UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
-------
For the fiscal year ended December 31, 1995
Commission file number 0-12505
THE PARKWAY COMPANY
(Name of small business issuer in its charter)
Texas 74-2123597
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
300 One Jackson Place 39201
188 East Capitol Street (Zip Code)
Jackson, Mississippi
(Address of principal executive offices)
Issuers's telephone number: (601)948-4091
Securities registered under Section 12(b) of the Act:
None
Securities registered under Section 12(g) of the Act:
Common Stock, $1.00 Par Value
Check whether the issuer (1) 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
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form, and
no disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. ( )
Revenues for the year ended December 31, 1995 were
$23,633,000.
The aggregate market value of the voting stock held by
non-affiliates of the Registrant as of March 15, 1996 was
$35,942,000.
The number of shares outstanding in the issuer's class of
common stock as of March 14, 1996 was 2,008,508.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 1996 Annual Meeting of
Shareholders are incorporated by reference into Part III.
PART I
Item 1. Description of Business
Original Organization
The Parkway Company ("Parkway" or the "Company") was created
in 1971 under the Texas Real Estate Investment Trust Act and
operated under the name Texas First Mortgage Real Estate Investment
Trust ("TFMR"). From its inception through June 30, 1974, TFMR
operated as a qualified real estate investment trust ("REIT") under
the Internal Revenue Code of 1954, as amended ("Code"). TFMR
terminated its qualification as a REIT under the Code for fiscal
years ending after 1974. TFMR was reorganized and converted into
a Texas corporation known as The Parkway Company on January 7,
1981.
Investment Strategy
Parkway is a full service real estate investment company
specializing primarily in the ownership, management, leasing and
development of office properties in the Southeast and Southwest
United States. The Company will seek investments where the
expertise of the Parkway staff can add value through direct
management, hands on operating philosophy and the Company's
liquidity and financial strength.
The Company will invest directly in properties in the form of
equity ownership. These investments may include acquiring equity
positions in private or publicly traded companies. Parkway's
operating philosophy will be based on superior service to its
customers, timely sales of non-core assets, sound new investments,
simplicity and innovation.
A fundamental component of Parkway's business strategy has
been the investigation of possible mergers or acquisitions of other
real estate companies to increase its asset base and, thereby, its
ability to compete with larger real estate investors for attractive
real estate opportunities. This was carried out in the past
through the acquisition of GNB in August 1979 and Sugar Creek
Corporation in March 1980, mergers of the NOVA Real Estate
Investment Trust in June 1983 and Highlands National, Inc. in April
1986 and the acquisition of EastPark Realty Trust in April 1990.
More recently, this was accomplished through the mergers of First
Continental Real Estate Investment Trust ("First Continental" or
"FCREIT") effective May 10, 1994, Congress Street Properties, Inc.
("Congress Street") effective November 29, 1994 and EB, Inc. ("EB")
effective April 27, 1995.
Administration
Since January 1, 1995, Parkway has self-managed its
operations. From 1980 through 1994, Parkway operated under an
expense-sharing agreement with certain affiliated companies. The
expense-sharing agreement provided that the participating companies
have common officers, facilities and personnel, and the costs of
these were shared among the participants. Certain costs, including
directors' fees, legal, audit and stock transfer expenses, were
considered non-allocable and paid directly by each participating
company. As a result of certain business combinations involving
the expense-sharing participants, the expense-sharing agreement was
terminated on December 31, 1994. Since that date, Parkway has
maintained its own employees and offices located in One Jackson
Place in Jackson, Mississippi. Leland R. Speed continues to serve
as the Chairman of the Board and Chief Executive Officer of Parkway
and EastGroup Properties ("EastGroup"), a former participant in the
expense-sharing agreement. The administrative costs associated
with Mr. Speed and a small number of clerical and support staff
employees are shared equally by Parkway and EastGroup.
Recent Mergers
Congress Street. Effective November 29, 1994, the merger of
Congress Street with Parkway Congress Corporation, a wholly-owned
subsidiary of the Company, was completed. The increase to net
assets was as follows:
Parkway shares reacquired
(567,066 shares) $ 7,939,000
Operating real estate 675,000
Real estate companies 201,000
Mortgage loans 27,000
Cash 42,000
Accounts receivable and other assets 84,000
Notes payable to bank (27,000)
Accounts payable & other liabilities (235,000)
------------
8,706,000
Parkway shares retired at date
of merger (567,066 shares) (7,939,000)
------------
Increase to net assets $ 767,000
============
The Company's purchase price of these assets consisted of:
Common Stock issued (561,086 shares) $ 7,855,000
Cash in lieu of fractional shares 2,000
Merger expenses 90,000
Investment in Congress Street 364,000
Note and interest receivable-affiliate 395,000
------------
$ 8,706,000
============
EB, Inc. On April 27, 1995, the merger of Parkway Acquisition
Corporation, a wholly-owned subsidiary of Parkway, with and into EB
was completed. Under the terms of the merger, EB became a wholly-
owned subsidiary of Parkway. Shareholders of EB 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 owned by them.
The merger resulted in the issuance of 428,955 shares of Parkway.
Prior to the merger, Parkway owned 52.3% of the outstanding shares
of EB. Details of the merger transaction and the assets acquired
in the merger are discussed further under "Management's Discussion
and Analysis of Financial Condition and Results of Operations".
Description of Operations
Parkway is currently engaged in the management of its existing
office building portfolio, as well as the management and/or sale of
its other assets, consisting of real estate properties, mortgage
loans and securities of other real estate companies. Through
Eastover Realty, a wholly-owned subsidiary, Parkway is also
involved in the management of commercial and multi-family
residential properties for which it receives management fees.
Eastover Realty currently manages and leases a portfolio of
1,534,000 square feet of office space. Eastover Realty also
performs brokerage services on a commission basis. Parkway is
actively seeking new investments that meet the criteria set forth
in the investment strategy. In pursuing this strategy, Parkway
purchased three office building investments, totalling 442,000
square feet of net rentable area during 1995 and one office
building investment representing 161,000 net rentable square feet
in March 1996. These new investments are discussed in greater
detail elsewhere in this report.
Parkway currently has 35 employees, including its seven
salaried officers. This includes 12 employees which are reimbursed
by office buildings managed by Eastover Realty.
Item 2. Description of Properties
The operations of the Company are conducted from approximately
12,100 square feet of office space located at 188 East Capitol
Street, 300 One Jackson Place, Jackson, Mississippi. The space is
owned by One Jackson Place, Ltd., an affiliate of Parkway, and is
leased by Parkway at market rental rates. Approximately 40% of the
space currently leased by the Company is occupied by EastGroup.
The Company is reimbursed by EastGroup for its pro rata share of
the expenses related to the lease of office space. Parkway also
leases 1,006 square feet of office space in Houston, Texas.
Investments in Real Estate
Parkway principally invests in office buildings, but may
acquire other types of real estate in connection with the merger or
acquisition of other real estate companies or the buyout of its
minority interest participants on existing investments. Property
acquisitions in 1995 and through March 15, 1996, were made with
existing cash reserves, bank borrowings and funds made available by
the sale of real estate and securities and the collection of
mortgage notes receivable. Following the acquisition of office
building investments, the Company has applied, and proposes to
continue to apply, for fixed rate, non-recourse financing at fully-
amortizing terms ranging from twelve to fifteen years. The Company
is generally seeking mortgages for approximately seventy percent
(70%) or less of a property's value.
The Company is seeking new office building investments in the
southern United States, but is not limited to any specific
geographical region. Following the office building acquisition
made in March 1996, the Company has nine (9) office building
investments comprising 996,000 square feet of office space in six
(6) states with an average carrying value of $60.73 per net
rentable square foot. As of March 15, 1996, 66% of the Company's
office building investments were located in Jackson, Mississippi,
13% in Atlanta, Georgia, 12% in Houston, Texas, 4% in Indianapolis,
Indiana, 3% in New Orleans, Louisiana and 2% in Columbus, Ohio.
Through Eastover Realty, the Company directly manages the office
buildings in Jackson and contracts with unrelated third party
companies to manage the day-to-day operations of and provide
leasing services to the remaining office buildings.
Description of Real Estate and Operating Data
Office Buildings
The Company intends to hold its portfolio of office buildings,
individually discussed below, for investment purposes. Unless
otherwise noted, the Company does not propose any program for the
renovation, improvement or development of any of the office
buildings, except as called for under the renewal of existing
leases or the signing of new leases. All such tenant improvements
are expected to be financed by cash flow from the property.
Parkway, or an 100% owned subsidiary of Parkway, holds fee simple
title to the entire property, unless noted otherwise. In the
opinion of management, all properties are adequately covered by
insurance. All office building investments compete with other
office buildings located within the same submarket.
One Jackson Place. This 14-story Class A office building was
built in 1986, was 100% leased at March 15, 1996 and competes with
other office buildings in the central business district of Jackson,
Mississippi. Parkway has a 73.125% effective interest in the
building through its general partnership interest in One Place
Partners, a Mississippi general partnership. One Place Partners
has a general partnership interest in Jackson Place Investments, a
Texas general partnership, equivalent to 73.125% of this office
building. Because the Company has majority voting control over the
building, the operations of the building have been consolidated in
the financial statements of the Company.
One Jackson Place has a total rentable area of approximately
218,000 square feet with the average effective annual rental per
square foot of $17.42. At December 31, 1995, two tenants occupied
ten percent or more of the rentable square footage of the building.
One tenant occupies 22,721 square feet of office space, or 10.42%
of the rentable square footage, and provides legal services,
primarily to corporate clients. This lease expires in February
1997 and is at a market rental rate. A second tenant occupies
27,434 square feet of office space, or 12.58% of the rentable
square footage, and provides services in the telecommunications
industry. This lease expires in June 1997 and is at a market
rental rate. The principal tenants in the building are
professional services firms, including communications, legal,
accounting, advertising and investment brokerage firms.
The Jackson, Mississippi Central Business District Class A and
B office submarket consists of twelve buildings totalling 2,201,000
square feet. At March 15, 1996, the submarket was 97% leased at an
average rental rate of $15.63. There is currently no Class A
office properties under construction in the downtown business
district.
Leases expiring
-----------------------------------------------------
Year ending Minimum Percentage of
December 31 Number Square feet Annual rents Gross annual rents
- ----------- ------ ----------- ------------ ------------------
1996 11 50,628 $ 875,000 23.11%
1997 8 71,712 1,254,000 33.15%
1998 4 35,569 603,000 15.95%
1999 3 10,435 172,000 4.54%
2000 2 22,446 370,000 9.77%
2001 1 15,248 263,000 6.95%
2006 1 11,237 247,000 6.53%
Depreciation is computed using the straight-line method over
their estimated useful lives. Below is a schedule of the estimated
useful lives and federal tax basis of the One Jackson Place office
building.
Life Tax Basis
------- ----------
Land - $1,799,000
Building and improvements 40 yrs. 8,001,000
Equipment, furniture and fixtures 5 yrs. 22,000
Tenant improvements lease term 2,875,000
Real estate taxes paid for 1995 and 1994 were $362,000 and
$360,000, respectively.
In October 1995, the Company refinanced the $22,404,000 first
mortgage on this investment. The partnership owning this building
made a principal payment of $4,004,000 to the lender in return for
a reduction in the interest rate from 9.25% to 7.85% and an
extension of the maturity date. The $18,400,000 non-recourse first
mortgage has a fixed rate of 7.85% and a twenty-year amortization
period. The loan matures November 10, 2010 when the balance of the
note will be approximately $7,532,000.
Mtel Centre'. Mtel Centre' is an office building complex
consisting of approximately 260,000 net rentable square feet in two
buildings and 130 parking spaces located in the central business
district of Jackson, Mississippi. The buildings were purchased in
July 1995 from the Resolution Trust Corporation as receiver for
Security Federal Savings and Loan Association for $13,500,000. The
buildings were constructed in the 1950's and were completely
renovated in 1986 at an estimated cost of $20,000,000.
