SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------------------
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
-----------------------------------
For Quarterly Period Ended June 30, 1995
Commission File Number 0-12505
The Parkway Company
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(Exact name of small business issuer as specified in its charter)
Texas 74-2123597
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
300 One Jackson Place
188 East Capitol Street
P. O. Box 22728
Jackson, Mississippi 39225-2728
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (601) 948-4091
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Former name, former address and former fiscal year,
if changed since last report
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
1,997,263 shares of common stock, $1.00 par value, were
outstanding at August 1, 1995.
<PAGE>
THE PARKWAY COMPANY
FORM 10-QSB
TABLE OF CONTENTS
FOR THE QUARTER ENDED JUNE 30, 1995
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Page
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Part I. Financial Information
Item 1. Financial Statements
Consolidated balance sheet, June 30, 1995 and 3
December 31, 1994
Consolidated statements of income for the three months 4
and six months ended June 30, 1995 and 1994
Consolidated statements of cash flows for the six 6
months ended June 30, 1995 and 1994
Consolidated statements of shareholders' equity for the 8
six months ended June 30, 1995 and 1994
Notes to consolidated financial statements 9
Item 2. Management's Discussion and Analysis of 13
Financial Condition and Results of Operations
Item 4. Submission of Matters to a Vote of Security Holders 22
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 22
Signatures
Authorized signatures 23
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30 Dec. 31
1995 1994
-------- --------
(Unaudited)
Assets
Real estate related investments
Operating real estate (net of
accumulated depreciation of
$6,692 and $6,177)............... $ 27,133 $ 27,907
Real estate held for sale.......... 12,064 11,369
Real estate and financial
service companies................ 19,480 15,061
Mortgage loans..................... 7,001 3,603
Real estate partnerships and
corporate joint venture.......... 775 889
-------- --------
66,453 58,829
Interest and rents receivable and
other assets....................... 2,787 1,486
Cash and cash equivalents............ 1,899 320
Restricted cash...................... 271 427
-------- --------
$ 71,410 $ 61,062
======== ========
Liabilities
Notes payable to banks............... $ 340 $ 4,154
Mortgage notes payable without
recourse........................... 22,750 22,827
Mortgage notes payable on wrap
mortgages.......................... 1,928 -
Accounts payable and other
liabilities........................ 4,935 1,563
Deferred gain........................ 271 280
-------- --------
30,224 28,824
-------- --------
Shareholders' Equity
Common stock, $1.00 par value,
10,000,000 shares authorized,
1,992,263 and 1,563,308 shares
issued in 1995 and 1994,
respectively....................... 1,992 1,563
Additional paid-in capital........... 32,788 26,847
Retained earnings.................... 3,868 3,158
-------- --------
38,648 31,568
Unrealized gains on securities....... 2,538 670
-------- --------
41,186 32,238
-------- --------
$ 71,410 $ 61,062
======== ========
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See notes to consolidated financial statements.
[CAPTION]
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
Three Months Ended Six Months Ended
June 30 June 30
---------------------- ---------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <S> <S> <S>
(In thousands, except per share data)
Revenues
Income from real estate properties.. $ 1,948 $ 1,800 $ 3,731 $ 3,360
Management company income........... 245 - 480 -
Interest on mortgage loans.......... 341 123 493 177
Equity in earnings (losses):
Real estate companies............. - 270 135 379
Real estate partnerships and
corporate joint venture......... 30 72 47 44
Gain (loss) on securities........... 125 116 101 453
Interest on investments............. 33 41 35 72
Dividends, deferred gains and
other income...................... 371 40 477 57
Gain (loss) on real estate and
mortgage loans.................... 713 14 836 (113)
------- -------- -------- --------
3,806 2,476 6,335 4,429
------- -------- -------- --------
Expenses
Real estate owned:
Operating expense................. 1,079 1,006 2,056 1,941
Interest expense.................. 535 591 1,072 1,185
Depreciation and amortization..... 282 271 563 526
Minority interest................. (33) (97) (70) (240)
Interest expense:
Notes payable to banks............ 26 - 111 -
Notes payable on wrap mortgages... 29 - 29 -
Management company expenses......... 153 - 323 -
Shared general and administrative
expenses.......................... - 204 - 329
Other expenses...................... 530 118 973 225
-------- -------- -------- --------
2,601 2,093 5,057 3,966
-------- -------- -------- --------
