SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------------------
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): April 27, 1995
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THE PARKWAY COMPANY
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(Exact name of Registrant as specified in its charter)
Texas 0-12505 74-2123597
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(State or other Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) Number)
300 One Jackson Place, 188 E. Capitol St., Jackson, MS 39201
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (601) 948-4091
----------------
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(Former name or former address,if changed since last report)
<PAGE>
FORM 8-K
THE PARKWAY COMPANY
Item 2. Acquisition or Disposition of Assets.
On April 27, 1995, Parkway Acquisition Corporation
("PAC"), a wholly-owned subsidiary of The Parkway Company
("Parkway"), merged with and into EB, Inc. ("EB"). Under
the terms of the Merger, EB became a wholly-owned
subsidiary of Parkway. Shareholders of EB received a
cash payment in the amount of eight dollars ($8.00) plus
sixty-two point three one hundredths (.6230) of one share
of The Parkway Company for each share of EB owned by
them, resulting in the issuance by Parkway of an
aggregate of approximately 430,413 shares. Information
regarding EB, its assets, the principles followed in
determining the amount of shares issued by Parkway in the
merger, and the nature of certain relationships between
EB and its affiliates and Parkway and its affiliates is
contained in the Joint Proxy Statement/Prospectus of
Parkway and EB dated March 29, 1995, which is incorporated
herein by this reference.
The unaudited Pro Forma Consolidated Financial
Statements that are attached as an Exhibit hereto are
based on Congress Street Properties, Inc.'s ("Congress
Street"), Parkway's and EB's historical financial data as
adjusted to give effect to the business combinations
involving Parkway's subsidiaries and EB and Congress Street on
on the basis described in the notes thereto.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of EB
The following audited financial statements of EB are
attached in an Exhibit hereto:
EB,INC. Page
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 Cash Flows - for the years ended
December 31, 1994 and 1993
Statements of Changes in Stockholders' Equity - for
the years ended December 31, 1994 and 1993
Notes to Financial Statements
(b) Pro Forma Consolidated Financial Statements.
The unaudited Pro Forma Consolidated Financial
Statements are attached in an Exhibit hereto.
THE PARKWAY COMPANY Page
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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
(c) Exhibits.
--------
The following exhibits are filed herewith or
incorporated herein by reference:
(2) Agreement and Plan of Merger among Parkway,
Parkway Acquisition Corporation and EB dated
as of October 28, 1994 (as amended by the
First Amendment to Agreement and Plan of
Merger dated January 5, 1995) incorporated by
reference to Appendix B of the Joint Proxy
Statement/Prospectus which is incorporated by
reference to the Rule 424(b)(3) filing of same
on March 31, 1995. Parkway agrees to furnish
supplementally to the Commission upon request
a copy of any omitted schedule or exhibit to
the Agreement and Plan of Merger.
<PAGE>
FORM 8-K
THE PARKWAY COMPANY
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.
DATED: March 12, 1995
THE PARKWAY COMPANY
BY: /s/ Sarah P. Clark
------------------------------
Sarah P. Clark, Vice President
and Chief Financial Officer
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
EB, Inc.
Jackson, Mississippi
We have audited the accompanying balance sheets of EB, Inc. as of
December 31, 1994 and 1993 and the related statements of income,
changes in stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of EB, Inc. as of
December 31, 1994 and 1993 and the results of its operations and
its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
As discussed in Note 3 to the financial statements, in 1994, the
Company changed its method of accounting for its investment
securities.
/s/ Deloitte & Touche LLP
Jackson, Mississippi
March 29, 1995
<PAGE>
Balance Sheets
(In thousands)
December 31
----------------------
1994 1993
---------- ----------
Assets
Cash and cash equivalents.............. $ 7,517 $ 442
Investment in common stock - available
for sale............................. 13,312 9,930
Mortgage-backed derivative securities
(approximate fair value $35 in 1994
and $134 in 1993).................... 35 134
Loans, net of allowance for loan losses
of $5,117 in 1994 and $5,381 in 1993. 12,635 16,344
Real estate held for sale.............. 1,510 3,337
Interest and other receivables and
other assets......................... 389 517
---------- ----------
$ 35,398 $ 30,704
========== ==========
Liabilities and Stockholders' Equity
Liabilities
Accounts payable and accrued expenses.. $ 1,689 $ 1,428
---------- ----------
1,689 1,428
---------- ----------
Stockholders' Equity
Common stock, stated value $2 per share,
authorized 25,000,000 shares; issued
and outstanding - 1,450,117 shares in
1994 and 1993........................ 2,900 2,900
Paid-in capital........................ 30,017 30,452
Deficit................................ (2,590) (4,076)
Unrealized gain on available for sale
securities 3,382 -
---------- ----------
$ 33,709 $ 29,276
---------- ----------
$ 35,398 $ 30,704
========== ==========
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See notes to financial statements
Statements of Income
(In thousands, except per share data)
Year Ended December 31
--------------------------
1994 1993
----------- -----------
Revenue
Interest on loans................ $ 1,926 $ 2,196
Dividend income.................. 351 316
Gain from sale of mortgage
backed derivative security..... 44 68
Other............................ 301 248
-------- --------
2,622 2,828
-------- --------
Expenses
Provision for loan losses........ - 794
Real estate held for sale:
Net operations, gains and
losses....................... 281 112
Depreciation................... 35 48
Provision for losses........... 55 1,589
Interest......................... - 385
Other operating expenses......... 765 949
-------- --------
1,136 3,877
-------- --------
Income (Loss) from continuing
operations....................... 1,486 (1,049)
Discontinued operations
Income from discontinued banking
operations..................... - 1,001
Gain on sale of discontinued
banking operations............. - 4,992
-------- --------
- 5,993
-------- --------
Net income......................... $ 1,486 $ 4,944
======== ========
Net income (loss) per share:
From continuing operations....... $ 1.03 $ (.72)
From discontinued operations..... - 4.13
-------- --------
Net income per share............. $ 1.03 $ 3.41
======== ========
Weighted average shares outstanding. 1,450 1,450
======== ========
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See notes to financial statements
Statements of Changes in Stockholders' Equity
(In thousands)
Year Ended December 31
-------------------------
1994 1993
---------- ----------
Common Stock
Balance at beginning of year..... $ 2,900 $ 2,903
