<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, 1997 Commission File No. 06201
BRESLER & REINER, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as Specified in its Charter)
DELAWARE 52-0903024
- -------------------------------- ----------------------------------
(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 ninety (90) days.
Yes: X No:
--- ---
Number of Shares of Common Stock
Outstanding November 6, 1997: 2,792,653
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
ASSETS
------
<TABLE>
<CAPTION>
Sept. 30, 1997 Dec. 31, 1996
---------------- --------------
(Unaudited)
<S> <C> <C>
Rental Property and Equipment, Net $ 36,354,000 $36,488,000
Construction in Process 8,506,000 8,035,000
Homes Held for Sale 1,822,000 3,169,000
Land Held for Sale 4,644,000 4,770,000
Receivables:
Mortgages and Notes, Affiliates 5,118,000 5,501,000
Mortgages and Notes, Other 1,009,000 1,094,000
Direct Financing Leases 30,000 126,000
Other 2,345,000 1,300,000
Investment In and Advances To
Joint Ventures and Partnerships 2,400,000 4,366,000
Cash and Cash Equivalents 14,620,000 6,761,000
Cash Deposits Held in Escrow 5,437,000 3,427,000
Investments 11,647,000 13,303,000
Income Taxes Receivable 42,000 32,000
Deferred Charges and Other Assets 6,455,000 6,554,000
------------ -----------
$100,429,000 $94,926,000
============ ===========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<TABLE>
<S> <C> <C>
Liabilities:
Notes Payable:
Mortgages Payable $ 21,122,000 $22,202,000
Leasing Equipment -0- 36,000
Accounts Payable 2,239,000 2,662,000
Accrued Expenses 583,000 742,000
Deposits 258,000 253,000
Deferred Income 325,000 325,000
Income Taxes Payable 1,407,000 -0-
Deferred Income Taxes Payable 2,694,000 2,694,000
Due To Affiliates 558,000 577,000
------------ -----------
Total Liabilities 29,186,000 29,491,000
Minority Interest 269,000 193,000
Shareholders' Equity 70,974,000 65,242,000
------------ -----------
$100,429,000 $94,926,000
============ ===========
</TABLE>
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Revenues:
Sales of Homes $ 3,536,000 $ 6,650,000
Other Construction (Net) 600,000 678,000
Rentals - Apartments 1,763,000 1,761,000
Rentals - Commercial 8,965,000 8,464,000
Hotel Income 4,631,000 4,591,000
Management Fees, Affiliates 671,000 638,000
Leasing Fee, Affiliates 561,000 561,000
Interest:
Affiliates 648,000 742,000
Other 1,142,000 932,000
Gain on Sale Of Realty Interests 549,000 323,000
Equipment Leasing & Vending 79,000 91,000
Income From Equity Investments 660,000 636,000
Gain on Commercial Paper 377,000 -0-
Other 20,000 50,000
------------ ------------
24,202,000 26,117,000
------------ ------------
Costs And Expenses:
Cost of Home Sales 3,294,000 6,358,000
Rentals - Apartments 1,138,000 1,275,000
Rentals - Commercial 3,205,000 3,238,000
Hotel Expenses 3,592,000 3,630,000
Land Development Expense 97,000 80,000
General And Administrative 1,340,000 1,381,000
Interest Expense 1,534,000 2,221,000
Equipment Leasing & Vending 41,000 68,000
Provision for Write Down of Construction 650,000 -0-
Reserve for Advances to Partnerships 110,000 -0-
------------ ------------
15,001,000 18,251,000
------------ ------------
Net Income Before Income Taxes And
Minority Interest 9,201,000 7,866,000
Income Taxes 3,393,000 2,957,000
Minority Interest 76,000 44,000
------------ ------------
Net Income $ 5,732,000 $ 4,865,000
============ ============
Earnings Per Common Share $ 2.05 $ 1.74
============ ============
Weighted Average Number of Common
Shares Outstanding 2,792,653 2,792,653
============ ============
</TABLE>
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Revenues:
Sales of Homes $1,016,000 $2,604,000
Other Construction (Net) 222,000 282,000
Rentals - Apartments 602,000 541,000
Rentals - Commercial 3,140,000 2,797,000
Hotel Income 1,599,000 1,600,000
Management Fees, Affiliates 240,000 216,000
Leasing Fee, Affiliates 187,000 187,000
Interest:
Affiliates 210,000 260,000
Other 452,000 296,000
Gain on Sale Of Realty Interests 121,000 111,000
Equipment Leasing & Vending 15,000 26,000
Income From Equity Investments 235,000 209,000
Gain on Commercial Paper 377,000 -0-
Other 6,000 18,000
----------- ----------
8,422,000 9,147,000
----------- ----------
Costs And Expenses:
Cost of Home Sales 952,000 2,608,000
Rentals - Apartments 396,000 392,000
Rentals - Commercial 1,104,000 1,067,000
Hotel Expenses 1,250,000 1,250,000
Land Development Expense 46,000 29,000
General And Administrative 395,000 435,000
Interest Expense 489,000 731,000
Equipment Leasing & Vending 15,000 16,000
Provision for Write Down of Construction 650,000 -0-
Reserve for Advances to Partnerships (41,000) -0-
----------- ----------
5,256,000 6,528,000
----------- ----------
Net Income Before Income Taxes And
Minority Interest 3,166,000 2,619,000
Income Taxes 1,186,000 1,121,000
Minority Interest 23,000 18,000
----------- ----------
Net Income $ 1,957,000 $1,480,000
=========== ==========
Earnings Per Common Share $ 0.70 $ 0.53
