<PAGE> 1
FORM-10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITY EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1995
------------------------------------
Commission File Number 0-18261
TOWER PROPERTIES COMPANY
------------------------
(Exact name of registrant as specified in its charter)
Missouri (43-1529759)
------------------------ -----------------
(State of incorporation) (IRS tax number)
Suite 102, 911 Main Street, Kansas City, Missouri 64105
-------------------------------------------------------
(Address of principal executive offices) Zip Code
(816)-421-8255
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15 1
(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to the filing requirements for the past 90
days.
Yes X . No .
-------------------- -------------------
Indicate the number of shares outstanding of each of
the issuer's classes of common stock, at the close of the
period covered by this report.
170,881 shares of common stock
------------------------------
$1.00 par value per share, at October 13, 1995
<PAGE> 2
<TABLE>
TOWER PROPERTIES COMPANY - CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
<CAPTION>
(UNAUDITED)
ASSETS 1995 1994
----------- ----------
<S> <C> <C>
Cash $ 29,211 $ 23,225
Commercial Paper, At Cost 60,000 60,000
Short Term Investments 2,320,507 1,586,169
Accounts Receivable 716,820 689,231
Notes Receivable 72,728 169,606
Tenant Leasehold Improvements, Net 3,741,599 3,324,724
Prepaid Expenses and Other Assets 2,434,181 726,841
Rental Income Property, At Cost 55,422,650 53,017,440
Less: Accumulated Depreciation (21,207,668) (20,432,648)
----------- -----------
Net Rental Income Property 34,214,982 32,584,792
Real Estate Held for Sale 1,193,650 1,184,918
Equipment and Furniture, at Cost 5,821,155 5,300,354
Less: Accumulated Depreciation (3,531,724) (3,151,916)
----------- -----------
Net Equipment and Furniture 2,289,431 2,148,438
----------- -----------
Total Assets $47,073,109 $42,497,944
=========== ===========
LIABILITIES AND STOCKHOLDERS'
INVESTMENT
Liabilities:
Accounts Payable and Other Liabilities $ 1,271,867 $ 957,222
Related Party Loan 6,251,509 3,743,080
Income Taxes Payable 298,136 --
Deferred Income Taxes 1,402,170 1,145,131
Mortgage Notes Payable 17,474,379 17,820,480
----------- -----------
Total Liabilities 26,698,061 23,665,913
Minority Interest In Subsidiary 120,205 213,989
Preferred Stock, No Par Value
Authorized 60,000 Shares, None Issued -- --
Stockholders' Investment:
Common Stock, Par Value $1.00
Authorized 1,000,000 Shares, Issued
178,430 Shares, Unchanged 178,430 178,430
Paid-In Capital 17,355,872 17,355,872
Retained Earnings 2,268,560 1,103,532
Unrealized Holding Gain for Securities 947,030 469,732
----------- -----------
20,749,892 19,107,566
Less Treasury Stock, At Cost (7,549 and
7,464 shares in 1995 and 1994, respectively (495,049) (489,524)
----------- -----------
Total Stockholders' Investment 20,254,843 18,618,042
----------- -----------
Total Liabilities and Stockholders' Investment $47,073,109 $42,497,944
=========== ===========
The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>
<PAGE> 3
<TABLE>
TOWER PROPERTIES COMPANY
CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
1995 1994
------------------ ------------------
<S> <C> <C>
REVENUES:
Rent $ 8,781,773 $ 7,170,453
Rent, Related Party 425,865 412,178
Management and Service Fees 121,071 237,371
Management and Services Fees, Related Party 240,820 240,431
Real Estate Sales -- 164,550
Interest and Other Income 59,125 167,485
Other Income, Related Party 80,245 83,937
------------------ ------------------
Total Revenues 9,708,899 8,476,405
------------------ ------------------
COSTS & EXPENSES:
Costs of Real Estate Sold $ -- $ 61,535
Salaries and Employee Benefits 1,171,910 1,532,831
Depreciation 1,171,683 1,097,678
Maintenance and Repairs 1,580,880 1,381,357
Taxes Other than Income 821,991 686,612
Utilities 618,627 754,820
Interest 1,129,340 836,857
Interest, Related Party 225,783 229,498
Amortization of Leasehold Improvements 637,526 441,647
Leasing and Advertising 67,816 65,945
Professional Fees 73,644 168,524
Insurance 167,451 142,241
Other 215,582 277,192
------------------ ------------------
Total Costs and Expenses 7,882,233 7,676,737
Income Before Minority Interest and
Provision for Income Taxes 1,826,666 799,668
Minority Interest In Income of Subsidiary (22,278) (20,108)
------------------ ------------------
Income Before Provision for Income Taxes 1,804,388 779,560
PROVISION FOR INCOME TAXES 639,360 279,632
------------------ ------------------
NET INCOME $ 1,165,028 $ 499,928
================== ==================
Earnings per Share $ 6.82 $ 2.93
================== ==================
Weighted Average Common Shares Outstanding 170,863 170,839
