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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 2000
------------------------------------
Commission File Number 0-18261
TOWER PROPERTIES COMPANY
------------------------
(Exact name of registrant as specified in its charter)
Missouri (43-1529759)
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(State of incorporation) (IRS tax number)
Suite 100, 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(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.
179,118 shares of common stock
------------------------------
$1.00 par value per share, at October 15, 2000
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<TABLE>
TOWER PROPERTIES COMPANY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
<CAPTION>
(UNAUDITED)
2000 1999
------------- -------------
<S> <C> <C>
ASSETS
Investment in Commercial Properties:
Rental Property, Net $74,655,089 $76,109,334
Tenant Leasehold Improvements, Net 3,055,568 3,871,804
Equipment and Furniture, Net 3,767,621 4,068,565
Construction in Progress 3,606,794 1,266,623
------------- -------------
Commercial Properties, Net 85,085,072 85,316,326
Real Estate Held for Sale 396,453 396,453
Cash and Cash Equivalents 100,284 145,362
Investments At Market (Related Party) 4,140,081 3,809,718
Receivables 2,166,392 2,555,254
Prepaid Expenses and Other Assets 1,213,895 1,200,207
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TOTAL ASSETS $93,102,177 $93,423,320
============= =============
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Liabilities:
Mortgage Notes $46,245,165 $47,567,080
Real Estate Bond Issue 6,400,000 6,400,000
Line of Credit (Related Party) 5,100,000 5,065,030
Accounts Payable and Other Liabilities 3,100,271 2,837,461
Deferred Income Taxes 2,535,437 2,406,595
Income Taxes Payable 112,836 --
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Total Liabilities 63,493,709 64,276,166
Commitments and Contingencies
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
183,430 Shares 183,430 183,430
Paid-In Capital 18,460,986 18,460,693
Retained Earnings 9,616,084 8,760,535
Other Comprehensive Income 1,998,692 1,797,170
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30,259,192 29,201,828
Less Treasury Stock, At Cost (4,312 and
516 shares in 2000 and 1999, respectively) (650,724) (54,674)
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Total Stockholders' Investment 29,608,468 29,147,154
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TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $93,102,177 $93,423,320
============= =============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<TABLE>
TOWER PROPERTIES COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(UNAUDITED)
<CAPTION>
2000 1999
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<S> <C> <C>
REVENUES
Rent $13,631,878 $13,272,059
Rent, Related Party 1,265,576 1,246,996
Management and Service Fees 3,242 19,361
Management and Services Fees, Related Party 530,014 549,443
Real Estate Sales -- 59,840
Interest and Other Income 357,573 302,198
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Total Revenues 15,788,283 15,449,897
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OPERATING EXPENSES
Operating Expenses 2,814,998 2,547,665
Maintenance and Repairs 3,069,761 4,679,029
Depreciation and Amortization 3,205,008 3,004,060
Taxes Other than Income 1,239,305 1,282,694
General, Administrative and Other 883,053 840,366
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Total Operating Expenses 11,212,125 12,353,814
OTHER EXPENSE
Interest (Including Related Party) 3,172,338 2,791,389
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Income Before Minority Interest and
Provision for Income Taxes 1,403,820 304,694
Minority Interest In Income of Subsidiary -- (7,643)
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Income Before Provision for Income Taxes 1,403,820 297,051
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PROVISION FOR INCOME TAXES
Currently Payable 548,271 118,829
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NET INCOME $ 855,549 $ 178,222
============= =============
Earnings Per Share:
Basic $ 4.72 $ 0.98
============= =============
Diluted $ 4.72 $ 0.98
============= =============
Weighted Average Common Shares Outstanding:
Basic 181,079 182,711
============= =============
Diluted 181,079 182,712
============= =============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<TABLE>
TOWER PROPERTIES COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(UNAUDITED)
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
NET INCOME $ 855,549 $ 178,222
Unrealized holding gain (loss) on marketable
equity securities arising during the period 330,363 (763,152)
Deferred Income tax benefit (128,842) 297,629
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Comprehensive income (loss) $1,057,070 $(287,301)
============ ===========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<TABLE>
TOWER PROPERTIES COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(UNAUDITED)
<CAPTION>
2000 1999
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<S> <C> <C>
REVENUES
