<PAGE>
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 January 31, 1998.
[ ] 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 January 31,1998 there were 3,484,560 shares of the issuer's
beneficial interests outstanding
Transitional Small Business Disclosure Format
Yes ____ No XX
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SEVEN FIELDS DEVELOPMENT COMPANY
Form 10-QSB
FOR THE THREE MONTHS ENDED JANUARY 31, 1998 AND 1997
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
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<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
BALANCE SHEETS
AS OF JANUARY 31, 1998 AND OCTOBER 31, 1997
<CAPTION>
ASSETS
1998 1997
<S> <C> <C>
Cash $ 130,448 $ 225,807
Temporary investments 2,764,434 195,710
Total Cash & Temporary Investments $ 2,894,882 $ 421,517
Certificate of deposit $ $
Accounts and notes receivable, net of
allowances of $57,589 196,154 197,690
Mortgage notes receivable 548,500 61,114
Capitalized development costs 5,129,562 5,365,267
Capitalized house construction costs 3,008,055 3,687,231
Prepaid expenses and deposits 92,339 391,600
Property not currently under
development 3,098,843 3,077,133
Tenant security deposits 735 40,740
Deferred income tax assets 2,648,284 3,483,784
Property, Buildings &
Equipment
Land $ 473,267 $ 359,725
Buildings 1,389,723 3,373,859
Equipment and furnishings 1,017,055 1,393,155
Construction in progress 449,757
Total Property, Buildings and
Equipment $ 2,880,045 $ 5,576,496
Accumulated Depreciation (644,082) (2,055,493)
Total Property, Buildings and
Equipment, Net of
Accumulated Depreciation $ 2,235,963 $ 3,521,003
Total Assets $ 19,853,317 $ 20,247,079
</TABLE>
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<TABLE>
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
LIABILITIES
<CAPTION>
1998 1997
<S> <C> <C>
Accounts payable and accrued expenses $ 135,841 $ 696,329
Accrued estimated costs related to
developed lots and townhouses sold 918,271 812,427
Notes payable - credit lines 673,407 918,157
Mortgages payable 939,446 1,785,570
Customer deposits and advances 74,251 133,046
Tenant security deposits 735 40,740
General unsecured debt - minority
investors 9,897,933 9,897,933
General unsecured debt -
Seven Fields (Del), Inc. 48,306,984 48,306,984
Total Liabilities $ 60,946,868 $ 62,591,186
<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) 7,657,288 6,406,732
Total Shareholders' Deficiency $(41,093,551) $(42,344,107)
Total Liabilities and
Shareholders' Deficiency $ 19,853,317 $ 20,247,079
</TABLE>
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<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JANUARY 31, 1998 AND 1997
<CAPTION>
1998 1997
<S> <C> <C>
Gross Revenue
Rental income $ 128,108 $ 137,904
Fees & other operating income 19,281 17,074
Water revenue 39,619 36,133
Developed lot and house sales 2,656,713 2,368,441
Townhouse unit sales 3,967,900 76,900
$ 6,811,621 $ 2,636,452
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 2,322,706 $ 1,694,662
Cost of Townhouses Sold $ 1,843,638 $ 72,223
Other Operating Expenses* $ 216,286 $ 177,243
General & Administrative Expenses* $ 222,856 $ 220,336
Depreciation Expense $ 98,798 $ 72,230
Operating Income $ 2,107,337 $ 399,758
Interest Expense* $ (31,624) $ (40,072)
Interest Income $ 10,343 $ 5,653
Income Before
Provision for Income Taxes $ 2,086,056 $ 365,339
Provision for Income Taxes $ 835,500 146,000
Net Income $ 1,250,556 $ 219,339
Earnings Per Share** $ .36 $ .06
Weighted Average Number of Shares 3,484,560 3,484,560
<FN>
* See details on following page.
** Basic and fully diluted earnings per share are identical.
</TABLE>
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<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENT OF OPERATIONS - CONTINUED
DETAILS OF OTHER OPERATING EXPENSES,
GENERAL AND ADMINISTRATIVE EXPENSES, AND INTEREST EXPENSE
FOR THE THREE MONTHS ENDED JANUARY 31, 1998 AND 1997
<CAPTION>
1998 1997
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 180,828 $ 213,630
Repairs & maintenance 31,239 44,928
Utilities 25,603 25,662
Insurance 30,360 29,525
Property taxes 58,069 39,148
Other operating supplies & services 33,199 15,362
Total Other Operating Expenses $ 359,298 $ 368,255
Less Costs Capitalized To
Development and Construction (143,012) (191,012)
Net Other Operating Expenses $ 216,286 $ 177,243
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 94,320 $ 109,957
Professional fees 45,026 54,164
Other general and administrative
expenses 100,667 71,659
Total General and Administrative
Expenses $ 240,013 $ 235,780
Less Costs Capitalized To
Development and Construction (17,157) (15,444)
Net General and Administrative
Expenses $ 222,856 $ 220,336
Interest Expense
Total Interest Expense $ 59,451 $ 48,755
Less Interest Capitalized to
Development and House
Construction (27,827) (8,683)
Net Interest Expense $ 31,624 $ 40,072
</TABLE>
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<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENT OF RETAINED EARNINGS,
FOR THE THREE MONTHS ENDED JANUARY 31, 1998
<CAPTION>
STATEMENT OF RETAINED EARNINGS
<S> <C>
Retained earnings - beginning $ 6,406,732
Net income for the three month period 1,250,556
Retained earnings - ending $ 7,657,288
</TABLE>
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<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 1998 AND 1997
<CAPTION>
1998 1997
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 1,250,556 $ 219,339
Provision for income taxes 835,500 146,000
Depreciation 98,798 72,230
Capitalized development costs incurred (216,431) (314,443)