Mtel Centre' has an average effective annual rental rate per
square feet of $14.23. The buildings were 99% leased at March 15,
1996. At December 31, 1995, two tenants occupied ten percent or
more of the rentable square footage of the building. One tenant
occupies 32,455 square feet or 12.48% of the total net rentable
square footage, and provides legal services, primarily to corporate
clients. This lease expires in June 2003 and is at a market rental
rate. Mobile Telecommunications Technologies Corp. (Mtel), a
service provider in the telecommunications industry, occupies
149,515 square feet under multiple leases or 56.95% of the total
net rentable square footage. These leases expire in July 2005. In
connection with the acquisition of the building, Mtel signed a
lease for 122,000 square feet of space at an annual rental rate of
$12.50 per square foot. Subsequent leases with Mtel are at market
rental rates. Other principal tenants in the building are
professional services firms, including legal, accounting, banking
and oil services firms.
Mtel Centre' competes in the same business district as One
Jackson Place mentioned above.
Leases expiring
-----------------------------------------------------
Year ending Minimum Percentage of
December 31 Number Square feet Annual rents Gross annual rents
- ----------- ------ ----------- ------------ ------------------
1996 3 17,716 $ 274,000 8.26%
1997 2 10,435 154,000 4.64%
1998 3 7,757 124,000 3.74%
1999 1 173 3,000 .09%
2000 1 9,690 155,000 4.67%
2001 2 22,844 384,000 11.58%
2003 1 34,344 567,000 17.10%
2005 1 130,066 1,655,000 49.92%
Depreciation is computed using the straight-line method over
their estimated useful lives. Below is a schedule of the estimated
useful lives and federal tax basis of Mtel Centre' office building.
Life Tax Basis
---------- -----------
Land - $ 1,360,000
Building and improvements 40 yrs. 12,281,000
Equipment, furniture and fixtures 5 yrs. 21,000
Tenant improvements lease term 6,000
Real estate taxes paid for 1995 were $395,000.
In December 1995, the Company obtained an $11,000,000 non-
recourse first mortgage on Mtel Centre' at a fixed rate of 7.75%
and a twelve-year, fully amortizing term. The loan matures January
1, 2008.
Waterstone. Waterstone is a four-story Class A office
building built in 1987 located approximately one mile from the
Atlanta Hartsfield International Airport in Atlanta, Georgia. It
consists of approximately 92,000 square feet of net rentable area
and 361 surface parking spaces. The building was purchased in
December 1995 from an insurance company for $8,031,000. As of
March 15, 1996, the building is 94% leased to 13 tenants.
Subsequent to December 31, 1995, the Company applied for a
non-recourse, fixed rate first mortgage covering approximately 70%
of the purchase price of this property.
One Park 10 Plaza. One Park 10 Plaza is an eight-story Class
A office building built in 1982 located in the Katy Freeway/Energy
Corridor submarket of Houston, Texas. The building consists of
approximately 161,000 square feet of net rentable area and 609
parking spaces in a four-level attached parking garage. The
building was purchased in March 1996 from an insurance company for
$6,700,000. As of March 15, 1996, the building is 89% leased to 28
tenants. The Company intends to apply for a non-recourse, fixed
rate first mortgage during 1996.
IBM Building. The IBM Building is a four-story brick office
building built in 1985 located in northeast Jackson, Mississippi.
The building consists of approximately 90,000 square feet of net
rentable area and 362 surface parking spaces. The building was
purchased in October 1995 from an unrelated real estate company for
$6,500,000. As of March 15, 1996, the building is 94% leased to 13
tenants. In February 1996, the Company secured a $4,800,000 non-
recourse, first mortgage on the building at a fixed rate of 7.70%
and fifteen-year, fully amortizing term. The loan matures March 1,
2011.
Corporate Square West. This office center consists of
approximately 95,000 square feet of rentable office space located
in Indianapolis, Indiana. The center, which was completed in 1970,
consists of four "L" shaped one-story buildings located on 9.5
acres. The center was 96% leased at March 15, 1996, and is not
subject to a mortgage.
Cascade III. Cascade III is a two-story office building
located in Worthington, a suburb of Columbus, Ohio. The building
was completed in 1978 and contains approximately 25,000 square feet
of rentable office space. The office building was 86% leased at
March 15, 1996, and is not subject to a mortgage.
West Office Building. This 22,000 square foot single-story
office building is located in Houston, Texas. This building,
completed in 1984, was 100% leased to one tenant at March 15, 1996,
and is not subject to a mortgage.
Wink Office Building. This 33,000 square foot office/warehouse
building located in New Orleans, Louisiana, is owned by the Wink-
Parkway Partnership, a partnership that is owned 50% by each
Parkway and Wink Engineering. At March 15, 1996, the building was
100% leased, of which Wink Engineering occupied 96% on a 15-year
net lease. This 50% ownership was purchased by the Company on June
15, 1994. The investment is accounted for on the equity method of
accounting as an investment in real estate partnership.
Real Estate Held for Sale
In addition to its core investments in office buildings, the
Company also has a portfolio of land and other operating properties
that it is currently holding for sale. In December 1995, the
Company's Board of Directors adopted an investment strategy that
more specifically focused on office building investments and
decided to judiciously sell operating properties that did not meet
this product type. The operating properties in this category were
acquired in the April 27, 1995 merger of EB and the May 10, 1994
merger of First Continental and are individually discussed below.
None of the real estate held for sale is subject to mortgage debt
at December 31, 1995.
The Club at Winter Park. The Club at Winter Park is a 180-
unit apartment complex in Winter Park, Florida, a suburb of
Orlando. Parkway acquired a 40% interest in this property through
the merger with EB. In December 1995, the Company purchased an
additional 44% interest from the Resolution Trust Corporation for
$1,100,000. The Company is actively pursuing the purchase of the
remaining 16% interest from its participant. At March 15, 1996,
the complex is 90% occupied.
Plantation Village Shopping Center. This shopping center
consists of approximately 57,000 square feet of rentable retail
space and is located in Lake Jackson, Texas. At March 15, 1996,
the center was 88% leased and was acquired through the merger with
First Continental.
Oak Creek Apartments. Oak Creek Apartments is a 212-unit
apartment complex in Dallas, Texas. Parkway acquired a 40%
interest in a mortgage note receivable collateralized by this
property through the merger with EB. The Company acquired title to
the property through foreclosure on September 5, 1995. The Company
is actively pursuing the purchase of the remaining 60% interest
from its two participants. At March 15, 1996, the complex is 93%
occupied.
At December 31, 1995, three land investments accounted for 88%
of the land held for sale. These three investments are
individually discussed below.
Bullard Road. This property consists of 80 acres of
undeveloped commercial land in New Orleans, Louisiana purchased in
December 1990.
Sugar Creek. Parkway owns one 15.4 acre and one 5.45 acre
commercial tract in Sugar Creek Center, a mixed use commercial
development comprised of landscaped tracts with streets and
utilities located in Sugar Land, Texas (southwest of Houston).
Sugar Land Triangle. At December 31, 1995, this property
consists of 4 tracts totalling 6 acres located in Sugar Land,
Texas. During 1995, the Company sold 21 acres of land at this
location for a net sales price of $5,719,000. The gain recognized
on these sales was $3,365,000. Parkway originally owned a 50%
undivided interest in this property which it acquired in the merger
with First Continental in May 1994. On September 2, 1994, the
Company purchased the remaining 50% interest in this property from
the Resolution Trust Corporation.
Mortgage Loans and Securities
In addition to its direct investments in real estate
properties, the Company presently owns an indirect interest in real
estate through its mortgage loan portfolio and its investments in
real estate company securities portfolio.
The Company intends to service its existing portfolio of 174
mortgage loans and intends to make new loans only to facilitate the
sale of its real estate. At December 31, 1995, the mortgage loan
portfolio had a carrying value of $11,161,000, a face value of
$29,222,000 and an estimated net realizable value of approximately
$21,000,000. As of December 31, 1995, 17 loans with a carrying
value of $172,000 and face value of $1,443,000 were non-earning.
The Company acquired 98 loans in the merger with EB, which were
recorded at $3,698,000. At the date of the merger, the loans had
a principal balance of $18,794,000 and an estimated net realizable
value of $13,945,000. Under the purchase method of accounting, the
loans were recorded at significantly less than the 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. One mortgage loan
accounts for 53% of the carrying value, 55% of the face value and
44% of the net realizable value of the Company's entire portfolio
of mortgage loans. This mortgage loan represents a second mortgage
on the Pembroke Office Park in Virginia Beach, Virginia. This
268,000 square foot office complex is 90% leased as of March 15,
1996. The Company acquired a 40% interest in this loan through the
EB merger. In December 1995, the Company acquired the remaining
60% interest in the loan from the Resolution Trust Company for
approximately $1,420,000 cash plus the assumption of 60% of the
first mortgage debt. The loan is currently earning 8.58% and is
scheduled to mature September 30, 1998. The loan is subject to
seven underlying first mortgages on individual buildings within the
complex with a balance as of December 31, 1995 of $4,669,000,
interest rates ranging from 8.75% to 9.625% and maturity dates
ranging from December 1, 2002 to February 1, 2009.
The Company's portfolio of real estate company securities at
December 31, 1995 consisted of a less than three percent ownership
in two real estate investment trusts ("REIT"). The Company owned
90,575 shares (2.14%) of EastGroup Properties and 105,000 shares
(1.17%) of another REIT at December 31, 1995. Both investments are
accounted for under the cost method of accounting with dividends
received recorded as income. The two investments in REITs are shown
in the financial statements at their combined market value at
December 31,1995 of $2,866,000.
Item 3. Legal Proceedings
The Company and its subsidiaries are, from time to time,
parties to litigation arising from the ordinary course of their
businesses. Management of Parkway does not believe that any such
litigation will materially effect the financial position or
operations of Parkway.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's common stock, $1.00 par value, is traded in the
over-the-counter market and is listed on the NASDAQ National Market
System under the symbol PKWY. The number of record holders of the
Company's common stock at March 15, 1996, was 4,739.
The following table sets forth, for the periods indicated, the
high and low bid prices per share of the Company's common stock as
reported by NASDAQ and the per share distributions paid during each
quarter.
Twelve Months Ended Twelve Months Ended
December 31, 1995 December 31, 1994
-------------------------- --------------------------
Distri- Distri-
Qtr. Ended High Low butions High Low butions
- ---------- -------- ------- ------- -------- ------- -------
March 31 $ 15.25 $ 13.00 $ .16 $ 13.50 $ 11.50 $ .15
June 30 17.25 14.13 .16 13.25 11.00 .15
Sept. 30 20.00 15.63 .17 14.50 12.38 .15
Dec. 31 20.50 18.50 .17 15.50 13.00 .16
------ ------
$ .66 $ .61
====== ======
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations
FINANCIAL CONDITION
- -------------------
(Comments are for the balance sheet dated December 31, 1995
compared to the balance sheet dated December 31, 1994.)
Total assets of The Parkway Company ("Parkway" or the
"Company") were $88,043,000 at December 31, 1995, an increase of
$26,981,000 from December 31, 1994. Liabilities increased
$10,008,000 to $38,832,000 during the same period. Book value per
share increased from $20.62 at December 31, 1994 to $24.51 at
December 31, 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 many of the balance sheet changes from
December 31, 1994 as compared to December 31, 1995. The increase
in net assets resulting 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 price of the net assets acquired 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
allocation of 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 generally selling at a
discount to book value and the stocks of companies acquired are
also generally 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 cash received exceeds 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. Therefore, 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 may be recorded, subject to certain limitations.
Management believes that Parkway is positioned to record earnings
without creating income tax liabilities by selling assets of the
acquired companies.
