<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 March 31, 1999 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 May 11, 1999: 2,780,528
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
------
Mar. 31, 1999 DEC. 31, 1998
---------------------- ----------------------
(Unaudited)
<S> <C> <C>
Rental Property and Equipment, Net $ 34,590,000 $ 34,871,000
Construction in Process 6,821,000 7,142,000
Homes Held for Sale 482,000 590,000
Land Held for Sale 4,245,000 4,245,000
Receivables:
Mortgages and Notes, Affiliates 3,960,000 4,090,000
Mortgages and Notes, Other 763,000 800,000
Other 3,302,000 3,161,000
Investment In and Advances To
Joint Ventures and Partnerships 3,407,000 2,864,000
Cash and Cash Equivalents 5,771,000 5,338,000
Cash Deposits Held in Escrow 11,040,000 9,626,000
Investments 19,238,000 19,626,000
Income Taxes Receivable -0- 12,000
Due From Affiliates 1,194,000 -0-
Deferred Charges and Other Assets 5,454,000 5,521,000
---------------------- ----------------------
$ 100,267,000 $ 97,886,000
====================== ======================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Notes Payable:
Mortgages Payable $ 5,127,000 $ 5,151,000
Accounts Payable 1,139,000 987,000
Accrued Expenses 930,000 871,000
Due To Affiliates -0- 558,000
Deposits 222,000 220,000
Deferred Income 370,000 544,000
Current Income Taxes Payable 660,000 -0-
Deferred Income Taxes Payable 6,011,000 6,011,000
---------------------- ----------------------
Total Liabilities 14,459,000 14,342,000
Minority Interest 1,050,000 1,063,000
Shareholders' Equity 84,758,000 82,481,000
---------------------- ----------------------
$ 100,267,000 $ 97,886,000
====================== ======================
</TABLE>
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
---------------------- ----------------------
<S> <C> <C>
Revenues:
Sales of Homes $ 1,327,000 $ 954,000
Other Construction (Net) 272,000 269,000
Rentals - Apartments 611,000 621,000
Rentals - Commercial 2,895,000 2,921,000
Hotel Income 1,527,000 1,366,000
Management Fees, Affiliates 225,000 224,000
Leasing Fee, Affiliates 187,000 187,000
Interest:
Affiliates 333,000 205,000
Other 401,000 415,000
Gain on Sale Of Realty Interests 144,000 128,000
Equipment Leasing & Vending 6,000 62,000
Income From Equity Investments 241,000 318,000
Other 21,000 10,000
---------------------- ----------------------
8,190,000 7,680,000
---------------------- ----------------------
Costs And Expenses:
Cost of Home Sales 1,247,000 898,000
Rentals - Apartments 358,000 344,000
Rentals - Commercial 1,113,000 1,005,000
Hotel Expenses 1,121,000 1,212,000
Land Development Expense 26,000 26,000
General And Administrative 497,000 496,000
Interest Expense 110,000 354,000
Equipment Leasing & Vending 6,000 13,000
Reserve for Advances to Partnerships 6,000 112,000
---------------------- ----------------------
4,484,000 4,460,000
---------------------- ----------------------
Net Income Before Income Taxes And
Minority Interest 3,706,000 3,220,000
Provision for Income Taxes 1,468,000 1,231,000
Minority Interest (39,000) 23,000
---------------------- ----------------------
Net Income $ 2,277,000 $ 1,966,000
====================== ======================
Earnings Per Common Share $ 0.82 $ 0.71
====================== ======================
Weighted Average Number of Common
Shares Outstanding 2,780,528 2,780,528
====================== ======================
</TABLE>
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
---------------------- ----------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 2,277,000 $ 1,966,000
Adjustments to Reconcile Net Income To Net Cash
Provided by Operating Activities:
Depreciation & Amortization 512,000 575,000
Gain on Sale of Realty Interest (144,000) (128,000)
(Income) Loss From Equity Investments (241,000) (318,000)
Changes in Other Assets & Liabilities:
(Increase) Decrease In:
Construction in Process 321,000 670,000
Homes Held for Sale 108,000 (471,000)
Mortgages & Notes Receivable 311,000 269,000
Income Taxes Receivable 12,000 1,015,000
Cash Deposits Held in Escrow (1,414,000) (366,000)
Other Assets (100,000) 222,000
Increase (Decrease) In Other Liabilities (1,066,000) (701,000)
---------------------- ----------------------
Total Adjustments (1,701,000) 767,000
---------------------- ----------------------
Net Cash Provided By Operating Activities 576,000 2,733,000
