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, 1999.
[ ] 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 (724) 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 July 31, 1999 there were 3,484,392 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 NINE MONTHS ENDED JULY 31, 1999 AND 1998
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, 1999 AND OCTOBER 31, 1998
<CAPTION>
ASSETS
1999 1998
<S> <C> <C>
Cash $ 723,655 $ 106,865
Temporary investments 1,741,908 308,103
Total Cash & Temporary Investments $ 2,465,563 $ 414,968
Accounts and notes receivable, net of
allowances of $57,492 145,361 199,482
Mortgage notes receivable 422,418 497,918
Capitalized development costs 3,699,445 5,282,662
Capitalized house construction costs,
net of allowances 2,864,291 3,606,597
Prepaid expenses and deposits 49,493 78,445
Property not currently under
development 3,350,379 3,038,721
Deferred income tax assets 1,975,535 2,096,129
Property, Buildings &
Equipment
Land $ 484,756 $ 484,756
Buildings 1,294,345 1,294,345
Equipment and furnishings 860,693 845,934
Construction in progress
Total Property, Buildings and
Equipment $ 2,639,794 $ 2,625,035
Accumulated Depreciation (650,214) (581,633)
Total Property, Buildings and
Equipment, Net Of
Accumulated Depreciation $ 1,989,580 $ 2,043,402
Total Assets $ 16,962,065 $ 17,258,324
</TABLE>
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<TABLE>
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
LIABILITIES
<CAPTION>
1999 1998
<S> <C> <C>
Accounts payable and accrued expenses $ 77,928 $ 580,812
Accrued estimated costs related to
developed lots and buildings sold 1,024,152 1,041,873
Notes payable - credit lines 196,000
Mortgages payable 998,141 972,461
Customer deposits and advances 320,037 106,245
General unsecured debt - minority
investors 9,501,710 9,501,710
General unsecured debt -
Seven Fields (Del), Inc. 46,372,015 46,372,015
Total Liabilities $ 58,293,983 $ 58,771,116
<CAPTION>
SHAREHOLDERS' DEFICIENCY
<S> <C> <C>
Shares of beneficial interest, $1 par value
5,000,000 shares authorized,
3,484,392 shares issued and outstanding $ 3,484,392 $ 3,484,392
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) 7,419,089 7,238,215
Total Shareholders' Deficiency $(41,331,918) $(41,512,792)
Total Liabilities and
Shareholders' Deficiency $ 16,962,065 $ 17,258,324
</TABLE>
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<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JULY 31, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Gross Revenue
Rental income $ 22,402 $ 18,961
Fees & other operating income 7,759 17,296
Water revenue 63,997 47,414
Developed lot and house sales 4,348,493 2,430,595
$ 4,442,651 $ 2,514,266
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 3,907,359 $ 2,091,332
Cost of Townhouses Sold $ 503
Other Operating Expenses* $ 118,899 $ 127,713
General & Administrative Expenses* $ 189,626 $ 153,810
Depreciation Expense $ 27,644 $ 32,262
Operating Income $ 199,123 $ 108,646
Interest (Expense)/Credit* $ (7,463) $ 9,568
Interest Income $ 22,964 $ 19,374
Income Before Provision for Income Taxes $ 214,624 $ 137,588
Provision for Income Taxes $ 85,850 $ 46,352
Net Income $ 128,774 $ 91,236
Net Income Per Share,
Basic and Fully Diluted $ .04 $ .03
Weighted Average Number of Shares 3,484,392 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, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 174,590 $ 171,966
Repairs & maintenance 30,792 38,695
Utilities 42,842 28,682
Insurance 22,800 23,460
Property taxes 6,263 6,745
Other operating supplies & services 13,792 27,910
Total Other Operating Expenses $ 291,079 $ 297,458
Less Expenses Capitalized To
Development and Construction (172,180) (169,745)
Net Other Operating Expenses $ 118,899 $ 127,713
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 104,298 $ 93,282
Professional fees 13,523 15,524
Other general and administrative
expenses 83,583 62,161
Total General and Administrative
Expenses $ 201,404 $ 170,967
Less Expenses Capitalized To
Development and Construction (11,778) (17,157)
Net General and Administrative
Expenses $ 189,626 $ 153,810
Interest Expense
Total Interest Expense $ 18,754 $ 30,079
