- --------
Unrealized gain on securities
Balance at beginning of period.......... 652 -
Unrealized gain on securities........... 1,554 -
-------- --------
Balance at end of period................ 2,206 -
-------- --------
Total shareholders' equity................ $ 33,391 $ 27,622
======== ========
See notes to consolidated financial statements
Notes to Consolidated Financial Statements (Unaudited)
September 30, 1994
(1) Basis of Presentation
The accompanying financial statements reflect all adjustments
which are, in the opinion of management, necessary for a fair
statement of the results for the interim periods presented. All
such adjustments are of a normal recurring nature. The financial
statements should be read in conjunction with the annual report and
the notes thereto.
(2) Reclassifications
Certain reclassifications have been made in the fiscal 1994
financial statements to conform to the fiscal 1995 classifications.
(3) Investments in Real Estate Companies
Investments in real estate companies consist of the following:
Quoted
Sept. 30 Market
1994 Investments Value
Ownership Sept. 30 Sept. 30
Percentage 1994 1994
---------- ----------- --------
(In thousands)
Investee
Equity method investees:
EB,Inc..................... 51.55% $ 14,049 $ 11,214
EastGroup Properties
("EastGroup")............ 2.68% 1,619 2,175
Congress Street
Properties, Inc.......... 10.26% 364 (a)
--------
16,032
Non-equity method investees:
Other...................... 339 339
--------
$ 16,371
========
(a) This stock is no longer quoted on the NASDAQ NMS National
Market System. During 1994, trading was sporadic and reliable
quotations were unavailable.
Condensed unaudited statements of income from which the Company
has recorded its equity in earnings for EB, Inc. are as follows:
Three Months Ended
June 30, 1994
------------------
(In thousands)
Revenues................................. $ 570
Expenses................................. (166)
--------
Net income............................... $ 404
========
Equity in earnings recorded
by Parkway............................. $ 221
========
Condensed unaudited statements of income from which the
Company has recorded its equity in earnings for EastGroup are as
follows:
Three Months Ended
June 30, 1994
------------------
(In thousands)
Revenues................................. $ 5,965
Expenses................................. (4,634)
Gains (losses)........................... 2,494
--------
$ 3,825
========
Equity in earnings recorded
by Parkway............................. $ 45
========
Certain investments accounted for by the equity method have
been purchased at amounts different from the Company's pro-rata
share of the investee's book value as follows:
Investee Amount
-------- --------------
(In thousands)
Equity in excess of cost: EB, Inc.......... $3,943
Congress Street.. 640
EastGroup........ 594
The amounts above have been assigned to the investee's
principal net assets and are primarily being recognized in
operations as the assets are depreciated or sold.
(4) Supplemental Cash Flow Information
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
September 30
----------------------
1994 1993
---------- ----------
(In thousands)
Cash paid for interest......... $ 587 $ 565
Cash paid for income taxes..... 49 63
Loans to facilitate sales
of real estate............... 184 -
(5) Change in Accounting Principle
Effective July 1, 1994, the Company adopted Statement of
Financial Accounting Standard (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" which requires
that investment securities be carried at fair market value and
unrealized gains or losses be reflected as a separate component of
shareholders' equity. The Company's investment in equity
securities to which SFAS 115 applied are all classified as
"available for sale" securities. The fair value of these
securities at September 30, 1994 was $339,000 and unrealized gain
on these securities totaled $27,000. Also included as unrealized
gains in shareholders' equity at September 30, 1994 is $2,179,000
from the application of SFAS 115 by certain of the Companies equity
investees.
THE PARKWAY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
- -------------------
(Comments are for the balance sheet dated September 30, 1994
compared to the balance sheet dated June 30, 1994.)
Total assets of the Company increased $2,719,000 to $62,454,000
at September 30, 1994. The primary reason for the increase was the
purchase of real estate properties for $1,500,000 and recording
unrealized gains on marketable equity securities of $1,554,000.
Liabilities increased $1,057,000 to $29,063,000 during the same
period. Book value per share increased from $20.56 at June 30,
1994 to $21.64 at September 30, 1994.
The investments in real estate increased a net $1,333,000.
This increase is due primarily to the September 2, 1994 purchase of
the remaining 50% interest in the Sugarland Triangle land for a
purchase price of $1,500,000. Decreases in investments in real
estate are due to the sale of 9 residential lots, 5 townhomes and
one commercial parcel. The sales prices totalled $362,000
consisting of $178,000 in cash and $184,000 in mortgage notes.
Total gains on the sales were $216,000. Of this amount, $115,000
was recognized as gains on sale of real estate and $101,000 was
deferred to be realized using the installment method of accounting.
The investment in real estate companies increased a net
$1,682,000 during the quarter. The Company recorded equity in
earnings of $252,000 and dividends received of $123,000. The
Company also recorded $1,554,000 of unrealized gains on securities.
Of this amount, $27,000 is due to the adoption of Statement of
Financial Accounting Standard (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" which requires
that investment securities be carried at fair market value. The
remaining increase of $1,527,000 is due to certain of the Company's
investees application of SFAS No. 115.
Mortgage loans increased a net $118,000 primarily due to
mortgage notes of $184,000 received in the sales mentioned above.
The Company received $124,000 in principal payments and recognized
$58,000 from amortization of valuations and deferred gains.
The net decrease in real estate partnerships and corporate
joint venture for the quarter was $91,000. The Company recorded
equity in earnings of real estate partnerships and corporate joint
venture of $106,000 and received distributions of $196,000.
