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, 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 January 31, 1999 there were 3,484,392 shares of the issuer's
beneficial interests outstanding
Transitional Small Business Disclosure Format
Yes ____ No XX
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
Form 10-QSB
FOR THE THREE MONTHS ENDED JANUARY 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
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
BALANCE SHEETS
AS OF JANUARY 31, 1999 AND OCTOBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
<S> <C> <C>
Cash $ 237,696 $ 106,865
Temporary investments 62,542 308,103
Total Cash & Temporary Investments $ 300,238 $ 414,968
Accounts and notes receivable, net of
allowances of $57,492 171,772 199,482
Mortgage notes receivable 475,172 497,918
Capitalized development costs 4,830,251 5,282,662
Capitalized house construction costs,
net of allowances 3,908,276 3,606,597
Prepaid expenses and deposits 107,511 78,445
Property not currently under
development, net of
allowances of 123,788 3,275,410 3,038,721
Deferred income tax assets 2,079,429 2,096,129
Property, Buildings &
Equipment
Land $ 484,756 $ 484,756
Buildings 1,294,345 1,294,345
Equipment and furnishings 848,243 845,934
Construction in progress
Total Property, Buildings and
Equipment $ 2,627,344 $ 2,625,035
Accumulated Depreciation (609,167) (581,633)
Total Property, Buildings and
Equipment, Net Of
Accumulated Depreciation $ 2,018,177 $ 2,043,402
Total Assets $ 17,166,236 $ 17,258,324
</TABLE>
<PAGE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
LIABILITIES
<CAPTION>
1999 1998
<S> <C> <C>
Accounts payable and accrued expenses $ 255,859 $ 580,812
Accrued estimated costs related to
developed lots and buildings sold 916,664 1,041,873
Notes payable - credit lines 454,000 196,000
Mortgages payable 994,772 972,461
Customer deposits and advances 159,049 106,245
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 $ 58,654,069 $ 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) 7,263,174 7,238,215
Total Shareholders' Deficiency $(41,487,833) $(41,512,792)
Total Liabilities and
Shareholders' Deficiency $ 17,166,236 $ 17,258,324
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JANUARY 31, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Gross Revenue
Rental income $ 22,402 $ 128,108
Fees & other operating income 12,950 19,281
Water revenue 47,749 39,619
Developed lot and house sales 1,815,060 2,656,713
Townhouse unit sales 3,967,900
$ 1,898,161 $ 6,811,621
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 1,493,852 $ 2,322,706
Cost of Townhouses Sold $ 1,843,638
Other Operating Expenses* $ 118,758 $ 216,286
General & Administrative Expenses* $ 227,237 $ 222,856
Depreciation Expense $ 27,534 $ 98,798
Operating Income $ 30,780 $ 2,107,337
Interest Expense* $ (5,327) $ (31,624)
Interest Income $ 16,206 $ 10,343
Income Before Provision for Income Taxes $ 41,659 $ 2,086,056
Provision for Income Taxes $ 16,700 $ 835,500
Net Income $ 24,959 $ 1,250,556
Net Income Per Share,
Basic and Fully Diluted $ .01 $ .36
Weighted Average Number of Shares 3,484,392 3,484,392
<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 THREE MONTHS ENDED JANUARY 31, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 176,679 $ 180,828
Repairs & maintenance 32,648 31,239
Utilities 27,852 25,603
Insurance 24,200 30,360
Property taxes 6,250 58,069
Other operating supplies & services 11,473 33,199
Total Other Operating Expenses $ 297,102 $ 359,298
Less Expenses Capitalized To
Development and Construction (160,344) (143,012)
Net Other Operating Expenses $ 118,758 $ 216,286
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 112,069 $ 94,320
Professional fees 41,069 45,026
Other general and administrative
expenses 85,877 100,667
Total General and Administrative
Expenses $ 239,015 $ 240,013
Less Expenses Capitalized To
Development and Construction (11,778) (17,157)
Net General and Administrative
Expenses $ 227,237 $ 222,856
Interest Expense
Total Interest Expense $ 19,790 $ 59,451
Less Interest Capitalized to
Development and House
Construction $ (14,463) $ (27,827)
Net Interest Expense $ 5,327 $ 31,624
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENT OF RETAINED EARNINGS
FOR THE THREE MONTHS ENDED JANUARY 31, 1999
<S> <C>
Retained earnings - beginning $ 7,238,215
Net income for the three month period 24,959
Retained earnings - ending $ 7,263,174
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 24,959 $ 1,250,556
Provision for deferred income taxes 16,700 835,500
