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, 1996.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ........... to ...........
Commission File No. 33-85102-01
SEVEN FIELDS DEVELOPMENT (PA), INC.
(Name of small business issuer in its charter)
PENNSYLVANIA 25-1752570
(State of Incorporation) (I.R.S. Employer Identification No.)
2200 Garden Drive, Suite 200, Mars, 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 20,1996 there were 2,905,682 shares of the
issuer's $1.00 par value common stock outstanding.
Transitional Small Business Disclosure Format
Yes ____ No XX
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
Form 10-QSB
FOR THE NINE MONTHS ENDED JULY 31, 1996 AND 1995
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 (PA), INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JULY 31, 1996 AND OCTOBER 31, 1995
<CAPTION>
ASSETS
1996 1995
<S> <C> <C>
Cash $ 3,153 $ 2,887
Temporary investments 525,446 1,205,919
Total Cash & Temporary Investments $ 528,599 $ 1,208,806
Certificate of deposit $ 47,548 $ 23,885
Cash escrow - horses 184,550
Accounts and notes receivable, net of
allowances of $70,899 and $58,308 178,000 241,601
Mortgage notes receivable 62,591 186,681
Capitalized development costs 4,310,318 2,944,303
Capitalized house construction costs 2,311,569 1,961,255
Prepaid expenses and deposits 228,717 282,492
Property not currently under
development 2,502,721 2,995,685
Tenant security deposits 55,292 79,220
Deferred income tax assets 3,992,000 3,992,000
Property, Buildings &
Equipment
Land $ 401,117 $ 452,061
Buildings 4,200,457 5,217,808
Equipment and furnishings 1,386,781 1,397,097
Construction in progress 296,953 317,124
Total Property, Buildings and
Equipment $ 6,285,308 $ 7,384,090
Accumulated Depreciation (2,195,012) (2,447,881)
Total Property, Buildings and
Equipment, Net of Accumulated
Depreciation $ 4,090,296 $ 4,936,209
Total Assets $ 18,307,651 $ 19,036,687
</TABLE>
<PAGE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
<CAPTION>
1996 1995
<S> <C> <C>
Accounts payable and accrued expenses $ 108,506 $ 419,924
Accrued estimated costs related to
developed lots and townhouses sold 384,624 267,973
Mortgage payable 1,991,830 1,645,985
Customer deposits and advances 161,748 61,714
Tenant security deposits 55,292 79,220
Legal settlement payable 175,000
General unsecured subordinated debt 10,067,744 10,406,981
Total Liabilities $ 12,769,744 $ 13,056,797
<CAPTION>
SHAREHOLDERS' EQUITY
<S> <C> <C>
Common stock, $1 par value,
10,000,000 shares authorized,
2,905,682 and 2,905,960 shares
issued and outstanding $ 2,905,682 $ 2,905,960
Additional Paid In Capital 49,713,983 51,375,083
Shareholders' Deficit - excess of
non-discharged debt over assets
on November 7, 1987 (Date of
reorganization) (52,235,399) (52,240,537)
Retained earnings, since
November 7, 1987 (Date
of reorganization) 5,153,641 3,939,384
Total Shareholders' Equity $ 5,537,907 $ 5,979,890
Total Liabilities and
Shareholders' Equity $ 18,307,651 $ 19,036,687
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JULY 31, 1996 AND 1995
<CAPTION>
1996 1995
<S> <C> <C>
Gross Revenue
Apartment rentals $ 173,204 $ 231,945
Fees & other operating income 17,582 33,828
Water revenue 34,959 32,121
Developed lot and house sales 1,527,583 994,081
Townhouse unit sales 913,876 1,015,202
$ 2,667,204 $ 2,307,177
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 1,206,654 $ 882,547
Cost of Townhouses Sold $ 456,054 $ 503,133
Other Operating Expenses* $ 214,798 $ 238,148
General & Administrative Expenses* $ 155,495 $ 339,754
Depreciation Expense $ 74,547 $ 84,692
Operating Income $ 559,656 $ 258,903
Interest Expense* $ (12,598) $ (26,230)
Interest Income $ 13,254 $ 40,260
Net Income $ 560,312 $ 272,933
Earnings per Share .16 .08
Weighted Average Shares Outstanding 2,905,682 2,905,682
<FN>
* See details on following page.