During the twelve months ended December 31, 1995, real estate
related investments increased a net $20,598,000. The gross
investment in office buildings increased $27,863,000 during this
time, largely due to the purchase of three Class A office building
investments located in Jackson, Mississippi and Atlanta, Georgia.
On July 31, 1995, the Company purchased 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 approximately 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 and 99% leased as of March 15, 1996. Jackson-based Mobile
Telecommunications Technologies Corporation (Mtel) occupies
approximately 149,515 square feet in the building under a ten-year
lease that expires in July 2005.
On October 2, 1995, the Company purchased the IBM Building in
Jackson, Mississippi from ICMPI (Jackson) Inc., a wholly-owned
subsidiary of Bedford Property Investors, Inc., for $6,500,000.
The IBM Building is a four-story brick office building with
approximately 90,000 net rentable square feet and surface parking
for approximately 362 automobiles. The building was 92% leased at
the purchase date and 94% leased as of March 15, 1996. In
addition, on December 19, 1995, the Company purchased the
Waterstone Building in Atlanta, Georgia from Massachusetts Mutual
Life Insurance Company for $8,031,000. The Waterstone Building
consists of approximately 92,000 net rentable square feet with 361
parking spaces and was 94% leased at the date of purchase. The
increase in office buildings due to the above three purchases
totalled $28,323,000 including capitalized expenses. Improvements
to office buildings totalled $188,000 during 1995.
Office buildings decreased due to the sale of Corporate
Square East located in Indianapolis, Indiana in October 1995. This
office center was sold for $700,000 with a net basis of $624,000
(including depreciation) and resulted in a gain of $58,000 with net
cash proceeds of $682,000.
The decrease in other operating properties of $2,541,000 from
December 31, 1994 includes the sale of one hotel, four townhomes
and four foreclosed homes with a combined basis net of depreciation
of $896,000 and the reclassification discussed below. The sales
mentioned above resulted in net gains of $579,000 with the Company
receiving net cash proceeds of $1,395,000 and a mortgage loan of
$80,000 which matures in August 2010 and has an interest rate of
7%.
At December 31, 1995, the Company reclassified its operating
properties, other than office buildings, to real estate held for
sale based on the adoption of an investment strategy that focuses
more specifically on office building investments by the Company's
Board of Directors. This investment strategy resulted in a
decision to sell operating properties that do not meet this product
type. Additions to other operating properties during the year
included the properties received in the merger with EB totalling
$307,000, improvements of $380,000, the foreclosure of one mortgage
loan in September 1995 on a 40% interest in the Oak Creek
Apartments and the purchase of an additional 44% interest in the
Coral Club Apartments received in the EB merger. These assets were
reclassed at December 31, 1995 to real estate held for sale in
accordance with the Board's decision.
Land held for sale decreased a net $2,928,000 during the
twelve months ended December 31, 1995. This net decrease includes
increases of $96,000 from real estate acquired in the EB merger
offset by decreases of $2,880,000 due to the sales of various real
estate properties and writedowns of real estate held for sale to
net realizable value of $179,000.
The land held for sale acquired through the EB merger consists
of six non-operating properties located in various cities in
Mississippi and are being actively marketed for sale. Three
mortgage loans were foreclosed during the twelve month period with
capitalized costs of $35,000. During 1995, the Company sold 36
lots, 99.53 acres of raw land, one foreclosed condominium and two
foreclosed homes which resulted in net gains of $4,115,000
recognized. The Company received net cash proceeds of $6,712,000
and two mortgage receivables totalling $330,000 from these sales.
Additional gains of $46,000 were deferred and will be recognized as
principal payments are received on the notes.
The increase in operating properties held for sale of
$3,990,000 from December 31, 1994 is due to the reclassification of
assets discussed previously.
Mortgage loans increased a net $7,558,000 during the twelve
months ended December 31, 1995. The Company acquired 98 loans in
the EB merger which were recorded at $3,698,000. At the date of
the merger, the loans had 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 twelve
months ended December 31, 1995, $1,874,000 was amortized on the
loans acquired in the EB merger and recorded as gain on mortgage
loans. The Company received pay offs of mortgage loans acquired in
the First Continental merger during the twelve months ended
December 31, 1995, recognizing a gain on mortgage loans of $161,000
related to those loans. Mortgage loans decreased $3,038,000 due to
principal payments received during the year and increased $91,000
due to the amortization of valuations on mortgage loans. The
Company also foreclosed on four mortgage loans with a net book
value of $443,000 during the twelve months ended December 31, 1995.
Mortgage loans increased during this time $410,000 due to loans
made to facilitate the sales of real estate.
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 had an outstanding
principal balance of $16,113,000 at the date of merger, of which
the Company's 40% interest was $6,445,000. The Company's 40%
interest in this loan was recorded at $1,044,000. The Virginia
Beach mortgage loan was 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 wraparound mortgages have an average rate of
9.14% and mature on various dates beginning in December 2002.
Effective December 1, 1995, the Company purchased the remaining 60%
interest in the Virginia Beach mortgage loan for $1,420,000 cash
plus the assumption of 60% of the outstanding balance of the
wraparound mortgages. This purchase increased mortgage loans by
$4,863,000 and increased the balance in mortgage notes payable on
wrap mortgages by $3,491,000.
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 common stock of EB at the date of the merger of $12,453,000
was eliminated through the recording of the merger. Parkway sold
the Union Planters shares, 22,400 shares of EastGroup and shares of
other investments in real estate company securities having a
combined basis of $15,785,000 during the twelve months ended
December 31, 1995. Total cash proceeds from the sales were
$20,100,000 and net gains of $4,314,000 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
twelve months ended December 31, 1995, the Company recorded equity
in earnings from its investment in EB through the date of merger of
$135,000, recorded net decreases in unrealized gains on securities
of $78,000 and purchased 105,000 shares of a real estate company
stock at a cost of $992,000.
The net decrease in real estate partnerships and corporate
joint venture for the twelve months ended December 31, 1995 was
$204,000. The Company recorded equity in earnings of real estate
partnerships and corporate joint venture of $116,000 and received
distributions of $318,000 during the period.
Interest and rents receivable and other assets increased
$659,000 during the twelve months ended December 31, 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 a net $4,154,000 reflecting
advances of $19,344,000 and payments of $23,008,000 under bank
lines of credit and payments of $490,000 on other bank debt. At
December 31, 1995, no amounts were outstanding on the Company's
lines of credit. The decrease in other bank debt of $490,000
includes scheduled principal payments of $225,000 and a prepayment
of $265,000 on a note scheduled to mature in June 1996.
Mortgage notes payable without recourse increased a net
$6,509,000 during the twelve months ended December 31, 1995.
Decreases to mortgage notes payable without recourse includes
scheduled principal payments of $118,000, the prepayment of
$305,000 on a note scheduled to mature in June 1996 and principal
reductions of $4,068,000 on the One Jackson Place mortgage. The
increase in mortgage notes payable without recourse is due to the
long-term financing placed on Mtel Centre' of $11,000,000 on
December 29, 1995. This note is a twelve year fully amortizing
loan with a fixed interest rate of 7.75% and maturing in January
2008.
The increase in mortgage notes payable on wrap mortgages of
$5,368,000 includes increases of $1,945,000 due to the merger with
EB, Inc., decreases of $68,000 due to principal payments made
subsequent to the merger and an increase of $3,491,000 due to the
purchase of the remaining 60% interest in the Virginia Beach loan
in December 1995 discussed previously.
Accounts payable and other liabilities increased $2,271,000
during the twelve months ended December 31, 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 $16,973,000 during the
comparison period as a result of the following:
Increase (decrease)
-------------------
(In thousands)
Net income $ 11,820
Dividends declared and paid (1,249)
Decrease in unrealized gains (78)
Shares issued in EB merger 6,370
Purchase/retirement of treasury shares (118)
Exercise of stock options 228
----------
$ 16,973
==========
RESULTS OF OPERATIONS
- ---------------------
(Comments are for the twelve months ended December 31, 1995
compared to the six months ended December 31, 1994 and twelve
months ended June 30, 1994.)
The Company changed is fiscal year end from a June 30 (fiscal
year) to December 31 as of December 31, 1994. As a result, the
comparative information given below includes the twelve months
ended December 31, 1995, the six months ended December 31, 1994 and
the twelve months ended June 30, 1994.
Operations of real estate properties are summarized below:
12 Months 6 Months 12 Months
Ended Ended Ended
12/31/95 12/31/94 06/30/94
--------- -------- ---------
(In thousands)
Income from real
estate properties...... $ 8,941 $ 3,683 $ 6,429
Real estate
operating expense...... (4,876) (1,951) (3,760)
------- ------- -------
4,065 1,732 2,669
Interest expense on
real estate properties. (2,230) (1,078) (2,392)
Depreciation and
amortization........... (1,331) (565) (1,022)
Minority interest....... 100 209 542
------- ------- -------
$ 604 $ 298 $ (203)
======= ======= =======
The increase in income from real estate properties and real
estate operating expense for the twelve months ended December 31,
1995 is primarily due to the July 1995 purchase of the Mtel Centre'
office complex, the October 1995 purchase of the IBM Building and
the December 1995 purchase of the Waterstone Building, offset by
the August 1995 sale of the American Inn North Motel and the
October 1995 sale of the Corporate Square East Office Building.
The effect on the Company's operations related to One Jackson
Place (which have been included in the numbers above) follows:
12 Months 6 Months 12 Months
Ended Ended Ended
12/31/95 12/31/94 06/30/94
--------- -------- ---------
(In thousands)
Revenues $ 3,789 $ 1,762 $ 3,517
Operating expenses (1,439) (678) (1,463)
Interest expense (1,931) (1,036) (2,072)
Depreciation (896) (459) (887)
Minority interest income 100 209 542
------- ------- -------
Net loss $ (377) $ (202) $ (363)
======= ======= =======
The effect on the Company's operations related to Mtel Centre'
(which have been included in the numbers above) follows:
12 Months 6 Months 12 Months
Ended Ended Ended
12/31/95 12/31/94 06/30/94
--------- -------- ---------
(In thousands)
Revenues $ 1,464 $ - $ -
Operating expenses (722) - -
Interest expense (252) - -
Depreciation (130) - -
------- ------- -------
Net income $ 360 $ - $ -
======= ======= =======
The increase in interest on mortgage loans for the twelve
months ending December 31, 1995 compared to the six months ending
December 31, 1994 and twelve months ending June 30, 1994 is due
primarily to interest income on loans received in the mergers with
EB, Inc. in April 1995 and FCREIT in May 1994. The interest on
mortgage loans recognized for the twelve months ending December 31,
1995 totalled $884,000 for the EB loans and $280,000 for the FCREIT
loans. Also contributing to this increase was interest recorded on
mortgage loans made during the last fiscal year in connection with
the sales of real estate.
The gain on real estate and mortgage loans for the twelve
months ended December 31, 1995 of $6,552,000 includes net gains on
the sale of real estate of $4,752,000, gains of $2,035,000 due to
payoffs and payments on mortgage loans acquired in the EB, Inc. and
FCREIT mergers and writeoffs on mortgage loans of $56,000. During
the twelve months ending December 31, 1995, the Company sold 36
lots, 99.53 acres of raw land, four townhomes, six foreclosed
houses and one foreclosed condominium having gains of $$4,752,000.
The Company also recorded writedowns to real estate of $179,000
reflecting declines in current market values as evidenced by
contracts, appraisals and other comparable sales.
The gain on securities of $4,314,000 for the twelve months
ended December 31, 1995 is due to the sale of 637,705 shares of
Union Planters stock for $19,244,000 with a basis of $15,069,000,
22,400 shares of EastGroup stock for $457,000 with a basis of
$317,000 and other investments in real estate company securities
for $399,000 with a basis of $399,000.