Purchase and retirement of
treasury stock................. - (3)
---------- ----------
Balance at end of year........... 2,900 2,900
---------- ----------
Paid-in Capital
Balance at beginning of year..... 30,452 30,464
Purchase and retirement of
treasury stock................. - (12)
Cash dividends declared and paid
($.30 in 1994)................. (435) -
---------- ----------
Balance at end of year........... 30,017 30,452
---------- ----------
Retained Earnings (Deficit)
Balance at beginning of year..... (4,076) (9,020)
Net income for the year.......... 1,486 4,944
---------- ----------
Balance at end of year........... (2,590) (4,076)
---------- ----------
Unrealized Gain on Available for Sale Securities
Balance at beginning of year..... - -
Unrealized gain on available for
sale securities:
Adoption of FASB 115......... 933 -
Change during year........... 2,449 -
---------- ----------
Balance at end of year........... 3,382 -
---------- ----------
Total Stockholders' Equity......... $ 33,709 $ 29,276
========== ==========
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See notes to financial statements
Statements of Cash Flows
(In thousands)
Year Ended December 31
-------------------------
1994 1993
---------- ----------
Operating Activities
Net income........................ $ 1,486 $ 4,944
Adjustments to reconcile net
income to net cash provided by
operating activities:
Provision for loan losses....... - 794
Provision for real estate
held for sale losses.......... 55 1,589
Gain on sale of mortgage-backed
derivative securities......... (44) (68)
Gain on sale of discontinued
banking operations............ - (4,992)
Loss on sale of real estate held
for sale...................... 99 -
Amortization of loan discounts.. (69) (77)
Depreciation.................... 35 48
Net decrease (increase) in other
assets........................ 128 (506)
Net increase (decrease) in other
liabilities................... 88 (1,300)
---------- ----------
Net cash provided by operating
activities...................... 1,778 432
---------- ----------
Investing Activities
Proceeds from sale of discontinued
banking operations.............. - 100
Advances on existing loans........ (26) -
Receipts from mortgage-backed
derivative securities........... 11 125
Proceeds from sale of mortgage-
backed derivative security...... 132 200
Loan repayments................... 3,980 6,676
Proceeds from sale of real estate
held for sale................... 1,635 2,918
---------- ----------
Net cash provided by investing
activities....................... 5,732 10,019
---------- ----------
Financing Activities
Purchase of treasury stock........ - (15)
Repayments of long term debt...... - (22,317)
Proceeds from bank borrowings..... - 10,000
Decrease in net liabilities of
discontinued banking operations. - (887)
Dividends paid.................... (435) -
---------- ----------
Net cash used in financing
activities....................... (435) (13,219)
---------- ----------
Increase (decrease) in cash and
cash equivalents................. 7,075 (2,768)
Cash and cash equivalents at
beginning of year................ 442 3,210
---------- ----------
Cash and cash equivalents at end
of year.......................... $ 7,517 $ 442
========== ==========
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See notes to financial statements
<PAGE>
Notes to Financial Statements
1. Basis of Presentation and Accounting Policies
A. Basis of Presentation
The financial statements for all periods reflect the sale
of assets to Sunburst Bank, Mississippi ("Sunburst") and assumption
of liabilities by Sunburst and the related results of operations
described in Note 2 to the financial statements as discontinued
operations. Sunburst identified, as of April 30, 1992, those
assets it would not purchase and those liabilities it would not
assume and which, therefore, would be retained by EB ("retained
assets"). Balances and actual operating results for these retained
assets have been presented in the financial statements. All other
asset and liability balances have been presented as net liabilities
of discontinued banking operations.
Income from discontinued operations, net, for 1993 includes
all operating activities related to assets sold and liabilities
assumed.
B. Cash Equivalents
For purposes of cash flows, the Company considers all
highly liquid investments including interest bearing bank accounts
and investments with maturities of three months or less when
purchased as cash equivalents.
C. Investment in Common Stock - Available for Sale
On January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" and classified its
investment in common stock as securities available-for-sale. The
investment in common stock is carried at fair value with the
unrealized gain or loss presented as a separate component of
stockholders' equity. Any recognized gains or losses from the
actual sale of the investment in common stock is recorded in the
statement of operations. The cost of investments in common stock
sold is determined on the specific identification method. Dividend
income is recorded upon the declaration of a cash dividend.
Aggregate net unrealized losses were included in stockholders'
equity unless there was an indication that the decline in market
value was other than temporary, in which case the writedown to
market value was classified in the statements of income as a loss
on investments.
Prior to 1994, investments in common stock were valued at the
lower of cost or market value on an aggregate basis.
D. Mortgage-Backed Derivative Securities
Investments in the residual interest of collateralized
mortgage obligations are recorded at cost and adjusted for
amortization determined on the basis of estimated level yields
expected to be realized over the remaining life of the investments.
Such estimated yields are re-assessed quarterly and the effect of
revisions, if any, is recognized prospectively. Gains and losses
on sales of securities are recognized on a specific identification
basis.
E. Revenue Recognition on Loans
Interest on loans is calculated using the simple interest
method on daily balances of the principal amount outstanding. The
Company's policy is to provide an allowance for uncollected
interest on loans delinquent for 90 days or more. Accrual of
interest is stopped on a loan when management believes that
collection of interest is doubtful.
F. Allowance for Loan Losses
The allowance for loan losses is established through a
provision for loan losses charged to expense. Loans are charged
against the allowance for loan losses when management believes that
the collectibility of the principal is unlikely. The allowance is
an amount that management believes will be adequate to absorb
possible losses on existing loans that may become uncollectible,
based on evaluations of the collectibility of loans and prior loan
loss experience. The evaluations take into consideration such
factors as changes in the nature and volume of the loan portfolio,
overall portfolio quality, review of specific problem loans, and
current economic conditions that may affect the borrower's ability
to pay.
G. Real Estate Held for Sale
Real estate held for sale represents properties that have
been acquired in satisfaction of debt or in-substance foreclosed.
