<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, 1998 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 10, 1998: 2,780,528
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
ASSETS
------
<TABLE>
<CAPTION>
Sept. 30, 1998 Dec. 31, 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
Rental Property and Equipment, Net $ 35,343,000 $ 36,250,000
Construction in Process 7,271,000 8,594,000
Homes Held for Sale 1,296,000 1,135,000
Land Held for Sale 4,245,000 4,237,000
Investments 19,248,000 13,667,000
Receivables:
Mortgages and Notes, Affiliates 4,562,000 4,984,000
Mortgages and Notes, Other 693,000 923,000
Other 3,889,000 3,124,000
Investment In and Advances To
Joint Ventures and Partnerships 2,846,000 3,515,000
Cash and Cash Equivalents 4,988,000 5,762,000
Cash Deposits Held in Escrow 6,672,000 8,641,000
Income Taxes Receivable -0- 1,156,000
Due From Affiliates 304,000 -0-
Deferred Charges and Other Assets 6,217,000 6,340,000
--------------- ---------------
$ 97,574,000 $ 98,328,000
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Mortgage Loans Payable $ 7,175,000 $ 15,667,000
Accounts Payable 1,018,000 1,810,000
Accrued Expenses 791,000 691,000
Due To Affiliates -0- 16,000
Deposits 254,000 249,000
Deferred Income 771,000 341,000
Current Income Taxes Payable 1,239,000 -0-
Deferred Income Taxes Payable 5,186,000 5,186,000
--------------- ---------------
Total Liabilities 16,434,000 23,960,000
Minority Interest 1,076,000 1,115,000
Shareholders' Equity 80,064,000 73,253,000
--------------- ---------------
$ 97,574,000 $ 98,328,000
=============== ===============
</TABLE>
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Revenues:
Sales of Homes $ 3,544,000 $ 3,536,000
Other Construction, Net 878,000 600,000
Rentals - Apartments 1,881,000 1,763,000
Rentals - Commercial 8,532,000 8,965,000
Hotel Income 5,582,000 4,631,000
Management Fees, Affiliates 660,000 671,000
Leasing Fee, Affiliates 561,000 561,000
Interest:
Affiliates 1,036,000 648,000
Other 1,171,000 1,142,000
Gain on Sale of Realty Interests 457,000 549,000
Equipment Leasing and Vending 200,000 79,000
Income from Equity Investments 1,244,000 660,000
Gain on Commercial Paper -0- 377,000
Other 26,000 20,000
----------- -----------
25,772,000 24,202,000
----------- -----------
Costs And Expenses:
Cost of Home Sales 3,468,000 3,294,000
Rentals - Apartments 1,113,000 1,138,000
Rentals - Commercial 3,210,000 3,205,000
Hotel Expenses 3,989,000 3,592,000
Land Carrying Cost 78,000 97,000
General and Administrative 1,366,000 1,340,000
Interest Expense 901,000 1,534,000
Equipment Leasing and Vending 30,000 41,000
Provision for Write Down of
Construction -0- 650,000
Reserve for Advances to Partnerships 252,000 110,000
----------- -----------
14,407,000 15,001,000
----------- -----------
Net Income Before Income Taxes and
Minority Interest 11,365,000 9,201,000
Income Taxes 4,620,000 3,393,000
Minority Interest (66,000) 76,000
----------- -----------
Net Income $ 6,811,000 $ 5,732,000
=========== ===========
Earnings per Common Share $ 2.45 $ 2.05
=========== ===========
Weighted Average Number of Common
Shares Outstanding 2,780,528 2,792,653
=========== ===========
</TABLE>
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Revenues:
Sales of Homes $ 1,522,000 $ 1,016,000
Other Construction, Net 296,000 222,000
Rentals - Apartments 627,000 602,000
Rentals - Commercial 2,835,000 3,140,000
Hotel Income 1,992,000 1,599,000
Management Fees, Affiliates 220,000 240,000
Leasing Fee, Affiliates 187,000 187,000
Interest:
Affiliates 532,000 210,000
Other 397,000 452,000
Gain on Sale of Realty Interests 198,000 121,000
Equipment Leasing and Vending 67,000 15,000
Income from Equity Investments 644,000 235,000
Gain on Commercial Paper -0- 377,000
Other 9,000 6,000
------------ ------------
9,526,000 8,422,000
------------ ------------
Costs And Expenses:
Cost of Home Sales 1,523,000 952,000
Rentals - Apartments 396,000 396,000
Rentals - Commercial 1,122,000 1,104,000
Hotel Expenses 1,405,000 1,250,000
Land Carrying Cost 26,000 46,000
General and Administrative 442,000 395,000
Interest Expense 335,000 489,000
Equipment Leasing and Vending 9,000 15,000
Provision for Write Down of
Construction -0- 650,000
Reserve for Advances to Partnerships 28,000 (41,000)
------------ ------------
5,286,000 5,256,000
------------ ------------
Net Income Before Income Taxes and
Minority Interest 4,240,000 3,166,000
Income Taxes 1,862,000 1,186,000
Minority Interest (27,000) 23,000
------------ ------------
Net Income $ 2,405,000 $ 1,957,000
============ ============