Gain on securities of $27,000 in the six months ended December
31, 1994, represent the sale of an investment in a real estate
investment trust for $340,000 with a net basis of $313,000. The
gain of securities of $579,000 in the twelve moths ended June 30,
1994 represented the sale of 58,525 shares of EastGroup for
$1,152,000 with a gain of $337,000 and other stock investments for
$504,000 with gains of $242,000.
Equity in earnings of real estate companies consists of the
following:
12 Months 6 Months 12 Months
Ended Ended Ended
12/31/95 12/31/94 06/30/94
--------- -------- ---------
(In thousands)
EB, Inc. $ 135 $ 618 $ 388
EastGroup - 77 443
FCREIT - - (9)
Congress Street - (14) (67)
-------- ------- -------
$ 135 $ 681 $ 755
======== ======= =======
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% at that date and the lack of control over its operations.
Since May of 1994, the Company has completed three mergers
with prior equity method investees: 1) First Continental Real
Estate Investment Trust (May 1994); 2) Congress Street
Properties, Inc. (November 1994) and; 3) EB, Inc. (April 1995).
These mergers also account for the decrease in equity in earnings
of real estate companies.
Equity in operations of real estate partnerships and corporate
joint venture consists of the following:
12 Months 6 Months 12 Months
Ended Ended Ended
12/31/95 12/31/94 06/30/94
--------- -------- ---------
(In thousands)
Golf Properties, Inc. $ 80 $ 166 $ 233
Wink/Parkway Partnership 36 29 -
GV Partners - - 6
------- ------- -------
$ 116 $ 195 $ 239
======= ======= =======
Dividend income for the twelve months ended December 31, 1995
totalled $601,000. This increase is due in part to the Union
Planters Corporation dividends received subsequent to the merger
with EB, Inc. on April 27, 1995 of $353,000. The increase in
dividend income is also due to the change in accounting for
EastGroup Properties from the equity method of accounting to the
cost method effective January 1, 1995. All dividends received from
EastGroup Properties have been accounted for as dividend income in
the twelve months ending December 31, 1995 and totalled $189,000.
Other increases in dividend income are due to new investments in
dividend-paying real estate companies.
The gain on sale of real estate partnership of $280,000 during
the twelve moths ended June 30, 1994 represents the sale of the
Company's 22% ivestment in a partnership to the 78% partner,
EastGroup Properties. The sales price was $275,000 in cash plus
the assumption of 22% of the outstanding mortgage and was based on
an appraisal by an independent third party.
Interest expense of $156,000 for the twelve months ending
December 31, 1995 is due to borrowings under bank lines of credit.
Interest expense on wrap mortgages of $135,000 for the twelve
months ending December 31, 1995 represents interest on the debt
received in the merger with EB, Inc.
The Company recorded management company income of $1,041,000
and management company expenses of $804,000 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 twelve months
ending December 31, 1995. The increase in other expenses of
$1,637,000 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,
Congress Street Properties, Inc. and EB, Inc.
Total tax expense of $82,000 for the twelve months ending
December 31, 1995 represents alternative minimum tax of $70,000 and
state income taxes of $12,000.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Funds provided by operations, mortgage loan payments, bank
borrowings, proceeds from the sale of investments in real estate
and financial service securities, sales of real estate properties
and proceeds from long term financing were the primary sources of
funds for the Company during the twelve months ended December 31,
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, new real estate investments and the payment of
operating expenses. At December 31, 1995, the Company had
available $6,044,000 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 from the merger. Parkway issued 428,955
shares of common stock to EB shareholders.
At December 31, 1995, the Company had one line of credit with
Deposit Guaranty National Bank at an amount equal to sixty-five
(65%) of the quoted market value of certain pledged securities, not
to exceed $10,000,000 (the "$10,000,000 line of credit"). 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 are due monthly with a fixed maturity on September 30, 1996.
At December 31, 1995, no amount was 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 Company substantially 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 had the
same terms as the $10,000,000 line of credit with the exception of
the maturity date, which was August 15, 1995. On September 19,
1995, the Company received funding of $10,000,000 on a term loan
from Deposit Guaranty National Bank which is secured by the
investment in Mtel Centre'. The note accrued interest at the
bank's prime rate, with interest payments due monthly and principal
due upon maturity on February 5, 1997. Proceeds from the term loan
were used to repay amounts outstanding under the two lines of
credit. The Company received funding on December 29, 1995 from a
life insurance company for $11,000,000 non-recourse, 12-year, fully
amortizing financing on the building at a rate of 7.75%. Cash
flows from the operation of the building are expected to fully
cover debt service on the long-term financing. The proceeds were
used to repay the $10,000,000 term loan to Deposit Guaranty.
On October 2, 1995, the Company purchased the IBM Building in
Jackson, Mississippi from ICMPI (Jackson), Inc., a wholly owned
subsidiary of Bedford Property Investors, Inc., an unrelated party,
for $6,500,000. The IBM Building is a four-story brick office
building with approximately 90,000 square feet of rentable area and
surface parking for approximately 362 automobiles. The $6,500,000
purchase price was funded with existing cash reserves. Cash
proceeds from the $10,000,000 term loan discussed previously
contributed to the cash reserves used to purchase the IBM Building.
In February 1996, the Company received the funding of a $4,800,000
non-recourse, 15-year, fully amortizing loan from a life insurance
company on the building at a rate of 7.70%.
On October 10, 1995, the partnership that owns One Jackson
Place made a principal payment of $4,004,000 on the One Jackson
Place office building mortgage note payable without recourse. This
payment was made in connection with the refinancing of this loan
with New York Life which was completed in January 1996. The terms
of the new loan agreement were implemented October 10, 1995. The
15-year, $18,400,000 non-recourse loan calls for monthly principal
and interest payments of $152,000 based on a 20-year amortization
schedule, interest at 7.85% and maturity on October 10, 2010.
Prior to the refinancing, the $22,404,000 mortgage note had an
interest rate of 9.25%, required monthly interest payments of
$173,000 through April 1996 and matured in April 1999.
On March 7, 1996, the Company purchased the One Park 10 Plaza
Building in Houston, Texas from an insurance company for
$6,700,000. One Park 10 Plaza is an eight-story Class A building
with 609 parking spaces. Funds received from the financing of the
IBM Building, along with existing cash reserves, were used to
purchase the building.
Subsequent to year-end, the Company acquired a $20,000,000
acquisition line of credit with Deposit Guaranty National Bank and
replaced the $10,000,000 line of credit discussed previously with
a $5,000,000 line of credit. The Company plans to continue
actively pursuing the purchase of office building investments that
meet the Company's investment criteria and intends to use these
lines of credit to fund those acquisitions. Both lines of credit
have an interest rate equal to the 90-day LIBOR rate plus 2.35%
(adjusted quarterly), interest due monthly and commitment fees of
.125% due upon acceptance. In addition, both lines of credit have
fees of .125% on the unused balances due quarterly. The
acquisition line of credit matures June 30, 1998 and the $5,000,000
line of credit matures June 30, 1997.
As previously discussed, the Company plans to continue
actively pursuing the purchase of office building investments. In
doing so, funding on the acquisition line of credit will be
necessary in the short-term. The Company also intends to continue
seeking long-term financing on new investments. Proceeds from
long-term financing will be used to repay the acquisition line
debt.
Item 7. Consolidated Financial Statements
Index to Consolidated Financial Statements
--------------------------------------------
Page
----
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . .25
Consolidated Balance Sheets--
as of December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . .26
Consolidated Statements of Income--
for the twelve months ended December 31, 1995,
the six months ended December 31, 1994
and the twelve months ended June 30, 1994. . . . . . . . . . . . . .27
Consolidated Statements of Cash Flows--
for the twelve months ended December 31, 1995,
the six months ended December 31, 1994
and the twelve months ended June 30, 1994. . . . . . . . . . . . . .28
Consolidated Statements of Shareholders' Equity--
for the twelve months ended December 31, 1995,
the six months ended December 31, 1994
and the twelve months ended June 30, 1994. . . . . . . . . . . . . .30
Notes to Consolidated Financial Statements . . . . . . . . . . . . . .32
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
The Parkway Company
We have audited the accompanying consolidated balance sheets of
The Parkway Company and subsidiaries as of December 31, 1995 and
1994 and the related consolidated statements of income,
shareholders' equity, and cash flows for the years ended December
31, 1995 and June 30, 1994 and the six months ended December 31,
1994. 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. The financial
statements of EB, Inc. and EastGroup Properties (investees in which
the Company had a 52.3%, and 2.7% interest at December 31, 1994,
respectively), have been audited by other auditors whose reports
have been furnished to us; our opinion on the consolidated
financial statements for the six months ended December 31, 1994 and
the year ended June 30, 1994, insofar as it relates to data
included for EB, Inc. for its years ended December 31, 1994 and
1993; and EastGroup Properties for its years ended December 31,
1994 and 1993; is based solely on the reports of the other
auditors.