In-substance foreclosures are properties in which borrowers have
little or no remaining equity, have effectively abandoned control
of the property, and repayment can only be expected to come from
the sale of the property or from its operations. Real estate held
for sale is carried at the lower of cost or estimated fair value
less estimated cost of sale. Any valuation adjustments required
prior to foreclosure are charged to the allowance for possible loan
losses to the extent such losses had previously been recorded. Any
adjustment above that amount is recorded as a loss upon
foreclosure. Costs of operating and maintaining the properties,
net of related income, are charged to cost of operations of real
estate held for sale as incurred.
The recognition of gains on the sale of properties is
dependent upon the transaction meeting certain criteria relating to
the type of property sold and the terms of the sale. Under certain
circumstances, usually involving continuing seller involvement in
the property as a lender, the gain is deferred until the criteria
are met.
The amounts EB could ultimately recover from these assets
could differ materially from the amounts used in arriving at the
assets net carrying value because of future market factors beyond
EB's control or changes in EB strategy for recovering its
investment.
H. Income Taxes
In 1993, the Company adopted Statement of Financial
Accounting Standards, No. 109, "Accounting for Income Taxes" which
requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included
in the financial statements or tax returns. Under this method,
deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect in the years in
which the differences are expected to reverse.
I. Thrift Savings Plan and 401(k) Plan
EB had a Thrift Savings Plan that was converted to a 401(k)
Plan in July, 1992. This plan covered substantially all of its
employees. Matching contributions to the 401(k) Plan were
discontinued on February 28, 1993, and the plan was terminated on
April 15, 1993.
J. Income (Loss) Per Common Share
Income (loss) per common share is computed using the
weighted average number of common shares and common share
equivalents outstanding during the year.
K. Reclassifications
Certain reclassifications have been made in the 1993
financial statements to conform to the 1994 presentation.
2. Asset Sale and Liability Assumption of Discontinued Banking
Operations, Corporate Reorganization and Name Change
On February 28, 1993, after necessary regulatory approvals,
together with stockholder approval, were obtained, Eastover Bank
for Savings ("Eastover Bank") sold a significant portion of its
assets to Sunburst, a wholly-owned subsidiary of Grenada Sunburst
System Corporation ("Grenada" or "GSSC"), and Sunburst assumed all
of Eastover Bank's deposit liabilities together with certain other
liabilities in exchange for Eastover Bank receiving 438,889 shares
of Grenada common stock valued at $9,930,000 (on March 1, 1993) and
$100,000 in cash.
As one of the conditions precedent to closing, Eastover Bank's
subsidiaries, Carleton, Ceylon and, Guaranty and Guaranty's
subsidiary were merged into Eastover Bank and ceased their
corporate existence. At closing, Eastover Bank's charter was
amended in order to change the name and organizational nature of
Eastover Bank from a Mississippi-chartered savings bank to a
Mississippi corporation to be known as EB, Inc. After the
amendment, the Company is no longer a depository institution, can
no longer accept insured deposits and is no longer subject to
regulation and supervision by the Office of Thrift Supervision or
the Federal Deposit Insurance Corporation.
As part of the transaction, Sunburst agreed to make loans to
EB in an amount equal to the net liabilities which Sunburst would
assume in the form of two term loans not to exceed $20 million.
These loans were collateralized by substantially all of the assets
of EB and had an interest rate of two percent over the prime rate,
provided that the note rate would not be less than six percent nor
in excess of ten percent. The loans provided for mandatory
prepayments based upon specified percentages of the proceeds
resulting from the repayment and liquidation of EB's assets. In
addition, the loans contained covenants affecting EB's permitted
activities, payment of dividends, incurring additional debt, and
the sale of Grenada stock received as consideration.
Net liabilities of discontinued banking operations consisted
of the following liabilities which were assumed and assets which
were purchased. Sunburst assumed the liabilities and purchased the
assets at their net carrying value. The transaction with Sunburst
was settled based on balances as of March 1, 1993.
March 1
1993
------------
(In thousands)
Liabilities Assumed
Deposits......................... $ 395,941
Borrowed money................... 10,025
Other liabilities................ 2,734
------------
Total liabilities.............. 408,700
------------
Assets Purchased
Cash............................. 16,032
Securities....................... 138,556
Loans............................ 239,542
Less: Unearned income.......... (5,326)
Allowance for loan losses (4,935)
------------
Net loans...................... 229,281
Premises and equipment........... 6,624
Federal Home Loan Bank stock..... 1,919
Other assets..................... 3,971
------------
Total assets................... 396,383
------------
Net liabilities assumed by Sunburst $ 12,317
============
A gain of $4,992,000 was recognized on the sale to Sunburst.
This gain is computed as follows (dollars in thousands):
Liabilities assumed by Sunburst $ 408,700
Value of stock received 9,930
Cash received 100
---------
$ 418,730
Less:
Basis of assets sold (396,383)
Loans made to EB (12,317)
Writeoff of deferred charges (4,025)
Costs of sale (1,013)
---------
Gain $ 4,992
=========
Revenues related to discontinued banking operations
approximated $6,000,000 in 1993.
3. Investment in Common Stock
The Company's investment in common stock consists of the
following:
December 31, 1994
-----------------------------------------------
Gross
Ownership Unrealized
Percentage Cost Gain Fair Value
---------- -------- ---------- ------------
(in thousands)
Union Planters
Corporation... 1.6% $9,930 $2,449 $13,312
==== ====== ====== =======
December 31, 1993
----------------------------------------------
Gross
Ownership Unrealized
Percentage Cost Gain Fair Value
---------- -------- ---------- ------------
(In thousands)
Grenada Sunburst
System Corp... 4.6% $9,930 $ 933 $10,863
==== ====== ====== =======
On December 31, 1994, Grenada merged with GSSC Acquisition
Corporation, Inc., a wholly-owned subsidiary of Union Planters
Corporation, a Tennessee corporation ("UPC"), resulting in EB
receiving 1.453 shares of common stock of UPC in exchange for each
share of common stock of Grenada. This resulted in EB owning
637,705 shares of UPC stock which represents approximately 1.6% of
the UPC outstanding shares.