================== ==================
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE> 4
<TABLE>
TOWER PROPERTIES COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Retained Earnings, Beginning
of Period $ 1,103,532 $ 291,701
Net Income $ 1,165,028 499,928
-------------- --------------
Retained Earnings, End of Period $ 2,268,560 $ 791,629
============== ==============
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE> 5
<TABLE>
TOWER PROPERTIES COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
REVENUES:
Rent $ 3,011,174 $ 2,635,285
Rent, Related Party 140,584 136,959
Management and Service Fees 47,576 91,250
Management and Services Fees, Related Party 79,365 72,098
Interest and Other Income 18,644 49,003
Other Income, Related Party 18,642 18,759
-------------- --------------
Total Revenues 3,315,985 3,003,354
-------------- --------------
COSTS & EXPENSES:
Salaries and Employee Benefits 390,070 503,697
Depreciation 402,805 394,760
Maintenance and Repairs 498,098 578,539
Taxes Other than Income 273,997 248,472
Utilities 273,835 289,643
Interest 399,689 284,989
Interest, Related Party 88,015 125,195
Amortization of Leasehold Improvements 246,627 155,948
Leasing and Advertising 27,828 22,934
Professional Fees 20,850 60,915
Insurance 54,289 58,125
Other 66,007 83,144
-------------- --------------
Total Costs and Expenses 2,742,110 2,806,361
Income Before Minority Interest and
Provision for Income Taxes 573,875 196,993
Minority Interest In Income of Subsidiary (5,305) (8,888)
-------------- --------------
Income Before Provision for Income Taxes 568,570 188,105
PROVISION FOR INCOME TAXES 200,827 68,800
-------------- --------------
NET INCOME $ 367,743 $ 119,305
============== ==============
Earnings per Share $ 2.15 $ 0.70
============== ==============
Weighted Average Common Shares Outstanding 170,879 170,884
============== ==============
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE> 6
<TABLE>
TOWER PROPERTIES COMPANY - CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
1995 1994
----------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,165,028 $ 499,928
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 1,171,683 1,097,678
Amortization of Leasehold Improvements 637,526 441,647
(Increase) Decrease in Accounts Receivables (27,589) 72,208
Decrease in Notes Receivable 96,878 78,531
Increase in Accounts Payable and
Other Liabilities 314,644 636,950
Increase in Prepaid Expenses and Other Assets (1,624,282) (23,597)
Increase (Decrease) in Income Taxes Payable 215,078 (13,371)
Gain on Real Estate Sales -- (86,265)
----------------- ---------------
Net Cash Provided by Operating Activities 1,948,966 2,703,709
----------------- ---------------
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to Real Estate Held for Sale, Net (8,732) (10,612)
Additions to Equipment & Furniture (337,656) (200,280)
Additions to Rental Property (5,210) (63,258)
Acquisition of Barkley Place office building -- (5,900,000)
Acquisition of 9200 Cody warehouse/office facility (2,600,000) --
Additions to Leasehold Improvements (1,054,401) (551,457)
----------------- ---------------
Net Cash Used in Investing Activities (4,005,999) (6,725,607)
----------------- ---------------
CASH FLOW FROM FINANCING ACTIVITIES:
Principal Payments on Mortgage Notes Payable (346,101) (3,004,429)
Proceeds From Mortgage Notes Payable -- 6,600,000
Increase in Related Party Short Term Loan 2,508,429 399,655
Purchase of Treasury Stock (15,470) (6,582)
Treasury Stock Issued to Directors 9,945 10,937
(Decrease) Increase in Minority Interest, Net (93,784) 20,108
----------------- ---------------
Net Cash Used In Financing Activities 2,063,019 4,019,689
----------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,986 (2,209)
CASH, Beginning of Period 23,225 18,659
----------------- ---------------
CASH, End of Period $ 29,211 $ 16,450
================= ===============
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> 7
TOWER PROPERTIES COMPANY AND SUBSIDIARIES
FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The consolidated financial statements included herein
have been prepared by the Company and reflect all
adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management,
necessary for a fair statement of the results for the
interim periods. Certain information and footnote
disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted, although the
Company believes that the disclosures are adequate to make
the information presented not misleading. It is suggested
that these condensed financial statements be read in
conjunction with the consolidated financial statements and
the notes thereto included in the company's latest annual
report on Form 10-K as of and for the year ended December
31, 1994.
