------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
AMENDMENT TO FORM 8-K
Filed Pursuant to
THE SECURITIES EXCHANGE ACT OF 1934
PARKWAY PROPERTIES, INC.
-----------------------------------
(Exact name of registrant as specified in its charter)
AMENDMENT NO. 2
The undersigned registrant hereby amends the following
items, financial statements, exhibits or other portions of its Form 8-K
filed July 23, 1996 as amended by Form 8-K/A filed August 30, 1996 as set
forth in the pages attached hereto:
Item 7. Financial Statements and Exhibits
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this amendment to be
signed on its behalf by the undersigned, thereunto duly
authorized.
Date: September 20, 1996 PARKWAY PROPERTIES, INC.
By /s/ Sarah P. Clark
-----------------------
Sarah P. Clark
Vice President, Chief
Financial Officer,
Treasurer and Secretary
FORM 8-K/A
PARKWAY PROPERTIES, INC.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements
The following combined audited financial
statement of the Cherokee Business Center and the 8381
and 8391 Courthouse Road Buildings for the twelve
months ended December 31, 1995 are attached hereto.
Page
----
Report of Independent Auditors 3
Combined Statement of Rental Revenue and
Direct Operating Expenses 4
Notes to Combined Statement of Rental Revenue
and Direct Operating Expenses 5
(b) Pro Forma Consolidated Financial Statements
The unaudited Pro Forma Consolidated
Financial Statements are attached hereto.
PARKWAY PROPERTIES, INC.
Page
----
Pro Forma Consolidated Financial Statements (Unaudited) 7
Pro Forma Consolidated Balance Sheet (Unaudited) -
As of June 30, 1996 8
Pro Forma Consolidated Statement of Income (Unaudited) -
For the Twelve Months Ended December 31, 1995 9
Pro Forma Consolidated Statement of Income (Unaudited) -
For the Six Months Ended June 30, 1996 10
Notes to Pro Forma Consolidated Financial
Statements (Unaudited) 11
Report of Independent Auditors
The Board of Directors
Parkway Properties, Inc.
We have audited the accompanying combined statement of rental
revenue and direct operating expenses of the Cherokee Business
Center and the 8381 and 8391 Courthouse Road Buildings for the
year ended December 31, 1995. This statement is the
responsibility of management. Our responsibility is to express
an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statement of rental revenue and direct operating expenses is
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amount and disclosures in the
statement. An audit includes assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of
complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in Form 8-K/A of Parkway
Properties, Inc. as described in Note 2, and is not intended to
be a complete presentation of the Cherokee Business Center's and
the 8381 and 8391 Courthouse Road Buildings' combined revenue and
expenses.
In our opinion, the combined statement of rental revenue and
direct operating expenses referred to above presents fairly, in
all material respects, the combined rental revenue and direct
operating expenses described in Note 2 of the Cherokee Business
Center and the 8381 and 8391 Courthouse Road Buildings for the
year ended December 31, 1995, in conformity with generally
accepted accounting principles.
We have compiled the accompanying combined statement of rental
revenue and direct operating expenses of the Cherokee Business
Center and the 8381 and 8391 Courthouse Road Buildings for the
six months ended June 30, 1996 in accordance with Statements on
Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. A compilation
is limited to presenting in the form of the financial statement
information that is the representation of management. We have
not audited or reviewed the combined statement of rental revenue
and direct operating expenses of the Cherokee Business Center and
the 8381 and 8391 Courthouse Road Buildings for the six months
ended June 30, 1996 and, accordingly, do not express an opinion
or any other form of assurance on them.