Rent $4,625,830 $4,366,214
Rent, Related Party 419,513 450,971
Management and Service Fees 145 3,713
Management and Service Fees, Related Party 224,646 252,906
Real Estate Sales -- --
Interest and Other Income 113,825 108,599
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Total Revenues 5,383,959 5,182,403
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OPERATING EXPENSES
Operating Expenses 1,017,654 907,554
Maintenance and Repairs 1,129,145 1,560,998
Depreciation and Amortization 994,620 999,313
Taxes Other than Income 413,101 436,667
General, Administrative and Other 314,055 279,002
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Total Operating Expenses 3,868,575 4,183,534
OTHER EXPENSE
Interest (Including Related Party) 1,046,476 906,656
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Net Income Before Minority Interest and
Provision for Income Taxes 468,908 92,213
Minority Interest In Income of Subsidiary -- (3,173)
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Income Before Provision for Income Taxes 468,908 89,040
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PROVISION FOR INCOME TAXES
Currently Payable 183,655 35,954
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NET INCOME $ 285,253 $ 53,086
============ ============
Earnings Per Share:
Basic $ 1.59 $ 0.29
============ ============
Diluted $ 1.59 $ 0.29
============ ============
Weighted Average Common Shares Outstanding:
Basic 179,135 182,869
============ ============
Diluted 179,135 182,869
============ ============
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
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<PAGE> 6
<TABLE>
TOWER PROPERTIES COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(UNAUDITED)
<CAPTION>
2000 1999
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 855,549 $ 178,222
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 2,279,581 2,134,885
Amortization of Leasehold Improvements 925,427 869,175
Gain on Real Estate Sales -- (24,951)
Net Change in Minority Interest -- (178,705)
Treasury Shares Issued to Directors 7,536 9,954
Change in Assets and Liabilities, Net:
Receivables 388,862 (379,108)
Prepaid Expenses and Other Assets (13,688) (216,260)
Accounts Payable and Other Liabilities 262,811 (770,251)
Income Taxes Payable 112,836 61,405
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Net Cash Provided by Operating Activities 4,818,914 1,684,366
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CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in Construction in Progress (2,340,171) (5,818,467)
Proceeds from Sale of Land -- 59,870
Additions to Real Estate Held for Sale, Net -- (655)
Additions to Equipment & Furniture, Net (383,710) (319,418)
Additions to Rental Income Property, Net (140,682) (331,623)
Additions to Leasehold Improvements, Net (109,191) (292,861)
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Net Cash Used In Investing Activities (2,973,754) (6,703,154)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal Payments on Mortgages (1,321,915) (1,133,566)
Proceeds from Long Term Borrowings -- 7,000,000
Change in Short Term Borrowings, Net 34,970 (1,145,000)
Sale of Treasury Stock -- 312,000
Purchase of Treasury Stock (603,293) (44,180)
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Net Cash Provided by (Used in) Financing Activities (1,890,238) 4,989,254
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NET DECREASE IN CASH (45,078) (29,534)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 145,362 147,928
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 100,284 $ 118,394
============= =============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<PAGE> 7
TOWER PROPERTIES COMPANY AND SUBSIDIARIES
FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The consolidated financial statements included herein have been
prepared by Tower Properties Company (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, 1999.
The Company is primarily engaged in owning, developing, leasing and
managing real property located in Johnson County, Kansas and Clay, Jackson
and St. Louis County, Missouri. Substantially all of the improved real estate
owned by the Company and its subsidiaries consists of office buildings,
apartment complexes, a warehouse and a warehouse/office facility, parking
facilities and land held for future sales.
2. Rental revenue is recognized on a straight-line basis over the term of
individual leases.
3. Interest of $69,958 and $158,296 was capitalized during the first nine
months of 2000 and 1999, respectively.
4. Interest paid during the first nine months of 2000 and 1999 for
long-term mortgages amounted to $2,769,462 and $2,686,960, respectively.
Interest paid to related party was $268,487 and $78,436 for the first nine
months of 2000 and 1999, respectively. Income taxes paid during the first
nine months of 2000 and 1999 amounted to $435,435 and $57,423, respectively.
5. Certain prior quarter amounts have been reclassified to conform to the
2000 presentation.
6. Under SFAS No. 115, the investment in Commerce Bancshares, Inc. common
stock is classified as "available for sale", and is recorded at fair value.