Income before taxes................. 1,205 383 1,278 463
Income tax provision................ - - - 1
-------- -------- -------- --------
Net income.......................... $ 1,205 $ 383 $ 1,278 $ 462
======== ======== ======== ========
Net income per share................ $ .65 $ .27 $ .75 $ .34
======== ======== ======== ========
Weighted average shares outstanding 1,860 1,419 1,713 1,340
======== ======== ======== ========
</TABLE>
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See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30
1995 1994
-------- --------
(In thousands)
Operating Activities
Net income........................... $ 1,278 $ 462
Adjustments to reconcile net income
to net cash provided by operating
activities:
Equity in earnings.................. (182) (423)
Dividends received.................. 76 197
Distributions from operations of
real estate partnership and
corporate joint venture........... 161 98
Depreciation and amortization....... 563 526
Amortization of discounts, deferred
gains and other................... (97) (53)
(Gain) loss on real estate and
mortgage loans................... (836) 113
(Gain) loss on securities........... (101) (453)
Minority interest depreciation...... (104) (269)
-------- --------
758 198
Changes in operating assets and
liabilities:
Decrease (increase) in
receivables..................... 248 73
Increase in accounts payable and
accrued expenses................ 878 507
-------- --------
Cash provided by operating
activities........................ 1,884 778
-------- --------
Investing Activities
Payments received on mortgage loans... 724 197
Purchases of investments in real
estate companies.................... (992) (5,636)
Purchase of real estate properties.... - 7
Proceeds from sale of real estate
owned............................... 667 100
Proceeds from sale of investments in
real estate companies............... 1,218 1,404
Improvements to real estate owned..... (148) (225)
Purchase of real estate partnership
interest............................ - (291)
Release of restricted cash............ - 165
Proceeds from merger of EB, Inc....... 2,702 -
Proceeds from merger of First
Continental......................... - 25
Payments (advances) on notes
receivable from affiliates.......... - 190
-------- --------
Cash used in investing activities...... 4,171 (4,064)
-------- --------
Financing Activities
Principal payments on long-term debt.. (94) 79
Proceeds from bank borrowings......... 1,498 6,296
Principal payments on bank borrowings. (5,312) (5,517)
Payments on note payable to affiliate. - (2,274)
Stock options exercised............... - (4)
Dividends paid........................ (568) (378)
-------- --------
Cash provided by (used in) financing
activities........................... (4,476) (1,798)
-------- --------
Increase (decrease) in cash............ 1,579 (5,084)
Cash and cash equivalents at beginning
of period............................ 320 5,301
-------- --------
Cash and cash equivalents at end of
period............................... $ 1,899 $ 217
======== ========
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See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
Six Months Ended
June 30
---------------------
1995 1994
-------- --------
(In thousands)
Common stock, $1.00 par value
Balance at beginning of period...... $ 1,563 $ 2,333
Shares issued in merger with
EB, Inc........................... 429 -
Retire treasury shares.............. - (1,073)
-------- --------
Balance at end of period............ 1,992 1,260
-------- --------
Additional paid-in capital
Balance at beginning of period...... 26,847 39,271
Shares issued in merger with
EB, Inc........................... 5,941 -
Retire treasury shares.............. - (15,246)
-------- --------
Balance at end of period............ 32,788 24,025
-------- --------
Retained Earnings
Balance at beginning of period...... 3,158 2,361
Net income.......................... 1,278 80
Cash dividends declared............. (568) -
Exercise stock options.............. - (2)
-------- --------
Balance at end of period............ 3,868 2,439
-------- --------
Treasury shares, at cost
Balance at beginning of period...... - (16,320)
Exercise stock options.............. - 1
Retire treasury shares.............. - 16,319
-------- --------
Balance at end of period............ - -
-------- --------
Unrealized gain on securities
Balance at beginning of period...... 670 -
Unrealized gain on securities....... 1,868 -
-------- --------
Balance at end of period............ 2,538 -
-------- --------
Total shareholders' equity............ $41,186 $27,724
======== ========
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See notes to consolidated financial statements
Notes to Consolidated Financial Statements (Unaudited)
June 30, 1995
(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 1994 financial
statements to conform to the 1995 classifications. The Company
changed its fiscal year end from June 30 (fiscal year) to December
31 as of December 31, 1994.