=========== ==========
Weighted Average Number of Common
Shares Outstanding 2,792,653 2,792,653
=========== ==========
</TABLE>
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 5,732,000 $ 4,865,000
Adjustments to Reconcile Net Income To Net Cash
Provided by Operating Activities:
Depreciation & Amortization 1,636,000 1,637,000
Provision for Write Down of Construction 650,000 -0-
Gain on Sale of Realty Interest (549,000) (324,000)
Direct Financing Lease Payments 57,000 646,000
Amortization of Investment in Direct
Financing Leases (22,000) (6,000)
Proceeds From Sale of Equipment Under
Direct Financing Leases 90,000 230,000
(Income) Loss From Equity Investments (660,000) (636,000)
Other (29,000) (31,000)
Changes in Other Assets & Liabilities:
(Increase) Decrease In:
Construction in Process (1,121,000) 1,919,000
Homes Held for Sale 1,347,000 217,000
Mortgages & Notes Receivable 1,017,000 759,000
Income Taxes Receivable (10,000) 991,000
Other Assets (1,005,000) (3,370,000)
Increase (Decrease) In Other Liabilities 887,000 (1,570,000)
----------- -----------
Total Adjustments 2,288,000 462,000
----------- -----------
Net Cash Provided By Operating Activities 8,020,000 5,327,000
----------- -----------
Cash Flows From Investing Activities:
Investment in Joint Ventures 2,626,000 56,000
Net Maturities of US Treasury Instruments 1,656,000 (6,970,000)
Other (1,317,000) (609,000)
----------- -----------
Net Cash Provided By (Used In) Investing Activities 2,965,000 (7,523,000)
----------- -----------
Cash Flows From Financing Activities:
Repayment of Notes Payable (1,116,000) (1,871,000)
----------- -----------
Net Cash Used In Financing Activities (1,116,000) (1,871,000)
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents 9,869,000 (4,067,000)
Cash and Cash Equivalents And Cash Deposits Held
in Escrow at Beginning of Year 10,188,000 9,547,000
----------- -----------
Cash and Cash Equivalents And Cash Deposits Held
in Escrow at End of Period $20,057,000 $ 5,480,000
=========== ===========
</TABLE>
<PAGE>
Page Two
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
1997 1996
---------- -----------
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period For:
Interest (Net of Amount Capitalized) $1,552,000 $2,261,000
Income Taxes 2,042,000 950,000
Supplemental Disclosure of Non-Cash Activities:
Escrowed Cash Deposits Received 138,000 102,000
Escrowed Cash Deposits Refunded 143,000 126,000
</TABLE>
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
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, 1996 as filed with the Securities and Exchange
Commission.
COMMITMENTS AND CONTINGENCIES:
The Company is contingently liable for $214,000 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 partnerships. The interests acquired range from 79% to 99%. The partnerships
generated low income housing tax credits. Capital contributions by the Company
are payable in annual installments over the ten years such tax credits are
available. The amount of projected contributions are to be adjusted annually as
a percentage of tax benefits derived. The Company estimates that the annual tax
benefits will be sufficient to fund the annual capital contributions.
At September 30, 1997, the Company had approximately $2,099,000 of
outstanding letters of credit for land improvements in housing projects that it
is developing.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Results of Operations
- ---------------------
Sales of Homes and Lots. 25 homes and two lots were sold in the first
------------------------
nine months of 1997 compared with 48 homes and two lots in the same period of
1996. In the third quarter of 1997, 7 homes and one lot were sold versus 17
homes and no lots in the same period of 1996. Sales of homes have decreased due
to market conditions in the area in which the Company is building.
Registrant's backlog of homes under contract of sale as of September 30 was
30 in 1997 versus 25 in 1996. Registrant receives a deposit of $500 to $2,000
which may be forfeited if the buyer terminates the agreement. There is no
assurance that all of the backlog will settle in 1997.
Rentals - Apartments: Income and Expenses. Rental income from apartments
------------------------------------------
was $1,763,000 in the nine months of 1997 as compared to $1,761,000 for the same
period in 1996. Income for the third quarter of 1997 increased by 11.25% over
the like period in 1996. Expenses for the first nine months of 1997 was
$1,138,000 as compared to $1,275,000 in 1996, a 10.75% decrease. Expenses for
the third quarter of 1997 were constant with the third quarter of 1996. The
reduction in expenses is the result of Registrant delivering rental units in the
first half of 1996 to the condominium association. The condominium association
assumed the rental and operations of these units pending a final disposition of
these units. The loss of income from these units was offset by higher occupancy
from other rental projects.
