<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, 1996
--------------------------------
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
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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.
171,014 shares of common stock
------------------------------
$1.00 par value per share, at April 15, 1996
<PAGE> 2
<TABLE>
TOWER PROPERTIES COMPANY - CONSOLIDATED BALANCE SHEETS
March 31, 1996 and December 31, 1995
<CAPTION>
(UNAUDITED)
ASSETS 1996 1995
--------------- ---------------
<S> <C> <C>
Cash $ 58,662 $ 5,577
Short Term Investments 60,000 60,000
Related Party Investment, At Market 2,143,519 2,359,413
Accounts Receivable 909,983 988,565
Notes Receivable 62,652 69,678
Tenant Leasehold Improvements, Net 4,307,239 4,555,924
Construction in Progress 1,487,542 3,016,024
Prepaid Expenses and Other Assets 307,884 346,478
Rental Income Property, At Cost 65,521,254 62,521,254
Less: Accumulated Depreciation (21,822,621) (21,492,176)
--------------- ---------------
Net Rental Income Property 43,698,633 41,029,078
Real Estate Held for Sale 834,358 1,147,859
Equipment and Furniture, at Cost 6,657,486 6,572,718
Less: Accumulated Depreciation (3,805,965) (3,647,253)
--------------- ---------------
Net Equipment and Furniture 2,851,521 2,925,465
--------------- ---------------
Total Assets $ 56,721,993 $ 56,504,061
=============== ===============
LIABILITIES AND STOCKHOLDERS'
INVESTMENT
Liabilities:
Accounts Payable and Other Liabilities $ 1,043,937 $ 919,297
Related Party Loan 8,601,859 13,856,859
Income Taxes Payable 199,225 436,086
Deferred Income Taxes 1,155,225 1,230,788
Mortgage Notes Payable 24,568,173 19,300,872
--------------- ---------------
Total Liabilities 35,568,419 35,743,902
Minority Interest 130,786 124,900
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 3,141,572 2,613,712
Unrealized Holding Gain for Securities 831,988 972,319
--------------- ---------------
21,507,862 21,120,333
Less Treasury Stock, At Cost
(7,416 shares) (485,074) (485,074)
--------------- ---------------
Total Stockholders' Investment 21,022,788 20,635,259
--------------- ---------------
Total Liabilities and Stockholders' Investment $ 56,721,993 $ 56,504,061
=============== ===============
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, 1996 AND MARCH 31, 1995
(UNAUDITED)
<CAPTION>
March, 1996 March, 1995
------------- -------------
<S> <C> <C>
REVENUES:
Rent $3,226,106 $2,850,483
Rent, Related Party 157,181 143,517
Management and Service Fees 29,211 45,422
Management and Services Fees, Related Party 79,615 75,664
Real Estate Sales 580,000 --
Interest and Other Income 14,866 16,759
Other Income, Related Party 39,177 36,869
------------- -------------
Total Revenues 4,126,156 3,168,714
------------- -------------
COSTS & EXPENSES:
Costs of Real Estate Sold 349,179 --
Salaries and Employee Benefits 393,758 394,200
Depreciation 489,157 397,373
Maintenance and Repairs 461,750 434,702
Taxes Other than Income 273,137 273,997
Utilities 244,332 193,231
Interest 410,634 369,558
Interest, Related Party 211,609 69,277
Amortization of Leasehold Improvements 307,950 183,000
Leasing and Advertising 21,569 18,230
Professional Fees 23,111 23,400
Insurance 30,938 54,737
Other 88,058 75,722
------------- -------------
Total Costs and Expenses 3,305,182 2,487,427
Income Before Minority Interest and
Provision for Income Taxes 820,974 681,287
Minority Interest In Income of Subsidiary (5,886) (9,895)
------------- -------------
Income Before Provision for Income Taxes 815,088 671,392
PROVISION FOR INCOME TAXES:
Currently Payable 287,228 238,803
------------- -------------
NET INCOME $ 527,860 $ 432,589
============= =============
Earnings Per Share $ 3.09 $ 2.53
============= =============
Weighted Average Common Shares Outstanding 171,014 170,960
============= =============
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 THREE MONTHS ENDING MARCH 31, 1996 AND MARCH 31, 1995
(UNAUDITED)
<CAPTION>
March, 1996 March, 1995
------------- -------------
<S> <C> <C>
Retained Earnings, Beginning
of Period $ 2,613,712 $ 1,103,532
Net Income 527,860 432,589
------------- -------------
