<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, 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. 33-85102-01
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 February 11,1997 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>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
Form 10-QSB
FOR THE THREE MONTHS ENDED JANUARY 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
<PAGE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JANUARY 31, 1997 AND OCTOBER 31, 1996
ASSETS
[CAPTION]
1997 1996
<TABLE>
<S> <C> <C>
Cash $ 10,067 $ 252,504
Temporary investments 62,015 149,825
Total Cash & Temporary Investments $ 72,082 $ 402,329
Certificate of deposit $ 60,416 $ 53,755
Accounts and notes receivable, net of
allowances of $57,552 150,979 168,614
Mortgage notes receivable 61,753 61,807
Capitalized development costs 5,059,145 5,020,059
Capitalized house construction costs 2,673,356 2,842,203
Prepaid expenses and deposits 394,767 481,519
Property not currently under
development 2,649,843 2,791,363
Tenant security deposits 41,240 51,485
Deferred income tax assets 3,846,000 3,992,000
Property, Buildings &
Equipment
Land $ 385,197 $ 386,789
Buildings 3,882,535 3,914,327
Equipment and furnishings 1,352,111 1,347,903
Construction in progress 208,430
Total Property, Buildings and
Equipment $ 5,828,273 $ 5,649,019
Accumulated Depreciation (2,138,622) (2,083,587)
Total Property, Buildings and
Equipment, Net of Accumulated
Depreciation $ 3,689,651 $ 3,565,432
Total Assets $ 18,699,232 $ 19,430,566
</TABLE>
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
[CAPTION]
1997 1996
<TABLE>
<S> <C> <C>
Accounts payable and accrued expenses $ 104,295 $ 509,923
Accrued estimated costs related to
developed lots and townhouses sold 692,463 590,920
Notes payable - credit lines 527,750 130,000
Mortgages payable 1,924,642 1,958,581
Customer deposits and advances 93,593 95,137
Tenant security deposits 41,240 51,485
General unsecured debt -
minority investors 9,897,933 10,067,744
Total Liabilities $ 13,281,916 $ 13,403,790
<CAPTION>
SHAREHOLDERS' EQUITY
<S> <C> <C>
Common stock, $1 par value,
10,000,000 shares authorized,
2,905,682 shares issued
and outstanding $ 2,905,682 $ 2,905,682
Additional Paid In Capital 48,885,863 49,713,983
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) 5,861,170 5,642,510
Total Shareholders' Equity $ 5,417,316 $ 6,026,776
Total Liabilities and
Shareholders' Equity $ 18,699,232 $ 19,430,566
</TABLE>
<PAGE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JANUARY 31, 1997 AND 1996
[CAPTION]
1997 1996
<TABLE>
<S> <C> <C>
Gross Revenue
Rental Income $ 137,904 $ 205,352
Fees & other operating income 17,074 16,914
Water revenue 36,133 32,030
Developed lot and house sales 2,368,441 1,096,742
Townhouse unit sales 76,900 807,475
$ 2,636,452 $ 2,158,513
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 1,694,662 $ 900,384
Cost of Townhouses Sold $ 72,223 $ 372,625
Other Operating Expenses* $ 177,243 $ 169,684
General & Administrative Expenses* $ 221,015 $ 224,315
Depreciation Expense $ 72,230 $ 93,798
Operating Income $ 399,079 $ 397,707
Interest Expense* $ (40,072) $ (27,148)
Interest Income $ 5,653 $ 17,840
Income Before
Provision for Income Taxes $ 364,660 $ 388,399
Provision for Income Taxes $ 146,000
Net Income $ 218,660 $ 388,399
Weighted Average Shares Outstanding 2,905,682 2,905,682
Earnings per Share .06 .11
<FN>
* See details on following page.