(3) Investments in Real Estate Companies
Investments in real estate companies consist of the following:
Quoted
June 30 Market
1995 Investments Value
Ownership June 30 June 30
Percentage 1995 1995
---------- ----------- -------
(In thousands)
Investee
Non-equity method investees:
Union Planters Corporation... 1.4% $ 16,136 $ 16,136
EastGroup Properties......... 2.7% 2,189 2,189
Other........................ - 1,155 1,155
-------- --------
$ 19,480 $ 19,480
======== ========
Prior to December 31, 1994, Parkway accounted for its
investment in EastGroup using the equity method of accounting
because of the presence of three members of Eastgroup's Board of
Trustees who were also directors of Parkway and management of the
day-to-day business of Parkway by officers who were also officers
of Eastgroup. Effective December 31, 1994, Parkway and EastGroup
no longer share joint officers or directors, with the exception of
the Chairman of the Board and one other director. Parkway began
reporting its investment in EastGroup using the cost method of
accounting on January 1, 1995 due to its ownership percentage of
2.7% and the lack of control over its operations.
At June 30, 1995, Union Planters Corporation had a cost basis
of $14,178,000, EastGroup Properties had a cost basis of $1,599,000
and the other non-equity method investees had a cost basis of
$1,165,000. The securities are carried at fair value, resulting in
a net unrealized gain of $2,538,000 at June 30, 1995.
Condensed unaudited statements of income from which the Company
has recorded its equity in earnings for EB, Inc. are as follows:
Six Months Ended
March 31, 1995
------------------
(In thousands)
Revenues................................. $ 1,129
Expenses................................. (872)
--------
Net income............................... $ 257
========
Equity in earnings recorded
by Parkway............................. $ 135
========
On April 27, 1995, the merger of Parkway Acquisition Corporation,
a wholly-owned subsidiary of Parkway, with and into EB, Inc. was
completed. Under the terms of the merger, EB, Inc. became a wholly-
owned subsidiary of Parkway. Shareholders of EB, Inc., other than
Parkway, received a cash payment in the amount of eight dollars
($8.00) plus sixty-two point three one hundredths (.623) of one share
of Parkway common stock for each share of EB, Inc. owned by them. The
merger resulted in a total of approximately $5,548,000 being disbursed
to EB, Inc. shareholders. At April 27, 1995, EB, Inc. had $8,603,000
in cash and cash equivalents which were used to make these payments.
Parkway incurred $353,000 of expenses in completing the merger.
Parkway recorded a net increase in cash and cash equivalents
of $2,702,000 as a result of the merger and issued 428,955
shares of common stock to EB shareholders.
Effective April 27, 1995 with the merger of EB, Inc. (discussed
in further detail below), the Company no longer has any equity method
investments in real estate companies.
(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.
June 30
-----------------------
1995 1994
---------- ----------
(In thousands)
Cash paid for interest....... $1,192,000 $1,228,000
Cash paid for income taxes... 8,300 1,400
Loans to facilitate sales
of real estate............. 30,000 420,000
(5) Subsequent Events
On July 31, 1995, the Company acquired the Security Centre' office
complex in Jackson, Mississippi from the Resolution Trust Corporation,
as receiver for Security Federal Savings and Loan Association, for
$13,500,000. Upon acquisition, the buildings were renamed Mtel
Centre'. Mtel Centre' is an office building complex consisting of
260,000 net rentable square feet in two buildings and 130 parking
spaces located in the central business district of Jackson. The
buildings were 96% leased at July 31, 1995. Jackson-based Mobile
Telecommunications Technologies Corp. (Mtel) currently occupies
approximately 122,000 square feet in the building under a ten-year
lease that expires in July 2005. The Company funded the acquisition
with cash balances of $4,270,000 and $8,740,000 drawn under two lines
of credit with Deposit Guaranty National Bank. In addition to the
line of credit discussed previously, Deposit Guaranty National Bank
extended the Company an additional $2,000,000 Line of Credit for the
purpose of purchasing Mtel Centre'. The line of credit has the same
terms as the $10,000,000 line of credit with the exception of the
maturity date, which is August 15, 1995. The Company has received a
commitment from Deposit Guaranty National Bank to provide a
$10,000,000 term loan secured by the Mtel Centre' which would mature
eighteen (18) months from the date of the loan closing. The term loan
will have an interest rate of the bank's prime lending rate with
interest payments due monthly and principal due at maturity. The
Company expects to close on the $10,000,000 term loan prior to August
31, 1995. The Company intends to seek non-recourse, 12-year, fully
amortizing financing on the building. Cash flows from the operation
of the building are expected to fully cover debt service on the long-
term financing.