Notes receivable from affiliates had a net decrease of $28,000.
This included advances of $48,000 and repayments of $76,000.
The increase in notes payable to banks of $714,000 included
advances of $1,945,000 and payments of $1,231,000. The decrease of
$37,000 in mortgage notes payable without recourse was due to
scheduled principal payments.
The increase in deferred gains of $101,000 is due to the sales
mentioned previously. These deferred gains will be recognized as
payments are received on the notes.
Shareholders' equity increased $1,662,000 during the comparison
period as a result of the following factors:
Increase (decrease)
-------------------
(In thousands)
Net income $ 355
Dividends declared (247)
Unrealized gains 1,554
----------
$ 1,662
==========
RESULTS OF OPERATIONS
- ---------------------
(Comments are for the three months ended September 30, 1994
compared to the three months ended September 30, 1993.)
Operations of real estate properties are summarized below:
Three Months Ended
September 30
--------------------
1994 1993
-------- --------
(In thousands)
Income from real estate properties.... $ 1,842 $ 1,551
Real estate operating expense......... (977) (923)
-------- --------
865 628
Interest expense on real estate
properties.......................... (539) (610)
Depreciation and amortization......... (273) (247)
Minority interest..................... 123 158
-------- --------
$ 176 $ (71)
======== ========
The effect on the Company's operations related to One Jackson
Place (which have been included in the numbers above) follows:
Three Months Ended
September 30
---------------------
1994 1993
-------- --------
(In thousands)
Revenues $ 902 $ 839
Operating expenses (370) (369)
Interest expense (518) (518)
Depreciation (220) (220)
Minority interest income 123 161
-------- --------
$ (83) $ (107)
======== ========
The increase in interest on mortgage loans of $106,000 is due
primarily to $72,000 of interest income recorded on the mortgage
loans received in the merger with FCREIT. Also contributing the
this increase was interest recorded on a mortgage loan made during
the last fiscal year in connection with the sale of real estate.
The gain on sale of real estate partnership of $280,000 in
September 1993, is due to the sale of the Company's 22% investment
in GV Partners to the 78% partner, EastGroup Properties.
Equity in of real estate companies consists of the following:
Three Months Ended
September 30
--------------------
1994 1993
-------- --------
(In thousands)
EB, Inc. $ 221 $ 96
EastGroup 45 54
Congress Street (14) (18)
-------- --------
$ 252 $ 132
Less amounts recognized as
discontinued operations - 51
-------- --------
$ 252 $ 81
======== ========
Equity in operations of real estate partnerships and corporate
joint venture consists of the following:
Three Months Ended
September 30
---------------------
1994 1993
-------- --------
(In thousands)
Golf Properties, Inc. $ 93 $ 53
GV Partners - 5
Wink/Parkway Partnership 13 -
-------- --------
$ 106 $ 58
======== ========
Interest expense of $61,000 in the quarter ending September 30,
1994 is due to borrowings under lines of credit.
Other expenses increased $174,000 during the three months
ending September 30, 1994 as compared to the three months ended
September 30, 1993 primarily as a result of stock appreciation
rights expense recorded of $92,000, increased directors fees of
$19,000 due to special meetings held in connection with the
proposed mergers with Congress Street and EB, Inc. and increased
administrative expenses due to the merger of FCREIT.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Funds provided by operations, mortgage loan payments, bank
borrowings and proceeds from sales of real estate were the primary
sources of funds for the Company during the three months. Funds
provided by these sources and cash balances were sufficient to
cover repayment of long-term debt and bank debt, dividends paid to
shareholders, improvements to real estate owned properties, the
purchase of real estate properties and the payment of operating
expenses.
At September 30, 1994, the Company had available for general
use $175,000 in cash and $2,220,000 available under two lines of
credit. Management believes that funds generated from operations,
borrowings and cash on hand will be sufficient to cover future cash
requirements.
On July 6, 1994, Parkway and Congress Street Properties, Inc.
jointly announced that their Boards of Directors had agreed in
principle to a merger of Congress Street and a wholly-owned
subsidiary of Parkway. Under the terms of the proposed merger,
Congress Street shareholders will receive .29 shares of Parkway for
each Congress Street share owned. The exchange ratio was
recommended to the Boards by negotiating committees comprised of
independent directors. The merger is subject to the approval of
the shareholders of Congress Street in a special meeting scheduled
for November 29, 1994.
On July 27, 1994, Parkway and EB, Inc. jointly announced that
their Boards of Directors had agreed in principle to a merger of EB
and a wholly-owned subsidiary of Parkway. EB shareholders would
receive $17.25 for each EB share, consisting of cash of $8 per
share and shares of Parkway with a value of $9.25 based on a
defined formula. The merger is subject to shareholder approval in
the case of EB and registration of the Parkway shares to be issued
in the merger with the Securities and Exchange Commission.
The Company believes that the balance of funds available on the
lines of credit, along with the cash available from the proposed
merger with EB, Inc. will be sufficient for the cash requirements
of the proposed merger of approximately $5,527,000. At September
30, 1994, EB, Inc. had available $4,464,000 in cash and cash
equivalents and Grenada Sunburst stock with a market value
(determined using the market price as quoted on the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") National Market System) of $14,154,000.
On November 8, 1994, the Company sold a stock investment for
$339,000 cash and will recognize a gain of $27,000 on the sale in
the quarter ending December 31, 1994. The funds from the sale will
be used to reduce the lines of credit.
