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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 March 31, 1998 Commission File No. 06201
BRESLER & REINER, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as Specified in its Charter)
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<S> <C>
DELAWARE 52-0903024
- --------------------------------------- -------------------------------
(State or other jurisdiction of (IRS Employer Identification)
incorporation or organization)
401 M Street, S. W., Washington, D. C. 20024
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(Address of Principal Executive Office) (Zip Code)
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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:
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Number of Shares of Common Stock
Outstanding April 29, 1998: 2,780,528
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BRESLER & REINER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1998 AND DECEMBER 31, 1997
ASSETS
-------------
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<CAPTION>
Mar. 31, 1998 DEC. 31, 1997
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(Unaudited)
<S> <C> <C>
Rental Property and Equipment, Net $ 35,887,000 $ 36,250,000
Construction in Process 7,924,000 8,594,000
Homes Held for Sale 1,606,000 1,135,000
Land Held for Sale 4,237,000 4,237,000
Receivables:
Mortgages and Notes, Affiliates 4,847,000 4,984,000
Mortgages and Notes, Other 919,000 923,000
Other 2,062,000 2,318,000
Investment In and Advances To
Joint Ventures and Partnerships 2,986,000 3,515,000
Cash and Cash Equivalents 4,493,000 5,762,000
Cash Deposits Held in Escrow 9,007,000 8,641,000
Investments 17,251,000 13,667,000
Income Taxes Receivable 141,000 1,156,000
Due From Affiliates 15,000 -0-
Deferred Charges and Other Assets 6,321,000 6,340,000
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$ 97,696,000 $ 97,522,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Notes Payable:
Mortgages Payable $ 14,561,000 $ 15,667,000
Accounts Payable 975,000 1,810,000
Accrued Expenses 659,000 691,000
Due To Affiliates -0- 16,000
Deposits 263,000 249,000
Deferred Income 501,000 341,000
Deferred Income Taxes Payable 5,186,000 5,186,000
------------ ------------
Total Liabilities 22,145,000 23,960,000
Minority Interest 332,000 309,000
Shareholders' Equity 75,219,000 73,253,000
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$ 97,696,000 $ 97,522,000
============ ============
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BRESLER & REINER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
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<CAPTION>
1998 1997
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<S> <C> <C>
Revenues:
Sales of Homes $ 954,000 $ 1,334,000
Other Construction (Net) 269,000 249,000
Rentals - Apartments 621,000 609,000
Rentals - Commercial 2,921,000 2,866,000
Hotel Income 1,366,000 1,149,000
Management Fees, Affiliates 224,000 212,000
Leasing Fee, Affiliates 187,000 187,000
Interest:
Affiliates 205,000 222,000
Other 415,000 334,000
Gain on Sale Of Realty Interests 128,000 309,000
Equipment Leasing & Vending 62,000 40,000
Income From Equity Investments 318,000 223,000
Other 10,000 8,000
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7,680,000 7,742,000
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Costs And Expenses:
Cost of Home Sales 898,000 1,201,000
Rentals - Apartments 344,000 370,000
Rentals - Commercial 1,005,000 1,094,000
Hotel Expenses 1,212,000 1,082,000
Land Development Expense 26,000 27,000
General And Administrative 496,000 520,000
Interest Expense 354,000 503,000
Equipment Leasing & Vending 13,000 14,000
Reserve for Advances to Partnerships 112,000 118,000
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4,460,000 4,929,000
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Net Income Before Income Taxes And
Minority Interest 3,220,000 2,813,000
Provision for Income Taxes 1,231,000 1,137,000
Minority Interest 23,000 18,000
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Net Income $ 1,966,000 $ 1,658,000
============ ============
Earnings Per Common Share $ 0.71 $ 0.59
============ ============
Weighted Average Number of Common
Shares Outstanding 2,780,528 2,792,653
============ ============
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BRESLER & REINER, INC. AND SUBSIDIARIE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
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<CAPTION>
1998 1997
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<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 1,966,000 $ 1,658,000
Adjustments to Reconcile Net Income To Net Cash
Provided by Operating Activities:
Depreciation & Amortization 575,000 544,000
Gain on Sale of Realty Interest (128,000) (309,000)
Direct Financing Lease Payments -0- 54,000
Amortization of Investment in Direct
Financing Leases -0- (1,000)
(Income) Loss From Equity Investments (318,000) (223,000)
Other -0- (29,000)
Changes in Other Assets & Liabilities:
(Increase) Decrease In:
Construction in Process 670,000 (233,000)
Homes Held for Sale (471,000) 513,000
Mortgages & Notes Receivable 269,000 469,000
Income Taxes Receivable 1,015,000 32,000
Other Assets 222,000 (641,000)
Increase (Decrease) In Other Liabilities (701,000) (1,495,000)
------------ ------------
Total Adjustments 1,133,000 (1,319,000)
------------ ------------
Net Cash Provided By Operating Activities 3,099,000 339,000
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Cash Flows From Investing Activities:
Investment in Joint Ventures 847,000 493,000
Investment in US Treasury Instruments (3,584,000) 1,542,000
Other (159,000) (354,000)
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Net Cash Provided By (Used In) Investing Activities (2,896,000) 1,681,000
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Cash Flows From Financing Activities:
Repayment of Notes Payable (1,106,000) (364,000)
------------ ------------
Net Cash Used In Financing Activities (1,106,000) (364,000)
------------ ------------
Net Increase (Decrease) in Cash and
Cash Equivalents (903,000) 1,656,000
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 $ 13,500,000 $ 11,844,000
============ ============
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Page Two
Consolidated Statements of Cash Flows
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<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) $ 363,000 $ 515,000
Income Taxes (Current and Estimated) 216,000 642,000
Supplemental Disclosure of Non-Cash Activities:
Escrowed Cash Deposits Received 33,000 53,000
Escrowed Cash Deposits Refunded 47,000 85,000
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BRESLER & REINER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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.