Subsequent to June 30, 1995, the Company sold 6.96 acres of land
in Houston, Texas, the American Inn North Motel in Indianapolis,
Indiana, and 75,000 shares of Union Planters Corporation common stock
and received the prepayment of $915,000 on a mortgage loan payable
to the Company. The total cash proceeds to the Company from these
transactions was approximately $5,600,000. The Company expects to
report aggregate gains of approximately $2,300,000 in the third
quarter of 1995 related to these dispositions. Funds from these
transactions were used to repay borrowings under bank lines of credit.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
-------------------
(Comments are for the balance sheet dated June 30, 1995 compared to
the balance sheet dated December 31, 1994.)
Total assets of The Parkway Company ("Parkway" or the "Company")
were $71,410,000 at June 30, 1995, an increase of $10,348,000 from
December 31, 1994. Liabilities increased $1,400,000 to $30,224,000
during the same period. Book value per share increased from $20.62
at December 31, 1994 to $20.67 at June 30, 1995.
The April 27, 1995 merger of Parkway Acquisition Corporation
("PAC"), a wholly-owned subsidiary of Parkway, with and into EB, Inc.
("EB") accounts for most of the balance sheet changes from December
31, 1994 as compared to June 30, 1995. The increase to net assets
from the merger was as follows:
Union Planters Corporation stock
(637,705 shares) . . . . . . . . . . . . . . . . . . $15,069,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . 8,603,000
Mortgages. . . . . . . . . . . . . . . . . . . . . . . 3,698,000
Operating real estate properties . . . . . . . . . . . 307,000
Real estate held for sale. . . . . . . . . . . . . . . 96,000
Interest receivable and other assets . . . . . . . . . 392,000
Mortgage notes payable on wrap mortgages . . . . . . . (1,945,000)
Accounts payable and other liabilities . . . . . . . . (1,496,000)
-----------
$24,724,000
===========
The Company's purchase prices of these assets consisted of:
Common stock issued (428,955 shares) $ 6,370,000
Cash 5,534,000
Cash in lieu of fractional shares 14,000
Merger expenses 353,000
Investment in EB 12,453,000
-----------
$24,724,000
===========
The financial reporting and income tax accounting may vary
considerably in a business combination. Parkway has historically used
and plans to continue to use, when applicable, the purchase method of
accounting for financial reporting purposes. Because mergers have
such a material impact on Parkway, a brief explanation of the purchase
method of accounting and its effect on Parkway is set forth below.
For financial reporting purposes, the assets of the company
acquired are assigned new cost basis amounts based on the purchase
price of the assets to Parkway. In general, the purchase price to
Parkway consists of the new shares issued at the market price of the
Parkway stock on the date of the merger plus cash paid, if any, and
the previous investment Parkway has in the company. Since Parkway
stock is selling at a discount to book value and the stocks acquired
are also selling at discounts to book value, the accounting results
in a writedown of the assets acquired from their book value and also
a decrease in book value per share of the Parkway stock. In some
cases, the non current assets, usually real estate and mortgage loans,
are written down considerably from their previous book values. As the
assets are sold or loans are collected, income will be recorded to the
extent of cash received less the new written down basis.
For income tax purposes, Parkway typically receives a carryover
basis in the assets purchased which is equal to the tax basis of those
assets prior to the merger. In most cases, this basis is higher than
book basis due to allowance for losses and writedowns that were
recorded for financial reporting purposes but not tax purposes, so as
in the example above, assets sold may generate tax losses.
In summary, if assets from merged companies are sold for their
pre-merger book value, two positive things happen - (1) gains for
financial reporting purposes are recorded and (2) losses for income
tax purposes are recorded. Management believes that Parkway is
positioned to record earnings without creating income tax liabilities
by selling assets of the acquired companies.
The investment in operating real estate decreased a net $774,000
during the six months ended June 30, 1995. One component of this
decrease was the reclassification of the American Inn North hotel
investment of $744,000 from operating real estate to real estate held
for sale. This reclassification was made to reflect the July 31, 1995
sale of the property. Other decreases in operating real estate was
due to depreciation of operating properties of $517,000 and the sale
of three townhomes in Corpus Christi, Texas with a basis of $37,000.
These sales resulted in a net gain of $116,000 with the Company
receiving net cash proceeds of $153,000. The Company made capital
improvements to operating properties of $145,000 and recorded the
operating real estate properties of EB, acquired through the April 27,
1995 merger, at $307,000. The operating properties of EB consist of
one 180-unit apartment complex in Orlando, Florida known as Coral Club
Apartments and the leasehold improvements on a theatre in Meridian,
Mississippi.