In 1994, the Company adopted Statement of Financial Accounting
Standards No. 115 "Accounting for Certain Investments in Debt and
Equity Securities" and classified its investment in common stock as
securities available-for-sale. Accordingly, as of December 31,
1994, the investment in UPC stock is carried at fair value of
$20.875 per share with the unrealized gain of $3,382,000 presented
as a separate component of stockholders equity. No investments in
common stock were sold during 1994.
Securities classified as held for sale in 1993 were carried at
the lower of aggregate cost or market.
4. Loans
The table which follows sets forth by type of secured property
the number and amount of EB's loan portfolio at December 31, 1994
and 1993 (dollars in thousands):
As of December 31
-------------------------------------------
1994 1993
--------------------- --------------------
Outstanding Outstanding
Number Number
of Principal of Principal
Loans Balance Loans Balance
-------- ----------- -------- ----------
Real Estate Loans
Mississippi:
One-to four-family
residential. 53 $ 1,505 76 $ 2,247
Multi-family
residential..... 3 2,233 4 2,410
Office Space...... 2 94 1 42
Motel............. 4 3,059 4 3,249
Industrial and
warehouse....... 1 44 2 971
Land and lots..... 3 260 3 300
Other............... 7 1,061 11 1,794
----- ----------- ----- ----------
73 8,256 101 11,013
----- ----------- ----- ----------
Other states:
One-to four-family
residential..... 7 377 12 483
Multi-family
residential..... 2 2,714 2 2,729
Office space...... 3 5,511 3 5,462
Industrial and
warehouse....... - - 1 825
------ ---------- ----- ----------
12 8,602 18 9,499
------ ---------- ----- ----------
85 16,858 119 20,512
------ ---------- ----- ----------
Commercial Business Loans
Accounts receivable,
inventory and
equipment......... 1 21 1 23
Aircraft............ 1 367 1 425
Small business
administration.... 1 278 1 302
Other............... 1 62 2 68
------ ---------- ----- ----------
4 728 5 818
------ ---------- ----- ----------
Other Secured Loans... 21 221 48 521
------ ---------- ----- ----------
Total Loans........... 110 17,807 172 21,851
====== =====
Less: Unearned income (55) (126)
Allowance for
loan losses. (5,117) (5,381)
---------- ----------
Net loans............. $ 12,635 $ 16,344
========== ==========
Real estate loans are presented net of wrap around loans of
$1,977,000 in 1994 and $2,068,000 in 1993.
There were $3,211,000 and $1,626,000 in nonearning loans at
December 31, 1994 and 1993, respectively.
The changes in the allowance for loan losses are shown in the
following table (dollars in thousands):
1994 1993
------------ ------------
Balance at beginning of year....... $ 5,381 $ 6,546
Current provision.................. - 794
Current charge-offs................ (359) (1,089)
Current recoveries................. 80 28
Transfer from (to) real estate
held for sale.................... 15 (898)
------------ ------------
Balance at end of year............. $ 5,117 $ 5,381
============ ============
Restructured loans approximated $2,965,000 and $4,852,000 as
of December 31, 1994 and 1993, respectively. These are loans for
which concessions, including reduction of interest rates,
reductions of principal balance or deferral of interest or
principal payments, have been granted due to the borrower's
financial condition. Interest income recognized on restructured
loans approximated $417,000 in 1994 and $448,000 in 1993. The
difference between interest income recognized on restructured loans
and income that would have been recorded in accordance with the
original loan terms was not material for any period presented. At
December 31, 1994, there were no outstanding commitments to lend
additional funds to borrowers with restructured loans.
5. Real Estate Held for Sale
A summary of real estate held for sale at December 31, 1994 and
1993, follows (dollars in thousands):
As of December 31
------------------------------------------------
1994 1993
--------------------- ---------------------
Number of Net Book Number of Net Book
Properties Value Properties Value
---------- --------- ---------- --------
Mississippi
One-to four-family
residential..... - $ - 6 $ 163
Multi-family
residential..... - - 1 220
Retail business... 4 131 5 146
Land and lots..... 5 330 15 545
------- --------- ---------- --------
9 461 27 1,074
------- --------- ---------- --------
Other states
One-to four-family
residential..... - - 1 5
Multi-family
residential..... 1 1,102 1 1,103
Retail business... - - 1 1,223
------ --------- ---------- --------
1 1,102 3 2,331
------ --------- ---------- --------
10 1,563 30 3,405
====== ==========
Less:
Accumulated
depreciation.... (53) (68)
-------- --------
Total............... $ 1,510 $ 3,337
======== ========
6. Notes Payable
On April 5, 1993, EB borrowed $10.0 million from a bank and,
with cash on hand, paid off the loan to Grenada (See Note 2 of the
financial statements). This new loan was collateralized by the
438,889 shares of Grenada stock and five deeds of trust on real
estate property held for sale. On December 15, 1993, this loan was
paid in full.
7. Related Party Transactions
Security Federal Savings
EB and Security Federal Savings, the parent company of Bailey
Mortgage Company, a 30% owner of EB at December 31, 1993,
participated in a joint venture for the purpose of providing data
processing services to each company. The companies were charged
for services provided at rates comparable to those which would have
been paid to other data processing companies providing similar type
services. EB's net cost for these services approximated $329,000
in 1993. The joint venture was dissolved February 28, 1993.
The Parkway Company
EB was a party to an administration agreement with Congress
Street Properties ("Congress Street"), an affiliate of Parkway.
Congress Street was merged into Parkway Congress Corporation
("Parkway Congress"), a wholly-owned subsidiary of Parkway, on
November 29, 1994. Subsequent to the November 29, 1994 merger and
prior to December 31, 1994, the administrative services provided
under the Administration Agreement were performed through Parkway
Congress. EB entered into an agreement with Parkway on January 1,
1995 to pay a monthly fee based on the average of EB's costs under
the Administration Agreement for the last quarter of 1994. Prior
to December 31, 1994, Congress Street and certain other affiliated
companies participated in an expense-sharing agreement (the
participants in the expense-sharing agreement and certain other
affiliated companies were collectively referred to as the "Eastover
Group") whereby administrative offices for the participating
companies were maintained in Congress Street's office in Jackson,
Mississippi and officers of Congress Street also served as officers
of the other participating companies, subject to the authority of
the Board of each participant to elect or appoint and remove its
officers in accordance with its certificate of incorporation,
declaration of trust or other charter documents and applicable law.