Earnings per Common Share $ 0.86 $ 0.70
============ ============
Weighted Average Number of Common
Shares Outstanding 2,780,528 2,792,653
============ ============
</TABLE>
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 6,811,000 $ 5,732,000
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 1,750,000 1,636,000
Provision for Write Down of Construction -0- 650,000
Gain on Sale of Realty Interest (457,000) (549,000)
Direct Financing Lease Payments -0- 57,000
Amortization of Investment in Direct
Financing Leases -0- (22,000)
Proceeds from Sale of Equipment Under
Direct Financing Leases -0- 90,000
(Income) Loss from Equity Investment (1,244,000) (660,000)
Other -0- (29,000)
Changes in Other Assets and Liabilities:
(Increase) Decrease In:
Construction in Process 1,323,000 (1,121,000)
Homes Held for Sale (161,000) 1,347,000
Mortgages and Notes Receivable 1,109,000 1,017,000
Income Taxes Receivable 1,156,000 (10,000)
Other Assets (809,000) (880,000)
Increase (Decrease) In Other Liabilities 623,000 762,000
-------------- --------------
Total Adjustments 3,290,000 2,288,000
-------------- --------------
Net Cash Provided by Operating Activities 10,101,000 8,020,000
-------------- --------------
Cash Flows from Investing Activities:
Investment in Joint Ventures 1,913,000 2,626,000
Investment in US Treasury Instruments (5,581,000) 1,656,000
Other (684,000) (1,317,000)
-------------- --------------
Net Cash (Used In) Provided by Investing Activities (4,352,000) 2,965,000
-------------- --------------
Cash Flows from Financing Activities:
Repayment of Mortgage Loans Payable (8,492,000) (1,116,000)
-------------- --------------
Net Cash Used in Financing Activities (8,492,000) (1,116,000)
-------------- --------------
Net Increase (Decrease) in Cash and
Cash Equivalents (2,743,000) 9,869,000
Cash and Cash Equivalents and Cash Deposits Held
in Escrow at Beginning of Year 14,403,000 10,188,000
-------------- --------------
Cash and Cash Equivalents and Cash Deposits Held
in Escrow at End of Period $ 11,660,000 $ 20,057,000
============== ==============
</TABLE>
<PAGE>
Page Two
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for:
Interest (Net of Amount Capitalized) $ 910,000 $ 1,552,000
Income Taxes (Current and Estimated) 2,500,000 2,042,000
Supplemental Disclosure of Non-Cash Activities:
Escrowed Cash Deposits Received 138,000 138,000
Escrowed Cash Deposits Refunded 133,000 143,000
</TABLE>
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
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, 1997 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:
During 1990 and 1989, the Company purchased limited partnership interests
in partnerships. The interests acquired range from 79% to 99%. The partnerships
generate low income housing tax credits. Capital contributions by the Company
are payable in annual installments for ten years. The Company will no longer be
liable for additional capital contributions to some of these partnerships after
1999 and the remainder after the year 2000. The amount of projected
contributions are to be adjusted annually. The Company estimates that it will
have sufficient funds for required capital contributions.
At September 30, 1998, the Company had approximately $1,930,000 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. 26 homes and no lots were settled in the first
-----------------------
nine months of 1998 as compared with 25 homes and two lots in the same period of
1997. Net Home Sales was $76,000 in the first nine months of 1998 as compared to
$242,000 for the same period of 1997 or a decrease of 68.60%. The decrease is
caused by the highly competitive market place for new homes in the area. In the
third quarter of 1998, 11 homes and no lots were settled versus 7 homes and one
lot in the same period of 1997.
Registrant's backlog of homes under contract of sale as of September 30 was
27 in 1998 versus 30 in 1997. Registrant generally receives a deposit of $500 to
$2,000 which may be forfeited if the buyer terminates the agreement.
Rentals - Apartments: Income and Expenses. Rental income from apartments
------------------------------------------
was $1,881,000 in the first nine months of 1998, an increase of 6.70% over
$1,763,000 for the same period in 1997. Income for the third quarter of 1998 was
$627,000, an increase of 4.20% over $602,000 for the like period in 1997.
Expenses for the first nine months of 1998 were $1,113,000 as compared to
$1,138,000 in 1997, a 2.2% decrease. Expenses for the third quarter of 1998
were consistent with the third quarter of 1997.