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 and
the reports of other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the reports of other
auditors, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of The Parkway Company and subsidiaries at December 31,
1995 and 1994, and the consolidated results of their operations and
their cash flows for the years ended December 31, 1995 and June 30,
1994 and the six months ended December 31, 1994 in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
---------------------------
Ernst & Young LLP
Jackson, Mississippi
March 25, 1996
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31
----------------------
1995 1994
---------- ---------
Assets
Real estate related investments
Office buildings....................... $ 59,406 $ 31,543
Other operating properties............. - 2,541
Accumulated depreciation............... (7,122) (6,177)
-------- --------
52,284 27,907
Real estate held for sale
Land................................. 8,441 11,369
Operating properties................. 3,990 -
Mortgage loans......................... 11,161 3,603
Real estate securities................. 2,866 15,061
Real estate partnerships and
corporate joint venture.............. 685 889
-------- --------
79,427 58,829
Interest and rents receivable and other
assets................................. 2,572 1,913
Cash and cash equivalents................ 6,044 320
-------- --------
$ 88,043 $ 61,062
======== ========
Liabilities
Notes payable to banks................... $ - $ 4,154
Mortgage notes payable without recourse.. 29,336 22,827
Mortgage notes payable on wrap mortgages. 5,368 -
Accounts payable and other liabilities... 3,834 1,563
Deferred gain............................ 294 280
-------- --------
38,832 28,824
-------- --------
Shareholders' Equity
Common stock, $1.00 par value, 10,000,000
shares authorized, 2,007,658 and
1,563,308 shares issued in 1995
and 1994, respectively................. 2,008 1,563
Additional paid-in capital............... 32,882 26,847
Retained earnings........................ 13,729 3,158
-------- --------
48,619 31,568
Unrealized gain on securities............ 592 670
-------- --------
49,211 32,238
-------- --------
$ 88,043 $ 61,062
======== ========
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
12 Months 6 Months 12 Months
Ended Ended Ended
12/31/95 12/31/94 06/30/94
--------- -------- ---------
(In thousands,
except per share data)
Revenues
Income from real estate
properties........................$ 8,941 $ 3,683 $ 6,429
Interest on mortgage loans.......... 1,421 283 265
Management company income........... 1,041 - -
Equity in earnings
Real estate companies............. 135 681 755
Real estate partnerships and
corporate joint venture......... 116 195 239
Interest on investments............. 167 18 235
Dividend income..................... 601 10 7
Deferred gains and other income..... 345 36 331
Gain (loss) on real estate
and mortgage loans................ 6,552 529 (113)
Gain on securities.................. 4,314 27 579
Gain on sale of real estate
partnership....................... - - 280
------- ------- -------
23,633 5,462 9,007
------- ------- -------
Expenses
Real estate owned
Operating expense................. 4,876 1,951 3,760
Interest expense.................. 2,230 1,078 2,392
Depreciation and amortization..... 1,331 565 1,022
Minority interest................. (100) (209) (542)
Interest expense
Notes payable to banks............ 156 140 -
Notes payable on wrap mortgages... 135 - -
Management company expenses......... 804 - -
Shared general and
administrative expenses........... - 270 502
Other expenses...................... 2,299 662 569
------- ------- -------
11,731 4,457 7,703
------- ------- -------
Income before income taxes.......... 11,902 1,005 1,304
Income tax provision................ 82 - 1
------- ------- -------
Net income..........................$11,820 $ 1,005 $ 1,303
======= ======= =======
Net income per share................$ 6.36 $ .65 $ 1.00
======= ======= =======
Weighted average shares outstanding. 1,858 1,544 1,300
======= ======= =======
Dividends paid per share............$ .66 $ .31 $ .65
======= ======= =======
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
12 Months 6 Months 12 Months
Ended Ended Ended
12/31/95 12/31/94 06/30/94
--------- --------- ---------
(In thousands)
Operating Activities
Net income........................$ 11,820 $ 1,005 $ 1,303
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Equity in earnings.............. (251) (876) (994)
Dividends received.............. 76 250 332
Distributions from
operations of real estate
partnerships and corporate
joint venture................. 318 327 543
Depreciation and amortization... 1,331 565 1,022
Amortization of discounts,
deferred gains and other.. (141) (56) (318)
Gain on sale of real estate
partnership................... - - (280)
(Gain) loss on real estate
and mortgage loans............ (6,552) (529) 113
Gain on securities.............. (4,314) (27) (579)
Minority interest depreciation.. (206) (233) (535)
Changes in operating assets
and liabilities:
Decrease (increase) in
receivables................. (194) (277) 46
Increase in accounts payable
and accrued expenses........ 768 763 668
-------- -------- --------
Cash provided by operating
activities.................... 2,655 912 1,321
-------- -------- --------
Investing Activities
Payments received on mortgage
loans........................... 3,038 310 269
Purchases of investments in
real estate companies........... (992) (399) (7,468)
Purchase of real estate
properties...................... (29,568) (1,502) (66)
Purchase of mortgage loans........ (1,420) - (907)
Proceeds from sale of real
estate partnership owned........ - - 296
Release of restricted cash........ - - 165
Proceeds from sale of real
estate owned.................... 8,789 1,223 100
Proceeds from sale of investments
in real estate companies........ 20,100 340 1,656
Improvements to real estate
owned........................... (728) (190) (380)
Purchase of real estate
partnership interest............ - - (291)
Proceeds from merger of
EB, Inc......................... 2,702 - -
Proceeds from merger of First
Continental (net)............... - - 25
Proceeds from merger of
Congress Street (net)........... - (48) -
Payments (advances) on notes
receivable from affiliates...... - 49 135
-------- -------- --------
Cash provided by (used in)
investing activities............ 1,921 (217) (6,466)
-------- -------- --------
Financing Activities
Principal payments on
mortgage notes payable.......... (4,559) (102) (867)
Proceeds from borrowings on
mortgage notes payable.......... 11,000 - -
Proceeds from bank borrowings..... 19,344 3,714 6,296
Principal payments on bank
borrowings...................... (23,498) (3,191) (5,517)
Payments on note payable to
affiliate....................... - - (2,274)
Stock options exercised........... 228 (535) (4)
Dividends paid.................... (1,249) (478) (819)
Purchase and retirement
of treasury shares.............. (118) - -
-------- -------- --------
Cash provided by (used in)
financing activities............ 1,148 (592) (3,185)
-------- -------- --------
Increase (decrease) in cash....... 5,724 103 (8,330)
Cash and cash equivalents at
beginning of period............. 320 217 8,547
-------- -------- --------
Cash and cash equivalents at
end of period...................$ 6,044 $ 320 $ 217
======== ======== ========
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Additional Unrealized
Common Paid-In Retained Treasury Gain (Loss) On
Stock Capital Earnings Shares Securities Total
------- ---------- --------- --------- -------------- --------
Balance,
<S> <C> <C> <C> <C> <C> <C>
June 30, 1993. $ 2,333 $ 39,271 $ 1,899 $(16,320) $ - $ 27,183
Net income.... - - 1,303 - - 1,303
Cash dividends
declared
($.60 per
share)...... - - (799) - - (799)
Retirement of
treasury
shares...... (1,073) (15,247) - 16,320 - -
Merger with
First
Continental
Real Estate
Investment
Trust....... 283 3,110 - - - 3,393
Unrealized
gain on
securities.. - - - - 652 652
Stock options
exercised... - - (3) - - (3)
------- -------- -------- -------- --------- --------
Balance,
June 30,1994.. 1,543 27,134 2,400 - 652 31,729
Net income.... - - 1,005 - - 1,005
Cash dividends
declared
($.16 per
share)...... - - (247) - - (247)
Shares issued
in merger
with
Congress
Street...... 561 7,294 - - - 7,855
Shares retired
in merger
with
Congress
Street...... (567) (7,372) - - - (7,939)
Unrealized
gain on
securities.. - - - - 18 18
Stock options
exercised... 23 (255) - - - (232)
Shares issued
in payment
of incentive
compensation 3 46 - - - 49
------- -------- -------- -------- --------- --------
Balance,
Dec. 31, 1994. 1,563 26,847 3,158 - 670 32,238
Net income.... - - 11,820 - - 11,820
Cash dividends
declared
($.66 per
share)...... - - (1,249) - - (1,249)
Shares issued
in EB merger 429 5,941 - - - 6,370
Retirement of
treasury
shares...... (6) (112) - - - (118)
Unrealized
gain on
securities.. - - - - (78) (78)
Stock options
exercised... 22 206 - - - 228
------- -------- -------- -------- --------- --------
Balance,
Dec. 31, 1995 $ 2,008 $ 32,882 $ 13,729 $ - $ 592 $ 49,211
======= ======== ======== ======== ========= ========
</TABLE>
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - Summary of Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include the accounts of
The Parkway Company ("Parkway" or "the Company"); Sugar Creek
Center Corporation, Parkway Texas Corporation, Parkway Lamar, Inc.,
Parkway Ridgewood, Inc., Parkway Atlanta, Inc., EB, Inc. and
Parkway Congress Corporation and its wholly-owned subsidiaries; and
One Place Partners (a Mississippi general partnership), owned 100%
by Parkway and Parkway Congress Corporation. All significant
intercompany transactions and accounts have been eliminated.
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Real estate properties
Gains from sales of real estate are recognized based on the
provisions of Statement of Financial Accounting Standards No. 66
which require upon closing, the transfer of rights of ownership to
the purchaser, receipt from the purchaser of an adequate cash down
payment and adequate continuing investment by the purchaser. If
the requirements for recognizing gains have not been met, the sale
and related costs are recorded, but the gain is deferred and
recognized generally on the installment method of accounting as
collections are received.
Real estate properties are carried at cost less accumulated
depreciation. Cost includes the carrying amount of the Company's
investment plus any additional consideration paid, liabilities
assumed, costs of securing title (not to exceed fair market value
in the aggregate) and improvements made subsequent to acquisition.
Depreciation of buildings is computed using the straight line
method over their estimated useful lives of 40 years. Depreciation
of tenant improvements including personal property is computed
using the straight line method over the term of the lease involved.
Maintenance and repair expenses are charged to expense as incurred,
while improvements are capitalized and depreciated in accordance
with the useful lives outlined above. Geographically, the
Company's investments are concentrated in the Southeast and
Southwest United States, with an emphasis in the states of
Mississippi and Texas.
Revenue from real estate rentals is recognized and accrued as
earned on a pro rata basis over the term of the lease.
Real estate held for sale is carried at the lower of fair
value minus estimated costs to sell or cost. Operating real estate
held for investment is stated at the lower of cost or net
realizable value.
Management fee income and leasing and brokerage commissions
are recorded in income as earned. Such fees on Company-owned
properties are eliminated in consolidation.
Allowance for possible losses
The Company provides an allowance for possible losses on real
estate and mortgage loan investments for financial reporting
purposes which, in the opinion of Management, is adequate to absorb
possible losses determined in accordance with generally accepted
accounting principles. The adequacy of the allowance or the need
for an allowance is evaluated by Management quarterly based on a
review of investments and properties on an individual basis.
Beginning in 1995, the Company adopted Financial Accounting
Standards Board ("FASB") Statement No. 114, "Accounting by
Creditors for Impairment of a Loan" and FASB Statement No. 118,
"Accounting by Creditors of Impairment of a Loan - Income
Recognition and Disclosures." Under Statement 114, the 1995
allowance for credit losses related to loans that are identified
for evaluation in accordance with Statement 114 is based on
discounted cash flows using the loan's initial effective interest
rate or the fair value of the collateral for certain collateral
dependent loans. Prior to 1995, the allowance for credit losses
related to these loans was based on undiscounted cash flows or the
fair value of the collateral for collateral dependent loans.
If the estimated net realizable value of an underlying
property or mortgage loan is less than the carrying amount of the
Company's investments, the difference is included in the allowance.
Although the assumptions and projections upon which estimates of
net realizable value or fair market value are based reflect the
Company's best judgment, there can be no assurance that the
projected events will actually occur. Therefore, adjustments to
the allowance for possible losses may be required in subsequent
periods.
Investments in real estate companies, partnerships and corporate
joint venture
The equity method of accounting is used to account for
investments where the Company has the ability to exercise
significant influence over the operating and financial policies of
the investee but does not have majority voting control. The
Company shares voting control in Golf Properties, Inc. ("GPI") with
a joint venture partner and, accordingly, accounts for its
investment in this corporate joint venture using the equity
method. The Company also shares voting control in the Wink-Parkway
Partnership with a partner and, accordingly, accounts for its
investment using the equity method. All other marketable equity
securities are classified as "available for sale" and are carried
at fair market value with unrealized gains or losses reflected as
a separate component of shareholders' equity. Loss in value of
equity investments that is considered to be an other than temporary
decline is charged to operations.
Interest income recognition
Interest is generally accrued monthly based on the outstanding
loan balances. Recognition of interest income is discontinued
whenever, in the opinion of management, the collectability of such
income becomes doubtful. After a loan is classified as non-
earning, interest is recognized as income when received in cash.
Amortization
Debt origination costs are deferred and amortized using the
straight-line method over the term of the loan. Leasing
commissions are deferred and amortized using the straight-line
method over the term of the respective lease.
Stock based compensation
The Company grants stock options for a fixed number of shares
to employees with an exercise price equal to or above the fair
value of the shares at the date of grant. The Company accounts for
stock option grants in accordance with APB Opinion No. 25,
"Accounting for Stock Issued to Employees", and, accordingly,
recognizes no compensation expense for the stock option grants.
Income taxes
Income taxes have been provided using the liability method
with FASB Statement No. 109, "Accounting for Income Taxes".
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 and tax credit carryforwards.
Reclassifications
Certain reclassifications have been made in the June 30, 1994
and December 31, 1994 financial statements to conform to the
December 31, 1995 classifications.
Cash equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
Business segment
The Company's operations are in the real estate industry.
Change of fiscal year end
The Company changed its fiscal year end from a June 30 (fiscal
year) to December 31 as of December 31, 1994.
Impact of recently issued accounting standards
In March 1995, the FASB issued Statement No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of", which requires impairment losses to be recorded
on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to
be generated by those assets are less than the assets' carrying
amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company will adopt
Statement 121 in the first quarter of 1996 and, based on current
circumstances, does not believe the effect of adoption will be
material.
