<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 June 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.
170,901 shares of common stock
------------------------------
$1.00 par value per share, at July 15, 1995
<PAGE> 2
<TABLE>
TOWER PROPERTIES COMPANY - CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
<CAPTION>
ASSETS 1995 1994
------------ ------------
<S> <C> <C>
Cash $ 25,909 $ 23,225
Commercial Paper, At Cost 60,000 60,000
Short term Investments 1,835,844 1,586,169
Accounts Receivable 710,195 689,231
Notes Receivable 84,276 169,606
Tenant Leasehold Improvements, Net 3,849,803 3,324,724
Prepaid Expenses and Other Assets 1,214,574 726,841
Rental Income Property, At Cost 55,421,874 53,017,440
Less: Accumulated Depreciation (20,940,005) (20,432,648)
------------ ------------
Net Rental Income Property 34,481,869 32,584,792
Real Estate Held for Sale 1,193,650 1,184,918
Equipment and Furniture, at Cost 5,732,120 5,300,354
Less: Accumulated Depreciation (3,396,582) (3,151,916)
------------ ------------
Net Equipment and Furniture 2,335,538 2,148,438
------------ ------------
Total Assets $ 45,791,658 $ 42,497,944
============ ============
LIABILITIES AND STOCKHOLDERS'
INVESTMENT
Liabilities:
Accounts Payable and Other Liabilities $ 1,151,450 $ 957,222
Related Party Loan 5,911,509 3,743,080
Income Taxes Payable 225,709 --
Deferred Income Taxes 1,232,538 1,145,131
Mortgage Notes Payable 17,592,128 17,820,480
------------ ------------
Total Liabilities 26,113,334 23,665,913
Minority Interest In Subsidiary 114,900 213,989
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 1,900,817 1,103,532
Unrealized Holding Gain for Securities 631,999 469,732
------------ ------------
20,067,118 19,107,566
Less Treasury Stock, At Cost (7,682 and
7,464 shares in 1995 and 1994, respectively) (503,694) (489,524)
------------ ------------
Total Stockholders' Investment 19,563,424 18,618,042
------------ ------------
Total Liabilities and Stockholders' Investment $ 45,791,658 $ 42,497,944
============ ============
The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>
<PAGE> 3
<TABLE>
TOWER PROPERTIES COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
June, 1995 June, 1994
------------ ------------
<S> <C> <C>
REVENUES:
Rent $ 5,770,599 $ 4,535,168
Rent, Related Party 285,281 275,219
Management and Service Fees 73,495 146,121
Management and Services Fees, Related Party 161,455 168,333
Real Estate Sales -- 164,550
Interest and Other Income 40,481 118,482
Other Income, Related Party 61,603 65,178
------------ ------------
Total Revenues 6,392,914 5,473,051
------------ ------------
COSTS & EXPENSES:
Costs of Real Estate Sold $ -- $ 61,535
Salaries and Employee Benefits 781,840 1,029,134
Depreciation 768,878 702,918
Maintenance and Repairs 1,082,782 802,818
Taxes Other than Income 547,994 438,140
Utilities 344,792 465,177
Interest 729,651 551,868
Interest, Related Party 137,768 104,303
Amortization of Leasehold Improvements 390,899 285,698
Leasing and Advertising 45,816 43,011
Professional Fees 46,966 107,609
Insurance 113,162 84,116
Other 149,575 194,049
------------ ------------
Total Costs and Expenses 5,140,123 4,870,376
Income Before Minority Interest and
Provision for Income Taxes 1,252,791 602,675
Minority Interest In Income of Subsidiary (16,973) (11,220)
------------ ------------
Income Before Provision for Income Taxes 1,235,818 591,455
PROVISION FOR INCOME TAXES:
Currently Payable 438,533 210,832
------------ ------------
NET INCOME $ 797,285 $ 380,623
============ ============
Earnings per Share $ 4.67 $ 2.23
============ ============
Weighted Average Common Shares Outstanding 170,855 170,817
============ ============
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 SIX MONTHS ENDING JUNE 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
June, 1995 June, 1994
------------ ------------
<S> <C> <C>
Retained Earnings (Deficit), Beginning
of Period $ 1,103,532 $ 291,701
Net Income $ 797,285 380,623
------------ ------------
Retained Earnings, End of Period $ 1,900,817 $ 672,324
