<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15
OF THE SECURITIES EXCHANGE ACT
For Quarter Ended September 30, 1995 Commission File No. 0-6201
BRESLER & REINER, INC.
- ------------------------------------------------------------------------
(Exact name of Registrant as Specified in its Charter)
DELAWARE 52-0903424
- ------------------------------ ------------------------------
(State or other jurisdiction of (IRS Employer Identification)
incorporation or organization)
401 M Street, S. W., Washington, D. C. 20024
- ------------------------------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number including area code: (202) 488-8800
---------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 of the Securities Exchange Act of 1934 during
the preceding twelve months, and (2) has been subject to the filing requirements
for at least the past ninety (90) days.
Yes: X No:
------- --------
Number of Shares of Common Stock
Outstanding November 13, 1995: 2,792,653
<PAGE>
BRESLER & REINER, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
ASSETS
------
Sept. 30, 1995 Dec. 31, 1994
-------------- -------------
(Unaudited)
<S> <C> <C>
Rental Property and Equipment, Net $38,344,000 $ 40,337,000
Construction in Process 14,969,000 15,764,000
Land Held for Development 4,903,000 4,886,000
Receivables:
Mortgages and Notes, Affiliates 6,077,000 6,358,000
Mortgages and Notes, Other 1,713,000 2,417,000
Direct Financing Leases 1,964,000 3,007,000
Other 3,497,000 3,457,000
Operating Equipment, Net 18,000 37,000
Investment In and Advances To
Joint Ventures and Partnerships 5,850,000 5,077,000
Cash and Cash Equivalents 7,861,000 7,200,000
Cash Deposits Held in Escrow 7,875,000 7,165,000
Due From Affiliates 221,000 538,000
Income Taxes Receivable 402,000 2,733,000
Deferred Charges and Other Assets 5,913,000 4,425,000
----------- ------------
$99,607,000 $103,401,000
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Notes Payable:
Mortgages Payable $34,541,000 $ 40,045,000
Land and Development 500,000 1,000,000
Leasing Equipment 633,000 1,450,000
Accounts Payable 1,117,000 3,259,000
Accrued Expenses 664,000 970,000
Deposits 290,000 264,000
Deferred Income 976,000 976,000
Income Taxes:
Deferred 2,791,000 2,791,000
----------- ------------
Total Liabilities 41,512,000 50,755,000
Minority Interest 339,000 432,000
Shareholders' Equity 57,756,000 52,214,000
----------- ------------
$99,607,000 $103,401,000
=========== ============
</TABLE>
-2-
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Revenues:
Sales of Homes & Lots $ 6,177,000 $ 6,973,000
Other Construction (Net) 869,000 722,000
Rentals-Apartments and Commercial 10,439,000 11,322,000
Hotel Income 4,377,000 4,303,000
Management Fees, Affiliates 629,000 633,000
Leasing Fees, Affiliates 538,000 582,000
Interest:
Affiliates 854,000 814,000
Other 594,000 450,000
Gain on Sale of Realty Interests 183,000 1,316,000
Equipment Leasing & Vending 223,000 663,000
Income From Equity Investments 624,000 453,000
Other 31,000 48,000
----------- -----------
25,538,000 28,279,000
----------- -----------
Costs and Expenses:
Cost of Sales 5,743,000 6,247,000
Rentals - Apartments & Commercial 4,795,000 5,219,000
Hotel Expense 3,805,000 4,070,000
Land Development Expense 80,000 192,000
General and Administrative 1,874,000 1,960,000
Interest Expense 2,473,000 2,764,000
Loss on Write Down of Receivables 673,000 -0-
Provision for Loss on Real Estate -0- 4,000,000
Equipment Leasing & Vending 130,000 336,000
----------- -----------
19,573,000 24,788,000
----------- -----------
Net Income Before Income Taxes,
Minority Interest and Debt Elimination 5,965,000 3,491,000
Income Taxes 2,107,000 1,227,000
Minority Interest 14,000 (23,000)
----------- -----------
Net Income Before Debt Elimination $ 3,844,000 $ 2,287,000
