<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 June 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 August 11, 1998: 2,792,653
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS
------
June 30, 1998 Dec. 31, 1997
--------------- ---------------
(Unaudited)
<S> <C>
Rental Property and Equipment, Net $ 35,517,000 $ 36,250,000
Construction in Process 8,405,000 8,594,000
Homes Held for Sale 1,319,000 1,135,000
Land Held for Sale 4,237,000 4,237,000
Investments 16,305,000 13,667,000
Receivables:
Mortgages and Notes, Affiliates 4,706,000 4,984,000
Mortgages and Notes, Other 724,000 923,000
Other 3,140,000 2,318,000
Investment In and Advances To
Joint Ventures and Partnerships 2,531,000 3,515,000
Cash and Cash Equivalents 5,669,000 5,762,000
Cash Deposits Held in Escrow 5,446,000 8,641,000
Income Taxes Receivable 270,000 1,156,000
Deferred Charges and Other Assets 6,010,000 6,340,000
--------------- ---------------
$ 94,279,000 $ 97,522,000
=============== ===============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Liabilities:
Mortgage Loans Payable $ 7,205,000 $ 15,667,000
Accounts Payable 1,033,000 1,810,000
Accrued Expenses 651,000 691,000
Due To Affiliates 683,000 16,000
Deposits 284,000 249,000
Deferred Income 1,308,000 341,000
Deferred Income Taxes Payable 5,186,000 5,186,000
--------------- ---------------
Total Liabilities 16,350,000 23,960,000
Minority Interest 270,000 309,000
Shareholders' Equity 77,659,000 73,253,000
--------------- ---------------
$ 94,279,000 $ 97,522,000
=============== ===============
</TABLE>
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
Revenues:
Sales of Homes $ 2,022,000 $ 2,520,000
Other Construction (Net) 582,000 378,000
Rentals - Apartments 1,254,000 1,161,000
Rentals - Commercial 5,697,000 5,825,000
Hotel Income 3,590,000 3,032,000
Management Fees, Affiliates 440,000 431,000
Leasing Fee, Affiliates 374,000 374,000
Interest:
Affiliates 504,000 438,000
Other 774,000 690,000
Gain on Sale of Realty Interests 259,000 428,000
Equipment Leasing and Vending 133,000 64,000
Income from Equity Investments 600,000 425,000
Other 17,000 14,000
--------------- ---------------
16,246,000 15,780,000
--------------- ---------------
Costs And Expenses:
Cost of Home Sales 1,945,000 2,342,000
Rentals - Apartments 717,000 742,000
Rentals - Commercial 2,088,000 2,101,000
Hotel Expenses 2,584,000 2,342,000
Land Carrying Cost 52,000 51,000
General and Administrative 924,000 945,000
Interest Expense 566,000 1,045,000
Equipment Leasing and Vending 21,000 26,000
Reserve for Advances to Partnerships 224,000 151,000
--------------- ---------------
9,121,000 9,745,000
--------------- ---------------
Net Income Before Income Taxes and
Minority Interest 7,125,000 6,035,000
Income Taxes 2,758,000 2,207,000
Minority Interest (39,000) 53,000
--------------- ---------------
Net Income $ 4,406,000 $ 3,775,000
=============== ===============
Earnings per Common Share $ 1.58 $ 1.35
=============== ===============
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 JUNE 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
Revenues:
Sales of Homes $ 1,068,000 $ 1,186,000
Other Construction (Net) 313,000 129,000
Rentals - Apartments 633,000 552,000
Rentals - Commercial 2,776,000 2,959,000
Hotel Income 2,224,000 1,883,000
Management Fees, Affiliates 216,000 219,000
Leasing Fee, Affiliates 187,000 187,000
Interest:
Affiliates 299,000 216,000
Other 359,000 356,000
Gain on Sale of Realty Interests 131,000 119,000
Equipment Leasing and Vending 71,000 24,000
Income from Equity Investments 282,000 202,000
Other 7,000 6,000
--------------- ---------------
8,566,000 8,038,000
--------------- ---------------
Costs And Expenses:
Cost of Home Sales 1,047,000 1,141,000
Rentals - Apartments 373,000 372,000
Rentals - Commercial 1,083,000 1,007,000
Hotel Expenses 1,372,000 1,260,000
Land Carrying Cost 26,000 24,000
General and Administrative 428,000 425,000
Interest Expense 212,000 542,000
Equipment Leasing and Vending 8,000 12,000
Reserve for Advances to Partnerships 112,000 33,000
--------------- ---------------
4,661,000 4,816,000
--------------- ---------------
Net Income Before Income Taxes and
Minority Interest 3,905,000 3,222,000
Income Taxes 1,527,000 1,070,000
Minority Interest (62,000) 35,000
--------------- ---------------
Net Income $ 2,440,000 $ 2,117,000
=============== ===============
Earnings per Common Share $ 0.87 $ 0.75
=============== ===============
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 SIX MONTHS ENDED JUNE 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 $ 4,406,000 $ 3,775,000
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 1,151,000 1,090,000
Gain on Sale of Realty Interest (259,000) (428,000)
Direct Financing Lease Payments -0- 57,000
Amortization of Investment in Direct
Financing Leases -0- (1,000)
Proceeds from Sale of Equipment Under
Direct Financing Leases -0- 10,000
(Income) Loss from Equity Investments (600,000) (425,000)
Other -0- (29,000)
Changes in Other Assets and Liabilities:
(Increase) Decrease In:
Construction in Process 189,000 (296,000)
Homes Held for Sale (184,000) 800,000
Mortgages and Notes Receivable 736,000 734,000
Income Taxes Receivable 886,000 32,000
Other Assets (598,000) (251,000)
Increase (Decrease) In Other Liabilities 813,000 470,000
-------------- --------------
Total Adjustments 2,134,000 1,763,000
-------------- --------------
Net Cash Provided by Operating Activities 6,540,000 5,538,000
-------------- --------------
Cash Flows from Investing Activities:
Investment in Joint Ventures 1,584,000 769,000
Investment in US Treasury Instruments (2,638,000) 235,000
Other (312,000) (862,000)
-------------- --------------
Net Cash (Used In) Provided by Investing Activities (1,366,000) 142,000
-------------- --------------
Cash Flows from Financing Activities:
Repayment of Mortgage Loans Payable (8,462,000) (736,000)
-------------- --------------
Net Cash Used in Financing Activities (8,462,000) (736,000)
-------------- --------------
Net Increase (Decrease) in Cash and
Cash Equivalents (3,288,000) 4,944,000
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 $ 11,115,000 $ 15,132,000
============== ==============
</TABLE>
<PAGE>
Page Two
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for:
Interest (Net of Amount Capitalized) $ 575,000 $ 1,060,000
Income Taxes (Current and Estimated) 1,871,000 781,000
Supplemental Disclosure of Non-Cash Activities:
Escrowed Cash Deposits Received 106,000 93,000
Escrowed Cash Deposits Refunded 71,000 107,000
</TABLE>
<PAGE>
BRESLER & REINER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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.