Jackson, Mississippi /s/ Ernst & Young LLP
August 26, 1996
Cherokee Business Center and the
8381 and 8391 Courthouse Road Buildings
Combined Statement of Rental Revenue
and Direct Operating Expenses
Year ended Six months ended
December 31, 1995 June 30, 1996
----------------- ----------------
(unaudited)
Rental revenue:
Minimum rents................ $1,760,356 $900,490
Reimbursed charges and
other income................ 87,692 16,705
---------- --------
1,848,048 917,195
---------- --------
Direct operating expenses
(Note 2):
Utilities................... 242,115 129,474
Real estate taxes........... 99,823 49,912
Management fees (Note 3).... 62,078 30,865
Janitorial services
and supplies............... 118,972 47,733
Maintenance services
and supplies............... 113,569 86,929
Salaries.................... 75,341 68,875
Security services........... 20,288 9,068
Insurance................... 27,902 11,626
Legal and professional
fees....................... 50,476 24,559
Administrative and
miscellaneous expenses..... 30,842 20,641
---------- ---------
841,406 479,682
---------- ---------
Excess of rental revenue over
direct operating expenses.... $1,006,642 $437,513
========== =========
See accompanying notes.
Cherokee Business Center and the
8381 and 8391 Courthouse Road Buildings
Notes to Combined Statement of Rental Revenue
and Direct Operating Expenses
1. Organization and Significant Accounting Policies
Description of Property
Parkway Virginia, Inc., a wholly-owned subsidiary of Parkway
Properties, Inc., (the "Company") acquired the Cherokee Business
Center and the 8381 and 8391 Courthouse Road Buildings (the
"Buildings") effective July 9, 1996 from an unrelated party. The
Buildings are three office buildings located in Tysons Corner and
Springfield, Virginia with approximately 150,000 (unaudited)
combined square feet of leasable area.
Rental Income
Minimum rents from leases are accounted for ratably over the term
of each lease. Tenant reimbursements are recognized as income as
the applicable services are rendered or expenses incurred.
The combined future minimum rents on non-cancelable operating
leases at December 31, 1995 are as follows:
Year Amount
--------------------------------
1996 $1,939,000
1997 1,847,000
1998 1,555,000
1999 1,283,000
2000 931,000
Thereafter 1,440,000
----------
$8,995,000
==========
The above amounts do not include tenant reimbursements for
utilities, taxes, insurance, and common area maintenance.
Cherokee Business Center and the
8381 and 8391 Courthouse Road Buildings
Notes to Combined Statement of Rental Revenue
and Direct Operating Expenses (continued)
2. Basis of Accounting
The accompanying combined statement of rental revenue and direct
operating expenses is presented on the accrual basis. The
statement has been prepared in accordance with the applicable
rules and regulations of the Securities and Exchange Commission
for real estate properties acquired. Accordingly, the statement
excludes certain expenses not comparable to the proposed future
operations of the Buildings such as depreciation and mortgage
interest expense. Management is not aware of any material
factors relating to the Buildings that would cause the reported
financial information not to be necessarily indicative of future
operating results.
3. Management Fees
Management fees were paid to an unrelated management company and
amounted to $5,500 per month prior to August 1995. Beginning in
August 1995, the fees were 2.5% of revenues received from the
operations of the Courthouse Road Buildings and the greater of
$1,548 or 2.5% of revenues received from the operations of the
Cherokee Business Center.
PARKWAY PROPERTIES, INC.
Pro Forma Consolidated Financial Statements
(Unaudited)
The following unaudited pro forma consolidated balance sheet as
of June 30, 1996 and pro forma consolidated statements of income
of Parkway Properties, Inc. ("Parkway") as of December 31, 1995
and June 30, 1996 give effect to the July 9, 1996 purchase of the
Cherokee Business Center and the 8381 and 8391 Courthouse Road
Buildings, as well as the August 9, 1996 purchase of the Falls
Pointe and Roswell North Buildings located in Atlanta, Georgia.
The pro forma consolidated financial statements have been
prepared by management of Parkway based upon the historical
financial statements of Parkway and the adjustments and
assumptions in the accompanying notes to the pro forma
consolidated financial statements.