Real estate held for sale increased a net $695,000 during the six
months ended June 30, 1995. As discussed previously, $744,000 of this
increase reflects the reclassification of the American Inn North hotel
investment from operating real estate to real estate held for sale.
The real estate held for sale acquired through the EB merger was
recorded at $96,000 and consists of 6 non-operating properties located
in various cities in Mississippi. The properties are being actively
marketed for sale. One mortgage loan was foreclosed during the period
with a capitalized cost of $24,000. The Company sold various real
estate properties with a basis of $170,000 during the six months ended
June 30, 1995. These sales resulted in a net gain of $358,000
recognized with the Company receiving net cash proceeds of $514,000
and a $30,000 mortgage note receivable. Additional gains of $16,000
were deferred and will be recognized as principal payments are
received on the note receivable.
The investment in real estate and financial services companies
increased a net $4,419,000 during the six months ended June 30, 1995.
The Company acquired 637,705 shares of Union Planters Corporation in
the EB merger, which was recorded at the market price as quoted on the
New York Stock Exchange on the date of the merger of $15,069,000
($23.63 per share). The Company's investment in the stock of EB at
the date of the merger of $12,453,000 was eliminated through the
recording of the merger. Parkway sold 37,705 shares of Union Planters
stock and shares of another investment in real estate company security
having a combined basis of $1,117,000 during the six months ended June
30, 1995. Total cash proceeds from the sales were $1,218,000 and net
gains from the sales of $101,000 were recorded. The Company received
dividends of $76,000 from its investment in EB prior to the April 27,
1995 merger date. Also during the six months ended June 30, 1995, the
Company recorded equity in earnings from its investment in EB through
the date of merger of $135,000, recorded an increase in unrealized
gains on securities of $1,869,000 and purchased 105,000 shares of a
real estate company stock at a cost of $992,000.
Mortgage loans increased a net $3,398,000 during the six months
ended June 30, 1995. The Company acquired 98 loans in the EB merger
which were recorded at $3,698,000. The loans have a principal balance
of $18,794,000 and an estimated net realizable value of $13,945,000.
Under the purchase method of accounting, which was discussed
previously, the loans were recorded at significantly less than their
net realizable value. The difference between the net realizable value
of the loans and the recorded balances will be amortized over the life
of the loans based on principal payments received. During the six
months ended June 30, 1995, $204,000 was amortized on the loans
acquired in the EB merger and recorded as gain on mortgage loans.
Parkway Texas received pay offs of four mortgage loans during the six
months ended June 30, 1995, recognizing a gain on mortgage loans of
$158,000 related to those loans. Mortgage loans decreased $724,000
due to principal payments received and increased $54,000 due to the
amortization of valuations on mortgage loans. The Company also
foreclosed on one mortgage loan with a net balance of $22,000.
The net decrease in real estate partnerships and corporate joint
venture for the six months ended June 30, 1995 was $114,000. The
Company recorded equity in earnings of real estate partnerships and
corporate joint venture of $47,000 and received distributions of
$161,000 during the period.
Interest and rents receivable and other assets increased
$1,301,000 during the six months ended June 30, 1995. The Company
recorded $392,000 in receivables and other assets as a result of the
EB merger. Other increases in receivables and other assets were the
result of normal business operations.
Notes payable to banks decreased $3,814,000 during the six months
ended June 30, 1995, reflecting advances of $1,498,000 and payments
of $5,312,000 under bank lines of credit and the payment of $150,000
on other bank debt. At June 30, 1995 no amounts were outstanding on
the Company's lines of credit. The decrease in mortgage notes payable
without recourse of $77,000 reflects scheduled principal payments.
In the EB merger, the Company received a forty percent (40%)
interest in a mortgage note receivable on an office complex in
Virginia Beach, Virginia. The mortgage loan has an outstanding
principal balance of $16,113,000, of which the Company's 40% interest
is $6,445,000. The Company's 40% interest in this loan was recorded
at $1,044,000. The Virginia Beach mortgage loan is subject to seven
wraparound mortgages totalling $4,862,000 at the date of the EB
merger. The Company's 40% share of these wraparound mortgages of
$1,945,000 was recorded in the EB merger. The loans have an average
rate of 9.14% and mature on various dates beginning in January 2004.
Subsequent to the April 27, 1995 EB merger, principal payments of
$17,000 were made on the wrap mortgages.
Accounts payable and other liabilities increased $3,372,000
during the six months ended June 30, 1995. Of this amount, $1,496,000
was recorded in the EB merger. Other increases in accounts payable
and other liabilities were the result of normal business operations.