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 June 30, 1998, the Company had approximately $2,122,000 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. 15 homes and no lots were settled in the first six
-----------------------
months of 1998 compared with 18 homes and one lot in the same period of 1997. In
the second quarter of 1998, 8 homes and no lots were settled versus 8 homes and
one lot in the same period of 1997.
Registrant's backlog of homes under contract of sale as of June 30 was 29 in
1998 versus 25 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 $1,254,000 in the first six months of 1998, an increase of 8.0% over
$1,161,000 for the same period in 1997. Income for the second quarter of 1998
was $633,000, an increase of 14.70% over $552,000 for the like period in 1997
due to increased occupancy. Expenses for the first six months of 1998 was
$717,000 as compared to $742,000 in 1997, a 3.4% decrease. Expenses for the
second quarter of 1998 were constant with the second quarter of 1997.
Rentals - Commercial: Income and Expenses. Rental income from commercial
------------------------------------------
operations was $5,697,000 in the first six months of 1998 as compared to
$5,825,000 for the same period in 1997 or a decrease of 2.20%. Income for the
second quarter of 1998 decreased by 6.20% over the same period in 1997. The
decrease is primarily due to a reduction in the rent of one of the Registrant's
office buildings. Expenses for the first six months of 1998 were $2,088,000 as
compared to $2,101,000 in 1997. Expenses for the second quarter of 1998
increased by 7.50% as a result of an increase in certain Waterside Mall
expenses.
Hotel Income and Hotel Expense. Hotel Income and Hotel Expense reflect the
------------ --------------
operating results for the Company's two hotel properties for the six months
ended June 30, as follows:
<TABLE>
<CAPTION>
Colonnade Holiday Inn
-------------------- -----------------------
1998 1997 1998 1997
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Income 2,492,000 2,299,000 1,098,000 733,000
Expense 1,642,000 1,562,000 942,000 780,000
--------- --------- --------- -------
Net Before Taxes 850,000 737,000 156,000 (47,000)
</TABLE>
The 1998 Colonnade results reflects increased income due to higher average room
rates and greater occupancy. The 1998 Holiday Inn results reflects increased
income due to the completion of the conversion to a Holiday Inn Express.
<PAGE>
Gain on Sale of Realty Interest. The 1997 results reflect the profit on
--------------------------------
the sale of a parcel of land in Montgomery County, MD in the amount of $187,000.
There was no similar transaction in 1998.
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.
Assets and Liabilities
- ----------------------
Receivables-Other. The increase in Receivables-Other is the result of
------------------
increased business at the Colonnade which has resulted in increased revenues and
business receivables.
Investments. The increase is the result of investment of cash 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 June 30, 1998, there were
two non-recourse mortgages on Registrant's properties in the amount of
$5,197,000 and $2,008,000 totaling $7,205,000.
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 of its needs out
of cash flow or that additional funding will be available to Registrant if
needed.
During the six month period ended June 30, l998, cash flow from operating,
investing and financing activities decreased by $3,288,000 in cash. Registrant
generated cash flow of $6,540,000 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. $8,462,000 was used for the repayment of property
mortgages and the purchase of mortgage loans.
<PAGE>
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 June 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: August 11, 1998 /S/ Burton J. Reiner
---------------- ------------------------------------------------
Burton J. Reiner, President
Date: August 11, 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
UNAUDITED 6/30/98 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 11,115,000
<SECURITIES> 16,305,000
<RECEIVABLES> 8,570,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 63,806,000
<DEPRECIATION> 28,289,000
<TOTAL-ASSETS> 94,279,000
<CURRENT-LIABILITIES> 0
<BONDS> 7,205,000
0
0
<COMMON> 28,000
<OTHER-SE> 77,631,000
<TOTAL-LIABILITY-AND-EQUITY> 94,279,000
<SALES> 2,604,000
<TOTAL-REVENUES> 16,246,000
<CGS> 1,945,000
<TOTAL-COSTS> 1,945,000
<OTHER-EXPENSES> 6,610,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 566,000
<INCOME-PRETAX> 7,125,000
<INCOME-TAX> 2,758,000
<INCOME-CONTINUING> 4,406,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,406,000
<EPS-PRIMARY> 1.58
<EPS-DILUTED> 1.58
</TABLE>