---------------------- ----------------------
Cash Flows From Investing Activities:
Investment in Joint Ventures (302,000) 847,000
Investment in US Treasury Instruments 388,000 (3,584,000)
Other (205,000) (159,000)
---------------------- ----------------------
Net Cash Provided By (Used In) Investing Activities (119,000) (2,896,000)
---------------------- ----------------------
Cash Flows From Financing Activities:
Repayment of Notes Payable (24,000) (1,106,000)
---------------------- ----------------------
Net Cash Used In Financing Activities (24,000) (1,106,000)
---------------------- ----------------------
Net Increase (Decrease) in Cash and
Cash Equivalents 433,000 (1,269,000)
Cash and Cash Equivalents, Beginning of Year 5,338,000 5,762,000
---------------------- ----------------------
Cash and Cash Equivalents, End of Period $ 5,771,000 $ 4,493,000
====================== ======================
</TABLE>
<PAGE>
Page Two
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
1999 1998
---------------------- ----------------------
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period For:
Interest (Net of Amount Capitalized) $ 145,000 $ 363,000
Income Taxes (Current and Estimated) 796,100 216,000
Supplemental Disclosure of Non-Cash Activities:
Escrowed Cash Deposits Received 28,000 62,000
Escrowed Cash Deposits Refunded 26,000 48,000
</TABLE>
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
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, 1998 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
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, 1999, the Company had approximately $1,266,000 of outstanding
letters of credit for land improvements in housing projects that it is
developing.
<PAGE>
SEGMENT INFORMATION:
The company reports segment information for the following categories:
1)Home Sales, 2)Commercial Rental, 3)Residential Rental and 4)Hotel Operations.
Home Sales reflect the sale of homes constructed by the Company and settled
during the current period. Commercial Rental includes income from leases to
tenants ranging from retail businesses to governmental agencies. Residential
Rental income is generated from the leasing of apartments in the Washington
Metropolitan area. Hotel Operations consist of income generated by the Company's
two hotel properties.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance based upon gross operating income from the combined properties in
each segment.
The Company's reportable segments are a consolidation of related
subsidiaries which offer different products. They are operated separately as
each segment requires different operating, pricing and leasing strategies. All
of the properties have been constructed by the Company and are incorporated into
the applicable segment.
<PAGE>
<TABLE>
<CAPTION>
For the Three Months Ended
--------------------------
3/31/99 3/31/98
--------------- ----------------
<S> <C> <C>
Revenues:
Home sales $ 1,327,000 $ 954,000
Commercial rental 3,184,000 3,200,000
Residential rental 611,000 621,000
Hotel operations 1,527,000 1,366,000
Other 2,328,000 2,923,000
Consolidated entries (787,000) (1,384,000)
--------------- ----------------
Total 8,190,000 7,680,000
--------------- ----------------
Gross operating income:
Home sales 102,000 56,000
Commercial rental 1,640,000 1,783,000
Residential rental 216,000 240,000
Hotel operations 406,000 154,000
Other 1,687,000 1,634,000
SG&A (497,000) (496,000)
Income taxes and minority interest (1,429,000) (1,208,000)
Consolidated entries 152,000 (197,000)
--------------- ----------------
Total 2,277,000 1,966,000
--------------- ----------------
Assets:
Home sales 8,277,000 10,253,000
Commercial rental 54,768,000 52,207,000
Residential rental 1,895,000 2,121,000
Hotel management 10,444,000 10,347,000
Other 33,003,000 22,639,000
Income taxes receivable -0- 141,000
Consolidated entries (8,120,000) (12,000)
--------------- ----------------
Total $100,267,000 $97,696,000
=============== ================
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Results of Operations
- ---------------------
Sales of Homes and Lots. 9 homes were settled in the first three months of
-----------------------
1999 compared with 7 homes in the same period of 1998. Net income from Home
Sales was $80,000 in the first three months of 1999 as compared to $56,000 for
the same period of 1998.