Although EB was not a participant in the expense-sharing agreement,
its annual payment to Congress Street was calculated as if it were.
There were no services or other benefits not available to EB due to
its participation in the Eastover Group through the Administration
Agreement rather than through the expense-sharing agreement. The
participants shared the cost of the common officers and other
employees and of shared facilities and activities provided by
Congress Street. Common costs were initially paid by Congress
Street. Each participant paid Congress Street an annual fee (on a
monthly basis) of one-half of one percent of its assets which are
publicly-traded securities and the remainder of the common costs
were allocated among the participants in proportion to their assets
other than publicly-traded securities, based on their most recent
publicly available balance sheets. Certain costs which the common
officers believed to be particularly attributable to each company
were not shared. These non-allocable costs include but were not
limited to: directors' fees, legal, audit, stock transfer expenses,
stationery and items of a similar nature. The Administration
Agreement was in effect from year to year and was automatically
renewable, although any party could terminate its participation in
the agreement at any time upon 60 days' notice. Subsequent to
March 1, 1993, EB, Inc. paid Congress Street approximately $292,000
in 1993 as a result of the Administrative Agreement. In 1994, EB
paid Congress Street approximately $267,000. The Administrative
Agreement between EB, Inc. and Congress Street did not exist prior
to March 1, 1993.
Other
Prior to March 1, 1993, EB leased certain real estate and
personal properties from related parties. Capitalized lease
obligations relative to certain of these leases approximated
$44,000 in 1993, and were included in net liabilities to be assumed
by Sunburst Bank. Interest and lease expense relative to these
leases approximated $13,000 in 1993.
8. Retirement Plan, Thrift Savings Plan and 401(k) Plan
Prior to March 1, 1993, EB had a defined contribution thrift
savings plan covering substantially all of its employees. In July
1992, the thrift savings plan was converted to a 401(k) plan.
Under the 401(k) plan, the Company matched employee contributions
up to 4% of wages, at a rate of 25%. The 401(k) plan cost included
in operating expense was $15,000 in 1993. On March 1, 1993,
matching contributions to the 401(k) plan were discontinued and the
plan was terminated on April 15, 1993.
9. Income Taxes
During 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 109 "Accounting for
Income Taxes". Under the provisions of the Statement, the Company
elected not to restate prior years' financial statements. The
cumulative effect of initial adoption was immaterial to the
financial statements.
Deferred income taxes reflect the net tax effects of (a)
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes, and (b) operating loss carryforwards. The
tax effects of significant items comprising the Company's net
deferred tax asset as of December 31, 1994 are as follows (dollars
in thousands):
1994 1993
-------- --------
Deferred tax liabilities
Unrealized gain on available
for sale securities $(1,261) $ -
------- -------
Deferred tax assets
Allowance for possible loan
losses 1,909 2,007
Real estate held for sale
valuation allowance 853 1,328
Uncollected accrued interest
allowance 236 240
Other 121 46
Operating loss carryforwards and
tax credit carryforwards 746 721
------- -------
3,865 4,342
------- -------
Valuation allowance (2,604) (4,342)
------- -------
Net deferred tax assets $ - $ -
======= =======
The valuation allowance decreased approximately $1,738,000 in
1994 and $1,512,000 in 1993.
Income tax benefits differ from amounts computed by applying
the statutory federal income tax rates to loss from continuing
operations as a result of the following (dollars in thousands):
1994 1993
-------- --------
Taxes at statutory rates on
income (loss) before income
taxes........................ $ 505 $ (357)
Dividend received deduction.... (84) 75
Temporary differences for which
no deferred tax benefit is
available due to uncertainty
of realization............... (421) 282
------- -------
$ - -
======= =======
EB has tax net operating loss and investment credit carryovers
which are available to benefit future profitable years.
Additionally, there are approximately $270,000 in alternative
minimum tax credits with no expiration date which are available to
reduce taxes which may become payable in future years. Tax net
operating and investment credit carryovers are as follows (dollars
in thousands):
Net Operating Investment Tax
Expiration Date Loss Credit
--------------- ------------- --------------
1995-97 $ - $ 28
1998-2000 312 32
2008 1,433 -
2009 78 -
------ ------
$1,823 $ 60
====== ======
10. Contingencies
EB is a defendant in various legal actions which principally
arose when the Company was involved in bank lending activities.
The legal actions are in various stages of discovery and/or
litigation. While the Company intends to vigorously defend these
matters, legal counsel is unable to form an opinion as to the
estimated outcome of certain of these matters due to their early
discovery stages. Management, with the advise of legal counsel,
has provided an accrual of $125,000 as its best estimate of the
amount the Company may incur in connection with the ultimate
resolution of these matters, which range from $125,000 to a maximum
of $1,157,000 (including total damages sought for matters where
legal counsel was unable to form an opinion as to potential
outcome).
EB has incurred cost approximating $111,000, in 1994 for
certain environmental cleanup cost of two parcels of its real
estate held for sale, which includes an accrual of $85,000 as of
December 31, 1994. Management presently believes future costs will
not have a material adverse effect on the Company's financial
position, results of operations or liquidity.
11. Supplemental Cash Flow Information
The following table provides information regarding
supplemental cash and noncash investing and financing activities:
Year Ended December 31
-------------------------
1994 1993
---------- ----------
Loan foreclosures added to real
estate held for sale............. $ 19 $ 1,484
Loans made to facilitate sales of
real estate held for sale........ 150 469
Interest paid...................... - 405
Income taxes paid.................. - 10
Common stock received from sale of
assets........................... - 9,930
Acquisition costs from sale of
assets, including deferred
charges.......................... - 5,038
Note payable to Sunburst........... - 12,317
Unrealized gain on available for
sale securities.................. 3,382 -
12. Short Term Investments
EB does not in the ordinary course of business take possession
of the securities which collateralize its reverse repurchase
agreements. EB has controls which consist of the right to demand
additional collateral or return of these invested funds at anytime
the collateral value is less than the invested funds plus any
accrued earnings thereon. EB conducts these transactions on a
short term basis with Deposit Guaranty National Bank with which it
has a normal business relationship. At December 31, 1994, the
Company had $460,000 invested in reverse repurchase agreements
which had a scheduled maturity of January 6, 1995. EB also had a
$7,060,000 Federal Home Loan Mortgage Corporation Discount Note
which had a scheduled maturity of January 13, 1995. These short
term investments are included as cash equivalents on the
accompanying balance sheets.