Depreciation 27,534 98,798
Capitalized development costs incurred (252,540) (216,431)
Capitalized house construction
costs incurred (1,269,658) (1,152,557)
Cost of lots & houses sold 1,436,241 2,262,159
Changes in other assets & liabilities:
Other assets (1,356) 340,802
Other liabilities (397,358) (553,444)
Net Cash Flows Provided By (Used In)
Operating Activities $ (415,478) $ 2,865,383
Cash Flows From Investing Activities:
Additions to property, buildings and
equipment $ (2,309) $ (58,818)
Payments on notes receivable 22,746
Sale of property, buildings & equipment 757,674
Total Cash Flows Provided By
Investing Activities $ 20,437 $ 698,856
Cash Flows From Financing Activities:
Net borrowings on credit lines $ 258,000 250,000
Proceeds from borrowings 32,500
Repayment of loans payable (10,189) (1,340,874)
Total Cash Flows Provided by(Used In)
Financing Activities $ 280,311 $ (1,090,874)
Net(Decrease)in Cash And
Temporary Investments $ (114,730) $ 2,473,365
Cash & Temporary Investments,
Beginning of Period $ 414,968 $ 421,517
Cash & Temporary Investments,
End of Period $ 300,238 $ 2,894,882
Interest Expense Included in
Net Income Above $ 5,327 $ 31,624
Interest Paid & Included in Capitalized
Development & House Construction Costs $ 14,463 $ 27,827
Total Interest Paid $ 19,790 $ 59,451
Income Taxes Paid None None
</TABLE>
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 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>
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
profit of $25,000 in the first three months of 1999. The Company purchased
one additional single family lot in the Nevillewood sub-division for $61,000,
of which a mortgage note of $32,000 was granted to the seller. Cash borrowed
from credit lines totalled $350,000 for the quarter, while $92,000 was repaid
on such notes resulting in a $258,000 increase to cash.
Inventory at the end of the first quarter of 1999 consists of thirteen single
family homes, in various stages of construction, including ten homes under
agreement of sale and three homes available for sale. Also in inventory are
thirty-two multi-family homes, in various stages of construction, including
two model homes, ten homes under agreement of sale and twenty homes available
for sale.
Results of Operations for the Three Month Periods
In 1999, rental income decreased from the prior year's period by over
$105,000 due to the sale of townhouse units in January 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 $3,967,900 in 1998. Developed lot and house sales
decreased from 1998 to 1999 by nearly $842,000 due to sales of eight lots,
two houses, six multi-family units, and one commercial parcel in 1999,
compared with six lots, four houses and eleven multi-family units a year
earlier. As a result of the above variations, total gross revenue in the
period decreased by over $4.9 million from the prior year's period.
Cost of developed lots and houses sold decreased by almost $830,000 from 1998
to 1999 and cost of townhouses sold was over $1.8 million in 1998; both such
variations are due primarily to corresponding proportionate changes in sales
volumes.
<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)
From 1998 to 1999 other operating expenses decreased by nearly $100,000
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 $71,000 due primarily to the first quarter 1998 sale of the
townhouses.
Gross and net interest expense decreased from 1998 to 1999 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 $2.0 million.
The Company recognized a provision for income tax in 1999 of $16,700 and in
1998, $835,000; 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>
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 January 31, 1999.
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 1, 1999 By: PAUL VOYTIK, PRESIDENT
Date: March 1, 1999 By: LYNN HOFFMAN-KYLE, CHIEF FINANCIAL OFFICER
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JAN-31-1999
<CASH> 300,238
<SECURITIES> 0
<RECEIVABLES> 704,436
<ALLOWANCES> (57,492)
<INVENTORY> 12,013,937
<CURRENT-ASSETS> 0
<PP&E> 2,627,344
<DEPRECIATION> (609,167)
<TOTAL-ASSETS> 17,166,236
<CURRENT-LIABILITIES> 0
<BONDS> 56,868,497
0
0
<COMMON> 3,484,392
<OTHER-SE> (44,972,225)
<TOTAL-LIABILITY-AND-EQUITY> 17,166,236
<SALES> 8,458,088
<TOTAL-REVENUES> 8,637,429
<CGS> 5,646,881
<TOTAL-COSTS> 6,560,620
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,776
<INCOME-PRETAX> 2,067,038
<INCOME-TAX> 835,500
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,231,538
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