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
DETAILS OF OTHER OPERATING EXPENSES,
GENERAL AND ADMINISTRATIVE EXPENSES, AND INTEREST EXPENSE
FOR THE THREE MONTHS ENDED JULY 31, 1996 AND 1995
<CAPTION>
1996 1995
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 183,634 $ 194,962
Repairs & maintenance 77,029 64,345
Utilities 32,791 24,585
Insurance 34,200 38,898
Property taxes 40,615 40,879
Other operating supplies & services 14,791 26,451
Total Other Operating Expenses $ 383,060 $ 390,120
Less Costs Capitalized To
Development and House Construction (168,262) (151,972)
Net Operating Expenses $ 214,798 $ 238,148
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 94,810 $ 93,999
Professional fees 16,138 10,611
Professional fees related to litigation
and pre-reorganization issues 800 176,477
Other general and administrative
expenses 53,275 71,816
Total General and Administrative
Expenses $ 165,023 $ 352,903
Less Costs Capitalized To
Development and Construction (9,528) (13,149)
Net General and Administrative
Expenses $ 155,495 $ 339,754
Interest Expense
Total Interest Expense $ 42,025 $ 38,571
Less Interest Capitalized to
Development and House
Construction $ (29,427) $ (12,341)
Net Interest Expense $ 12,598 $ 26,230
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JULY 31, 1996 AND 1995
<CAPTION>
1996 1995
<S> <C> <C>
Gross Revenue
Apartment rentals $ 565,049 $ 766,184
Fees & other operating income 51,552 68,785
Water revenue 99,349 91,074
Developed lot and house sales 3,980,635 4,486,114
Townhouse unit sales 2,368,920 2,637,598
$ 7,065,505 $ 8,049,755
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 3,266,499 $ 3,879,869
Cost of Townhouses Sold $ 1,172,266 $ 1,269,318
Other Operating Expenses* $ 538,894 $ 646,332
General & Administrative Expenses* $ 604,245 $ 873,253
Depreciation Expense $ 253,285 $ 285,022
Operating Income $ 1,230,316 $ 1,095,961
Interest Expense* $ (60,343) $ (56,623)
Interest Income $ 44,284 $ 126,690
Net Income $ 1,214,257 $ 1,166,028
Earnings per Share .35 .33
Weighted Average Shares Outstanding 2,905,682 2,905,682
<FN>
* See details on following page.
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
DETAILS OF OTHER OPERATING EXPENSES,
GENERAL AND ADMINISTRATIVE EXPENSES, AND INTEREST EXPENSE
FOR THE NINE MONTHS ENDED JULY 31, 1996 AND 1995
<CAPTION>
1996 1995
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 504,846 $ 489,760
Repairs & maintenance 154,081 157,407
Utilities 86,714 67,480
Insurance 102,600 119,773
Property taxes 106,566 143,529
Other operating supplies & services 52,083 79,091
Total Other Operating Expenses $ 1,006,890 $ 1,057,040
Less Costs Capitalized To
Development and House Construction (467,996) (410,708)
Net Operating Expenses $ 538,894 $ 646,332
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 301,453 $ 311,309
Professional fees 107,140 81,697
Professional fees related to litigation
and pre-reorganization issues 43,079 299,990
Other general and administrative
expenses 181,157 219,704
Total General and Administrative
Expenses $ 632,829 $ 912,700
Less Costs Capitalized To
Development and Construction (28,584) (39,447)
Net General and Administrative
Expenses $ 604,245 $ 873,253
Interest Expense
Total Interest Expense $ 142,921 $ 115,608
Less Interest Capitalized to
Development and House
Construction $ (82,578) $ (58,985)
Net Interest Expense $ 60,343 $ 56,623
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS,
SHAREHOLDERS' DEFICIT, COMMON STOCK, AND
ADDITIONAL PAID IN CAPITAL
FOR THE NINE MONTHS ENDED
JULY 31, 1996
<CAPTION>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<S> <C>
Retained earnings - beginning $ 3,939,384
Net income for the nine month period 1,214,257
ended July 31
Retained earnings - ending $ 5,153,641
<CAPTION>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
<S> <C>
Shareholders' deficit - excess of
non-discharged debt over assets on
November 7, 1987 (Date of
reorganization) - beginning $ (52,240,537)
Pre-November 7, 1987 shareholder adjustment 5,138
Shareholders' deficit - excess of
non-discharged debt over assets on
November 7, 1987 (Date of
reorganization) - ending $ (52,235,399)
<CAPTION>
CONSOLIDATED STATEMENT OF COMMON STOCK
<S> <C>
Common stock - beginning $ 2,905,960
Pre-November 7, 1987 shareholder adjustment (278)
Common stock - ending $ 2,905,682
<CAPTION>
CONSOLIDATED STATEMENT OF ADDITIONAL PAID IN CAPITAL
<S> <C>
Additional paid in capital - beginning $ 51,375,083
Pre-November 7, 1987 shareholder adjustment (4,860)
Return of capital distribution to shareholders (1,656,240)
Additional paid in capital - ending $ 49,713,983
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1996 AND 1995
<CAPTION>
1996 1995
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 1,214,257 $ 1,166,028
Depreciation 253,285 285,022
Capitalized development costs incurred (1,642,929) (1,109,729)