13. Accounting Standards to be Adopted in the Future
The Financial Accounting Standards Board issued SFAS No. 107
"Disclosures about Fair Value of Financial Instruments" and SFAS
No. 119 "Disclosure about Derivative Financial Instruments and Fair
Value of Financial Instruments" which are effective for
organizations with total assets less than $150 million for fiscal
years ending after December 15, 1995. These Statements will
require disclosures about the fair value of financial instruments,
whether recognized or not recognized in the balance sheet, for
which it is practicable to estimate the value and disclosures about
amounts, terms and the nature of certain derivative financial
instruments.
During May 1993 and October 1994, the Financial Accounting
Standards Board issued SFAS No. 114 "Accounting by Creditors for
Impairment of a Loan" and SFAS No. 118 "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosure" which are
effective for financial statements for fiscal years beginning after
December 15, 1994. These Statements address the accounting by
creditors for impairment of certain loans and requires that
impaired loans, as defined, be measured based upon the present
value of expected future cash flows discounted at the loan's
effective interest rate or at the loan's observable market price or
fair value of the underlying collateral. Management does not
believe the adoption of these statements will have a material
effect on the Company's financial statements.
14. Subsequent Event - Merger
On July 27, 1994, EB and Parkway announced that their Boards
of Directors had agreed in principle to a merger of EB and a
wholly-owned subsidiary of Parkway. EB shareholders (other than
Parkway) 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. Parkway presently owns 52.3% of EB's
outstanding shares. The merger is subject to shareholder approval
of EB and Parkway. Special shareholder meetings to vote on the
merger are scheduled for April 27, 1995. If the merger is
consummated, EB will become a wholly-owned subsidiary of Parkway
and will no longer operate as a separate publicly-traded entity.
THE PARKWAY COMPANY
PRO FORMA CONSOLIDATED BALANCE SHEET (Unaudited)
As of December 31, 1994
The following unaudited pro forma consolidated balance sheet sets
forth the effect of the merger of Parkway Aquisition Corporation (a wholly-owned
subsidiary of Parkway) ("PAC") with and into EB as if the merger had been
consummated on December 31, 1994. The pro forma consolidated balance sheet has
been prepared by management of Parkway based upon the historical financial
statements of Parkway and EB. This pro forma consolidated balance sheet may not
be indicative of the results that actually would have occurred if the merger had
been in effect on the dates indicated or which may be obtained in the future.
The pro forma consolidated balance sheet should be read in conjunction with the
other financial statements and notes to the financial statements of Parkway and
EB.
<TABLE>
<CAPTION>
Parkway EB Pro Forma
12/31/94 12/31/94 Pro Forma Consolidated
(Historical) (Historical) Adjustments After EB
------------ ------------ ----------- ------------
(In thousands, except per share data)
ASSETS
Investments
Real estate (net of
<S> <C> <C> <C> <C>
accumulated depreciation) $ 39,276 $ 1,510 $ (1,145) (2) $ 39,641
Real estate partnerships:
Wink-Parkway Partnership 319 319
Investment in marketable
securities:
EB, Inc. 13,096 (13,096) (1)(2) 0
Other real estate & financial
service companies 1,965 13,312 15,277
Mortgage loans 3,603 12,635 (8,252) (2) 7,986
Investment in Golf Properties,
Inc. 570 570
---------- ---------- ---------- ----------
58,829 27,457 (22,493) 63,793
Interest and rents receivable
and other assets 1,486 424 1,910
Cash and cash items 320 7,517 (5,527) (2) 2,310
Restricted cash 427 427
---------- ---------- ---------- ----------
$ 61,062 $ 35,398 $ (28,020) $ 68,440
========== ========== ========== ==========
LIABILITIES
Notes payable to banks $ 4,154 $ $ $ 4,154
Mortgage notes payable without
recourse 22,827 22,827
Accounts payable & other
liabilities 1,563 1,689 3,252
Deferred gain 280 280
---------- ---------- ---------- ----------
28,824 1,689 0 30,513
---------- ---------- ---------- ----------
STOCKHOLDERS' EQUITY
Common Stock 1,563 2,900 (2,470) (2) 1,993
Additional paid in capital 26,847 30,017 (24,056) (2) 32,808
Retained earnings 3,158 (2,590) 2,590 (2) 3,158
Unrealized gains 670 3,382 (4,084) (2)(1) (32)
---------- ---------- ---------- ----------
32,238 33,709 (28,020) 37,927
---------- ---------- ---------- ----------
$ 61,062 $ 35,398 $ (28,020) $ 68,440
========== ========== ========== ==========
Book value per share $ 20.63 $ 19.03
Shares outstanding
(In thousands) 1,563 1,450 430 1,993
</TABLE>
THE PARKWAY COMPANY
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET (Unaudited)
As of December 31, 1994
(1) Eliminate Parkway's $702,000 pro-rata share of the unrealized gain
related to EB's investment in Union Planters ("Union Planters")
Corporation (formerly Grenada Sunburst Corporation).
(2) Parkway issues 430,413 Parkway Shares and pays $8 in cash per share
of EB stock to all EB shareholders (except for Parkway) in exchange
for all EB shares outstanding. The 759,245 EB shares owned by
Parkway (representing 52.5% of the total shares outstanding)
are retired.