The unrealized gain of $3,276,544 net of tax effects of $1,277,852 is
reflected as a separate component of equity. There was an increase in the
net unrealized holding gain for the nine months from January 1, 2000 to
September 30, 2000, of $201,521, net of deferred taxes, and an
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<PAGE> 8
increase in the net unrealized holding gain of $484,509, net of deferred
taxes, for the three months from June 30, 2000 to September 30, 2000.
7. COMMITMENTS AND CONTINGENCIES:
Congress passed the Americans With Disabilities Act (the Act) of 1990
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 the first nine months of 2000, the Company made
modifications to certain properties at a cost of approximately $9,900.
Due to governmental regulations regarding asbestos and the uncertainty
surrounding the advantages and disadvantages of asbestos removal, Tower
Properties Company will continue to monitor the status of asbestos in its
commercial office buildings and will take appropriate action when required.
The cost to remove all asbestos from properties owned by the Company
cannot be determined; however, these removal costs could have a significant
adverse impact on the future operations and liquidity of Tower Properties
Company.
The Company has outstanding construction commitments of $2,645,000 as
of September 30, 2000 for structural repairs to the 811 Main garage. There
has been $1,335,000 paid through September 30, 2000, which is included in
construction in progress, related to the structural repairs. The Company
also has an extraordinary repair project at Phase II of the New Mark
apartment complex due to sudden termite damage. $126,000 has been expensed
through September 30, 2000 for repair of the termite damage. The Company has
agreed to the modernization of the elevators at the 811 Main Building for
approximately $729,000 with a remaining obligation of $134,000 as of
September 30, 2000. The project began in the fourth quarter of 1999 and will
be completed in November, 2000.
On Saturday July 22, 2000, the Company incurred fire damage at its
Commerce Tower office building located at 911 Main Street in Kansas City,
Missouri. Damage was primarily confined to an office suite on the 23rd
floor. Minor water damage was incurred on the floors above and below. The
Company is more than adequately insured. The cause of the fire was tenant
mishandling of smoking devices. The Company did not incur any significant
financial impact from this event.
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<PAGE> 9
8. BUSINESS SEGMENTS
The Company groups its operations into three business segments,
commercial office, apartments, and parking. The Company's business segments
are separate business units that offer different real estate services. The
accounting policies for each segment are the same as those described in the
summary of significant accounting policies.
Following is information for each segment as of and for the nine months
ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
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SEPTEMBER 30, 2000
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COMMERCIAL CORPORATE
OFFICE APARTMENTS PARKING AND OTHER TOTAL
----------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
REVENUE FROM EXTERNAL CUSTOMERS $ 8,962,720 4,738,955 1,063,711 1,022,897 15,788,283
LAND SALES -- -- -- -- --
INTEREST EXPENSE 1,291,625 1,191,986 232,049 456,678 3,172,338
DEPRECIATION AND AMORTIZATION 1,785,973 903,469 269,805 245,761 3,205,008
SEGMENT INCOME (LOSS) BEFORE TAX 1,350,149 289,534 (123,560) (112,304) 1,403,820
CAPITAL EXPENDITURES BY SEGMENT 203,380 362,416 55,544 14,863 636,203
IDENTIFIABLE SEGMENT ASSETS 38,657,686 26,395,737 11,920,894 16,127,860 93,102,177
<CAPTION>
-----------------------------------------------------------------------
SEPTEMBER 30, 1999
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COMMERCIAL CORPORATE
OFFICE APARTMENTS PARKING AND OTHER TOTAL
----------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
REVENUE FROM EXTERNAL CUSTOMERS $ 9,375,684 4,451,512 1,162,562 460,139 15,449,897
LAND SALES -- -- -- 59,840 59,840
INTEREST EXPENSE 1,286,205 1,190,501 -- 314,683 2,791,389
DEPRECIATION AND AMORTIZATION 1,811,815 876,915 90,412 224,918 3,004,060
SEGMENT INCOME (LOSS) BEFORE TAX 2,273,623 (1,134,956) (365,776) (468,197) 304,694
CAPITAL EXPENDITURES BY SEGMENT 393,491 256,571 250,000 58,841 958,903
IDENTIFIABLE SEGMENT ASSETS 37,013,316 26,650,586 12,269,515 12,693,335 88,626,752