The pro forma consolidated balance sheet sets forth the effect of
Parkway's purchases of the Cherokee Business Center, the 8381 and
8391 Courthouse Road Buildings and the Falls Pointe and Roswell
North Buildings as if the purchases had been consummated on June
30, 1996. The pro forma consolidated balance sheet also reflects
the placement of non-recourse mortgage financings made subsequent
to June 30, 1996 on certain of the office buildings acquired.
The pro forma consolidated statements of income set forth the
effects of Parkway's purchase of the Cherokee Business Center,
the 8381 and 8391 Courthouse Road Buildings and the Falls Pointe
and Roswell North Buildings as well as the July 31, 1995 purchase
of Mtel Centre', the October 2, 1995 purchase of the IBM
Building, the December 19, 1995 purchase of the Waterstone
Building and the April 15, 1996 purchase of the 400 North Belt
and Woodbranch Buildings as if these transactions had been
consummated on January 1, 1995. The pro forma consolidated
statements of income also set forth the effect of the May 31,
1996 sale of 157 mortgage loans and the placement of non-recourse
mortgage debt on recently acquired properties as if the
transactions occurred January 1, 1995.
These pro forma consolidated financial statements may not be
indicative of the results that actually would have occurred if
the purchases, sale and/or financings had been in effect on the
dates indicated or which may be obtained in the future. The pro
forma consolidated financial statements should be read in
conjunction with the financial statements and notes of Parkway
included in its annual report on Form 1O-KSB for the period ended
December 31, 1995.
PARKWAY PROPERTIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(Unaudited)
Parkway Pro Forma Parkway
Historical Adjustments Pro Forma
---------- ----------- ---------
(In thousands)
Assets
Real estate related investments
Office buildings.............$ 79,608 $ 25,050(2) $104,658
Accumulated depreciation..... (8,039) - (8,039)
-------- -------- --------
71,569 25,050 96,619
Real estate held for sale
Land....................... 7,828 - 7,828
Operating properties....... 3,982 - 3,982
Mortgage loans............... 6,176 - 6,176
Real estate securities....... 1,796 - 1,796
Real estate partnerships and
corporate joint venture.... 607 - 607
-------- -------- --------
91,958 25,050 117,008
Interest and rents receivable
and other assets............. 3,674 - 3,674
Cash and cash equivalents...... 24,765 (15,050) 9,715
-------- -------- --------
$120,397 $ 10,000 $130,397
======== ======== ========
Liabilities
Mortgage notes payable without
recourse.....................$ 39,218 $ 10,000(2) $ 49,218
Mortgage notes payable on wrap
mortgages.................... 4,539 - 4,539
Accounts payable and other
liabilities.................. 4,425 - 4,425
-------- -------- --------
48,182 10,000 58,182
-------- -------- --------
Shareholders' Equity
Common stock, $1.00 par value,
10,000,000 shares authorized,
4,168,962 shares issued...... 4,169 - 4,169
Additional paid-in capital..... 47,332 - 47,332
Retained earnings.............. 20,087 - 20,087
-------- -------- --------
71,588 - 71,588
Unrealized gain on securities.. 627 - 627
-------- -------- --------
72,215 - 72,215
-------- -------- --------
$120,397 $ 10,000 $130,397
======== ======== ========
PARKWAY PROPERTIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED 12/31/95
(Unaudited)
Parkway Pro Forma Parkway
Historical Adjustments Pro Forma
---------- ----------- ---------
(In thousands, except per share data)
Revenues
Income from real estate
properties.......................$ 8,941 $12,191 (3a) $21,132
Interest on mortgage loans......... 1,421 (896)(3e) 525
Management company income.......... 1,041 - 1,041
Equity in earnings
Real estate companies............ 135 - 135
Real estate partnerships and
corporate joint venture........ 116 - 116
Interest on investments............ 167 - 167
Dividend income.................... 601 - 601