Shareholders' equity increased $8,948,000 during the comparison
period as a result of the following factors:
Increase (decrease)
-------------------
(In thousands)
Net income $ 1,278
Dividends declared (568)
Change in unrealized gains 1,868
Shares issued in EB merger 6,370
----------
$ 8,948
==========
<PAGE>
RESULTS OF OPERATIONS
---------------------
(Comments are for the three months and six months ended June 30, 1995
compared to the three months and six months ended June 30, 1994.)
Operations of real estate properties are summarized below:
Three Months Ended
March 31
--------------------
1995 1994
-------- --------
(In thousands)
Income from real estate properties... $ 1,948 $ 1,800
Real estate operating expense........ (1,079) (1,006)
-------- --------
869 794
Interest expense on real estate
properties......................... (535) (591)
Depreciation and amortization........ (282) (271)
Minority interest.................... 33 97
-------- --------
$ 85 $ (29)
======== ========
Six Months Ended
June 30
--------------------
1995 1994
-------- --------
(In thousands)
Income from real estate properties... $ 3,731 $ 3,360
Real estate operating expense........ (2,056) (1,941)
-------- --------
1,675 1,419
Interest expense on real estate
properties......................... (1,072) (1,185)
Depreciation and amortization........ (563) (526)
Minority interest.................... 70 240
-------- --------
$ 110 $ (52)
======== ========
The effect on the Company's operations related to One Jackson
Place (which have been included in the numbers above) follows:
Three Months Ended Six Months Ended
March 31 June 30
--------------- ----------------
1995 1994 1995 1994
------- ------- ------- -------
(In thousands) (In thousands)
Revenues $ 943 $ 941 $1,842 $1,833
Operating expenses (354) (361) (681) (748)
Interest expense (518) (518) (1,036) (1,036)
Depreciation (224) (221) (450) (447)
Minority interest income 33 95 70 238
------- ------- ------- -------
Net loss $ (120) $ (64) $ (255) $ (160)
======= ======= ======= =======
The increase in interest on mortgage loans of $218,000 for the
three months ended June 30, 1995 is due primarily to $209,000 of
interest income on loans received in the merger with EB, Inc. The
increase in interest on mortgage loans of $316,000 for the six months
ended June 30, 1995 is due primarily to the merger with EB, Inc.
mentioned above and interest income recorded on the mortgage loans
received in the merger with First Continental Real Estate Investment
Trust ("FCREIT")in May 1994. Also contributing to 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 real estate and mortgage loans for the six months
ended June 30, 1995 of $836,000 is due primarily to the sale of 20
residential lots, 1 commercial lot, 3 townhomes and 1 foreclosed condo
having gains of $473,000. The Company also recorded $363,000 in gains
due to pay offs and payments on mortgage loans acquired in the EB,
Inc. and FCREIT mergers and accounted for under the purchase method
of accounting.
The gain on securities of $101,000 for the six months ended June
30, 1995 is due to a gain of $125,000 on the sale of an investment for
$1,018,000 with a basis of $893,000 in the three months ending June
30, 1995 and a loss on the sale of securities of $24,000 for $202,000
with a basis of $226,000 during the six month period ending June
30,1995.
The gain on securities for the three months and six months ending
June 30, 1994 of $116,000 and $453,000, respectively, is due the sale
of an investment for $252,000 with a basis of $136,000 in the three
months ending June 30, 1994 and the sale of 58,525 shares of EastGroup
Properties for $1,152,000 for a gain of $337,000 during the six months
ending June 30, 1994.
Equity in of real estate companies consists of the following:
Three Months Ended Six Months Ended
March 31 June 30
---------------- ---------------
1995 1994 1995 1994
------- ------- ------- -------
(In thousands) (In thousands)
EB, Inc. $ - $ 226 $ 135 $ 248
EastGroup - 59 - 170
FCREIT - - - (9)
Congress Street - (15) - (30)
------- ------- ------- -------
$ - $ 270 $ 135 $ 379
======= ======= ======= =======
Equity in operations of real estate partnerships and corporate
joint venture consists of the following:
Three Months Ended Six Months Ended
March 31 June 30
---------------- ----------------
1995 1994 1995 1994
------- ------- ------- -------
(In thousands) (In thousands)
Golf Properties, Inc. $ 28 $ 72 $ 30 $44
Wink/Parkway Partnership 2 - 17 -
------- ------- ------- -------
$ 30 $ 72 $ 47 $ 44
======= ======= ======= =======
Interest expense of $111,000 for the six months June 30, 1995 is
due to borrowings under bank lines of credit. Interest expense on
wrap mortgages of $29,000 for the three months and six months June 30,
1995 is due to the debt received in the merger with EB, Inc.