The company is primarily engaged in owning, developing,
leasing and managing real property located in Johnson
County, Kansas, Clay and Jackson County, Missouri.
Substantially all of the improved real estate owned by the
Company and its subsidiaries consist of office buildings,
apartment complexes, a warehouse/office facility and
automobile parking lots and garages.
2. Tenant leasehold improvements are being amortized over
the lives of the related leases using the straight-line
method.
3. Interest paid during the first nine months of 1995 and
1994 for long-term mortgages amounted to $1,129,340 and
$836,857, respectively. Income taxes paid during the first
nine months of 1995 and 1994 amounted to $343,706 and
$293,003, respectively.
4. Certain prior quarter amounts have been reclassified to
conform to the 1995 presentation.
5. Effective January 1, 1994, the Company implemented the
provisions of Statement of Financial Accounting Standards
(SFAS) No. 115. Under SFAS No. 115, the investment in
Commerce common stock is classified as "available for sale",
and is recorded at fair market value. The unrealized gain
of $1,456,969 net of tax effects of $509,939 is reflected as
a separate component of equity. The increase in the net
unrealized holding gain for the nine months from December
31, 1994 to September 30, 1995 was $477,298 and $315,031 for
the three months from June 30, 1995 to September 30, 1995.
<PAGE> 8
6. ACQUISITIONS:
On June 30, 1995, the Company purchased a warehouse/
office facility for $2,600,000. The warehouse/office facility
is a 93,923 square foot, single tenant commercial warehouse
and office facility located in Overland Park, Kansas. The
Company used the line of credit with Commerce Bank of Kansas
City to acquire the property. The Company is arranging for
permanent financing in the amount of $1,950,000 from Northland
Financial Company. This mortgage loan will have a twenty-year
amortization term and bear interest at a fixed rate of 8%.
The loan will close during November, 1995 and the proceeds of
this loan will be used to reduce the line of credit.
7. CONTINGENCIES
Congress passed the Americans With Disabilities Act of
1990 (the Act) which became effective January 26, 1992. The
Act contains provisions for building owners to provide
persons with disabilities with accommodations and access
equal to, or similar to, that available to the general
public. Management cannot estimate the eventual impact of
the Act on the financial condition of the Company since
certain provisions of the Act are open to interpretation.
The Company is implementing the requirements of the Act that
are readily achievable and will not constitute an undue
burden on the Company. During 1995 and 1994, the Company
made modifications to certain properties at a cost of
approximately $1,400 and $1,500, respectively.
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES:
The Company's principal assets consist of real estate
holdings which are not liquid assets. Real estate holdings
include office buildings, parking facilities, apartments and
land held for future sale. The principal source of funds
generated internally is income from operations and proceeds
from real estate sales. The principal source of external
funds is long-term debt and line of credit with Commerce
Bank of Kansas City. The Company has not experienced
liquidity problems during the nine months ended September
30, 1995. On June 30, 1995, the Company acquired a
warehouse/office facility located in Overland Park, Kansas,
for $2,600,000. The Company used the line of credit with
Commerce Bank of Kansas City to acquire the property. The
Company is arranging for permanent financing of $1,950,000
from Northland Financial Company. This mortgage loan will
have a twenty-year amortization term and bear interest at a
fixed rate of 8%. The loan will close during November, 1995
and the proceeds of this loan will be used to reduce the
line of credit.
NINE MONTHS ENDED SEPTEMBER 30, 1995
COMPARED WITH THE NINE MONTHS ENDED SEPTEMBER 30, 1994
RESULT OF OPERATIONS:
Increased occupancy in the Commerce Tower building,
increased revenue from parking operations and the
acquisition of the Barkley Place office building and the
9200 Cody warehouse on July 15, 1994 and June 30, 1995,
respectively, are primarily responsible for the increase in
rental income of $1,625,007. Occupancy in the Commerce
Tower was 92% at September, 1995 compared to 79% in 1994.
This increase in occupancy is a result of leasing
approximately 60,000 square feet in the third and fourth
quarters of 1994. Parking revenue increased 15% and
apartments rentals increased 9%. The acquisition of Barkley
Place office building in July, 1994 and the 9200 Cody
warehouse in June, 1995 with combined income of $772,503 was
responsible for 48% of the total increase. The sale of the
remaining ten single family lots located in the New Mark
Division during the first quarter of 1994 accounts for the
decrease in real estate sales and cost of real estate sold.