Less Interest Capitalized to
Development and House
Construction $ (11,291) $ (39,647)
Net Interest Expense/(Credit) $ 7,463 $ (9,568)
</TABLE>
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<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JULY 31, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Gross Revenue
Rental income $ 67,207 $ 165,682
Fees & other operating income 40,147 49,916
Water revenue 156,442 128,841
Developed lot and house sales 8,884,439 6,671,670
Townhouse unit sales 4,135,586
$ 9,148,235 $11,151,695
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 7,825,932 $ 5,825,246
Cost of Townhouses Sold $ 1,913,470
Other Operating Expenses* $ 333,754 $ 467,652
General & Administrative Expenses* $ 654,053 $ 593,890
Depreciation Expense $ 82,497 $ 165,982
Operating Income $ 251,999 $ 2,185,455
Interest Expense* $ (7,463) $ (31,208)
Interest Income $ 56,932 $ 50,379
Income Before
Provision for Income Taxes $ 301,468 $ 2,204,626
Provision for Income Taxes $ 120,594 $ 881,852
Net Income $ 180,874 $ 1,322,774
Net Income Per Share,
Basic and Fully Diluted $ .05 $ .38
Weighted Average Number of Shares 3,484,392 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, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 509,797 $ 514,473
Repairs & maintenance 103,439 98,683
Utilities 104,356 77,735
Insurance 71,400 76,980
Property taxes 18,553 70,454
Other operating supplies & services 35,732 92,340
Total Other Operating Expenses $ 843,277 $ 930,665
Less Expenses Capitalized To
Development and Construction (509,523) (463,013)
Net Other Operating Expenses $ 333,754 $ 467,652
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 317,135 $ 311,556
Professional fees 98,962 92,946
Other general and administrative
expenses 273,290 240,859
Total General and Administrative
Expenses $ 689,387 $ 645,361
Less Expenses Capitalized To
Development and Construction (35,334) (51,471)
Net General and Administrative
Expenses $ 654,053 $ 593,890
Interest Expense
Total Interest Expense $ 65,787 $ 123,862
Less Interest Capitalized to
Development and House Construction $ (58,324) $ (92,654)
Net Interest Expense $ 7,463 $ 31,208
</TABLE>
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<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENT OF RETAINED EARNINGS
FOR THE NINE MONTHS ENDED JULY 31, 1999 AND 1998
<S> <C>
Retained earnings - beginning $ 7,238,215
Net income for the nine month period 180,874
Retained earnings - ending $ 7,419,089
</TABLE>
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<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 180,874 $ 1,322,774
Provision for deferred income taxes 120,594 881,852
Depreciation 82,497 165,982
Capitalized development costs incurred (399,903) (939,999)
Capitalized house construction
costs incurred (5,170,681) (3,625,737)
Cost of lots & houses sold 7,584,449 5,580,360
Changes in other assets & liabilities:
Other assets 83,073 (97,479)
Other liabilities (306,813) (497,497)
Net Cash Flows Provided By
Operating Activities $ 2,174,090 $ 2,790,256
Cash Flows From Investing Activities:
Additions to property, buildings and
equipment $ (28,675) $ (80,666)
Payments on notes receivable 75,500
Sale of property, buildings & equipment 1,349,219
Total Cash Flows Provided By
Investing Activities $ 46,825 $ 1,268,553
Cash Flows From Financing Activities:
Repayment of general unsecured debt $ (2,328,505)
Net borrowings (repayments)on
credit lines (196,000)
Proceeds from borrowings 87,500 310,000
Repayment of loans payable (61,820) (1,711,286)
Total Cash Flows Used In
Financing Activities $ (170,320) $ (3,729,791)
Net Increase in Cash And
Temporary Investments $ 2,050,595 $ 329,018
Cash & Temporary Investments,
Beginning of Period $ 414,968 $ 421,517
Cash & Temporary Investments,
End of Period $ 2,465,563 $ 750,535
Interest Expense Included in
Net Income Above $ 7,463 $ 31,208
Interest Paid & Included in Capitalized
Development & House Construction Costs $ 58,324 $ 92,654
Total Interest Paid $ 65,787 $ 123,862
Income Taxes Paid None None
</TABLE>
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 1999 AND 1998
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, 1998.