Registrant's backlog of homes under contract of sale as of March 31 was 21
in 1999 as compared to the same number in 1998. 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 $611,000 in the three months of 1999 as compared to $621,000 for the same
period in 1998, a decrease of 1.61%. Expenses for the first three months of 1999
was $358,000 as compared to $344,000 in 1998, a 4.07% increase. 1999 net
income was $253,000 versus $277,000 for the same period in 1998, a decrease of
8.66%.
Rentals - Commercial: Income and Expenses. Rental income from commercial
------------------------------------------
operations was $2,895,000 in the first three months of 1999 as compared to
$2,921,000 for the same period in 1998. Expenses for the first three months of
1999 were $1,113,000 as compared to $1,005,000 in 1998, an increase of 10.75%.
1999 net income was $1,782,000 versus $1,916,000 in 1998, a decrease of 6.99%.
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:
<TABLE>
<CAPTION>
Colonnade Holiday Inn Express
--------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income 990,000 1,015,000 537,000 351,000
Expense 682,000 795,000 439,000 417,000
------- --------- ------- -------
Net Before Taxes 308,000 220,000 98,000 (66,000)
</TABLE>
The 1999 Colonnade operations reflect a lower occupancy of 60.30% in the
quarter ended March 31, 1999 as compared to 65.43% occupancy in the same period
of 1998. The average daily room rate increased by 5.58% in 1999 over the same
period of 1998. Even though the Colonnade gross income reflects a decrease of
$25,000, expenses decreased by $113,000 resulting in an $88,000 increase in net
income as compared to the 1998 period.
The 1999 Holiday Inn Express results reflect an increase of $186,000 in
increased revenue and an increase of 5.88% in
<PAGE>
average daily room rate for the period ended March 31, 1999 as compared to the
same period in 1998.
Interest - Affiliates: The increase in 1999 reflects the interest
----------------------
received by Registrant on one of its partnership's commercial properties.
Interest Expense. The l999 reduction in interest expense reflects the
-----------------
acquisition of the Paradise Sudley North Building D loan in May of 1998 and the
acquisition of the Paradise Sudley North Building A loan in November of 1998.
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 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, 1999, cash flow from
operating, investing and financing activities resulted in an increase of
$433,000 in cash and cash equivalents. Registrant generated cash flow of
$576,000 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 $24,000.
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
<PAGE>
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 March 31,
1999.
<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: May 11, 1999 /s/ Charles S. Bresler
------------ -------------------------------
Charles S. Bresler,
Chief Executive Officer
Date: May 11, 1999 /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
3/31/99 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 16,811,000
<SECURITIES> 19,238,000
<RECEIVABLES> 8,025,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 63,599,000
<DEPRECIATION> 29,009,000
<TOTAL-ASSETS> 100,267,000
<CURRENT-LIABILITIES> 0
<BONDS> 5,127,000
0
0
<COMMON> 28,000
<OTHER-SE> 84,730,000
<TOTAL-LIABILITY-AND-EQUITY> 100,267,000
<SALES> 1,599,000
<TOTAL-REVENUES> 8,190,000
<CGS> 1,247,000
<TOTAL-COSTS> 1,247,000
<OTHER-EXPENSES> 3,127,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 110,000
<INCOME-PRETAX> 3,706,000
<INCOME-TAX> 1,468,000
<INCOME-CONTINUING> 2,277,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,277,000
<EPS-PRIMARY> 0.82
<EPS-DILUTED> 0.82
</TABLE>