Retained Earnings, End of Period $ 3,141,572 $ 1,536,121
============= =============
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE> 5
<TABLE>
TOWER PROPERTIES COMPANY - CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDING MARCH 31, 1996 AND MARCH 31, 1995
(UNAUDITED)
<CAPTION>
1996 1995
--------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 527,860 $ 432,589
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 489,157 397,373
Amortization of Leasehold Improvements 307,950 183,000
Decrease (Increase) in Accounts Receivables 78,582 (64,983)
Decrease in Notes Receivables 7,026 89,656
Increase in Accounts Payable and
Other Liabilities 124,640 105,660
Decrease (Increase) in Prepaid Expenses and
Other Assets 38,594 (161,948)
(Decrease) Increase in Income Taxes Payable (236,861) 212,478
Gain on Real Estate Sales (230,821) --
--------------- --------------
Net Cash Provided by Operating Activities 1,106,127 1,193,825
--------------- --------------
CASH FLOW FROM INVESTING ACTIVITIES:
(Increase) in Construction in Progress (1,471,518) (483,811)
Sale of Real Estate, Net 544,322 --
Additions to Equipment & Furniture (84,768) (127,878)
Additions to Leasehold Improvements (59,265) (239,498)
--------------- --------------
Net Cash Used in Investing Activities (1,071,229) (851,187)
--------------- --------------
CASH FLOW FROM FINANCING ACTIVITIES:
Principal Payments on Mortgages (132,699) (113,002)
Proceeds from Long Term Borrowings 5,400,000 --
Reduction in Short Term Borrowings (5,255,000) (240,000)
Purchase of Treasury Stock, Net -- (7,085)
Increase in Minority Interest 5,886 9,895
--------------- --------------
Net Cash Used In Financing Activities 18,187 (350,192)
--------------- --------------
NET INCREASE (DECREASE) IN CASH 53,085 (7,554)
CASH, Beginning of Period 5,577 23,225
--------------- --------------
CASH, End of Period $ 58,662 $ 15,671
=============== ==============
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 latest
annual report on Form 10-K as of and for the year ended December 31, 1995.
The Company is primarily engaged in owning, developing, leasing and
managing real property located in Johnson County, Kansas and 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 three months of 1996 and 1995 for
long-term mortgages amounted to $410,634 and $369,558, respectively. Income
taxes paid during the first three months of 1996 and 1995 amounted to $524,089
and $26,324, respectively.
4. Certain prior quarter amounts have been reclassified to conform to the
1996 presentation.
5. 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 $1,279,982 net of tax effects of $447,994 is reflected as a
separate component of equity. The decrease in the net unrealized holding gain
for the three months from December 31, 1995 to March 31, 1996 was $140,331,
net of deferred taxes.
6. REAL ESTATE HELD FOR SALE:
Revenue is recorded on the sale of real estate when title passes to the
buyer. All land 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.
<PAGE> 7
7. ACQUISITIONS:
On June 30, 1995, the Company purchased a warehouse/office facility for
$2,600,000. The warehouse/office facility is a 93,900 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. In November, 1995, a $1,950,000 twenty-year term
mortgage loan was secured for this property with State Farm Insurance at a
fixed rate of 8%. The proceeds of this loan were used to reduce the line of
credit with Commerce Bank, N.A.
On December 15, 1995, the Company acquired the 6601 College Boulevard
commercial office building for $7,700,000. The 6601 College Boulevard is a
six-story, 101,200 square foot commercial office building located in Overland
Park, Kansas. The Company used the line of credit with Commerce Bank of
Kansas City to make this purchase. In March, 1996, a $5,400,000 twenty-year
term mortgage loan was secured for this property with Nationwide Life
Insurance Company at a fixed rate of 7.40%. The proceeds from this loan were
used to reduce the line of credit with Commerce Bank, N.A.
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.
The Company is in the process of demolishing the North section of the
Rodeway Hotel and constructing a temporary 100 stall surface parking lot.