Debt Elimination (Net of Income Taxes of
$1,010,000 in 1995, $2,250,000 in 1994) 1,863,000 4,148,000
----------- -----------
Net Income $ 5,707,000 $ 6,435,000
=========== ===========
Earnings Per Common Share Before
Debt Elimination $ 1.35 $ 0.81
Debt Elimination 0.66 1.46
----------- -----------
Earnings Per Common Share $ 2.01 $ 2.27
=========== ===========
Weighted Average Number of Common
Shares Outstanding 2,833,587 2,836,507
=========== ===========
</TABLE>
-3-
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
---------- -----------
<S> <C> <C>
Revenues:
Sales of Homes & Lots $2,409,000 $ 2,461,000
Other Construction (Net) 202,000 512,000
Rentals-Apartments and Commercial 3,362,000 4,157,000
Hotel Income 1,454,000 1,534,000
Management Fees, Affiliates 218,000 199,000
Leasing Fees, Affiliates 187,000 194,000
Interest:
Affiliates 280,000 267,000
Other 186,000 136,000
Gain on Sale of Realty Interests 17,000 77,000
Equipment Leasing & Vending 75,000 282,000
Income From Equity Investments 177,000 80,000
Other 18,000 14,000
---------- -----------
8,585,000 9,913,000
---------- -----------
Costs and Expenses:
Cost of Sales 2,298,000 2,469,000
Rentals - Apartments & Commercial 1,519,000 1,796,000
Hotel Expense 1,243,000 1,482,000
Land Development Expense 64,000 62,000
General and Administrative 641,000 636,000
Interest Expense 803,000 894,000
Loss on Write Down of Receivables 673,000 - 0 -
Provision for Loss on Real Estate - 0 - 4,000,000
Equipment Leasing & Vending 36,000 132,000
---------- -----------
7,277,000 11,471,000
---------- -----------
Net Income (Loss) Before Income Taxes,
and Minority Interest 1,308,000 (1,558,000)
Income Taxes 464,000 (551,000)
Minority Interest (11,000) 6,000
---------- -----------
Net Income (Loss) Before
Debt Elimination $ 855,000 $(1,013,000)
Debt Elimination (Net of Income Taxes
of $1,010,000 in l995, $-0- in 1994) 1,863,000 - 0 -
---------- -----------
Net Income (Loss) $2,718,000 $(1,013,000)
========== ===========
Earnings Per Common Share Before
Debt Elimination $0.30 $(0.35)
Debt Elimination 0.66 0.00
---------- -----------
Earnings per Common Share $0.96 $(0.35)
========== ===========
Weighted Average Number of Common
Shares Outstanding 2,828,047 2,836,507
========= =========
</TABLE>
-4-
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income Before Extra-Ordinary Item $ 3,844,000 $ 2,287,000
Extra-Ordinary Item, Net of Tax 1,863,000 4,148,000
------------ ------------
Net Income $ 5,707,000 $ 6,435,000
Adjustments to Reconcile Net Income To Net Cash
Provided By Operating Activities:
Extra Ordinary Item - Gain on
Debt Forgiveness (2,873,000) (6,398,000)
Depreciation & Amortization 1,742,000 1,876,000
Recognition of Deferred Income -0- (1,316,000)
Gain on Sale of Realty Interests (183,000) -0-
Investment in Direct Financing Leases -0- (54,000)
Direct Financing Lease Payments 999,000 2,256,000
Amortization of Investment in Direct
Financing Leases (103,000) (254,000)
Proceeds From Sale of Equipment Under
Direct Financing Leases 150,000 261,000
(Income) From Equity Investments (624,000) (453,000)
Provision for Loss on Real Estate -0- 4,000,000
Other (3,000) (134,000)
Changes in Other Assets & Liabilities:
(Increase) Decrease In:
Construction in Process 795,000 (346,000)
Mortgages & Notes Receivable 1,168,000 4,491,000
Prepaid Taxes 2,331,000 -0-
Other Assets (2,325,000) (4,485,000)
Increase (Decrease) In Other Liabilities (2,488,000) 862,000
------------ ------------
Total Adjustments (1,414,000) 306,000
------------ ------------
Net Cash Provided By Operating Activities: 4,293,000 6,741,000
------------ ------------
Cash Flows From Investing Activities:
Investment in Joint Ventures (149,000) 792,000
Purchase of Treasury Stock (165,000) (2,000)
Other (194,000) 564,000
------------ ------------
Net Cash Used in Investing Activities: (508,000) 1,354,000