NOTE B - Investments in Real Estate Companies, Real Estate
Partnerships and Corporate Joint Venture
On April 27, 1995, the merger of Parkway Acquisition
Corporation ("PAC"), a wholly-owned subsidiary of Parkway, with and
into EB, Inc. ("EB") was completed. The increase in net assets
resulting from the merger was as follows (in thousands):
Union Planters Corporation stock
(637,705 shares)............................ $15,069
Cash.......................................... 8,603
Mortgages..................................... 3,698
Operating real estate properties.............. 307
Real estate held for sale..................... 96
Interest receivable and other assets.......... 392
Mortgage notes payable on wrap mortgages...... (1,945)
Accounts payable and other liabilities........ (1,496)
-------
$24,724
=======
The Company's purchase price of the net assets acquired
consisted of (in thousands):
Common stock issued (428,955 shares) $ 6,370
Cash 5,534
Cash in lieu of fractional shares 14
Merger expenses 353
Investment in EB 12,453
-------
$24,724
=======
The Company's investment in the stock of EB of $12,453,000 at
the date of the merger was eliminated through the recording of the
merger. Accordingly, the Company's consolidated results of
operations include EB from the date of acquisition. The Company
recorded equity in earnings of EB of $135,000 for the four months
ended April 27, 1995, $618,000 for the six months ended December
31, 1994 and $388,000 for the twelve months ended June 30, 1994.
The following unaudited pro forma results reflect the increases to
the Company's operations assuming the EB acquisition took place at
the beginning of the periods presented (in thousands):
12 Months 6 Months 12 Months
Ended Ended Ended
12/31/95 12/31/94 06/30/94
--------- -------- ---------
Revenues $ 473 $ 845 $1,993
Net income 201 49 620
Net income per share $ .10 $ .02 $ .36
The pro forma results do not purport to be indicative of
actual results had the acquisition been made at the beginning of
the respective periods, or of results which may occur in the
future. Revenues for EB for the period April 27, 1995 through
December 31, 1995 totalled $3,625,000. During the period from
April 27, 1995 through December 31, 1995, the Company sold its
investment in Union Planters Corporation for $19,244,000 and
recognized a gain of $4,175,000.
At December 31, 1995, the Company's investment in real estate
company securities consisted of a less than three percent ownership
in two real estate investment trusts ("REIT"). The Company owns
90,575 shares (2.14%) of EastGroup Properties and 105,000 shares
(1.17%) of another REIT. Both investments are accounted for under
the cost method of accounting with dividends received recorded as
income. These investments are shown in the financial statements at
their combined market value at December 31, 1995 of $2,866,000,
which includes net unrealized gain of $592,000.
Investments in a corporate joint venture and real estate
partnership at December 31, 1995 and 1994, were as follows:
December 31
Ownership -------------------
Percentage 1995 1994
---------- -------- --------
(In thousands)
Corporate joint venture -
Golf Properties, Inc.
(GPI); Lot sales
in Highlands, NC......... 65.45% $ 368 $ 570
Partnership -
Wink-Parkway Partnership;
owns a 100% interest in
an office building in
New Orleans, LA.......... 50.00% 317 319
------ ------
$ 685 $ 889
====== ======
The investment in GPI, which is accounted for by the equity
method, was purchased at an amount different from the Company's pro
rata share of the investee's book value. At December 31, 1995, the
equity in excess of cost was $173,000. This amount has been
assigned to GPI's principal net assets and is being recognized in
operations as the assets are depreciated or sold. The equity in
earnings recorded by the Company includes $22,000, $51,000 and
$65,000 amortization of equity in excess of cost in the twelve
months ended December 31, 1995,the six months ended December 31,
1994 and the twelve months ended June 30, 1994, respectively.
The Company owns a 73.125% effective interest in One Jackson
Place, an office building, through its partnership interest in One
Place Partners. The Company has majority voting control over the
building and has consequently consolidated One Place Partners and
its subsidiaries in its consolidated financial statements since
March 1990. The Company records a reduction in real estate owned
expenses for the minority owner's interest in the losses of One
Jackson Place.
NOTE C - Investments in Office Buildings and Real Estate Held for
Sale
The Company's investment in office buildings and real estate
held for sale at December 31, 1995 includes seven office buildings,
one retail center, two apartment complexes, 21 townhomes, patio
homes and condominiums, approximately 433 acres of land and 7
residential lots. Office buildings represent 59% of total assets
at December 31, 1995 and are listed by location and carrying value
below (in thousands):
Jackson, Mississippi (3 locations) $ 39,977
Atlanta, Georgia 8,052
Indianapolis, Indiana 2,377
Columbus, Ohio 1,447
Houston, Texas 431
--------
$ 52,284
========
One tenant in the Jackson, Mississippi market leases
approximately 177,000 square feet out of a total 568,000 square
feet owned in Jackson. The rental income on an annual basis from
this tenant is approximately $2,400,000.
The location and carrying value of the real estate held for
sale are as follows (in thousands):
Orlando, Florida Apartment Complex $ 1,596
(84% interest)
Dallas, Texas Apartment Complex 519
(40% interest)
Lake Jackson, Texas Retail Center 1,415
Houston, Texas Townhomes/Condominiums 460
Sugar Land, Texas Acreage 3,910
Katy, Texas Acreage 477
New Orleans, Louisiana Acreage 3,799
Various Acreage/Lots 255
-------
$12,431
=======
The Company classified certain of its operating real estate
properties that are not office buildings, as held for sale as of
December 31, 1995. The properties have a carrying value of
$3,990,000, net of accumulated depreciation of $150,000 as of that
date. At December 31, 1995, there was no valuation allowance
related to real estate held for sale. Management believes that
current market conditions are favorable to allow them to actively
market the properties at prices they consider appropriate.
The following is a schedule by year of future approximate
minimum rental receipts under noncancelable leases for the office
buildings as of December 31, 1995:
Calendar Year Amount
------------- --------------
(In thousands)
1996 $ 10,286
1997 7,714
1998 6,193
1999 4,432
2000 3,648
Subsequently 10,256
--------
$ 42,529
========
NOTE D - Mortgage Loans
The unpaid balances of mortgage loans, summarized by type of
loan, are as follows:
Type of Loan December 31
--------------------
1995 1994
-------- --------
(In thousands)
First mortgages secured by:
Residential real estate... $ 1,792 $ 1,783
Motels.................... 1,593 1,001
Commercial real estate.... 218 423
Apartments................ 755 -
Land...................... 872 303
Other..................... 28 93
-------- --------
5,258 3,603
Second mortgage secured by:
Office buildings.......... 5,903 -
-------- --------
Total carrying amount of
mortgage loans............ $ 11,161 $ 3,603
======== ========
At December 31, 1995, the balance of non-earning mortgage
loans was $172,000. All loans were earning (performing) loans at
December 31, 1994. There was no allowance for loss set up at
December 31, 1995 or 1994.
NOTE E - Notes Payable
A summary of notes payable to banks is as follows:
December 31
1995 1994
-------- --------
(In thousands)
Notes Payable to Banks:
Note payable to a bank paid
during 1995..................... $ - $ 490
$10,000,000 line of credit with
bank at prime or Libor plus
1.85% maturing September 1996
secured by securities with a
carrying value of $932,000...... - 2,664
$1,000,000 line of credit with
bank at prime maturing
April 1996; secured by
securities with a carrying
value of $1,507,000............. - 1,000
------- -------
$ - $ 4,154
======= =======
The $10,000,000 line of credit and the $1,000,000 line of
credit are limited to sixty-five percent (65%) and fifty percent
(50%) of the quoted market value of the securities pledged as
collateral, respectively.
<PAGE>
A summary of mortgage notes payable, which are non-recourse to
the Company, is as follows:
December 31
1995 1994
-------- --------
(In thousands)
Mortgage Notes Payable:
Note payable to an insurance
company at 7.85%; due in monthly
payments of $152,000, maturing
in November 2010; secured by
office buildings with a carrying
value of $19,739,000............ $18,336 $22,404
Note payable to an insurance
company at 7.75%; due in monthly
payments of $118,000, maturing
in January 2008; secured by
office buildings with a carrying
value of $13,667,000............ 11,000 -
Note payable to an insurance
company paid during 1995........ - 423
------- -------
$29,336 $22,827
======= =======
December 31
1995 1994
-------- --------
(In thousands)
Mortgage Notes Payable on Wrap Mortgages:
Notes payable to insurance
companies ranging from 8.75%
to 9.625%; due in
total monthly payments of
$65,000, and maturity dates
ranging from December 2002
to February 2009; secured
by office buildings with a
carrying value of $5,903,000.... $ 5,368 $ -
======= =======
The principal maturities of all notes payable for the
succeeding five years and subsequently as of December 31, 1995 are
as follows:
Calendar Year Amount
------------- --------
(In thousands)
1996 $ 1,213
1997 1,366
1998 1,480
1999 1,605
2000 1,740
Subsequently 27,300
--------
$ 34,704
========
NOTE F - Income Taxes
The components of the provision for income taxes are as
follows:
12 Months 6 Months 12 Months
Ended Ended Ended
12/31/95 12/31/94 06/30/94
--------- -------- ---------
(In thousands)
Current:
Federal $70 $ - $ -
State 12 - -
--- --- ---
82 - 1
Deferred - - -
--- --- ---
$82 $ - $ -
=== === ===
The tax effects of significant items comprising the Company's
net deferred tax asset are as follows (in thousands):
December 31
1995 1994
-------- --------
Deferred tax assets:
Differences in book and tax
basis of assets....................... $ 1,613 $ 3,385
Operating loss carryforwards............ 3,180 3,625
------- -------
4,793 7,010
Valuation allowance..................... (4,793) (7,010)
------- -------
Net deferred tax asset.................. $ - $ -
======= =======
The Company's income differs for income tax and financial
reporting purposes principally because (1) the timing of the
deduction for the provision for possible losses or writedowns, (2)
the timing of the recognition of gains or losses from the sale of
investments, (3) the timing of the recognition of income or losses
from partnerships, (4) the equity in undistributed earnings of real
estate companies differing from dividends received from those
investments, (5) real estate owned has a different basis for tax
and financial reporting purposes, producing different gains upon
disposition, and (6) mortgage loans have a different basis for tax
and financial reporting purposes, producing different gains upon
collection of these receivables. At December 31, 1995, there was
no deferred federal or state income tax liability due to the
availability of net operating loss carryforwards.
An additional $23,500,000 of temporary differences related to
assets acquired in recent mergers with other companies will be
limited during the five year period commencing with the merger
dates, and therefore have not been included in the deferred tax
asset calculation. After the five year periods, the temporary
differences that exist on assets remaining at that time will be
unrestricted and will be included in the deferred tax assets of the
Company.
The net decrease in the total valuation allowance for the
twelve months ended December 31, 1995 was $2,217,000 and relates
primarily to differences in book and tax basis of securities and
real estate sold and mortgage loans collected. At December 31,
1995 and 1994, the net deferred tax asset is entirely offset by a
valuation allowance because realization of the net deferred tax
asset is not assured.
The following is a reconciliation between the amount reported
for income taxes and the amount computed by multiplying income
before income tax by the statutory federal tax rate (in thousands).
12 Months 6 Months 12 Months
Ended Ended Ended
12/31/95 12/31/94 06/30/94
--------- --------- ---------
Income tax expense
based on statutory
income tax rate........ $ 4,066 $ 342 $ 443
Operating loss carry-
forward for financial
reporting purposes..... (3,993) (139) (353)
Equity in earnings of
other real estate
companies............. (73) (203) (90)
Federal alternative
minimum tax........... 70 - -
State income tax expense 12 - 1
------- ------- -----
Income tax expense...... $ 82 $ - $ 1
======= ======= =====
At December 31, 1995, the Company has available net operating
loss carryforwards for federal income tax purposes (June 30 fiscal
year end) of approximately $9,352,000 which expire as follows for
fiscal years ended June 30:
Fiscal Year Amount
----------- ------
(in thousands)
1996 $1,510
1998 760
1999 14
2000 57
2001 12
2002 8
2003 300
2004 47
2007 1,052
2008 3,124
2009 1,152
2011 1,316
------
$9,352
======
In addition to these net operating losses, two subsidiaries
have net operating losses of approximately $17,282,000 and
$6,244,000, respectively, at the time of their mergers with the
Company. The Company's utilization of these losses will be limited
to a maximum of approximately $280,000 and $491,000, respectively,
in any given year, subject to increases for built-in gains
recognized, therefore, a majority of these loss carryforwards will
be unavailable for use by the Company. Also, EB had net operating
losses of approximately $1,363,000 at the time of its merger with
the Company. The Company's utilization of these losses will be
limited to a maximum of $803,000 in any given year. These loss
carryforwards have not been reflected in the deferred tax asset of
the Company at December 31, 1995.