</TABLE>
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<PAGE> 10
Following is information for each segment as of and for the three months
ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
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SEPTEMBER 30, 2000
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COMMERCIAL CORPORATE
OFFICE APARTMENTS PARKING AND OTHER TOTAL
----------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
REVENUE FROM EXTERNAL CUSTOMERS $3,002,744 1,645,507 329,723 405,985 5,383,959
LAND SALES -- -- -- -- --
INTEREST EXPENSE 426,622 392,497 84,661 142,696 1,046,476
DEPRECIATION AND AMORTIZATION 524,533 295,375 93,063 81,649 994,620
SEGMENT INCOME (LOSS) BEFORE TAX 365,048 163,044 (145,343) 86,159 468,908
CAPITAL EXPENDITURES BY SEGMENT 109,823 224,333 44,083 4,079 382,318
IDENTIFIABLE SEGMENT ASSETS 38,657,686 26,395,737 11,920,894 16,127,860 93,102,177
<CAPTION>
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SEPTEMBER 30, 1999
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COMMERCIAL CORPORATE
OFFICE APARTMENTS PARKING AND OTHER TOTAL
----------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
REVENUE FROM EXTERNAL CUSTOMERS $3,100,030 1,488,903 351,570 241,900 5,182,403
LAND SALES -- -- -- -- --
INTEREST EXPENSE 441,944 389,275 -- 75,437 906,656
DEPRECIATION AND AMORTIZATION 603,693 292,305 29,008 74,307 999,313
SEGMENT INCOME (LOSS) BEFORE TAX 637,563 (569,963) 3,003 21,610 92,213
CAPITAL EXPENDITURES BY SEGMENT 55,107 142,954 250,000 16,890 464,951
IDENTIFIABLE SEGMENT ASSETS 37,013,316 26,650,586 12,269,515 12,693,335 88,626,752
</TABLE>
<PAGE>
<PAGE> 11
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 and 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 nine months ended September
30, 2000. In April, 1999 the Company secured a $7,000,000 twenty-year
mortgage loan on the UMB Bank commercial office building from Business Men's
Assurance at a fixed rate of 6.9%. The proceeds of this loan were used to
pay off the line of credit and the balance invested in short-term money
market accounts. In December, 1999, the Company secured a $1,045,000
eighteen-year mortgage loan for Phase IV of the New Mark apartments from Ohio
National Life Insurance at a fixed rate of 7.78%. The proceeds were used to
pay for the major repairs at the New Mark apartments and the construction of
the Tower garage.
Cash and cash equivalents on hand at September 30, 2000 totaled $100,284,
a decrease of $45,078 from December 31, 1999. The decrease in cash and cash
equivalents is due to changes in the level of capital expenditures and
financing activities in the respective quarters, as well as an increase in
cash flows from operating activities, primarily due to changes in accounts
receivable and current liabilities. Cash from operations in 2000 has
exceeded capital expenditures and substantially all of the remaining cash has
been used to repay indebtedness. At September 30, 2000, available borrowings
under the line of credit totaled $5,977,519. Management believes the
Company's current cash position, available borrowings, and the properties'
ability to provide operating cash flow should enable the Company to fund
anticipated capital expenditures and service debt in 2000 and 2001.
NINE MONTHS ENDED SEPTEMBER 30, 2000
COMPARED WITH THE NINE MONTHS ENDED SEPTEMBER 30, 1999
RESULTS OF OPERATIONS:
Total revenue increased $338,386. The completion of the Tower Garage and
Phase IV New Mark Apartments, an increase in occupancy at the New Mark Phase
III and the Hillsborough apartment complexes, an increase in occupancy at the
Barkley Place commercial office building, an
<PAGE>
<PAGE> 12
increase in rent at the 9200 Cody warehouse/office facility and the pass
through of an increase in real estate taxes as additional rent at the UMB
Bank commercial office building offset by the loss of parking revenue due to
the 1999 exchange of the 710 Main parking garage for the 700 Baltimore lot,
the loss of revenue due to the structural repairs at the 811 Main garage and
the decrease in occupancy at the Commerce Tower commercial office building
primarily resulted in a $378,399 increase in rental income.
Management and service fees decreased in 2000 primarily due to the
decrease in rentable income in preparation of the Commerce Trust commercial
office building renovation, the 1999 lease commission earned on a new lease
at the Commerce Bank commercial office building, offset by the 2000 increase
in construction fees earned.
