U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1997.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ........... to ............
Commission File No. 33-85102
SEVEN FIELDS DEVELOPMENT COMPANY
(Name of small business issuer in its charter)
PENNSYLVANIA 25-1561828
(State of Incorporation) (I.R.S. Employer Identification No.)
2200 Garden Drive, Suite 200, Seven Fields, PA 16046-7846
(Address of principal executive office with Zip Code)
Issuer's telephone number (412) 776-5070
Check whether the issuer (1) has filed all reports required to be filed by
Sections 13 or 15(d) of the Exchange Act during the preceding 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes XX No ___
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of August 20, 1997 there were 3,484,560 shares of the issuer's
beneficial interests outstanding
Transitional Small Business Disclosure Format
Yes ____ No XX
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
Form 10-QSB
FOR THE NINE MONTHS ENDED JULY 31, 1997 AND 1996
PART I - Financial Information
The following financial information is provided in response to Items 1
and 2 of Form 10-QSB.
Item 1 - Financial Statements
SEVEN FIELDS DEVELOPMENT COMPANY
BALANCE SHEETS
AS OF JULY 31, 1997 AND OCTOBER 31, 1996
<CAPTION>
ASSETS
1997 1996
<S> <C> <C>
Cash $ 118,224 $ 252,045
Temporary investments 383,725 149,825
Total Cash & Temporary Investments $ 501,949 $ 401,870
Certificate of deposit $ 336 $ 53,755
Accounts and notes receivable, net of
allowances of $57,589 and $57,552 207,036 168,614
Mortgage notes receivable 61,397 61,807
Capitalized development costs 5,191,555 5,020,059
Capitalized house construction costs 3,493,310 2,842,203
Prepaid expenses and deposits 268,443 481,518
Property not currently under
development 2,983,670 2,791,363
Tenant security deposits 41,770 51,485
Deferred income tax assets 3,606,000 3,992,000
Property, Buildings &
Equipment
Land $ 370,869 $ 386,789
Buildings 3,596,405 3,914,327
Equipment and furnishings 1,406,959 1,347,903
Construction in progress 382,774
Total Property, Buildings and
Equipment $ 5,757,007 $ 5,649,019
Accumulated Depreciation (2,106,210) (2,083,587)
Total Property, Buildings and
Equipment, Net of
Accumulated Depreciation $ 3,650,797 $ 3,565,432
Total Assets $ 20,006,263 $ 19,430,106
</TABLE>
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<TABLE>
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
LIABILITIES
<CAPTION>
1997 1996
<S> <C> <C>
Accounts payable and accrued expenses $ 99,664 $ 507,566
Accrued estimated costs related to
developed lots and townhouses sold 1,060,553 590,920
Loans payable - lines of credit 1,185,125 130,000
Mortgages payable 1,854,467 1,958,581
Customer deposits and advances 89,098 95,137
Tenant security deposits 41,770 51,485
General unsecured debt - minority
investors 9,897,933 10,067,744
General unsecured debt -
Seven Fields (Del), Inc. 48,306,984 49,135,104
Total Liabilities $ 62,535,594 $ 62,536,537
<CAPTION>
SHAREHOLDERS' DEFICIENCY
<S> <C> <C>
Shares of beneficial interest, $1 par value
5,000,000 shares authorized,
3,484,560 shares issued
and outstanding $ 3,484,560 $ 3,484,560
Shareholders' deficit - excess of
non-discharged debt over assets on
November 7, 1987 (Date of reorganization) (52,235,399) (52,235,399)
Retained earnings, since
November 7, 1987
(Date of reorganization) 6,221,508 5,644,408
Total Shareholders' Deficiency $(42,529,331) $(43,106,431)
Total Liabilities and
Shareholders' Deficiency $ 20,006,263 $ 19,430,106
</TABLE>
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<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JULY 31, 1997 and 1996
<CAPTION>
1997 1996
<S> <C> <C>
Gross Revenue
Apartment rentals $ 129,323 $ 173,204
Fees & other operating income 17,165 17,582
Water revenue 44,206 34,959
Developed lot and house sales 2,481,337 1,527,583
Townhouse unit sales 393,250 913,876
$ 3,065,281 $ 2,667,204
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 1,760,648 $ 1,206,654
Cost of Townhouses Sold $ 187,135 $ 456,054
Other Operating Expenses* $ 233,315 $ 214,798
General & Administrative Expenses* $ 178,189 $ 153,646
Depreciation Expense $ 72,410 $ 74,547
Operating Income $ 633,584 $ 561,505
Interest Expense* $ (19,637) $ (12,598)
Interest Income $ 7,794 $ 13,252
Income Before Provision
for Income Taxes $ 621,741 $ 562,159
Provision for Income Taxes $ 240,000
Net Income $ 381,741 $ 562,159
Net Income Per Share $ .11 $ .16
Weighted Average Number of Shares 3,484,560 3,484,560
<FN>
* See details on following page.