The Company recorded management company income of $480,000 and
management company expenses of $323,000 in 1995 through Eastover
Realty, a wholly-owned subsidiary acquired in the merger of Congress
Street Properties, Inc. into Parkway Congress Corporation. Eastover
Realty offers full-service leasing, management, construction and
brokerage services.
Through December 31, 1994, the Company was a party to an expense-
sharing agreement whereby certain general and administrative expenses
were paid by the administrator of the agreement and then allocated on
a monthly basis among the participants, as defined. Congress Street
Properties, Inc. administered this agreement through the date of its
merger with Parkway and received no income for the administration of
the agreement. The agreement called for the income of Eastover Realty
to be netted against the costs of the shared expenses before
allocation to the participants. This was done through December 31,
1994, the termination date of the agreement.
Effective January 1, 1995, the Company terminated the expense-
sharing agreement and the income of Eastover Realty is now included
in the operations of the company as management company income and
expenses.
As a result of the termination of the expense-sharing agreement,
there were no shared general and administrative expenses during the
six months ending June 30, 1995. The increase in other expenses of
$748,000 reflects primarily the general and administrative expenses
paid previously through the expense-sharing agreement in addition to
increases as a result of the mergers of FCREIT and EB, Inc. on May 10,
1994 and April 27, 1995 respectively.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Funds provided by operations, mortgage loan payments, bank
borrowings, proceeds from the sale of investment securities and sales
of real estate investments were the primary sources of funds for the
Company during the six months ended June 30, 1995. In addition, the
Company received a net $2,702,000 from the merger with EB, Inc. This
is discussed in more detail elsewhere in "Liquidity and Capital
Resources". Funds provided by these sources and cash balances were
sufficient to cover repayment of long-term debt and bank debt,
dividends paid to shareholders, purchases of stock of other real
estate companies, improvements to real estate properties and the
payment of operating expenses. At June 30, 1995, the Company had
available $1,899,000 in cash and short-term investments. Management
believes that funds generated from operations, borrowings on lines of
credit and cash on hand will be sufficient to cover long and short-
term operating cash requirements.
On April 27, 1995, the merger of Parkway Acquisition Corporation,
a wholly-owned subsidiary of Parkway, with and into EB, Inc. was
completed. Under the terms of the merger, EB, Inc. became a wholly-
owned subsidiary of Parkway. Shareholders of EB, Inc., other than
Parkway, received a cash payment in the amount of eight dollars
($8.00) plus sixty-two point three one hundredths (.623) of one share
of Parkway common stock for each share of EB, Inc. owned by them. The
merger resulted in a total of approximately $5,548,000 being disbursed
to EB, Inc. shareholders. At April 27, 1995, EB, Inc. had $8,603,000
in cash and cash equivalents which were used to make these payments.
Parkway incurred $353,000 of expenses in completing the merger. As
a result, Parkway recorded a net increase in cash and cash equivalents
of $2,702,000 as a result of the merger. Parkway issued 428,955
shares of common stock to EB shareholders.
At June 30, 1995, the Company had one line of credit with Deposit
Guaranty National Bank at an amount equal to sixty-five percent (65%)
of the quoted market value of certain pledged securities described
below, not to exceed $10,000,000 (the "$10,000,000 line of credit").
The note is secured by 500,000 shares of Union Planters Corporation,
which were acquired in the EB merger and 105,000 shares of another
real estate company. At June 30, 1995, the securities had a combined
quoted market value of $14,442,500. The note has an interest rate of
the London Interbank Offered Rate ("LIBOR") quoted for a 90-day period
plus 1.85%. Interest payments on the note will be paid monthly with
a fixed maturity on June 30, 1996. At June 30, 1995, no amounts were
outstanding on the line of credit.