Deferred gains and other income.... 345 - 345
Gain on real estate
and mortgage loans............... 6,552 - 6,552
Gain on securities................. 4,314 - 4,314
------- ------- -------
23,633 11,295 34,928
------- ------- -------
Expenses
Real estate owned
Operating expense................ 4,876 6,038 (3a) 10,914
Interest expense................. 2,230 2,240 (3c) 4,470
Depreciation and amortization.... 1,331 1,371 (3a) 2,702
Minority interest................ (100) - (100)
Interest expense
Notes payable to banks........... 156 (156)(3e) -
Notes payable on wrap mortgages.. 135 - 135
Management company expenses........ 804 - 804
Other expenses..................... 2,299 - 2,299
------- ------- -------
11,731 9,493 21,224
------- ------- -------
Income before taxes................ 11,902 1,802 13,704
Income tax provision............... 82 - (4) 82
------- ------- -------
Net income.........................$11,820 $ 1,802 $13,622
======= ======= =======
Net income per share...............$ 4.24 $ 3.47
======= =======
Weighted average shares
outstanding (5).................. 2,787 3,927
======= =======
PARKWAY PROPERTIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED 6/30/96
(Unaudited)
Parkway Pro Forma Parkway
Historical Adjustments Pro Forma
---------- ----------- ---------
(In thousands, except per share data)
Revenues
Income from real estate
properties......................$ 8,084 $ 3,122 (3b) $ 11,206
Management company income......... 420 - 420
Interest on mortgage loans........ 1,103 (438)(3f) 665
Equity in earnings:
Real estate partnerships and
corporate joint venture....... 70 - 70
Loss on securities................ (128) - (128)
Interest on investments........... 183 - 183
Deferred gains and other income... 73 - 73
Dividend income................... 108 - 108
Gain on real estate and mortgage
loans........................... 5,700 - 5,700
-------- -------- --------
15,613 2,684 18,297
-------- -------- --------
Expenses
Real estate owned:
Operating expense............... 3,949 1,470 (3b) 5,419
Interest expense................ 1,331 608 (3d) 1,939
Depreciation and amortization... 944 384 (3b) 1,328
Minority interest............... 4 - 4
Interest expense:
Notes payable to banks.......... 94 (94)(3f) -
Notes payable on wrap mortgages. 230 - 230
Management company expenses....... 362 - 362
Other expenses.................... 1,476 - 1,476
-------- -------- --------
8,390 2,368 10,758
-------- -------- --------
Income before taxes............... 7,223 316 7,539
Income tax provision.............. 23 - (4) 23
-------- -------- --------
Net income........................$ 7,200 $ 316 $ 7,516
======== ======== ========
Net income per share..............$ 2.31 $ 1.81
======== ========
Weighted average shares
outstanding (5)................. 3,111 4,157
======== ========
PARKWAY PROPERTIES, INC.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited)
1. On July 9, 1996, Parkway Virginia, Inc., a wholly-owned
subsidiary of Parkway Properties, Inc. ("Parkway" or the
"Company"), purchased the Cherokee Business Center and the
8381 and 8391 Courthouse Road Buildings from Carfax
Enterprises, an unrelated party, for $11,050,000. The
buildings combined consist of approximately 150,000 net
rentable square feet. On August 9, 1996, Parkway Atlanta,
Inc., a wholly-owned subsidiary of Parkway, purchased the
Falls Pointe and Roswell North Buildings for $14,000,000
from an unrelated party. These buildings combined consist
of approximately 163,000 net rentable square feet.
2. The pro forma adjustments to the Consolidated Balance Sheet
as of June 30, 1996 include the $11,050,000 purchase of the
Cherokee Business Center and the 8381 and 8391 Courthouse
Road Buildings, as well as the $14,000,000 purchase of the
Falls Pointe and Roswell North Buildings mentioned above and
the placement of $10,000,000 in non-recourse mortgage
financings on certain of the Company's office buildings
subsequent to June 30, 1996.