NOTE G - Company Administration and Transactions with Affiliates
Since January 1, 1995, Parkway has self-managed its
operations. From 1980 through 1994, Parkway operated under an
expense-sharing agreement with certain affiliated companies. The
expense-sharing agreement provided that the participating companies
have common officers, facilities and personnel, and the costs of
these were shared among the participants. Certain costs, including
directors' fees, legal, audit and stock transfer expenses, were
considered non-allocable and paid directly by each participating
company. As a result of certain business combinations involving
the expense-sharing agreement participants, the expense-sharing
agreement was terminated on December 31, 1994. Since that date,
Parkway has maintained its own employees and offices located in One
Jackson Place in Jackson, Mississippi. Leland R. Speed continues
to serve as the Chairman of the Board and Chief Executive Officer
of Parkway and EastGroup Properties ("EastGroup"), a former
participant in the expense-sharing agreement. The administrative
costs associated with Mr. Speed and a small number of clerical and
support staff employees are shared equally by Parkway and
EastGroup. In addition, EastGroup reimburses Parkway for the
services of certain employees who perform those services for
EastGroup on an as requested basis and a pro rata share of the rent
on the office space in One Jackson Place. During the year ended
December 31, 1995, EastGroup reimbursed Parkway $387,000 for these
expenses.
NOTE H - Accounts Payable and Other Liabilities
December 31
-----------------------
1995 1994
----------- ---------
(In thousands)
Accounts payable.......... $ 555 $ 218
Accrued interest payable.. 84 152
Taxes payable, other than
income taxes............ 757 631
Other accrued expenses.... 1,713 171
Other payables............ 725 391
--------- ---------
$ 3,834 $ 1,563
========= =========
NOTE I - Supplemental Profit and Loss Information
Included in expenses are taxes, principally property taxes, of
$1,310,000, $871,000 and $901,000 for the twelve months ended
December 31, 1995, the six months ended December 31, 1994 and
fiscal 1994, respectively.
NOTE J - Stock Option Plans
The 1994 Stock Option Plan provides for the issuance of an
aggregate of 150,000 Parkway shares ("Shares") to key employees or
officers of the Company and its subsidiaries upon the exercise of
options and upon incentive grants pursuant to the Stock Option
Plan. On July 1 of each year, the number of Shares available for
grant shall automatically increase by one percent (1%) of the
Shares outstanding on such date, provided that the number of Shares
available for grant shall never exceed 12.5% of the Shares
outstanding. On September 23, 1994, the Company granted 137,250
options to officers and key employees of the Company. Of the
options granted, 104,250 options have an exercise price of $13.78,
the market price of Parkway shares on the date of grant. The
remaining 33,000 options are "premium" options and have an exercise
price of $18.33 per share, which was 133% of the market price of
the shares on the date of grant. The options issued under the 1994
Stock Option Plan vest over a two-year period, except that the
committee of Directors who administer the plan has agreed that
22,500 options granted to two officers vested completely upon their
termination of employment with the Company in connection with the
termination of the expense-sharing agreement discussed above. At
December 31, 1995, no shares are available for grant under the 1994
Stock Option Plan.
Stock option activity for the periods presented prior to
December 31, 1995 was as follows:
Number Option Price Total Option
of Shares Per Shares Price
--------- --------------- ------------
Outstanding at
June 30, 1993 64,597 $ 343,447
Exercised (600) $ 5.625 (3,375)
Relinquish (300) $ 5.625 (1,687)
Granted - -
-------- ------------
Outstanding at
June 30, 1994 63,697 338,385
Exercised (63,697) (338,385)
Granted 104,250 $13.78 1,436,565
Granted 33,000 $18.33 604,890
-------- ------------
Outstanding at
Dec. 31, 1994 137,250 2,041,455
Relinquish (4,000) $13.78 (55,125)
Exercised (7,742) $13.78 (106,694)
Granted 2,500 $19.00 47,500
Granted 34,173 $20.00 683,460
-------- ------ ------------
162,181 $ 2,610,596
======== ============
The 1994 Stock Option Plan does not carry stock appreciation
rights or incentive compensation units. The compensation expense
applicable to the stock appreciation rights plan totalled $102,000
for the six months ended December 31, 1994 and $135,000 for the
year ended June 30, 1994. Incentive compensation expense applicable
to the incentive compensation units totalled $69,000 for the six
months ended December 31, 1994 and $21,000 for the year ended June
30, 1994.
Also approved at the fiscal 1994 Annual Shareholders Meeting
was the 1991 Directors Stock Option Plan, as amended. Under this
plan, options for up to 100,000 shares may be granted to "non-
employee directors". As of December 31, 1995, options have been
granted at an option price ranging from $6.00 per share to $15.50
per share, the market values at date of grant. The total option
price at December 31, 1995 of these options was $705,000. The 1991
Directors Stock Option Plan, as amended does not carry stock
appreciation rights or incentive compensation units and options are
exercisable in full on the date of grant. At December 31, 1995,
there were 24,500 options available for grant under the 1991
Directors Stock Option Plan, as amended.
NOTE K - Litigation
The Company is not presently engaged in any litigation other
than ordinary routine litigation incidental to its business.
Management believes such litigation will not materially affect the
financial position, operations or liquidity of the Company.
NOTE L - Supplemental Cash Flow Information
12 Months 6 Months 12 Months
Ended Ended Ended
12/31/95 12/31/94 06/30/94
--------- --------- ---------
(In thousands)
Loans to facilitate sales
of real estate................. $ 410 $ 304 $ 420
Loan foreclosures added
to real estate held for
sale........................... 31 31 -
Loan foreclosures added
to operating real
estate......................... 412 71 -
Interest paid.................... 2,341 1,204 2,441
Income taxes paid................ 77 - 1
NOTE M - Subsequent Events
On February 15, 1996, the Company received funding on a
$4,800,000 non-recourse, 15-year, fully amortizing loan from a life
insurance company on the IBM Building. The loan has a fixed
interest rate of 7.70%.
On March 7, 1996, the Company purchased the One Park 10 Plaza
Building in Houston, Texas from an insurance company for
$6,700,000. One Park 10 Plaza is an eight-story office building
with 609 parking spaces and is 89% leased at March 15, 1996.
NOTE N - Fair Values of Financial Instruments
The following methods and assumptions were used by the Company
in estimating its fair value disclosures for financial instruments:
Cash and cash equivalents:
The carrying amount reported in the balance sheet for cash and
cash equivalents approximates its fair value.
Real estate securities:
The carrying amount reported in the balance sheet for real
estate securities are based on quoted market prices.
Mortgage loans:
The fair values for mortgage loans are estimated based on net
realizable value and discounted cash flow analyses, using interest
rates currently being offered loans with similar terms to borrowers
of similar credit quality.
Notes payable to banks and mortgage notes payable without recourse:
The carrying amounts of the Company's notes payable to banks
approximate fair value. The fair values of the Company's long-term
debt are estimated using discounted cash flow analysis, based on
the Company's current incremental borrowing rates for similar types
of borrowing arrangements.
The carrying amounts and fair values of the Company's
financial instruments at December 31, 1995 are as follows (in
thousands):
Carrying Amount Fair Value
--------------- ----------
Real estate related investments:
Real estate securities $ 2,866 $ 2,866
Mortgage loans 11,161 21,049
Cash and cash equivalents 6,044 6,044
Mortgage notes payable
without recourse 29,336 29,336
Mortgage notes payable
on wrap mortgages 5,368 5,181
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons, Compliance with Section 16(a) of the Exchange Act
The Registrant's definitive proxy statement which will be
filed with the Commission pursuant to Regulation 14A within 120
days of the end of Registrant's fiscal year is incorporated herein
by reference.
Item 10. Executive Compensation
The Registrant's definitive proxy statement which will be
filed with the Commission pursuant to Regulation 14A within 120
days of the end of Registrant's fiscal year is incorporated herein
by reference.
Item 11. Security Ownership of Certain Beneficial Owners and
Management
The Registrant's definitive proxy statement which will be filed
with the Commission pursuant to Regulation 14A within 120 days of
the end of Registrant's fiscal year is incorporated herein by
reference.
Item 12. Certain Relationships and Related Transactions
The Registrant's definitive proxy statement which will be filed
with the Commission pursuant to Regulation 14A within 120 days of
the end of Registrant's fiscal year is incorporated herein by
reference.
Item 13. Exhibits and Reports on Form 8-K
(a)Exhibits required by Item 601 of Regulation S-B:
(3)(a)Articles of Incorporation (incorporated by reference to
Exhibit 6.1 of Amendment No. 1 to the Registrant's Form
S-14 (No. 2-69138) filed on November 6, 1980).
(b)Amendment to the Articles of Incorporation (incorporated
by reference to Exhibit A of the Registrant's Proxy
Statement dated November 3, 1987).
(c)Bylaws (incorporated by reference to Exhibit 6.2 of
Amendment No. 1 to the Registrant's Form S-14 (No.
2-69138) filed on November 6, 1980).
(d)Amendment to Bylaws, dated December 4, 1986 (incorporated
by reference to Exhibit (3)(c) on the Registrant's 1987
Annual Report on Form 10-K).
(e)Amendment to Bylaws, dated December 4, 1987 incorporated
by reference to Exhibit (3)(e) on the Registrant's 1988
Annual Report on Form 10-K).
(10)(a)Amendment and Restatement of Expense-sharing Agreement
among Congress Street Properties, Inc., Eastover
Corporation, EastGroup Properties and Registrant dated as
of September 1, 1990, (incorporated by reference to the
Registrant's 1990 Form 10-K).
(b)Registrant's 1994 Stock Option Plan (incorporated by
reference to Registrant's Proxy Statement dated November
8, 1994).
(c)Registrant's 1991 Directors Stock Option Plan, as amended
(incorporated by reference to the Registrant's proxy
statement dated November 8, 1994).
(d)Agreement and Plan of Merger among Parkway, Parkway
Acquisition Corp. and EB dated as of October 28, 1994 (as
amended by the First Amendment to the Agreement and Plan
of Merger dated January 26, 1995), incorporated by
reference to Appendix B of the Joint Proxy
Statement/Prospectus filed with the Registration Statement
on Form S-4 of The Parkway Company (No. 33-85950).
Parkway agrees to furnish supplementally to the Commission
upon request a copy of any omitted schedule or exhibit to
the Merger Agreement.
(11)Statement re: Computation of earnings per share, filed
herewith.
(21)Subsidiaries of the small business issuer, filed herewith.
(23)(a)Consent of Ernst & Young LLP, filed herewith.
(b)Report of KPMG Peat Marwick LLP, filed herewith.
(c)Consent of KPMG Peat Marwick LLP, filed herewith.
(d)Report of Deloitte & Touche LLP, filed herewith.
(e)Consent of Deloitte & Touche LLP, filed herewith.
(24)Powers of attorney, filed herewith.
(27)Financial Data Schedule
(28)Agreement of Registrant to furnish the Commission with copies
of instruments defining the rights of holders of long-term
debt (incorporated by reference to Exhibit 28E of the
Registrant's Form S-4 (No. 33-2960) filed with the Commission
on February 3, 1986).
(99)The Company Shareholder Rights Plan dated September 7, 1995
(incorporated by reference to the Registrant's Form 8-A filed
September 8, 1995).
