<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 March 31, 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
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(Address of principal executive offices) Zip Code
816-421-8255
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(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.
170,857 shares of common stock
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$1.00 par value per share, at April 15, 1995
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<TABLE>
TOWER PROPERTIES COMPANY - CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
<CAPTION>
ASSETS 1995 1994
------------- -------------
<S> <C> <C>
Cash $ 15,671 $ 23,225
Short Term Investments 60,000 60,000
Related Party Investment, At Market 1,806,470 1,586,169
Accounts Receivable 754,214 689,231
Notes Receivable 79,950 169,606
Tenant Leasehold Improvements, Net 3,381,222 3,324,724
Prepaid Expenses and Other Assets 1,372,600 726,841
Rental Income Property, At Cost 53,017,440 53,017,440
Less: Accumulated Depreciation (20,697,815) (20,432,648)
-------------- --------------
Net Rental Income Property 32,319,625 32,584,792
Real Estate Held for Sale 1,184,918 1,184,918
Equipment and Furniture, at Cost 5,428,232 5,300,354
Less: Accumulated Depreciation (3,284,122) (3,151,916)
-------------- --------------
Net Equipment and Furniture 2,144,110 2,148,438
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Total Assets $43,118,780 $42,497,944
============== ==============
LIABILITIES AND STOCKHOLDERS'
INVESTMENT
Liabilities:
Accounts Payable and Other Liabilities $ 1,062,882 $ 957,222
Related Party Loan 3,503,080 3,743,080
Income Taxes Payable 212,478 --
Deferred Income Taxes 1,222,257 1,145,131
Mortgage Notes Payable 17,707,478 17,820,480
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Total Liabilities 23,708,175 23,665,913
Minority Interest 223,884 213,989
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 1,536,121 1,103,532
Unrealized Holding Gain for Securities 612,907 469,732
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19,683,330 19,107,566
Less Treasury Stock, At Cost (7,573 and
7,464 shares in 1995 and 1994,
respectively) (496,609) (489,524)
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Total Stockholders' Investment 19,186,721 18,618,042
-------------- --------------
Total Liabilities and Stockholders'
Investment $43,118,780 $42,497,944
============== ==============
The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>
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<TABLE>
TOWER PROPERTIES COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND MARCH 31, 1994
(UNAUDITED)
<CAPTION>
March, 1995 March, 1994
----------- -----------
<S> <C> <C>
REVENUES:
Rent $2,850,483 $2,265,700
Rent, Related Party 143,517 139,963
Management and Service Fees 45,422 73,372
Management and Services Fees, Related Party 75,664 81,874
Real Estate Sales -- 136,000
Interest and Other Income 16,759 75,251
Other Income, Related Party 36,869 27,008
----------- -----------
Total Revenues 3,168,714 2,799,168
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COSTS & EXPENSES:
Costs of Real Estate Sold -- 54,122
Salaries and Employee Benefits 394,200 510,063
Depreciation 397,373 362,817
Maintenance and Repairs 434,702 302,742
Taxes Other than Income 273,997 215,753
Utilities 193,231 250,800
Interest 369,558 266,601
Interest, Related Party 69,277 60,201
Amortization of Leasehold Improvements 183,000 139,500
Leasing and Advertising 18,230 16,435
Professional Fees 23,400 34,785
Insurance 54,737 42,169
Other 75,722 118,111
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Total Costs and Expenses 2,487,427 2,374,099
Income Before Minority Interest and
Provision for Income Taxes 681,287 425,069
Minority Interest In Income of Subsidiary (9,895) (4,803)
----------- -----------
Income Before Provision for Income Taxes 671,392 420,266
PROVISION FOR INCOME TAXES:
Currently Payable 238,803 148,744
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NET INCOME $ 432,589 $ 271,522
=========== ===========
Earnings Per Share $ 2.53 $ 1.59
=========== ===========
Weighted Average Common Shares Outstanding 170,960 170,821
=========== ===========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
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<TABLE>
TOWER PROPERTIES COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE THREE MONTHS ENDING MARCH 31, 1995 AND MARCH 31, 1994
(UNAUDITED)
<CAPTION>
March, 1995 March, 1994
----------- -----------
<S> <C> <C>
Retained Earnings, Beginning
of Period $1,103,532 $291,701
Net Income $ 432,589 271,522
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Retained Earnings, End of Period $1,536,121 $563,223
=========== =========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
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<TABLE>
TOWER PROPERTIES COMPANY - CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDING MARCH 31, 1995 AND MARCH 31, 1994
(UNAUDITED)
<CAPTION>
1995 1994
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 432,589 $ 271,522
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 397,373 362,817
Amortization of Leasehold Improvements 183,000 139,500
(Increase) Decrease in Accounts Receivables (64,983) 67,495
Decrease in Notes Receivables 89,656 8,326
Increase in Accounts Payable and
Other Liabilities 105,660 82,636
(Increase) Decrease in Prepaid Expenses and
Other Assets (645,759) 90,742
Increase in Income Taxes Payable 212,478 104,107
Gain on Real Estate Sales -- (81,878)
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Net Cash Provided by Operating Activities 710,014 1,045,267
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CASH FLOW FROM INVESTING ACTIVITIES:
Additions to Real Estate Held for Sale -- (2,495)
Additions to Equipment & Furniture (127,878) (73,117)
Additions to Leasehold Improvements (239,498) (238,454)
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Net Cash Used in Investing Activities (367,376) (314,066)
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CASH FLOW FROM FINANCING ACTIVITIES:
Principal Payments on Mortgages (113,002) (2,831,997)
Proceeds from Long Term Borrowings -- 6,600,000
Reduction in Short Term Borrowings (240,000) (4,450,000)
Purchase of Treasury Stock, Net (7,085) (780)
Increase in Minority Interest 9,895 4,803
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Net Cash Used In Financing Activities (350,192) (677,974)
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NET (DECREASE) INCREASE IN CASH (7,554) 53,227
CASH, Beginning of Period 23,225 18,659
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CASH, End of Period $ 15,671 $ 71,886
=========== ============
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> 6
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 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, which except for the
Hillsborough, Peppertree apartments and the Barkley Place
commercial office building (which are located in Mission,
Merriam, and Overland Park, Kansas) are located in Kansas City,
Missouri. Substantially all of the improved real estate owned by
the Company and its subsidiaries consist of office buildings,
apartment complexes 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. Tower Properties company considers investments purchased with
a maturity of three months or less to be cash equivalents.