Rentals - Commercial: Income and Expenses. Rental income from commercial
------------------------------------------
operations was $8,532,000 in the first nine months of 1998 as compared to
$8,965,000 for the same period in 1997 or a decrease of 4.80%. Income for the
third quarter of 1998 decreased by 9.70% over the same period in 1997. The
decrease is primarily due to a reduction in rent from one of the Registrant's
office buildings. The rent reduction is in lieu of tenant construction
allowances. Additionally, the lease for this building has been extended for an
additional ten year period effective January 1, 1999. As consideration for the
ten year lease, the rental rate will be reduced to current market. Expenses for
the first nine months of 1998 were $3,211,000 as compared to $3,205,000 in 1997.
Expenses for the third quarter of 1998 were consistent with the third quarter of
1997.
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
---------------------- ---------------------
1998 1997 1998 1997
--------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Income 3,880,000 3,554,000 1,702,000 1,077,000
Expense 2,561,000 2,419,000 1,428,000 1,173,000
--------- --------- --------- ---------
Net Before Taxes 1,319,000 1,135,000 274,000 (96,000)
</TABLE>
<PAGE>
The 1998 Colonnade operations reflects an increase of 3.70% in room occupancy
and an increase of 5.30% in average daily room rates over the same period in
1997. The 1998 Holiday Inn Express results reflects an increase of 40.70% in
room occupancy and and increase of 11.80% in average daily room rates as
compared to the same period in 1997 due in part to the completion of the
renovation and conversion to a Holiday Inn Express.
Interest Affiliates: The increase in 1998 reflects the interest received
---------------------
by Registrant on one of its partnership's commercial properties. "See Mortgage
Loans Payable".
Gain on Sale of Realty Interests. The 1998 results reflect the profit on
---------------------------------
the sale of one of Registrant's convenience stores in the amount of $64,000 and
the amortization of the deferred gains from prior years' Sale of Realty
Interests. The 1997 results reflect the profit on the sale of a parcel of land
in Montgomery County, MD in the amount of $187,000.
Income for Equity Investments. The 1998 results reflects the profit from
------------------------------
the sale of transportation equipment owned by Tech-High Leasing Company, in
which Registrant holds a 50% interest.
Interest Expense. The l998 reduction in interest expense reflects the
-----------------
1997 payoff of the Waterside Mall East mortgage loan and the February 1998
payoff of the Holiday Inn mortgage loan.
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. In February 1998, Registrant paid off the first
trust mortgage on this property. This resulted in an increase in the Reserve.
Assets and Liabilities
- ----------------------
Investments. The increase is the result of additional cash investment in
------------
short term Treasury instruments.
Mortgage Loans Payable. During the second quarter of 1998, Registrant
-----------------------
purchased the mortgage loan on one of its partnership's commercial properties.
The loan and the corresponding receivable are being eliminated in accordance
with generally accepted accounting principles. As of September 30, 1998, there
were two non-recourse mortgages on Registrant's properties in the amount of
$5,174,000 and $2,001,000 totaling $7,175,000.
Liquidity and Capital Resources
- -------------------------------
Registrant continues to fund its obligations out of current cash flow. There
is no assurance that Registrant will be able to meet all
<PAGE>
of its needs out of cash flow or that additional funding will be available to
Registrant if needed.
During the nine month period ended September 30, l998, cash flow from
operating, investing and financing activities decreased by $2,743,000.
Registrant generated cash flow of $10,101,000 from operating activities. Cash
flow from operating activities and accumulated cash equivalents were used to
fund Registrant's investments in low income housing partnerships and the
purchase of US Treasury instruments. $8,492,000 was used for the repayment of
property mortgages and the purchase of a mortgage loan.
Registrant estimates it will require substantial cash for capital improvements,
tenant fit up, leasing fees and allowances as the result of the expiration in
the year 2002 of the GSA lease in the Waterside Mall property. Without a major
tenant for the space that will be vacated, it may not be possible to finance the
project. Consequently, Registrant must be prepared to finance these anticipated
costs from its cash reserves.
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 Form 8-K have been filed during the quarter ended September
30, 1998.
<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 10, 1998 /s/ Burton J. Reiner
------------------ ---------------------------
Burton J. Reiner, President
Date: November 10, 1998 /s/ William Oshinsky
------------------ ---------------------------
William Oshinsky, Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED 9/30/98 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 11,660,000
<SECURITIES> 19,248,000
<RECEIVABLES> 9,144,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 64,072,000
<DEPRECIATION> 28,729,000
<TOTAL-ASSETS> 97,574,000
<CURRENT-LIABILITIES> 0
<BONDS> 7,175,000
0
0
<COMMON> 28,000
<OTHER-SE> 80,036,000
<TOTAL-LIABILITY-AND-EQUITY> 97,574,000
<SALES> 4,422,000
<TOTAL-REVENUES> 25,772,000
<CGS> 3,468,000
<TOTAL-COSTS> 3,468,000
<OTHER-EXPENSES> 10,038,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 901,000
<INCOME-PRETAX> 11,365,000
<INCOME-TAX> 4,620,000
<INCOME-CONTINUING> 6,811,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,811,000
<EPS-PRIMARY> 2.45
<EPS-DILUTED> 2.45
</TABLE>