(b)Reports on Form 8-K.
(1)Filed October 13, 1995
Amendment to Form 8-K filed August 14, 1995 reporting
"Item 7. Financial Statements and Exhibits".
(2)Filed October 16, 1995
Reporting the October 2, 1995 purchase of the IBM Building
from ICMPI (Jackson), Inc., a wholly owned subsidiary of
Bedford Property Investors, Inc., for $6,500,000.
(3)Filed December 15, 1995
Amendment to Form 8-K filed October 2, 1995 reporting
"Item 7. Financial Statements and Exhibits".
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
THE PARKWAY COMPANY
Registrant
/s/ Leland R. Speed
Leland R. Speed
Chief Executive Officer
March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
*/s/ Sarah P. Clark */s/ Sarah P. Clark
H. C. Bailey, Jr., Director Sidney W. Lassen, Director
March 29, 1996 March 29, 1996
*/s/ Sarah P. Clark
George R. Farish, Director Joe F. Lynch, Director
March 29, 1996 March 29, 1996
*/s/ Sarah P. Clark /s/ Leland R. Speed
B. Pat Green, Director Leland R. Speed, Director
March 29, 1996 March 29, 1996
*/s/ Sarah P. Clark /s/ Steven G. Rogers
C. Herbert Magruder, M.D., Director Steven G. Rogers, President
March 29, 1996 March 29, 1996
*/s/ Sarah P. Clark /s/ Sarah P. Clark
W. Lincoln Mossop, Jr., Director Sarah P. Clark, Vice-President
March 29, 1996 Chief Financial Officer
and Secretary
*/s/ Saran P. Clark March 29, 1996
Daniel C. Arnold, Director
March 29, 1996 /s/ Regina P. Shows
Regina P. Shows, Controller
*/s/ Sarah P. Clark Principal Accounting Officer
Roger P. Friou, Director March 29, 1996
March 29, 1996
*/s/ Sarah P. Clark
BY: Sarah P. Clark, Atty-in-Fact
Exhibit (11) Statement Re: Computation of Per Share Earnings
12 Months 6 Months 12 Months
Ended Ended Ended
12/31/95 12/31/94 06/30/94
--------- -------- ---------
(In thousands)
Fully diluted
Average shares
outstanding........... 1,858 1,544 1,300
Net effect of dilutive
stock options- Based
on the treasury stock
method using year-end
market price.......... 22 37 35
-------- -------- --------
TOTAL................... 1,880 1,581 1,335
======== ======== ========
Net income.............. $ 11,820 $ 1,005 $ 1,303
======== ======== ========
Per share amount........ $ 6.29 $ .64 $ .98
======== ======== ========
Note:
The above dilution is less than 3% or anti-dilutive, thus
earnings per share are based on the average shares outstanding.
Exhibit (21) List of Subsidiaries
Name State
Sugar Creek Center Corporation Texas
Parkway Texas Corporation Texas
Parkway Congress Corporation Texas
Subsidiary No. 1, Inc. Virginia
One Place Partners Mississippi
Parkway Ridgewood, Inc. Mississippi
Parkway Lamar, Inc. Mississippi
Parkway Atlanta, Inc. Georgia
Exhibit 23(a)
Consent of Independent Auditors
-------------------------------
Board of Directors and Stockholders
The Parkway Company
We consent to the incorporation by reference in the Registration
Statement (Form S-8 on Form S-3 No. 33-00311) pertaining to The
Parkway Company 1994 Stock Option Plan, The Parkway Company 1991
Incentive Plan, and The Parkway Company 1991 Directors Stock Option
Plan of our report dated March 25, 1996, with respect to the
consolidated financial statements of The Parkway Company included
in this Annual Report (Form 10-KSB) for the year ended December 31,
1995.
/s/ Ernst & Young LLP
-------------------------
Ernst & Young LLP
Jackson, Mississippi
March 28, 1996
Exhibit 23(b)
Independent Auditors' Report
----------------------------
The Trustees and Shareholders
EastGroup Properties:
We have audited the consolidated balance sheet of EastGroup
Properties and subsidiaries (the Company), a Maryland real estate
investment trust, as of December 31, 1994, and the related
consolidated statements of operations, changes in shareholders'
equity and cash flows for each of the years in the two-year period
ended December 31, 1994. Such consolidated financial statements
are not presented separately herein. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
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, the consolidated financial statements referred to
above present fairly, in all material respects,the financial
position of EastGroup Properties and subsidiaries at December 31,
1994, and the results of their operations and their cash flows for
each of the years in the two-year period ended December 31, 1994 in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG PEAT MARWICK LLP
Jackson, Mississippi
March 13, 1995
Exhibit 23(c)
Independent Auditors' Consent
-----------------------------
The Trustees and Shareholders
EastGroup Properties:
We consent to the use of our report dated March 13, 1995 on the
consolidated balance sheet of EastGroup Properties and subsidiaries
as of December 31, 1994, and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for each
of the years in the two-year period ended December 31, 1994
included herein.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG PEAT MARWICK LLP
Jackson, Mississippi
March 27, 1996
Exhibit 23(d)
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
EB, Inc.
Jackson, Mississippi
We have audited the 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 not presented separately herein.
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
Exhibit 23(e)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of The Parkway Company on Form S-8 on Form S-3 (No.
33-00311) pertaining to The Parkway Company 1994 Stock Option Plan,
The Parkway Company 1991 Incentive Plan, and The Parkway Company
1991 Director's Stock Option Plan of our report dated March 29,
1995, included in the Annual Report on Form 10-KSB of EB, Inc. for
the year ended December 31, 1994, and included in the Annual Report
on Form 10-KSB of The Parkway Company for the year ended December
31, 1995.
/s/ Deloitte & Touche LLP
Jackson, Mississippi
March 29, 1996
Exhibit 24
THE PARKWAY COMPANY
POWER OF ATTORNEY
The undersigned Director of The Parkway Company, a Texas
corporation, hereby constitutes and appoints Sarah P. Clark as the
true and lawful Attorney-in-fact and Agent of the undersigned to
sign on behalf of the undersigned: (a) the Annual Report of the
Company on Form 10-KSB (or such other form as may be required) for
the twelve month period ended December 31, 1995 to be filed with
the Securities and Exchange Commission ("SEC"); and (b) any and all
amendments to such Report as may be required to be filed with the
SEC.
/s/ H. C. Bailey, Jr.
------------------------
H. C. Bailey, Jr.
Director
Date: March 26, 1996
Exhibit 24
THE PARKWAY COMPANY
POWER OF ATTORNEY
The undersigned Director of The Parkway Company, a Texas
corporation, hereby constitutes and appoints Sarah P. Clark as the
true and lawful Attorney-in-fact and Agent of the undersigned to
sign on behalf of the undersigned: (a) the Annual Report of the
Company on Form 10-KSB (or such other form as may be required) for
the twelve month period ended December 31, 1995 to be filed with
the Securities and Exchange Commission ("SEC"); and (b) any and all
amendments to such Report as may be required to be filed with the
SEC.
/s/ B. Pat Green, Jr.
-----------------------
B. Pat Green, Jr.
Director
Date: March 26, 1996
Exhibit 24
THE PARKWAY COMPANY
POWER OF ATTORNEY
The undersigned Director of The Parkway Company, a Texas
corporation, hereby constitutes and appoints Sarah P. Clark as the
true and lawful Attorney-in-fact and Agent of the undersigned to
sign on behalf of the undersigned: (a) the Annual Report of the
Company on Form 10-KSB (or such other form as may be required) for
the twelve month period ended December 31, 1995 to be filed with
the Securities and Exchange Commission ("SEC"); and (b) any and all
amendments to such Report as may be required to be filed with the
SEC.
/s/ Sidney W. Lassen
---------------------
Sidney W. Lassen
Director
Date: March 26, 1996
Exhibit 24
THE PARKWAY COMPANY
POWER OF ATTORNEY
The undersigned Director of The Parkway Company, a Texas
corporation, hereby constitutes and appoints Sarah P. Clark as the
true and lawful Attorney-in-fact and Agent of the undersigned to
sign on behalf of the undersigned: (a) the Annual Report of the
Company on Form 10-KSB (or such other form as may be required) for
the twelve month period ended December 31, 1995 to be filed with
the Securities and Exchange Commission ("SEC"); and (b) any and all
amendments to such Report as may be required to be filed with the
SEC.
/s/ Joe F. Lynch
----------------------
Joe F. Lynch
Director
Date: March 26, 1996
Exhibit 24
THE PARKWAY COMPANY
POWER OF ATTORNEY
The undersigned Director of The Parkway Company, a Texas
corporation, hereby constitutes and appoints Sarah P. Clark as the
true and lawful Attorney-in-fact and Agent of the undersigned to
sign on behalf of the undersigned: (a) the Annual Report of the
Company on Form 10-KSB (or such other form as may be required) for
the twelve month period ended December 31, 1995 to be filed with
the Securities and Exchange Commission ("SEC"); and (b) any and all
amendments to such Report as may be required to be filed with the
SEC.
/s/ W. Lincoln Mossop, Jr.
-----------------------------
W. Lincoln Mossop, Jr.
Director
Date: March 26, 1996
Exhibit 24
THE PARKWAY COMPANY
POWER OF ATTORNEY
The undersigned Director of The Parkway Company, a Texas
corporation, hereby constitutes and appoints Sarah P. Clark as the
true and lawful Attorney-in-fact and Agent of the undersigned to
sign on behalf of the undersigned: (a) the Annual Report of the
Company on Form 10-KSB (or such other form as may be required) for
the twelve month period ended December 31, 1995 to be filed with
the Securities and Exchange Commission ("SEC"); and (b) any and all
amendments to such Report as may be required to be filed with the
SEC.
/s/ Roger P. Friou
---------------------
Roger P. Friou
Director
Date: March 26, 1996
Exhibit 24
THE PARKWAY COMPANY
POWER OF ATTORNEY
The undersigned Director of The Parkway Company, a Texas
corporation, hereby constitutes and appoints Sarah P. Clark as the
true and lawful Attorney-in-fact and Agent of the undersigned to
sign on behalf of the undersigned: (a) the Annual Report of the
Company on Form 10-KSB (or such other form as may be required) for
the twelve month period ended December 31, 1995 to be filed with
the Securities and Exchange Commission ("SEC"); and (b) any and all
amendments to such Report as may be required to be filed with the
SEC.
/s/ Daniel C. Arnold
----------------------
Daniel C. Arnold
Director
Date: March 28, 1996
Exhibit 24
THE PARKWAY COMPANY
POWER OF ATTORNEY
The undersigned Director of The Parkway Company, a Texas
corporation, hereby constitutes and appoints Sarah P. Clark as the
true and lawful Attorney-in-fact and Agent of the undersigned to
sign on behalf of the undersigned: (a) the Annual Report of the
Company on Form 10-KSB (or such other form as may be required) for
the twelve month period ended December 31, 1995 to be filed with
the Securities and Exchange Commission ("SEC"); and (b) any and all
amendments to such Report as may be required to be filed with the
SEC.
/s/ C. Herbert Magruder, M.D.
-----------------------------
C. Herbert Magruder, M.D.
Director
Date: March 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 6044
<SECURITIES> 2866
<RECEIVABLES> 2572
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 88043
<CURRENT-LIABILITIES> 38832
<BONDS> 0
0
0
<COMMON> 2008
<OTHER-SE> 47203
<TOTAL-LIABILITY-AND-EQUITY> 88043
<SALES> 0
<TOTAL-REVENUES> 23633
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9210
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2521
<INCOME-PRETAX> 11902
<INCOME-TAX> 82
<INCOME-CONTINUING> 11820
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11820
<EPS-PRIMARY> 6.36
<EPS-DILUTED> 6.29
</TABLE>