============ ============
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 JUNE 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
June, 1995 June, 1994
------------ ------------
<S> <C> <C>
REVENUES:
Rent $ 2,920,116 $ 2,269,468
Rent, Related Party 141,764 135,256
Management and Service Fees 28,073 72,749
Management and Services Fees, Related Party 85,791 86,459
Real Estate Sales -- 28,550
Interest and Other Income 23,722 43,231
Other Income, Related Party 24,734 38,170
------------ ------------
Total Revenues 3,224,200 2,673,883
------------ ------------
COSTS & EXPENSES:
Costs of Real Estate Sold $ -- $ 7,413
Salaries and employee benefits 387,640 519,071
Maintenance and Repairs 685,409 440,001
Depreciation 334,176 400,176
Taxes Other than Income 273,997 222,387
Utilities 151,561 214,377
Interest 360,093 285,267
Interest, Related Party 68,491 44,102
Amortization of Leasehold Improvements 207,899 146,199
Leasing and Advertising 27,586 26,576
Professional Fees 23,566 72,824
Insurance 58,425 41,947
Other 73,973 75,936
------------ ------------
Total Costs and Expenses 2,652,816 2,496,276
Income Before Minority Interest and Provision for
Income Taxes 571,384 177,607
Minority Interest In Income of Subsidiary (6,958) (6,418)
------------ ------------
Income Before Provision for Income Taxes 564,426 171,189
PROVISION FOR INCOME TAXES:
Currently Payable 199,730 62,088
------------ ------------
NET INCOME $ 364,696 $ 109,101
============ ============
Earnings per Share $ 2.13 $ 0.64
============ ============
Weighted Average Common Shares Outstanding 170,855 170,817
============ ============
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 SIX MONTHS ENDING JUNE 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
1995 1994
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 797,285 $ 380,623
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 768,878 702,918
Amortization of Leasehold Improvements 390,899 285,698
(Increase) Decrease in Accounts Receivables (20,964) 30,510
Decrease in Notes Receivable 85,330 70,827
Increase in Accounts Payable and
Other Liabilities 194,227 264,373
(Increase) Decrease in Prepaid Expenses and
Other Assets (487,733) 115,504
Increase (Decrease) in Income Taxes Payable 225,709 (6,395)
Gain on Real Estate Sales -- (93,678)
------------- ------------
Net Cash Provided by Operating Activities 1,953,631 1,750,380
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CASH FLOW FROM INVESTING ACTIVITIES:
Additions to Real Estate Held for Sale, Net (8,732) (3,199)
Additions to Equipment & Furniture (248,621) (135,027)
Acquisition of Warehouse (2,600,000) --
Additions to Rental Property (4,434) (5,436)
Additions to Leasehold Improvements (915,978) (480,858)
------------- ------------
Net Cash Used in Investing Activities (3,777,765) (624,520)
------------- ------------
CASH FLOW FROM FINANCING ACTIVITIES:
Principal Payments on Mortgage Notes Payable (228,352) (2,917,254)
Proceeds From Mortgage Notes Payable -- 6,600,000
Increase (Decrease) in Related Party Line of Credit 2,168,429 (4,760,000)
Purchase of Treasury Stock (14,170) (835)
(Decrease) Increase in Minority Interest, Net (99,089) 11,220
------------- ------------
Net Cash Used In Financing Activities 1,826,818 (1,066,869)
------------- ------------
NET INCREASE IN CASH 2,684 58,991
CASH, Beginning of Period 23,225 18,659
------------- ------------
CASH, End of Period $ 25,909 $ 77,650
============= ============
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, which except for the Hillsborough and Peppertree
apartments, the Barkley Place commercial office building and the commercial
warehouse/office facility (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, 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 six months of 1995 and 1994 were $729,651
and $551,868, respectively. Income taxes paid during the first six months of
1995 and 1994 amounted to $212,824 and $220,827, 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 $972,307
net of tax effects of $340,307 is reflected as a separate component of equity.