This site is included in the Redevelopment District established by the Company
and approved by the City of Kansas City, Missouri. The site is planned for a
commercial office building by the year 2005. The estimated cost for the
removal of asbestos, demolition, paving and landscaping of the lot will be
approximately $525,000.
<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, apartment
complexes, a warehouse/office facility, parking facilities and land held for
future sale. The principal source of funds generated internally is income
from operations. The principal source of external funds is long-term debt and
line of credit with Commerce Bank, N.A. The Company has not experienced
liquidity problems during the three months ended March 31, 1996. 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, N.A. to acquire the property. In November, 1995, a $1,950,000
twenty-year term mortgage loan was secured for this property with State Farm
Insurance. The proceeds from this loan were used to reduce the line of credit
with Commerce Bank, N.A. On December 15, 1995, the Company acquired the 6601
College Boulevard commercial office building, located in Overland Park,
Kansas, for $7,700,000. The Company used $7,700,000 of the line of credit
with Commerce Bank, N.A. to make this purchase. In March, 1996, a $5,400,000
twenty-year term mortgage loan was secured with Nationwide Life Insurance
Company at a fixed rate of 7.40%. The proceeds from this loan were used to
reduce the line of credit with Commerce Bank, N.A.
THREE MONTHS ENDED MARCH 31, 1996
COMPARED WITH THE THREE MONTHS ENDED MARCH 31, 1995
RESULT OF OPERATIONS:
Increased occupancy in the Commerce Tower building, increased revenue
from parking operations and the acquisition of the 9200 Cody warehouse/office
facility on June 30, 1995 and the December 15, 1995 acquisition of the 6601
College Boulevard office building are primarily responsible for the increase
in rental income of $389,287. Parking revenue increased 11% and apartments
rentals increased 7%. The acquisition of 9200 Cody warehouse/office facility
and the 6601 College Boulevard commercial office building with combined income
of $268,371 was responsible for 69% of the total increase. The sale of
twenty-nine acres of undeveloped land located in the New Mark Division during
the first quarter of 1996 accounts for the increase in real estate sales and
cost of real estate sold.
The increase of $27,048 in maintenance and repairs primarily due to
additional engineering expense due to the cold weather in January and
February, 1996 and the snow removal expense related to the bad weather at all
locations. The increase in depreciation and interest expense is a direct
result of the acquisition of the 9200 Cody warehouse/office facility and the
6601 College Boulevard commercial office building. The increase in utilities
is primarily due to severe weather conditions in the first two months of 1996.
<PAGE> 9
The increase in amortization of leasehold improvements is primarily due
to the large expenditures for tenant improvements for both the Commerce Tower
and Barkley Place office buildings being amortized over the life of the
respective leases. The decrease in insurance expense is due to a reduction in
premium for the 1994/1995 and the 1995/1996 workers compensation coverage
received in 1996.
ENVIRONMENTAL ISSUES:
Due to governmental regulations regarding asbestos and uncertainty
surrounding the advantages and disadvantages of asbestos removal, Tower
Properties Company will continue to monitor the status of asbestos in its
buildings and will take appropriate action when required.
The cost to remove all asbestos from properties owned by Tower
Properties Company has not been determined; however, these removal costs could
have a significant adverse impact on the future operations and liquidity of
Tower Properties Company.
<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, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 58,662
<SECURITIES> 2,203,519
<RECEIVABLES> 972,635
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,030,242
<PP&E> 72,178,740
<DEPRECIATION> 25,628,586
<TOTAL-ASSETS> 56,721,993
<CURRENT-LIABILITIES> 9,845,021
<BONDS> 24,568,173
<COMMON> 178,430
0
0
<OTHER-SE> 20,844,358
<TOTAL-LIABILITY-AND-EQUITY> 56,721,993
<SALES> 0
<TOTAL-REVENUES> 4,126,156
<CGS> 0
<TOTAL-COSTS> 2,682,939
<OTHER-EXPENSES> 5,886
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 622,243
<INCOME-PRETAX> 815,088
<INCOME-TAX> 287,228
<INCOME-CONTINUING> 527,860
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 527,860
<EPS-PRIMARY> 3.09
<EPS-DILUTED> 0
</TABLE>