For comparative purposes, certain 1998 amounts have been reclassified to
conform to the presentation adopted in 1999.
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 1999 AND 1998
Part I - Item 2 Management Discussion and Analysis
of Financial Condition and Results
of Operations
Financial Condition
The Company's financial condition improved slightly due to generation of net
income of $ 180,874 in the first nine months of 1999. Inventory at the end of
the third quarter of 1999 consists of eight single family homes, in various
stages of construction, including six homes under agreement of sale and two
homes available for sale. Also in inventory are forty-two multi-family homes,
in various stages of construction, including two model homes, twenty-four
homes under agreement of sale and sixteen homes available for sale.
Results of Operations for the Nine Month Periods
In 1999, rental income decreased from the prior year's period by nearly
$100,000 due to the sale of townhouse units in January/February 1998. Since
71 of these townhouse units were sold in the first quarter of 1998 and the
remainder of three units were sold in February 1998, gross revenue from
townhouse unit sales was $4,135,586 in 1998. Developed lot and house sales
increased from 1998 to 1999 by over $2.2 million due to sales of twenty-seven
lots, thirteen houses, twenty-five multi-family units, and one commercial
parcel in 1999, compared with fourteen lots, ten houses, twenty-two
multi-family units, and two commercial parcels a year earlier. As a result of
the above variations, total gross revenue in the period decreased by over
$2.0 million from the prior year's period.
Cost of developed lots and houses sold increased by over $2.0 million from
1998 to 1999 and cost of townhouses sold was over $1.9 million in 1998; both
such variations are due primarily to corresponding proportionate changes in
sales volumes.
From 1998 to 1999 other operating expenses decreased by almost $134,000
due to decreased costs related to the townhouses and greater capitalization
of costs related to home construction in 1999. Depreciation expense also
decreased by over $83,000 due primarily to the 1998 sale of the townhouses.
Gross interest expense decreased from 1998 to 1999 by over $58,000 due to pay
offs of the townhouse mortgage and credit lines.
Due to the variations previously indicated, the Company's income, before
provision for income taxes, decreased from 1998 to 1999 by over $1.9 million.
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 1999 AND 1998
Management Discussion and Analysis
of Financial Condition and Results
of Operations
Results of Operations for Nine Month Periods (Con't)
The Company recognized a provision for income tax in 1999 of $120,594 and in
1998, $881,852; such amounts serve 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>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 1999 AND 1998
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, 1999.
<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: August 31, 1999 By:PAUL VOYTIK, PRESIDENT
Date: August 31, 1999 By:LYNN HOFFMAN-KYLE, CHIEF FINANCIAL OFFICER
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JUL-31-1999
<CASH> 2,465,563
<SECURITIES> 0
<RECEIVABLES> 625,271
<ALLOWANCES> (57,492)
<INVENTORY> 9,914,115
<CURRENT-ASSETS> 0
<PP&E> 2,639,794
<DEPRECIATION> (650,214)
<TOTAL-ASSETS> 16,962,065
<CURRENT-LIABILITIES> 0
<BONDS> 56,871,866
0
0
<COMMON> 3,484,392
<OTHER-SE> (44,816,310)
<TOTAL-LIABILITY-AND-EQUITY> 16,962,065
<SALES> 9,040,881
<TOTAL-REVENUES> 9,148,235
<CGS> 7,825,932
<TOTAL-COSTS> 8,896,236
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,463
<INCOME-PRETAX> 301,468
<INCOME-TAX> 120,594
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 180,874
<EPS-BASIC> .05
<EPS-DILUTED> 0
</TABLE>