The increase in the net unrealized holding gain for the six months from
December 31, 1994 to June 30, 1995 was $162,268 and $19,092 for the three
months from March 31, 1995 to June 30, 1995.
<PAGE> 8
6. REAL ESTATE HELD FOR SALE
Revenue is recorded on the sale of real estate when sold. All sales are
to developers or 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 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.
7. 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 bears interest at a fixed rate
of 8%. The proceeds of this loan will be used to reduce the line of credit.
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 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 $1,100 and $2,300, 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. The
Company has not experienced liquidity problems during the six months ended
June 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 in the amount of $1,950,000
from Northland Financial Company. This mortgage loan will have a twenty-year
amortization term and bears interest at a fixed rate of 8%. The proceeds of
this loan will be used to reduce the line of credit.
SIX MONTHS ENDED JUNE 30, 1995
COMPARED WITH THE SIX MONTHS ENDED JUNE 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 on July 15, 1994, are primarily responsible for the increase in
rental income of $1,245,493. Occupancy in the Commerce Tower was 92% at
June, 1995 compared to 76% 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 18% and apartment rentals increased 8%. The
acquisition of Barkley in July, 1994, with six months income of $649,073, was
responsible for 52% 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 $146,916, the cleaning and sealing
of the exterior precast panels of the Commerce Tower building and the
acquisition of Barkley Place office building on July 15, 1994 are primarily
responsible for the increase in repairs and maintenance of $279,964. The
acquisition of 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 weather conditions in the first half 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 quarter 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
<PAGE> 10
connection with the land lease on the land at 6th and Main Streets and the
possible construction of a downtown parking garage during the first half of
1994.
THREE MONTHS ENDED JUNE 30, 1995
COMPARED WITH THREE MONTHS ENDED JUNE 30, 1994
RESULTS OF OPERATION
Increased occupancy in the Commerce Tower building, increased revenue in
parking operations, and the acquisition of the Barkley Place office building
effective July 15, 1994 are primarily responsible for the increase in rental
income of $657,155. The increase in occupancy as a result of leasing
approximately 60,000 square feet of the Commerce Tower during the third and
fourth quarter of 1994 resulted in an increase in income of 12%. Parking
revenue increase 19% and apartment rentals increased 12%. The acquisition of
Barkley in July, 1994, with second quarter income of $317,445, 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 contract building engineers in September, 1994
accounts for the decrease in management and service fees income and salaries
expense.
The increase of $185,333 in maintenance and repairs is primarily due to
the contract engineering expense of 1995 and the acquisition of Barkley Place
office building offset by the painting of the Hillsborough, New Mark and
Peppertree apartment complexes in 1994.
The increase in taxes other than income and interest of $150,825 is a
direct result of the acquisition of the Barkley Place office building on July
15, 1994. The decrease in utilities is primarily due to mild weather
conditions in 1995.
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 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.
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
<PAGE> 11
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 $1,100 and $2,300, respectively.
<PAGE> 12
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: August 15, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 25,909
<SECURITIES> 1,895,844
<RECEIVABLES> 794,471
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,930,798
<PP&E> 61,153,994
<DEPRECIATION> 24,336,587
<TOTAL-ASSETS> 45,791,658
<CURRENT-LIABILITIES> 7,288,668
<BONDS> 17,592,128
<COMMON> 0
0
178,430
<OTHER-SE> 19,384,994
<TOTAL-LIABILITY-AND-EQUITY> 45,719,658
<SALES> 0
<TOTAL-REVENUES> 6,392,914
<CGS> 0
<TOTAL-COSTS> 4,272,704
<OTHER-EXPENSES> 16,973
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 867,419
<INCOME-PRETAX> 1,235,818
<INCOME-TAX> 438,533
<INCOME-CONTINUING> 797,285
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 797,285
<EPS-PRIMARY> 4.67
<EPS-DILUTED> 0
</TABLE>