------------ ------------
Cash Flows From Financing Activities:
Repayment of Notes Payable (3,124,000) (12,839,000)
Proceeds from Notes Payable -0- 5,500,000
------------ ------------
Net Cash Used in Financing Activities (3,124,000) (7,339,000)
------------ ------------
Net Increase in Cash and Cash Equivalents 661,000 756,000
Cash and Cash Equivalents at Beginning of Year 7,200,000 2,662,000
------------ ------------
Cash and Cash Equivalents at End of Period $ 7,861,000 $ 3,418,000
============ ============
</TABLE>
-5-
<PAGE>
Page Two
Consolidated Statements of Cash Flows
Supplemental Disclosures of Cash Flow Information:
<TABLE>
<CAPTION>
Cash Paid During the Period For:
<S> <C> <C>
Interest (Net of Amount Capitalized) $2,504,000 $ 2,806,000
Income Taxes 975,000 768,000
Supplemental Disclosure of Non-Cash Activities:
Escrowed Cash Deposits Received 142,000 188,000
Escrowed Cash Deposits Refunded 116,000 139,000
Transfer of Construction in Process to
Advances To/From Affiliates 386,000 -0-
Real Estate Assets Transferred in Satisfaction
of Liabilities:
Land Held for Development 18,965,000
Mortgage-Land and Development 24,363,000
Accounts Payable 2,500,000
Accrued Expenses 1,000,000
Mortgage-Rental Property 4,177,000
Assets Tendered 851,000
Liabilities Extinguished 27,000
</TABLE>
-6-
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
GENERAL:
The information contained in this report is furnished for the Registrant,
Bresler & Reiner, Inc., and its subsidiaries referred to collectively as the
"Company". In the opinion of Management, the information in this report
reflects all adjustments of a normal recurring nature which are necessary to
present a fair statement of the results for the interim period shown.
The financial information presented herein should be read in conjunction
with the financial statements included in the Registrant's Form 10-K for the
year ended December 31, 1994 as filed with the Securities and Exchange
Commission.
Certain reclassifications have been made in prior years' financial
statements to conform to the classification used in the current year.
COMMITMENTS AND CONTINGENCIES:
The Company is contingently liable for $1,317,000 of outstanding
liabilities of non-consolidated partnerships and ventures in which it has
investments.
During 1990 and 1989, the Company purchased limited partnership interests
in limited partnerships, which are operating low income housing units. The
interests acquired range from 79% to 99%, and the required capital contributions
are payable in annual installments over the ten years such tax credit is
available. The amount of projected contributions are to be adjusted annually to
be a percentage of tax benefits derived. The Company anticipates that the
annual tax benefits will be more than sufficient to fund the annual capital
contributions.
At September 30, 1995, the Company had approximately $2,343,000 of
outstanding letters of credit for land improvements in housing projects that it
is developing.
-7-
<PAGE>
EXTRAORDINARY ITEM - DEBT ELIMINATION:
In January 1994 the holder of the note on the Country Club Associates
property foreclosed and obtained possession of the Property. On February 10,
1994, Registrant entered into an agreement with the holder of the first and
second mortgages relating to the property owned by Country Club Associates
Partnership whereby Registrant paid $3,500,000, including a two year secured
note for $1,000,000, for the release of Registrant's guaranty of the first trust
loan, the second trust note, the land exchange liability, any mechanics liens,
real estate taxes and unknown recourse claims. At that time Registrant recorded
the disposition of the property. This transaction resulted in a pre-tax
extraordinary gain of $6,398,000 in the first quarter of 1994.