3. The pro forma adjustments to the Consolidated Statements of
Income for the twelve months ended December 31, 1995 and the
six months ended June 30, 1996 include the Cherokee Business
Center and the 8381 and 8391 Courthouse Road Buildings as
well as the July 31, 1995 purchase of Mtel Centre', the
October 2, 1995 purchase of the IBM Building, the December
19, 1995 purchase of the Waterstone Building and the April
15, 1996 purchase of the 400 North Belt and Woodbranch
Buildings. In addition, the adjustments include the August
9, 1996 purchase of the Falls Pointe and Roswell North
Buildings, the May 31, 1996 sale of 157 mortgage loans and
the placement of non-recourse mortgage financing on certain
recent property acquisitions. These pro forma adjustments
are detailed below by property for the twelve months ended
December 31, 1995 and six months ended June 30, 1996.
The effect on income and expenses from real estate
properties due to the above purchases are as follows:
(a) For the twelve months ended December 31, 1995:
Revenue Expenses
----------- ---------------------------
Income From Real Estate Owned
Real Estate Operating Depreciation
Properties Expense Expense
----------- ------------ ------------
Mtel Centre' $ 2,420,000 $ 1,442,000 $ 177,000
IBM Building 959,000 449,000 102,000
Waterstone 1,183,000 499,000 181,000
400 North Belt
& Woodbranch 3,470,000 1,970,000 347,000
Cherokee &
Courthouse
Road Bldgs. 1,848,000 841,000 249,000
Falls Pointe &
Roswell North 2,311,000 837,000 315,000
----------- ----------- -----------
$12,191,000 $ 6,038,000 $ 1,371,000
=========== =========== ===========
(b) For the six months ended June 30, 1996:
Revenue Expenses
----------- ---------------------------
Income From Real Estate Owned
Real Estate Operating Depreciation
Properties Expense Expense
----------- ------------ ------------
400 North Belt
& Woodbranch $ 1,036,000 $ 551,000 $ 102,000
Cherokee &
Courthouse
Road Bldgs. 917,000 480,000 124,000
Falls Pointe &
Roswell North 1,169,000 439,000
158,000
----------- ----------- -----------
$ 3,122,000 $ 1,470,000 $ 384,000
=========== =========== ===========
Depreciation is provided by the straight-line method over
the estimated useful lives of the buildings (40 years).
Pro forma interest expense on real estate owned reflects the
non-recourse debt placed on the buildings at the actual
amounts and rates by property as if placed January 1, 1995
is as follows:
Property/Placement Twelve Months Six Months
Date/Rate Debt 12/31/95 (c) 6/30/96 (d)
------------------ ----------- ------------- -----------
Mtel Centre
12/95 7.75% $11,000,000 $ 595,000 $ -
IBM Building
2/96 7.78% 4,800,000 370,000 41,000
Waterstone
6/96 8.00% 5,620,000 450,000 185,000
400 North Belt &
Woodbranch
7/96 8.25% 10,000,000 825,000 382,000
---------- ----------
$2,240,000 $ 608,000
========== ==========
The January 1, 1995 pro forma effect of the sale of 157
mortgage loans on May 31, 1996 is as follows:
Twelve Months Six Months
12/31/95 (e) 6/30/96 (f)
------------- -----------
Interest Income:
Mortgage loans $ (896,000) $ (438,000)
Interest Expense:
Notes payable to banks $ (156,000) $ (94,000)
4. No additional income tax expenses were provided because of
the Company's net operating loss carryover.
5. All per share information for the twelve months ended
December 31, 1995 has been restated to reflect a 3 for 2
common stock split effected as a dividend of one share for
every two shares outstanding on April 30, 1996 as well as
the June 14,1996 private placement of 1,140,000 shares as if
both transactions had occurred January 1, 1995.