Basis of Additional Historical Basis
47.5% Interest of 52.5% Interest
------------------- ------------------
EB Shares outstanding 1,450,117
Less EB Shares owned
by Parkway (759,245)
---------------
690,872
Exchange ratio $9.25 to $14.85
---------------
New Parkway Shares issued 430,413
Market value per Parkway Share $ 14.85
---------------
$ 6,391,633
Cash paid to EB shareholders
(690,872 x $8) 5,526,976
Basis of EB Shares held
by Parkway -- $12,394,000
-------------- -----------
Parkway's cost of EB's net
assets $ 11,918,609 $12,394,000
============== ===========
The difference between EB's book value and Parkway's cost is
allocated to EB's real estate ($1,145,000) and mortgage loans
($8,252,000) pro-rata.
<TABLE>
<CAPTION>
47.5% Interest 52.5% Interest Total
-------------- -------------- ------------
<S> <C> <C> <C>
Cost $ 11,918,000 $ 12,394,000 $ 24,312,000
Book value 16,012,000 17,697,000 33,709,000
------------ ------------ ------------
Difference $ (4,094,000) $ (5,303,000) $ (9,397,000)
============ ============ ============
Cost is allocated as follows:
Union Planters Stock $ 6,323,000 $ 6,989,000 $ 13,312,000
Cash and other current
assets 3,772,000 4,169,000 7,941,000
Accounts payable and
other liabilities (802,000) (887,000) (1,689,000)
Real estate 173,000 192,000 365,000
Mortgage loans 2,452,000 1,931,000 4,383,000
------------ ------------ ------------
$ 11,918,000 $ 12,394,000 $ 24,312,000
============ ============ ============
</TABLE>
(3) A reconciliation of pro forma consolidated stockholders' equity is
presented on the following page:
<TABLE>
<CAPTION>
Unrealized
Common Additional Retained Gains
Stock Paid in Capital Earnings (Losses) Total
------- --------------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Parkway historical $ 1,563 $ 26,847 $ 3,158 $ 670 $ 32,238
EB historical 2,900 30,017 (2,590) 3,382 33,709
Pro forma adjustments:
(2) Issue Parkway shares
in EB merger 430 5,961 - - 6,391
(2) Retire EB shares
outstanding (2,900) (30,017) 2,590 (3,382) (33,709)
Other pro forma adjustments:
(1) Eliminate Parkway's
unrealized gain
related to invest-
ment in EB - - - (702) (702)
------- -------- ------- ------- --------
Pro forma consolidated $ 1,993 $ 32,808 $ 3,158 $ (32) $ 37,927
======= ======== ======= ======= ========
</TABLE>
THE PARKWAY COMPANY
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
FOR THE TWELVE MONTHS ENDED JUNE 30, 1994
The following unaudited pro forma consolidated statements of income set
forth the effect of PAC's April 27, 1995 merger with EB, the November 29, 1994
merger with Congress Street into Parkway Congress Corporation ("PCC") (a wholly-
owned subsidiary of Parkway) and the May 10, 1994 merger of First Continental
Real Estate Investment Trust ("First Continental" or "FCREIT") into Parkway
Texas Corporation (a wholly-owned subsidiary of Parkway) as if these
transactions had been consummated on July 1, 1993. The pro forma consolidated
statements of income have been prepared by management of Parkway based upon
historical statements of Parkway, Congress Street, EB and First Continental.
These pro forma statements of income may not be indicative of the results that
actually would have occurred if the mergers had been in effect on the
dates indicated or which may be obtained in the future. The pro forma
statements of income should be read in conjunction with the other financial
statements and notes to the financial statements of Parkway, Congress Street
and EB.
<TABLE>
<CAPTION>
Historical Pro Forma Adjustments
---------------------------------- ------------------------------------------
Parkway Congress
Company Street EB Congress Pro Forma
6-30-94 5-31-94 6-30-94 FCREIT FCREIT Street EB Other Consolidated
(1) (2) (2) (2)
------- -------- ------- ------ ------ -------- -------- ---------- ------------
REVENUES
Income
from
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REO $6,429 $ $ $ 595 $ $ $ $ $ 7,024
Interest
on
mortgage
loans 265 35 1,798 217 2,315
Gain
on sale
of real
estate
partner-
ship 280 280
Gain
(loss)
on
REO
and
mortgage
loans,
net (113) 3 71 28 (11)
Equity
in
earnings
(losses):
Real
estate
companies:
Congress
Street (67) 67 (4a) 0
EB 337 39 (39)(4d) (337)(4b) 0
Parkway 1,662 (1,662)(4e) 0
FCREIT (9) 9(4c) 0
Other 443 443
Real
estate
partner-
ships &
corp.
joint
ventures:
One
Jackson
Place (381) 381 (4f) 0
Other 239 239
Gain on
securities 579 44 623
Interest
on short-
term
investments 235 23 (107)(4h) 151
Dividends
and other
income 338 616 134 1,088
------- ------ ------ ----- - ------- ----- ----- -------
8,956 1,358 2,552 974 9 (1,253) (337) (107) 12,152
------- ------ ------ ----- - ------- ----- ----- -------
EXPENSES
Interest 31 76 81 203 391
Management
allocation 502 53 303 44 (4k) 902
Provision
for loan
losses 396 396
Real
estate
operating
expense:
Opera-
tions 3,760 168 417 4,345
Interest
expense 2,392 2,392
Depreci-
ation &
amorti-
zation 1,022 41 13 (4j) 1,076
Minority
interest (542) 343 (4g) (199)
Other
expenses 538 141 555 625 1,859
------ ------ ------ ----- -- ------- ----- ----- -------
7,703 270 1,544 1,245 0 400 0 0 11,162
------ ------ ------ ----- -- ------- ----- ----- -------
Income
(loss)
before
income
taxes
and
discon-
tinued
opera-
tions 1,253 1,088 1,008 (271) 9 (1,653) (337) (107) 909
Income
tax
expense 1 107 (107) (4i) 1
------ ------ ------ ----- -- ------- ----- ----- -------
Net
income
(loss)
from
continuing
operation $1,252 $ 981 $1,008 $(271) $9 $(1,546) $(337) $ (107) $ 989
====== ====== ====== ===== == ======= ===== ====== =======
Net
income
(loss)
from
continuing
operations
per
share $ 0.96 $ 0.62 $ 0.70 $ 0.57
====== ====== ====== =======
Weighted
average
shares
outstand-
ing (3) 1,300 1,571 1,450 1,724
====== ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
THE PARKWAY COMPANY
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994
Historical Pro Forma Adjustments
------------------------------ ------------------------------------------------
Parkway Congress
Company Street EB Congress Pro Forma
12-31-94 11-29-94 12-31-94 Street EB Other Consolidated
(1) (2) (2)
-------- -------- -------- -------- ------ ------- ------------
REVENUES
Income from
real estate
<S> <C> <C> <C> <C> <C> <C> <C>
properties $ 3,683 $ $ $ $ $ $ 3,683
Interest on
mortgage
loans 283 18 1,054 1,355
Gain (loss)
on real
estate &
mortgage
loans, net 529 1 (171) 359
Loss on
securities 27 (3,550) 3,550 (4l) 27
Equity in
earnings
(losses):
Real estate
companies:
Congress
Street (14) 14 (4a) 0
EB, Inc. 618 3 (3)(4d) (618)(4b) 0
Parkway 220 (220)(4e) 0
Other 77 77
Real
estate
partner-
ships
& corp.