</TABLE>
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<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENTS OF OPERATIONS - CONTINUED
DETAILS OF OTHER OPERATING EXPENSES,
GENERAL AND ADMINISTRATIVE EXPENSES, AND INTEREST EXPENSE
FOR THE THREE MONTHS ENDED JULY 31, 1997 AND 1996
<CAPTION>
1997 1996
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 201,826 $ 183,634
Repairs & maintenance 53,873 77,029
Utilities 32,064 32,791
Insurance 40,565 34,200
Property taxes 36,030 40,615
Other operating supplies & services 31,138 14,791
Total Other Operating Expenses $ 395,496 $ 383,060
Less Costs Capitalized To
Development and Construction (162,181) (168,262)
Net Other Operating Expenses $ 233,315 $ 214,798
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 107,269 $ 94,810
Professional fees 14,038 16,138
Professional fees related to litigation
and pre-reorganization issues 799
Other general and administrative
expenses 72,326 51,427
Total General and Administrative
Expenses $ 193,633 $ 163,174
Less Costs Capitalized To
Development and Construction (15,444) (9,528)
Net General and Administrative
Expenses $ 178,189 $ 153,646
Interest Expense
Total Interest Expense $ 69,364 $ 42,025
Less Interest Capitalized to
Development and House
Construction $ (49,727) $ (29,427)
Net Interest Expense $ 19,637 $ 12,598
</TABLE>
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<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JULY 31, 1997 AND 1996
<CAPTION>
1997 1996
<S> <C> <C>
Gross Revenue
Apartment rentals $ 393,632 $ 565,049
Fees & other operating income 51,414 51,552
Water revenue 117,001 99,349
Developed lot and house sales 6,024,144 3,980,635
Townhouse unit sales 778,724 2,368,920
$ 7,364,915 $ 7,065,505
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 4,512,385 $ 3,266,499
Cost of Townhouses Sold $ 427,870 $ 1,172,266
Other Operating Expenses* $ 579,074 $ 538,894
General & Administrative Expenses* $ 590,261 $ 602,396
Depreciation Expense $ 216,714 $ 253,285
Operating Income $ 1,038,611 $ 1,232,165
Interest Expense* $ (95,912) $ (60,343)
Interest Income $ 20,401 $ 44,282
Income (Loss) Before Provision
for Income Taxes $ 963,100 $ 1,216,104
Provision for income taxes $ 386,000
Net Income (Loss) $ 577,100 $ 1,216,104
Net Income Per Share $ .17 $ .35
Weighted Average Number of Shares 3,484,560 3,484,560
<FN>
* See details on following page.