In the latter part of 1992 Registrant tendered a deed to the note holder of
the loan on Allentown Apartments. The note holder refused the deed, had a
receiver appointed and took possession of the property. On May 4, 1995 the note
holder foreclosed on the property. On August 22, 1995 the Circuit Court for
Prince George's County, Maryland ratified the foreclosure sale. This
transaction resulted in an after-tax gain of $1,863,000 in the third quarter of
1995.
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Results of Operations
- ---------------------
Sales of Homes and Lots. Included are sales of 42 homes and 2 lots in the
------------------------
first nine months of 1995 as compared with 36 homes and no lots in 1994. In the
third quarter, sales of homes were 17 in 1995 and 11 in 1994.
Registrant's backlog of homes under contract of sale was 25 at September
30, 1995 and 44 at September 30, 1994.
Other Construction (Net). The income relates primarily to construction
-------------------------
performed for the tenant of the GSA Lease. (See Rentals - Apartments and
------------------------
Commercial below). As a result of uncertainty related to future appropriation
- ----------
levels and the current congressional budget process, GSA contracting has been
materially reduced.
Rentals - Apartments and Commercial, Management Fees, Affiliates and Leasing
----------------------------------------------------------------------------
Fees, Affiliates. General Services Administration ("GSA") leases offices from
- -----------------
Registrant and its affiliates ("GSA Lease"). GSA exercised an option to reduce
the rent by extending the GSA Lease for an additional five years. The parties
have agreed that the rent adjustment commenced March 1, 1995. The lower
rentals, leasing fees and management fees in the first nine months of 1995
reflect this reduction as of March 1, 1995. The annual reduction will be
approximately $895,000 in the Registrant's revenues from the GSA lease and
$350,000 per year in leasing, management fees and income from Town Center office
building discussed below.
Hotel Income and Hotel Expense. Included in Hotel Income for the nine months
------------ --------------
ended September 30, 1995 is $2,726,000 of income relating to the Colonnade, a
Baltimore, MD hotel, as compared with $2,493,000 for the same period in 1994.
Hotel Expense in 1995 reflects $2,559,000 relating to the Colonnade as compared
with $2,779,000 for the 1994 period.
Interest, Other. The 1995 results reflect higher interest income on invested
----------------
funds as compared with interest income in the 1994 period.
Gain on Sale of Realty Interest. The 1994 gain reflected the prepayment of
--------------------------------
a deferred purchase money note relating to the sale of a nursing home.
Equipment Leasing & Vending. The decline in revenues from 1994 to 1995
----------------------------
reflected a lower level of equipment leasing and
-9-
<PAGE>
vending activities. Registrant is no longer actively entering into any new
equipment leases. The current lease portfolio will substantially phase out in
1996.
Income from Equity Investments. Included herein is income of $651,000 from
-------------------------------
Registrant's 46% ownership in a partnership relating to the new GSA Lease in the
1995 period as compared with $686,000 in the 1994 period. (See Rentals -
----------
Apartments and Commercial above).
- -------------------------
Provision For Loss on Real Estate. At September 30, 1994, Registrant reduced
----------------------------------
the carrying value of its investment in a 57 acre proposed office/commercial
development in Fairfax County, Virginia to net realizable value, based on
Registrant's assessment of the property market conditions.
Loss on Write Down of Receivables. Included in Receivables - Other at
---------------------------------- -------------------
December 31, 1994 were amounts due Registrant from a state Department of Public
Welfare with respect to a nursing home previously owned by Registrant. At
September 30, 1995 Registrant reduced this receivable by $545,000 to reflect the
amount allowed by the Department of Public Welfare.
Debt Elimination. In January 1994 the holder of the loan on the Country
-----------------
Club Associates property foreclosed on the mortgage and obtained possession of
the property. Registrant recorded a write down at December 31, 1993 based on the
intent to dispose of the property. On February 10, 1994, Registrant entered into
an agreement with the holder of the first and second mortgages relating to the
property owned by Country Club Associates Partnership whereby Registrant paid
$3,500,000, including a two year secured note for $1,000,000, for the release of
Registrant's guaranty of the first trust loan, the second trust note, the land
exchange liability, any mechanics liens, real estate taxes and unknown recourse
claims. This transaction resulted in a pre-tax gain of $6,398,000 in the first
quarter of 1994.