A decision by management to sub-contract engineering
services in September, 1994 accounts for the decrease in
management and service fees income and salaries and employee
benefits expense.
The sub-contract engineering cost of $204,774, repairs
to the chillers and the cleaning and sealing of the exterior
precast panels of the Commerce Tower building and the
acquisition of the Barkley Place office building on July 15,
1994 offset by the painting and preventive maintenance of
Hillsborough, New Mark and Peppertree apartment complexes in
1994, are primarily responsible for the increase of $199,523
in maintenance and repairs.
<PAGE> 10
The increase in depreciation, taxes other than income,
and interest expense is a direct result of the acquisition
of the Barkley Place office building and the 9200 Cody
warehouse/office facility. The decrease in utilities is
primarily due to mild weather conditions in the nine months
of 1995.
The increase in amortization of leasehold improvements
is primarily due to the large expenditures for tenant
improvements during the last quarter of 1994 and the first
half of 1995 being amortized over the life of the respective
leases. The decrease in professional fees and other
expenses is primarily due to the expenses incurred in
connection with the land lease on the land at 6th and Main
Streets, the possible construction of a downtown parking
garage, and the legal fees related to the operating
engineers union contract negotiations and the subsequent
change to utilizing contract labor in the Commerce Tower
office building in 1994.
THREE MONTHS ENDED SEPTEMBER 30, 1995
COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 1994
RESULTS OF OPERATION
Increased occupancy in the Commerce Tower building,
increased revenue in parking operations, and the
acquisitions of the Barkley Place office building effective
July 15, 1994 and the June 30, 1995 acquisition of the 9200
Cody warehouse/office facility are primarily responsible for
the increase in rental income of $379,514. Increased
occupancy in the Commerce Tower resulted in an increase in
income of 13%. Parking revenue and apartment rentals both
increased 9%. The acquisition of Barkley Place office
Building and 9200 Cody warehouse, with combined income of
$123,430, was responsible for 33% of the total increase in
rental income.
The decrease of $80,441 in maintenance and repairs is
primarily due to the painting of the Hillsborough, New Mark
and Peppertree apartment complexes in 1994 offset by the
repairs and the sub-contract engineering expense of the
Commerce Tower building in 1995. The increase in
depreciation, taxes other than income and interest of
$210,990 is a direct result of the acquisitions of the
Barkley Place office building and 9200 Cody warehouse. The
decrease in utilities is primarily due to mild weather
conditions during 1995.
Amortization of leasehold improvements increased due to
the large expenditures for tenant improvements being
amortized over the life of the respective leases. The
decrease in professional fees and other expenses is
primarily due to the expenses incurred in connection with
the land lease on the land at 6th and Main streets, legal
fees related to the operating engineers and the possible
construction of a downtown parking garage during 1994.
ENVIRONMENTAL ISSUES:
Due to the lack of governmental regulations regarding
asbestos and uncertainty surrounding the advantages and
disadvantages of asbestos removal, Tower Properties Company
will continue to monitor asbestos and will take appropriate
action when required.
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant had duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
TOWER PROPERTIES COMPANY
/s/ Benjamin F. Bryan
- ---------------------
Benjamin F. Bryan
Executive Vice President
/s/ Chester A. Wittwer, Jr.
- ---------------------------
Chester A. Wittwer, Jr.
Vice President
Date: November 14, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Allows filer to insert legend qualifying information contained in the
schedule as provided by Item 601(c)(2)(i) of Regulations S-K and
S-B. The legend is limited to five lines of 80 characters. Optional.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 29,211
<SECURITIES> 2,380,507
<RECEIVABLES> 789,548
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,633,447
<PP&E> 61,243,805
<DEPRECIATION> 24,739,392
<TOTAL-ASSETS> 47,073,109
<CURRENT-LIABILITIES> 7,821,512
<BONDS> 17,474,379
0
0
<COMMON> 178,430
<OTHER-SE> 20,076,413
<TOTAL-LIABILITY-AND-EQUITY> 47,073,109
<SALES> 0
<TOTAL-REVENUES> 9,708,899
<CGS> 0
<TOTAL-COSTS> 6,527,110
<OTHER-EXPENSES> 22,278
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,355,123
<INCOME-PRETAX> 1,804,388
<INCOME-TAX> 639,360
<INCOME-CONTINUING> 1,165,028
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,165,028
<EPS-PRIMARY> 6.82
<EPS-DILUTED> 0
</TABLE>