On July 31, 1995, the Company acquired the Security Centre'
office complex in Jackson, Mississippi from the Resolution Trust
Corporation, as receiver for Security Federal Savings and Loan
Association, for $13,500,000. Upon acquisition, the buildings were
renamed Mtel Centre'. Mtel Centre' is an office building complex
consisting of 260,000 net rentable square feet in two buildings and
130 parking spaces located in the central business district of
Jackson. The buildings were 96% leased at July 31, 1995. Jackson-
based Mobile Telecommunications Technologies Corp. (Mtel) currently
occupies approximately 122,000 square feet in the building under a
ten-year lease that expires in July 2005. The Company funded the
acquisition with cash balances of $4,270,000 and $8,740,000 drawn
under two lines of credit with Deposit Guaranty National Bank. In
addition to the line of credit discussed previously, Deposit Guaranty
National Bank extended the Company an additional $2,000,000 Line of
Credit for the purpose of purchasing Mtel Centre'. The line of credit
has the same terms as the $10,000,000 line of credit with the
exception of the maturity date, which is August 15, 1995. The Company
has received a commitment from Deposit Guaranty National Bank to
provide a $10,000,000 term loan secured by the Mtel Centre' which
would mature eighteen (18) months from the date of the loan closing.
The term loan will have an interest rate of the bank's prime lending
rate with interest payments due monthly and principal due at maturity.
The Company expects to close on the $10,000,000 term loan prior to
August 31, 1995. The Company intends to seek non-recourse, 12-year,
fully amortizing financing on the building. Cash flows from the
operation of the building are expected to fully cover debt service on
the long-term financing.
Subsequent to June 30, 1995, the Company sold 6.96 acres of land
in Houston, Texas, the American Inn North Motel in Indianapolis,
Indiana, and 75,000 shares of Union Planters Corporation common stock
and the received the prepayment of $915,000 on a mortgage loan payable
to the Company. The total cash proceeds to the Company from these
transactions was approximately $5,600,000. The Company expects to
report aggregate gains of approximately $2,300,000 in the third
quarter of 1995 related to these dispositions. Funds from these
transactions were used to repay borrowings under bank lines of credit.
PART I.
Item 4. Submission of Matters to a Vote of Security Holders
On May 31, 1995, the Company held its Annual Meeting of
Shareholders. At the Annual Meeting, Daniel C. Arnold, H. C. Bailey,
Jr., George R. Farish, Roger P. Friou, B. Pat Green, Jr., Sidney W.
Lassen, Joe F. Lynch, C. Herbert Magruder, W. Lincoln Mossop and
Leland R. Speed were elected directors of the Company, each to serve
until the 1995 Annual Meeting. The following is a summary of the
voting for directors:
Nominee Vote For Votes Withheld
--------------- ------------ --------------
Mr. Arnold 1,197,634 5,056
Mr. Bailey, Jr. 1,197,592 5,098
Mr. Farish 1,197,837 4,853
Mr. Friou 1,197,016 5,674
Mr. Green, Jr. 1,197,628 5,062
Mr. Lassen 1,197,858 4,832
Mr. Lynch 1,197,551 5,139
Dr. Magruder 1,197,616 5,074
Mr. Mossop 1,197,843 4,847
Mr. Speed 1,197,822 4,868
Other matters voted upon at the meeting are described below.
Vote for Vote Against Abstain Non-Vote
------------ ------------ ------- --------
1. Approve Ernst &
Young as indepen-
dent auditors 1,197,028 1,815 3,847 -
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 27 - Financial Data Scheduled attached hereto.
(b) Reports on Form 8-K
(1) Filed May 12, 1995
Reporting the April 27, 1995 merger of Parkway
Acquisition Corporation ("PAC"), a wholly-owned
subsidiary of The Parkway Company ("Parkway"), with
and into EB, Inc. ("EB").
The following financial statements of EB, Inc. and
unaudited Pro Forma Consolidated Financial
Statements were attached in an exhibit thereto.
EB, INC.
Independent Auditor's Report
Balance Sheets - as of December 31, 1994 and 1993
Statements of Income - for the years ended
December 31, 1994 and 1993
Statements of Changes in Stockholders' Equity - for
the years ended December 31, 1994 and 1993
Statements of Cash Flows - for the years ended
December 31, 1994 and 1993
Notes to Financial Statements
THE PARKWAY COMPANY
Pro Forma Consolidated Balance Sheet (Unaudited) -
As of December 31, 1994
Pro Forma Consolidated Statements of Income (Unaudited) -
For the Twelve Months Ended June 30, 1994
Pro Forma Consolidated Statements of Income (Unaudited) -
For the Six Months Ended December 31, 1994
SIGNATURE
---------
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, thereunto duly authorized.
DATED: August 14, 1995 THE PARKWAY COMPANY
/s/ Regina P. Shows
Regina P. Shows, CPA
Controller
/s/ Sarah P. Clark
Sarah P. Clark, CPA
Vice-President,
Chief Financial Officer
and Secretary