Interest paid during the first three months of 1995 and 1994 were
$369,558 and $266,601 respectively. Income taxes paid during the
first three months of 1995 and 1994 were $26,324 and $44,637
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 $942,933 net of tax
effects of $330,047 is reflected as a separate component of
equity. The increase in the net unrealized holding gain from
December 31, 1994 to March 31, 1995 was $143,175 net of deferred
taxes.
6. REAL ESTATE HELD FOR SALE
Revenue is recorded on the sale of real estate when sold.
All sales are to builders for cash or short-term notes
receivable. The Company's real estate held for sale is recorded
at cost which does not exceed its estimated realizable value. In
1994, the
<PAGE> 7
Company eliminated its valuation reserve for real estate held for
sale. In the opinion of management, the reserve is no longer
deemed necessary due to current market conditions.
Supplemental disclosure of noncash investing activity: In
the first quarter of 1994, the Company exchanged real estate held
for sale for a $135,000 note receivable. This note was satisfied
during the first quarter of 1995.
8. 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 of 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 1994, the
Company made modifications to certain properties at a cost of
approximately $2,300.
<PAGE> 8
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. The Company has not experienced liquidity problems
during the three months ended March 31, 1995. On July 15, 1994,
the Company acquired the Barkley Place commercial office
building, located in Overland Park, Kansas, for $5,900,000. The
Company used $5,900,000 of the line of credit with Commerce
Bank of Kansas City to acquire the property. In December, 1994 a
$4,000,000 eighteen-year term mortgage loan was secured for this
property with the AEGON USA Realty Advisors, Inc. The proceeds
from this loan were used to reduce the line of credit with
Commerce Bank of Kansas City.
THREE MONTHS ENDED MARCH 31, 1995
COMPARED WITH THE THREE MONTHS ENDED MARCH 31, 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 on July 15, 1994, are primarily
responsible for the increase in rental income of $588,337.
Occupancy in the Commerce Tower was 92% at March, 1995 compared
to 74% 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 16% and apartment
rentals increased 5%. The acquisition of Barkley in July, 1994,
with first quarter income of $331,627, was responsible for 56% 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 contract building
engineers in September, 1994 accounts for the decrease in
management and service fees income and salaries expense.
The contract engineering expense of $67,556 and the
acquisition of Barkley Place office building on July 15, 1994 are
primarily responsible for the increase in repairs and maintenance
of $131,960. Barkley is also responsible for the increase in
depreciation, taxes other than income and interest expense. The
decrease in utilities is primarily due to mild winter conditions
in the first quarter of 1995.
The decrease in other expenses is primarily due to
the expenses incurred in connection with the land lease on the
land at 6th and Main Streets during the first quarter in 1994.
<PAGE> 9
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.
AMERICANS WITH DISABILITIES ACT:
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
conditions 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 1994, the
Company made modifications to certain properties at a cost of
approximately $2,300.
<PAGE> 10
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: May 15, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 15,671
<SECURITIES> 1,866,470
<RECEIVABLES> 834,164
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,088,905
<PP&E> 58,445,672
<DEPRECIATION> 23,981,937
<TOTAL-ASSETS> 43,118,780
<CURRENT-LIABILITIES> 4,778,441
<BONDS> 17,707,478
<COMMON> 178,430
0
0
<OTHER-SE> 19,008,291
<TOTAL-LIABILITY-AND-EQUITY> 43,118,780
<SALES> 0
<TOTAL-REVENUES> 3,168,714
<CGS> 0
<TOTAL-COSTS> 2,048,592
<OTHER-EXPENSES> 9,895
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 438,835
<INCOME-PRETAX> 671,392
<INCOME-TAX> 238,803
<INCOME-CONTINUING> 432,589
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 432,589
<EPS-PRIMARY> 2.53
<EPS-DILUTED> 0
</TABLE>