Capitalized construction
costs incurred (2,453,546) (2,895,857)
Cost of lots & houses sold 2,873,110 3,491,047
Changes in other assets & liabilities:
Restricted cash 184,550 (2,085)
Mortgage notes receivable 124,090 620,425
Other assets 117,641 299,818
Other liabilities (293,660) 141,775
Net Cash Flows From Operating Activities $ 376,798 $ 1,996,444
Cash Flows From Investing Activities:
Additions to property, buildings and
equipment $ (99,681) $(1,088,591)
Sale of property, buildings & equipment 692,309 838,588
Total Cash Flows From Investing Activities $ 592,628 $ (250,003)
Cash Flows From Financing Activities:
Repayment of investor debt $ (339,237) $ (386,463)
Return of capital to shareholders (1,656,241) (1,638,014)
Repayment of mortgages payable (404,155) (39,930)
Proceeds of new mortgage 750,000
Total Cash Flows From Financing Activities $ (1,649,633) $(2,064,407)
Net Decrease in Cash And
Temporary Investments $ (680,207) $ (317,966)
Cash & Temporary Investments,
Beginning of Period $ 1,208,806 $ 2,488,891
Cash & Temporary Investments,
End of Period $ 528,599 $ 2,170,925
Interest Expense Included in Net Income
From Operating Activities Above $ 60,343 $ 56,623
Interest Paid & Included in Capitalized
Development Costs & Houses Under
Construction $ 82,578 $ 58,985
Total Interest Paid $ 142,921 $ 115,608
Supplemental Schedule of Noncash
Investing and Financing Activities:
Pre-November 7, 1987 shareholder
adjustment $ 5,138
</TABLE>
<PAGE>
SEVEN FIELDS DEVELOPMENT (PA), INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 1996 AND 1995
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 financial statements and notes
thereto included in the Registrant's Annual Report for the two years in the
period ended October 31, 1995.
For comparative purposes certain 1995 amounts have been reclassified to
conform to the presentation adopted in 1996.
Principles of Consolidation
The consolidated financial statements include the accounts of Seven Fields
Development (PA), Inc. and its wholly-owned subsidiaries, Seven Fields
Development Company (a Pennsylvania Business Trust), Seven Fields Development
(Del), Inc., and Seven Fields Management, Inc. The companies were formed
pursuant to a plan of reorganization approved by the shareholders of Seven
Fields Development Corporation at the annual shareholders meeting on March
31, 1995.
All significant intercompany transactions have been eliminated from the
consolidated financial statements.
Minority Interest Adjustment and Earnings Per Share
The balance sheet of Seven Fields Development(PA), Inc. does not reflect the
minority interest of those shareholders of Seven Fields Development
Corporation who did not accept the exchange offer with Seven Fields
Development(PA), Inc., but instead received trust shares. Under generally
accepted accounting principles, it is not appropriate to reflect a negative
(i.e., a debit balance) minority interest in a balance sheet. Similarly,
there is no minority interest provision reflected in the statement of
operations because of such capital deficiency. Although earnings accrue to
the benefit of the minority shareholders of the Trust, no such minority
interest can be reflected in the statement of operations as long as the Trust
continues to have a capital deficiency, and as a result a negative minority
interest.
<PAGE>
SEVEN FIELDS DEVELOPMENT (PA), INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 1996 AND 1995
Minority Interest Adjustment and Earnings Per Share (Con't)
Earnings per share have been calculated to give effect to the earnings which
accrue to the benefit of the minority shareholders although under generally
accepted accounting principles such minority interests may not be reflected
in the balance sheet or statement of operations so long as the capital
deficiency exists in the Trust.
The computation of earnings per share for the three months ended July 31,
1996 and 1995 is as follows:
[CAPTION]
1996 1995
[S] [C] [C]
Net Income $ 560,312 $ 272,933
Less Net Income Accruing to
Minority Interest in Seven
Fields Development Company 93,083 46,399
Net Income Applicable to Seven Fields
(PA), Inc. Shareholders $ 467,229 $ 226,534
Earnings Per Share .16 .08
Weighted Average Shares Outstanding 2,905,682 2,905,682
The computation of earnings per share for the nine months ended July 31, 1996
and 1995 is as follows:
[CAPTION]
1996 1995
[S] [C] [C]
Net Income $1,214,257 $1,166,028
Less Net Income Accruing to
Minority Interest in Seven
Fields Development Company 201,720 198,225
Net Income Applicable to Seven Fields
(PA), Inc. Shareholders $1,012,537 $ 967,803
Earnings Per Share .35 .33
Weighted Average Shares Outstanding 2,905,682 2,905,682
Weighted average number of shares are adjusted to reflect retroactive changes
related to settlements with shareholders relating to the Corporation's
reorganization on November 7, 1987.