COMMITMENTS AND CONTINGENCIES:
The Company is contingently liable for $27,000 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 March 31, 1998, the Company had approximately $2,227,000 of outstanding
letters of credit for land improvements in housing projects that it is
developing.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Results of Operations
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Sales of Homes and Lots. 7 homes were settled in the first three months of
------------------------
1998 compared with 10 homes in the same period of 1997.
Registrant's backlog of homes under contract of sale as of March 31 was 21
in 1998 versus 22 in 1997. Registrant 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 $621,000 in the three months of 1998 as compared to $609,000 for the same
period in 1997 or an increase of 2.0%. These increases are primarily the result
of higher occupancy. Expenses for the first three months of 1998 was $344,000 as
compared to $370,000 in 1997, a 7.0% decrease due to higher maintenance costs in
1997. 1998 net income was $277,000 versus $239,000 for the same period in 1997
or an increase of 16.0%.
Rentals - Commercial: Income and Expenses. Rental income from commercial
------------------------------------------
operations was $2,921,000 in the first three months of 1998 as compared to
$2,866,000 for the same period in 1997 or an increase of 2.0%. These increases
are primarily due to higher occupancy. Expenses for the first three months of
1998 were $1,005,000 as compared to $1,094,000 in 1997 or a decrease of 8.0%
primarily due to a non-recurring 1997 cost. 1998 net income was $1,916,000
versus $1,772,000 in 1997 or an increase of 8.1%.
Hotel Income and Hotel Expense. Hotel Income and Hotel Expense reflect the
------------ --------------
operating results for the Company's two hotel properties for the three months
ended March 31, as follows:
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<CAPTION>
Colonnade Holiday Inn
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Income 1,015,000 886,000 351,000 263,000
Expense 795,000 706,000 417,000 376,000
--------- ------- ------- --------
Net Before Taxes 220,000 180,000 (66,000) (117,000)
</TABLE>
The 1998 Colonnade results reflects increased income due to higher average room
rates and greater occupancy. The 1998 Holiday Inn results reflects reduced net
loss due to the completion of the conversion to a Holiday Inn Express.
Gain on Sale of Realty Interest. The 1997 results reflect the profit on
--------------------------------
the sale of a parcel of land in Montgomery County,
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MD in the amount of $187,000. There was no such transaction in 1998.
Interest Expense. The l998 reduction in interest expense reflects the
-----------------
1997 payoff of the Waterside Mall East mortgage and the February 1998 payoff of
the Holiday Inn 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 mortgage
for this partnership.
Assets
- ------
Receivables-Other. The decrease in Receivables-Other is the result of
------------------
seasonal fluctuations of receivables from hotel guests and tenants.
Investments. The increase is the result of investment of cash in short
------------
term Treasury instruments.
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.
During the three month period ended March 31, 1998, cash flow from
operating, investing and financing activities resulted in a decrease of $903,000
in cash and cash equivalents. Registrant generated cash flow of $3,099,000 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 $1,106,000.
Disclaimer
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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
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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
release, 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 March 31,
1998.
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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)
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<S> <C>
Date: April 29, 1998 /S/ Burton J. Reiner
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Burton J. Reiner, President
Date: April 29, 1998 /S/ William Oshinsky
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William Oshinsky, Treasurer
(Principal Financial Officer)
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
3/31/98 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 13,500,000
<SECURITIES> 17,251,000
<RECEIVABLES> 7,828,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 63,629,000
<DEPRECIATION> 27,742,000
<TOTAL-ASSETS> 97,696,000
<CURRENT-LIABILITIES> 0
<BONDS> 14,561,000
0
0
<COMMON> 28,000
<OTHER-SE> 75,191,000
<TOTAL-LIABILITY-AND-EQUITY> 97,696,000
<SALES> 1,223,000
<TOTAL-REVENUES> 7,680,000
<CGS> 898,000
<TOTAL-COSTS> 898,000
<OTHER-EXPENSES> 3,208,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 354,000
<INCOME-PRETAX> 3,220,000
<INCOME-TAX> 1,231,000
<INCOME-CONTINUING> 1,966,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,966,000
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0.71
</TABLE>