joint
ventures:
One Jackson
Place (60) 60 (4f) 0
Other 195 195
Interest on
short-term
investments 18 101 119
Dividends and
other income 46 308 354
------- ------- ------- ------- ------ ---- ----------
5,462 (3,368) 1,292 (149) 2,932 0 6,169
------- ------- ------- ------- ------ ---- ----------
EXPENSES
Interest 140 19 159
Management
allocation 270 28 125 22 (4k) 445
REO
expense:
Operations 1,951 115 2,066
Interest
expense 1,078 1,078
Depreciation
& amortiza-
tion 565 16 6 (4J) 587
Minority
interest (209) 114 (4g) (95)
Provision for
possible losses 55 55
Other expenses 662 175 314 1,151
------- ------- ------- ------- ------ ---- ----------
4,457 222 625 120 0 22 5,446
------- ------- ------- ------- ------ ---- ----------
Income (loss)
before income
taxes and
discontinued
operations 1,005 (3,590) 667 (269) 2,932 (22) 723
Income tax
expense 3 (3)(4i) 1
------- ------- ------- ------- ------ ---- ----------
Net income
(loss) from
continuing
operations $ 1,005 $(3,593) $ 667 $ (272) $2,932 $(22) $ 723
======= ======= ======= ======= ====== ==== ==========
Net income
(loss) from
continuing
operations
per share $ 0.65 $ (1.67) $ .46 $ 0.37
======= ======= ======= ==========
Weighted
average
shares
outstanding
(3) 1,544 2,151 1,450 1,969
======== ======= ======= ==========
</TABLE>
THE PARKWAY COMPANY
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(1) During the fiscal year ended June 30, 1994, Parkway purchased
1,218,910 shares of First Continental for $1,198,000, 453,471
shares of EB for $5,864,000 and 117,232 shares of Congress
Street for $94,000. For purposes of the pro forma
consolidated statements of income, these transactions were
assumed to have taken place on July 1, 1993.
(2) For purposes of the pro forma consolidated statements of
income, income from operations of Congress Street has been
converted from an August 31 year end to a May 31 year end.
Accordingly, income for the twelve months ended May 31, 1994
and six months ended November 29, 1994 (the date of the merger
with Parkway) have been included in the pro forma consolidated
statements of income. Income from operations of EB has been
converted from a December 31 year end to a June 30 year end.
Accordingly, income for the twelve months ended June 30, 1994
and six months ended December 31, 1994 have been included in
the pro forma consolidated statements of income. Income from
operations of First Continental Real Estate Investment Trust
has been adjusted to reflect operations from June 1, 1993 to
May 9, 1994, the date of the merger with Parkway Texas
Corporation.
(3) Weighted average Parkway Shares outstanding were computed as
follows:
Twelve Months Six Months
Ended Ended
June 30, 1994 Dec. 31, 1994
------------- -------------
Historical weighted average
Parkway Shares outstanding 1,299,729 1,544,193
Parkway Shares issued in
merger of PCC with Congress
Street 561,086 561,086
Parkway Shares retired in
merger of PCC with Congress
Street (567,066) (567,066)
Parkway Shares issued in
merger of PAC with EB 430,413 430,413
--------- ---------
Pro forma weighted average
Parkway Shares outstanding 1,724,162 1,968,626
========= =========
(4) The pro forma adjustments to the consolidated statements of
income consist of the following:
Twelve Months Six Months
Ended Ended
June 30, 1994 Dec. 31, 1994
------------- --------------
(a) Elimination of
Parkway's equity
in the losses of
Congress Street. $ 67,000 $ 14,000
(b) Elimination of
Parkway's equity
in the earnings
of EB. (337,000) (618,000)
(c) Elimination of
Parkway's equity
in the losses of
First Continental. 9,000 0
(d) Elimination of
Congress Street's
equity in the
earnings of EB. (39,000) (3,000)
(e) Elimination of
Congress Street's
equity in the
earnings of Parkway. (1,662,000) (220,000)
(f) Elimination of
Congress Street's
equity in the losses
of One Jackson
Place. 381,000 60,000
(g) Adjust Parkway's
minority interest
expense to reflect
its additional
ownership of One
Jackson Place. (343,000) (114,000)
(h) Adjust Parkway's
interest income on
investments to
reflect the use of
short-term cash
investments to
purchase additional
ownership interests
in First Continental,
EB and Congress Street. (107,000) -
Twelve Months Six Months
Ended Ended
June 30, 1994 Dec. 31, 1994
------------- --------------
(i) Adjust Congress
Street's deferred
income taxes
applicable to federal
alternative minimum
tax and deferred
state income tax
expense to zero. 107,000 3,000
(j) Add depreciation
on the increased
basis in the One
Jackson Place real
estate investment. (13,000) (6,000)
(k) Adjust for fees
related to managing
LNH REIT that will
be eliminated with
the termination of
the shared expense
agreement. (44,000) (22,000)
(l) Eliminate Congress
Street's writedown
to the investments
in Parkway and EB. - 3,550,000