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENTS OF OPERATIONS - CONTINUED
DETAILS OF OTHER OPERATING EXPENSES,
GENERAL AND ADMINISTRATIVE EXPENSES, AND INTEREST EXPENSE
FOR THE NINE MONTHS ENDED JULY 31, 1997 AND 1996
<CAPTION>
1997 1996
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 575,395 $ 504,846
Repairs & maintenance 139,650 154,081
Utilities 90,723 86,714
Insurance 101,535 102,600
Property taxes 112,939 106,566
Other operating supplies & services 69,687 52,083
Total Other Operating Expenses $ 1,089,929 $ 1,006,890
Less Costs Capitalized To
Development and Construction (510,855) (467,996)
Net Other Operating Expenses $ 579,074 $ 538,894
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 306,668 $ 301,453
Professional fees 105,805 107,140
Professional fees related to litigation
and pre-reorganization issues 43,078
Other general and administrative
expenses 224,120 179,309
Total General and Administrative
Expenses $ 636,593 $ 630,980
Less Costs Capitalized To
Development and Construction (46,332) (28,584)
Net General and Administrative
Expenses $ 590,261 $ 602,396
Interest Expense
Total Interest Expense $ 171,155 $ 142,921
Less Interest Capitalized to
Development and House
Construction $ (75,243) $ (82,578)
Net Interest Expense $ 95,912 $ 60,343
</TABLE>
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<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1997 AND 1996
<CAPTION>
1997 1996
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 577,100 $ 1,216,104
Provision for deferred income taxes 386,000
Depreciation 216,714 253,285
Capitalized development costs incurred (1,496,386) (1,642,929)
Capitalized house construction
costs incurred (3,757,246) (2,453,546)
Cost of lots & houses sold 4,238,722 2,873,110
Changes in other assets & liabilities:
Restricted cash 184,550
Mortgage notes receivable 410 124,090
Other assets 237,787 117,641
Other liabilities 45,977 (295,418)
Net Cash Flows From Operating Activities $ 449,078 $ 376,887
Cash Flows From Investing Activities:
Additions to property, buildings and
equipment $ (490,554) $ (99,681)
Sale of property, buildings & equipment 188,475 692,309
Total Cash Flows From Investing Activities $ (302,079) $ 592,628
Cash Flows From Financing Activities:
Repayment of general unsecured debt $ (997,931) $ (1,995,478)
Repayment of loans payable (554,489) (404,155)
Proceeds of borrowings 1,505,500 750,000
Total Cash Flows From Financing Activities $ (46,920) $ (1,649,633)
Net Change in Cash And
Temporary Investments $ 100,079 $ (680,118)
Cash & Temporary Investments,
Beginning of Period $ 401,870 $ 1,208,228
Cash & Temporary Investments,
End of Period $ 501,949 $ 528,110
Interest Expense Included in Net Income
From Operating Activities Above $ 95,912 $ 60,343
Interest Paid & Included in Capitalized
Development Costs & Houses Under
Construction $ 75,243 $ 82,578
Total Interest Paid $ 171,155 $ 142,921
Supplemental Schedule of Noncash
Investing and Financing Activities:
Pre-November 7, 1987 investor
adjustment $ 5,138
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENT OF RETAINED EARNINGS
FOR THE NINE MONTHS ENDED JULY 31, 1997
<CAPTION>
STATEMENT OF RETAINED EARNINGS
<S> <C>
Retained earnings - beginning $ 5,644,408
Net income for the nine month period 577,100
Retained earnings - ending $ 6,221,508
</TABLE>
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 1997 AND 1996
Basis of Presentation
The financial statements included herein have been prepared by the
Registrant, without audit, for filing with the Securities and Exchange
Commission pursuant to the rules and regulations of said commission. The
financial information presented herein, while not necessarily indicative of
results to be expected for the year, reflects adjustments comprising normal
recurring accruals which in the opinion of the Registrant are necessary for
the fair statement of the results for the periods indicated. This financial
information should be read in conjunction with the financial statements and
notes thereto included in the Registrant's Annual Report for the two years in
the period ended October 31, 1996.
For comparative purposes, certain 1996 amounts have been reclassified to
conform to the presentation adopted in 1997.
<PAGE>
Part I - Item 2 Management Discussion and Analysis
of Financial Condition and Results
of Operations
Financial Condition
The Company obtained a $250,000 unsecured line of credit from PNC Bank, N.A.;
however, no amounts have been drawn on the line of credit. Over $1.5 million
has been borrowed during 1997 to fund construction, while approximately $.5
million of loans payable have been repaid. Cash was also used to fund
repayment of general unsecured debt of $997,931.
Land development for and construction of an office building continued during
the quarter. Such building shall be leased to the real estate sales company
which is responsible for all of the Company's residential sales.