A real estate commission earned on the leasing of a non-company owned
warehouse accounts for the increase in interest and other income. The
decrease in real estate sales is due to the 1999 sale of 7.48 acres of
undeveloped land in the New Mark subdivision.
The change in operating expenses and general, administrative and other
are a direct result of the completion of the New Mark Phase IV apartments,
the completion of the Tower Garage and the contract management fee of our
parking facilities. Salaries and employee benefits, which are included in
operating expenses, have increased primarily due to the leasing commission
earned on the leasing of the non-company warehouse and the salaries of the
contracted parking management. Maintenance and repairs decreased primarily
due to the termite repair at New Mark Phase I & II and the 1999 repairs of
the 710 Main parking facility, offset by the completion of the New Mark Phase
IV and the Tower Garage.
Interest expense, including related party from September 30, 1999 to
September 30, 2000, increased due to the following factors: the mortgage
loan on the UMB Bank commercial office building in April, 1999, the mortgage
loan on New Mark Phase IV in December, 1999, the increase in the related
party line of credit and a reduction in the capitalized interest on
construction of $69,958 as compared to $158,296 in 1999.
THREE MONTHS ENDED SEPTEMBER 30, 2000
COMPARED WITH THE THREE MONTHS ENDED SEPTEMBER 30, 1999
RESULTS OF OPERATIONS:
The completion of the Tower Garage and Phase IV New Mark Apartments, an
increase in occupancy at the New Mark Phase III and the Hillsborough
apartment complexes, an increase in occupancy at the Barkley Place
commercial office building, an increase in rent at the 9200 Cody
warehouse/office facility and the pass through of an increase in real
estate taxes as additional rent at the UMB Bank commercial office building
offset by the loss of parking revenue due to the 1999 exchange of the
710 Main parking garage for the 700 Baltimore lot, the loss of revenue due
to the structural repairs at the 811 Main garage and the decrease in
occupancy at the Commerce Tower commercial office building primarily
resulted in a $228,158 increase in rental income.
<PAGE>
<PAGE> 13
Management and service fees decreased in 2000 primarily due to the
decrease in rentable income in preparation of the Commerce Trust commercial
office building renovation, the 1999 lease commission earned on a new lease
at the Commerce Bank commercial office building, offset by the 2000 increase
in construction fees earned.
The change in operating expenses and general, administrative and other
are a direct result of the completion of the New Mark Phase IV apartments,
the completion of the Tower Garage and the contract management fee of our
parking facilities. Salaries and employee benefits, which are included in
operating expenses, have increased primarily due to the leasing commission
earned on the leasing of the non-company warehouse and the salaries of the
contracted parking management. Maintenance and repairs decreased primarily
due to the termite repair at New Mark Phase I & II and the 1999 repairs of
the 710 Main parking facility, offset by the completion of the New Mark Phase
IV and the Tower Garage.
Interest expense, including related party, increased due to the mortgage
loan on New Mark Phase IV in December, 1999 and the increase in the related
party line of credit.
MARKET RISK DISCLOSURE
The Company is exposed to various market risks, including equity
investment prices and interest rates.
The Company has $4,140,081 of equity securities as of September 30, 2000.
These investments are not hedged and are exposed to the risk of changing
market prices. The Company classifies these securities as
"available-for-sale" for accounting purposes and marks them to fair value on
the balance sheet at the end of each period. Management estimates that the
value of its investments will generally move consistently with trends and
movements of the overall stock market excluding any unusual situations. An
immediate 10% change in the fair value of the Company's equity securities
would have a $252,545 effect on comprehensive income.
The Company has approximately $11,500,000 of variable rate debt as of
September 30, 2000. A 100 basis point change in each debt series benchmark
would impact net income on an annual basis by approximately $70,150.
PRONOUNCEMENTS ISSUED BUT NOT YET EFFECTIVE
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133). This statement establishes accounting and reporting
standards requiring that every derivative instrument, including certain
derivative instruments embedded in other contracts, be recorded in the
balance sheet at its fair value. SFAS 133, effective January 1, 2001,
requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. The Company
is currently evaluating the impact of adopting SFAS 133, however, it is not
expected to have a material impact on the Company's financial position and
results of operations.
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<PAGE> 14
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/ Thomas R. Willard
Thomas R. Willard
President
/s/ Robert C. Harvey, III
Robert C. Harvey, III
Vice President and Chief Financial Officer
Date: November 15, 2000