<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
$1,214,257 in the first nine months of 1996. The Company granted a $1.0
million mortgage to Integra Bank on its property in the Northridge Manor
subdivision in order to secure a $1.0 million dollar line of credit. The line
of credit shall be used to fund home construction in such subdivision;
however, to date no amounts have been borrowed under this line. The Company
also granted a mortgage to PNC Bank on the office building to secure a term
loan in the amount of $750,000. Two mortgage notes receivable were sold,
generating approximately $124,000 of additional cash. The Company entered
into a loan commitment with Castle Creek Homeowners Association, Inc. to lend
up to $135,000 for capital improvements to be repaid within five years. No
funds have been drawn on the loan to date. The proceeds of the PNC loan, sale
of the mortgages and other cash generated through operations and sales served
to fund the partial repayment of investor debt in the amount of $339,237 and
return of capital to shareholders in the amount of $1,656,241. Approximately
$326,000 in additional principal payments was paid to PNC Bank to release
collateral from townhouse units in preparation for their sale.
Inventory at the end of the second quarter of 1996 consisted of nineteen
single family homes in various stages of construction including two model
homes, ten homes under agreement of sale, and seven homes available for sale.
Also included in inventory are three multi-family homes, all of which are
available for sale. Fourteen townhouse units are under construction, of which
two are models, five are under agreement of sale and seven are available for
sale.
Results of Operations for Nine Month Periods
In 1996, gross revenue from apartment rentals decreased from the prior year's
period by $201,135 due to the sale of such units. Since 32 of these townhouse
units were sold in 1996 and 37 were sold in 1995, gross revenue from
townhouse unit sales decreased in 1996 by $268,678. Developed lot and house
sales decreased from 1995 to 1996 by $505,479 due to sales of sixteen lots,
seven houses and thirteen multi-family units in 1996, compared with seven
lots, eleven houses, and sixteen multi-family units a year earlier.
Management believes that severe winter weather conditions in the area caused
the lower sales volumes. As a result of the above and other minor variations,
total gross revenue in the nine month period decreased by $984,250 from the
prior year's period.
Costs of developed lots and houses sold decreased by $613,370 from 1995 and
cost of townhouses sold decreased by $97,052 from 1995; both such variations
are due primarily to corresponding proportionate changes in sales volumes.
<PAGE>
Part I - Item 2 (Con't) Management Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations for Nine Month Periods (Con't)
Other operating expenses decreased by $107,438 when compared with 1995 due
primarily to greater capitalization of costs to home construction and
decrease of expense because of townhouse sales. General and administrative
expenses also decreased by $269,008. Most of such decrease is a result of
final settlement of all litigation with a predecessor principal early in the
first quarter of 1996.
Gross interest expense increased in 1996 over 1995 by $27,313 due primarily
to the new mortgages granted in the first quarter, while interest income
decreased by $82,406 because of mortgage notes receivable that existed in the
prior year's period and because of lower average cash balances in 1996.
<PAGE>
Part II - Item 1 Legal Proceedings
All previously reported litigation between the Company and Thomas Reilly,
Barbara Reilly, East Pointe Construction Company and TWBJT Realty Corporation
("the predecessors") has been settled. The Company received clear title to
the Moon Township property. The Company and the predecessors have agreed to
be bound by the Court's determination as to title to the 45 acres located in
Adams Township. The horse escrow account was dissolved with $175,000
distributed to the predecessors and the remainder released to the Company.
The litigation pending in Butler County, Pennsylvania, initiated by the
predecessors against the Company's Board of Directors, was dismissed with
prejudice. All other outstanding disputes between the predecessors, including
counterclaims filed by the predecessors against the Company, were terminated.
<PAGE>
Part II - 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, 1996.
<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 (PA), Inc.
Date:_________________ By:_______________________________________
George K. Wright, Vice-President
Date:_________________ By:_______________________________________
Roman Polnyj, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JUL-31-1996
<CASH> 528,599
<SECURITIES> 0
<RECEIVABLES> 178,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,285,308
<DEPRECIATION> (2,195,012)
<TOTAL-ASSETS> 18,307,651
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 2,905,628
0
0
<OTHER-SE> 2,632,225
<TOTAL-LIABILITY-AND-EQUITY> 18,307,651
<SALES> 0
<TOTAL-REVENUES> 7,065,505
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60,343
<INCOME-PRETAX> 1,214,257
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,214,257
<EPS-PRIMARY> .35
<EPS-DILUTED> 0
</TABLE>