Capitalized house construction
costs incurred (1,152,557) (1,035,085)
Cost of lots & houses sold 2,262,159 1,620,809
Changes in other assets & liabilities:
Mortgage notes receivable (487,386) 54
Other assets 340,802 107,970
Other liabilities (553,444) (316,512)
Net Cash Flows Provided By
Operating Activities $ 2,377,997 $ 500,362
Cash Flows From Investing Activities:
Additions to property, buildings and
equipment $ (58,818) $ (215,295)
Sale of property, buildings & equipment 1,245,060 18,846
Total Cash Flows Provided By
Investing Activities $ 1,186,242 $ (196,449)
Cash Flows From Financing Activities:
Repayment of general unsecured debt $ (997,931)
Net borrowings on credit lines 467,750
Repayment of mortgages & notes payable $(1,340,874) (103,939)
Proceeds from borrowings 250,000
Total Cash Flows Used in
Financing Activities $(1,090,874) $ (634,120)
Net Increase(Decrease) in Cash And
Temporary Investments $ 2,473,365 $ (330,207)
Cash & Temporary Investments,
Beginning of Period $ 421,517 $ 401,870
Cash & Temporary Investments,
End of Period $ 2,894,882 $ 71,663
Interest Expense Included in
Net Income Above $ 31,624 $ 40,072
Interest Paid & Included in Capitalized
Development and House Construction Costs $ 27,827 $ 8,683
Total Interest Paid $ 59,451 $ 48,755
</TABLE>
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SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 1998 AND 1997
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, 1997.
For comparative purposes, certain 1997 amounts have been reclassified to
conform to the presentation adopted in 1998.
<PAGE>
Part I - Item 2 Management Discussion and Analysis
of Financial Condition and Results
of Operations
Financial Condition
The Company's financial condition improved due to generation of net profit of
$1,250,556 in the first three months of 1998. The Company obtained a $250,000
mortgage note from National City Bank. The note is collateralized by the real
estate office building constructed by the Company. The Company was successful
in selling 71 townhouse units during the quarter, 65 of which were sold to
Watersoft, Inc. As part of the sale to Watersoft, Inc., the Company
granted a $487,000 mortgage to such buyer. The remaining proceeds from the
sale were used to pay off the PNC Bank, N.A. mortgage in full and to fund a
distribution to investors in February, 1998 of over $2.3 million.
Inventory at the end of the first quarter of 1998 consisted of eight single
family homes in various stages of construction including one model home, two
homes under agreement of sale, and five homes available for sale. Also
included in inventory are twenty-five multi-family homes, in various stages
of construction, including three model homes, four homes under agreement of
sale and eighteen homes available for sale.
<PAGE>
Results of Operations for the Three Month Periods
In 1998, rental income decreased from the prior year's period by $9,796 due
to the sale of townhouse units. Since 71 of these townhouse units were sold
in 1998 and one was sold in 1997, gross revenue from townhouse unit sales
increased in 1998 by $3,891,000. Developed lot and house sales increased from
1997 to 1998 by $288,272 due to sales of six lots, four houses and eleven
multi-family units in 1998, compared with six lots, seven houses, two
multi-family units and one commercial lot a year earlier. As a result of the
above and other minor variations, total gross revenue in the period increased
by $4,175,169 from the prior year's period.
Cost of developed lots and houses sold increased by $628,044 in 1998 and cost
of townhouses sold increased by $1,771,415 in 1998; both such variations are
due primarily to corresponding proportionate changes in sales volumes.
Net other operating expenses increased from 1997 to 1998 by less than $40,000
due primarily to payroll and maintenance related to the sale of the 71
townhouses and greater levels of construction activity. Gross interest
expense decreased by approximately $10,000 from 1997 to 1998 due to lower
loan balances.
<PAGE>
Part I - Item 2 Management Discussion and Analysis
of Financial Condition and Results
of Operations
Results of Operations for Three Month Periods (Con't)
Due primarily to type of product sold and respective sales volumes, the
Company's income before provision for income taxes increased from 1997 to
1998 by $1,720,717.
The Company recognized a provision for income tax in 1998 of $835,500; 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
years. Based on the assets the Company currently owns and its development
plans, 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
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 January 31, 1998.
<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: March 3, 1998 By: GEORGE K. WRIGHT
George K. Wright, Vice-President
Date: March 3, 1998 By: LYNN HOFFMAN-KYLE
Lynn Hoffman-Kyle, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 2,894,882
<SECURITIES> 0
<RECEIVABLES> 253,743
<ALLOWANCES> (57,589)
<INVENTORY> 8,137,617
<CURRENT-ASSETS> 0
<PP&E> 2,880,045
<DEPRECIATION> (644,082)
<TOTAL-ASSETS> 19,853,317
<CURRENT-LIABILITIES> 0
<BONDS> 59,817,770
0
0
<COMMON> 3,484,560
<OTHER-SE> (44,578,111)
<TOTAL-LIABILITY-AND-EQUITY> 19,853,317
<SALES> 6,664,232
<TOTAL-REVENUES> 6,811,621
<CGS> 4,166,344
<TOTAL-COSTS> 4,704,284
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,624
<INCOME-PRETAX> 2,086,056
<INCOME-TAX> 835,500
<INCOME-CONTINUING> 1,250,556
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,250,556
<EPS-PRIMARY> .36
<EPS-DILUTED> 0
</TABLE>