In the latter part of 1992 Registrant tendered a deed to the note holder of
the loan on Allentown Apartments. The note holder refused the deed, had a
receiver appointed and took possession of the property. On May 4, 1995 the note
holder foreclosed on the property. On August 22, 1995 the Circuit Court for
Prince George's County, Maryland ratified the foreclosure sale. This
transaction resulted in an after-tax gain of $1,863,000 in the third quarter of
1995.
Balance Sheet
-------------
Notes Payable-Mortgages. Included in the total for Mortgages is a
------------------------
$4,177,134 Deed of Trust Note on Allentown
-10-
<PAGE>
Apartments at December 31, 1994 and $480,000 at September 30, 1995. (See Notes
to Financial Statement - Debt Elimination). While the Note is non-recourse,
----------------
Registrant had issued a $480,000 guarantee agreement covering the property. The
guarantee is disputed by Registrant. The note holder is suing under the
guarantee.
Liquidity and Capital Resources
-------------------------------
Registrant continues to fund its obligations out of current cash flow.
The banking and finance communities continue to be adverse to most real estate
lending, requiring increased coverage on debt and significant owner investment
in properties. There is no assurance that Registrant will be able to meet all of
its needs out of cash flow or that additional funding will be available to
Registrant if needed.
The mortgage on the Colonnade Hotel, included in Notes Payable-Mortgages,
-----------------------
matured in September 1995 with a balance of $10,200,000. The mortgage note
provided for an extension to March 1, 1998 under certain conditions. The
conditions for the extension to 1998 were met (principally certain loan to value
ratios), and Registrant was granted the extension to March 1, 1998.
During the nine month period ended September 30, 1995, Registrant generated
cash flow from operating activities of $4,293,000. Cash flow from operating
activities was used in investing activities of $508,000 which consisted
primarily of funding Registrant's investments in low income housing
partnerships. Cash flow from operating activities was also used in financing
activities for the repayment of mortgages and notes payable in the amount of
$3,124,000. Overall, cash flow from operating, investing and financing
activities resulted in an increase of $661,000 in cash and cash equivalents
during the nine months ended September 30, 1995.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibit 27 - Financial Data Statement
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended September
30, 1995.
-11-
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of the Securities & Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BRESLER & REINER, INC.
(Registrant)
Date: November 13, 1995 /s/ Burton J. Reiner
-------------------- --------------------------------
Burton J. Reiner, President
Date: November 13, 1995 /s/ William Oshinsky
-------------------- --------------------------------
William Oshinsky, Treasurer
(Principal Financial Officer)
-12-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 15,736,000
<SECURITIES> 0
<RECEIVABLES> 13,472,000
<ALLOWANCES> 0
<INVENTORY> 14,969,000
<CURRENT-ASSETS> 0
<PP&E> 60,945,000
<DEPRECIATION> 22,601,000
<TOTAL-ASSETS> 99,607,000
<CURRENT-LIABILITIES> 0
<BONDS> 35,674,000
<COMMON> 28,000
0
0
<OTHER-SE> 57,728,000
<TOTAL-LIABILITY-AND-EQUITY> 99,607,000
<SALES> 6,177,000
<TOTAL-REVENUES> 25,538,000
<CGS> 5,743,000
<TOTAL-COSTS> 5,743,000
<OTHER-EXPENSES> 11,357,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,473,000
<INCOME-PRETAX> 5,965,000
<INCOME-TAX> 2,107,000
<INCOME-CONTINUING> 3,844,000
<DISCONTINUED> 0
<EXTRAORDINARY> 1,863,000
<CHANGES> 0
<NET-INCOME> 5,707,000
<EPS-PRIMARY> 2.01
<EPS-DILUTED> 2.01
</TABLE>