Inventory at the end of the third quarter of 1997 consisted of thirteen
single family homes in various stages of construction including one model
home, four homes under agreement of sale, and eight homes available for sale.
Also included in inventory are thirty-four multi-family homes, in various
stages of construction, including three model homes, ten homes under
agreement of sale and twenty-one homes available for sale.
Results of Operations for Nine Month Periods
In 1997, rental income decreased from the prior year's period by $171,417 due
to the sale of townhouse units. Since ten of these townhouse units were sold
in 1997 and 32 were sold in 1996, gross revenue from townhouse unit sales
decreased in 1997 by $1,590,196. Management believes that decreased townhouse
sales are a result of increased competition and slightly unfavorable market
conditions. Additionally, management believes that due to the availability of
its newly constructed multi-family units, buyers are opting to purchase the
higher priced units instead of the townhouse units.
Developed lot and house sales increased from 1996 to 1997 by $2,043,509 due
to sales of fourteen lots, ten houses, seventeen multi-family units and three
commercial lots in 1997, compared with sixteen lots, seven houses, and
thirteen multi-family units a year earlier. As a result of the above and
other minor variations, total gross revenue in the nine month period
increased by $299,410 from the prior year's period.
The cost of developed lots and houses sold increased by $1,245,886 in 1997
and the cost of townhouses sold decreased by $744,396 in 1997; both such
variations are due to corresponding proportionate changes in sales volumes.
While gross other operating expenses increased by $83,039 from 1996 to 1997
due to increased maintenance costs and rising activity levels in home
construction and water company activities, net other operating expenses only
increased by $40,180 due to greater capitalization of expenses in 1997.
Interest expense increased in 1997 because of increased borrowing for
construction activities.
<PAGE>
Part I - Item 2 Management Discussion and Analysis
of Financial Condition and Results
of Operations
Results of Operations for Nine Month Periods (Cont.)
As a result of the stated variations and due primarily to the decrease of
townhouse sales, the Company's income before provision for income taxes
decreased from 1996 to 1997 by $253,004.
The Company recognized a provision for income tax in 1997 of $386,000; such
amount serves to reduce deferred income tax assets and it is anticipated that
no income tax will be paid this year. Upon adopting Financial Accounting
Standard #109 ("FAS 109") in 1994 the Company recognized a $4 million dollar
deferred tax asset, and, annually, values the realizability of such asset
based on the Company's ability to generate sufficient revenue in future
periods. It is estimated that the deferred tax assets will be utilized upon
development and sale of the Company's remaining property, and the Company has
begun, effective November 1, 1996, recognizing tax expense at a combined
federal and state rate of 40%.
<PAGE>
Part II - Item 1 Legal Proceedings
None
<PAGE>
OTHER INFORMATION
Item 6. Exhibits and Other Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the
quarter ended July 31, 1997.
<PAGE>
SIGNATURES
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.
Seven Fields Development Company
Date: September 8, 1997 By:George K. Wright
George K. Wright, Vice-President
Date:September 8, 1997 By:Darell L. Craig
Darell L. Craig, Chief Operating Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JUL-31-1997
<CASH> 501,949
<SECURITIES> 336
<RECEIVABLES> 264,625
<ALLOWANCES> (57,589)
<INVENTORY> 8,684,865
<CURRENT-ASSETS> 0
<PP&E> 5,757,007
<DEPRECIATION> (2,106,210)
<TOTAL-ASSETS> 20,006,263
<CURRENT-LIABILITIES> 0
<BONDS> 60,059,384
0
0
<COMMON> 3,484,560
<OTHER-SE> (46,013,891)
<TOTAL-LIABILITY-AND-EQUITY> 20,006,263
<SALES> 6,802,868
<TOTAL-REVENUES> 7,364,915
<CGS> 4,940,255
<TOTAL-COSTS> 6,326,304
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 95,912
<INCOME-PRETAX> 963,100
<INCOME-TAX> 386,000
<INCOME-CONTINUING> 577,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 577,100
<EPS-PRIMARY> .17
<EPS-DILUTED> 0
</TABLE>