Rentals - Commercial: Income and Expenses. Rental income from commercial
------------------------------------------
operations was $8,965,000 in the first nine months of 1997 as compared to
$8,464,000 for the same period in 1996 or an increase of 6.0%. Income for the
third quarter of 1997 increased by 12.25% over the same period in 1996. These
increases are primarily due to higher occupancy. Expenses for the first nine
months of 1997 were $3,205,000 as compared to $3,238,000 in 1996. Expenses for
the third quarter of 1997 increased by 3.50% over the third quarter of 1996.
Hotel Income and Hotel Expense. Hotel Income and Hotel Expense reflect
------------ --------------
the operating results for the Company's two hotel properties for the nine months
ended September 30, as follows:
<TABLE>
<CAPTION>
Colonnade Holiday Inn
-------------------- -----------------------
1997 1996 1997 1996
--------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Income 3,554,000 3,159,000 1,077,000 1,432,000
Expense 2,419,000 2,441,000 1,173,000 1,189,000
--------- --------- --------- ---------
Net Before Taxes 1,135,000 718,000 (96,000) 243,000
</TABLE>
<PAGE>
The 1997 Colonnade results reflects increased income due to higher average room
rates and greater occupancy. The 1997 Holiday Inn results reflects reduced net
income due to remodeling and construction required by conversion to a Holiday
Inn Express. The construction is estimated to be completed prior to the end of
the year.
Gain on Commercial Paper. During the third quarter of 1997, Registrant
-------------------------
received $377,398 as an additional payment of the global settlement between
commercial paper creditors and the FDIC resulting from the failure of Washington
Bancorporation in 1990.
Interest Expense. The l997 reduction in interest expense reflects the
-----------------
December 1996 payoff of the Colonnade mortgage.
Provision for Write Down of Construction. During the third quarter of
-----------------------------------------
1997, Registrant determined that the costs of one of its substantially completed
construction projects exceeded current market valuation. The adjustment reduced
the carrying cost to market value less cost of sales.
Reserve for Advances to Partnerships. Effective in 1997, Registrant
-------------------------------------
determined that cash advances to a partnership operating at a loss are accounted
for as a cost to the Company.
Assets
- ------
Receivables-Other. The increase in Receivables-Other is the result of
------------------
the GSA rent being paid in arrears and increased activities at the Colonnade has
resulted in increased revenues and related receivables.
Cash Deposits Held in Escrow. The increase reflects funds set aside for
-----------------------------
the repayment, in December 1997, of the mortgage due on Registrant's portion of
the Waterside Mall Complex in the amount of $5,200,000.
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, personal guarantees 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.
<PAGE>
During the nine month period ended September 30, l997, cash flow from
operating, investing and financing activities resulted in an increase of
$9,869,000 in cash and cash equivalents. Registrant generated cash flow of
$8,020,000 from operating activities. Cash flow from operating activities and
cash and cash equivalents were used to fund Registrant's investments in low
income housing partnerships and the purchase of US Treasury instruments. Cash
flow from operating activities was also used for the repayment of mortgages and
notes payable in the amount of $1,116,000.
Disclaimer
- ----------
Except for historical matters, the matters discussed in this Form 10-Q are
forward looking statements which reflect the Company's current views with
respect to future events and financial performance. These forward-looking
statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from historical results or those
anticipated. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their dates. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
The following factors could cause actual results to differ materially from
historical results or those anticipated: 1) changes in operations, 2) market
conditions for the Company's products, 3) the Company's ability to lease and re-
lease, 4) development risks, 5) competition, and 6) changes in the economic
climate.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibit 27 - Financial Data Statement
(b) Reports on Form 8-K
No reports on From 8-K have been filed during the quarter ended September
30, 1997.
<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 6, 1997 /s/ Burton J. Reiner
-------------------------------
Burton J. Reiner, President
Date: November 6, 1997 /s/ William Oshinsky
-------------------------------
William Oshinsky, Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
9/30/97 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 20,057,000
<SECURITIES> 11,647,000
<RECEIVABLES> 8,502,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 62,963,000
<DEPRECIATION> 26,609,000
<TOTAL-ASSETS> 100,429,000
<CURRENT-LIABILITIES> 0
<BONDS> 21,122,000
0
0
<COMMON> 28,000
<OTHER-SE> 70,946,000
<TOTAL-LIABILITY-AND-EQUITY> 100,429,000
<SALES> 4,136,000
<TOTAL-REVENUES> 24,202,000
<CGS> 3,294,000
<TOTAL-COSTS> 3,294,000
<OTHER-EXPENSES> 10,173,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,534,000
<INCOME-PRETAX> 9,201,000
<INCOME-TAX> 3,393,000
<INCOME-CONTINUING> 5,732,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,732,000
<EPS-PRIMARY> 2.05
<EPS-DILUTED> 2.05
</TABLE>