</TABLE>
<PAGE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS - CONTINUED
DETAILS OF OTHER OPERATING EXPENSES,
GENERAL AND ADMINISTRATIVE EXPENSES, AND INTEREST EXPENSE
FOR THE THREE MONTHS ENDED JANUARY 31, 1997 AND 1996
[CAPTION]
1997 1996
<TABLE>
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 213,630 $ 174,501
Repairs & maintenance 44,928 34,369
Utilities 25,662 20,561
Insurance 29,525 34,200
Property taxes 39,148 38,198
Other operating supplies & services 15,362 18,965
Total Other Operating Expenses $ 368,255 $ 320,794
Less Costs Capitalized To
Development and House Construction (191,012) (151,110)
Net Operating Expenses $ 177,243 $ 169,684
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 109,957 $ 114,468
Professional fees 54,164 41,381
Professional fees related to litigation
and pre-reorganization issues 14,607
Other general and administrative
expenses 72,338 63,387
Total General and Administrative
Expenses $ 236,459 $ 233,843
Less Costs Capitalized To
Development and Construction (15,444) (9,528)
Net General and Administrative
Expenses $ 221,015 $ 224,315
Interest Expense
Total Interest Expense $ 48,755 $ 52,108
Less Interest Capitalized to
Development and House
Construction $ (8,683) $ (24,960)
Net Interest Expense $ 40,072 $ 27,148
</TABLE>
<PAGE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
AND ADDITIONAL PAID IN CAPITAL
FOR THE THREE MONTHS ENDED
JANUARY 31, 1997
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<TABLE>
<S> <C>
Retained earnings - beginning $ 5,642,510
Net income for the three month period
ended January 31, 1997 218,660
Retained earnings - ending $ 5,861,170
<CAPTION>
CONSOLIDATED STATEMENT OF ADDITIONAL PAID IN CAPITAL
<S> <C>
Additional paid in capital - beginning $ 49,713,983
Return of capital distribution (828,120)
Additional paid in capital - ending $ 48,885,863
</TABLE>
<PAGE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 1997 AND 1996
[CAPTION]
1997 1996
<TABLE>
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 218,660 $ 388,399
Provision for income taxes 146,000
Depreciation 72,230 93,798
Capitalized development costs incurred (314,443) (271,506)
Capitalized house construction costs incurred (1,035,085) (651,017)
Cost of lots & houses sold 1,620,809 849,451
Changes in other assets & liabilities:
Restricted cash 184,550
Mortgage notes receivable 54 59,345
Other assets 107,971 221,066
Other liabilities (315,874) (345,522)
Net Cash Flows Provided By
Operating Activities $ 500,322 $ 528,564
Cash Flows From Investing Activities:
Additions to property, buildings and
equipment $ (215,295) $ (29,335)
Sale of property, buildings & equipment 18,846 245,967
Total Cash Flows Provided By (Used In)
Investing Activities $ (196,449) $ 216,632
Cash Flows From Financing Activities:
Repayment of investor debt $ (169,811) $ (339,237)
Return of capital distribution (828,120) (1,647,378)
Repayment of mortgages & notes payable (103,939) (20,409)
Proceeds from borrowings 467,750 750,000
Total Cash Flows Used In
Financing Activities $ (634,120) $(1,257,024)
Net Decrease in Cash And
Temporary Investments $ (330,247) $ (511,828)
Cash & Temporary Investments,
Beginning of Period $ 402,329 $ 1,208,806
Cash & Temporary Investments,
End of Period $ 72,082 $ 696,978
Interest Expense Included in Net Income
From Operating Activities Above $ 40,072 $ 27,148
Interest Paid & Included in Capitalized
Development Costs & Houses Under
Construction $ 8,683 $ 24,960
Total Interest Paid $ 48,755 $ 52,108
Supplemental Schedule of Noncash
Investing and Financing Activities:
Pre-November 7, 1987 shareholder
adjustment $ 5,138
</TABLE>
<PAGE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 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 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.
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,"the Trust"), Seven Fields
(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 THREE MONTHS ENDED JANUARY 31, 1997 AND 1996
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 January 31,
1997 and 1996 is as follows:
[CAPTION]
1997 1996
<TABLE>
<S> <C> <C>
Net Income $ 218,660 $ 388,399
Less Net Income Accruing to
Minority Interest in Seven
Fields Development Company 36,183 64,524
Net Income Applicable to Seven Fields
(PA), Inc. Shareholders $ 182,477 $ 323,875
Earnings Per Share .06 .11
Weighted Average Shares Outstanding 2,905,682 2,905,682
</TABLE>
<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
$218,660 in the first three months of 1997. 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. Cash from operations and reserves was used to
fund repayment of general unsecured debt and return of capital distribution
totaling $997,931.
Inventory at the end of the first quarter of 1997 consisted of thirteen
single family homes in various stages of construction including two model
homes, two homes under agreement of sale, and nine homes available for sale.
Also included in inventory are thirty-three multi-family homes, in various
stages of construction, including two model homes, twelve homes under
agreement of sale and nineteen homes available for sale.
Development of land for a real estate sales center neared completion in the
quarter and construction of the building shall commence in the second
quarter.
Results of Operations for the Three Month Periods
In 1997, rental income decreased from the prior year's period by $67,448 due
to the sale of townhouse units. Since one of these townhouse units was sold
in 1997 and eleven were sold in 1996, gross revenue from townhouse unit sales
decreased in 1997 by $730,575. Developed lot and house sales increased from
1996 to 1997 by $1,271,699 due to sales of six lots, seven houses, two
multi-family units and one commercial lot in 1997, compared with four lots,
four houses, and five multi-family units a year earlier. As a result of the
above and other minor variations, total gross revenue in the period increased
by $477,939 from the prior year's period.
Cost of developed lots and houses sold increased by $794,278 in 1997 and cost
of townhouses sold decreased by $300,402 in 1997; 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)
Due primarily to type of product sold and respective sales volumes, the
Company's income before provision for income taxes decreased from 1996 to
1997 by $23,739.
The Company recognized a provision for income tax in 1997 of $146,000; 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
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.
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
January 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 (PA), Inc.
Date:_________________ By:_______________________________________
George K. Wright, Vice-President
Date:_________________ By:_______________________________________
Roman Polnyj, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<PAGE>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 72,082
<SECURITIES> 60,416
<RECEIVABLES> 270,284
<ALLOWANCES> 57,552
<INVENTORY> 10,382,344
<CURRENT-ASSETS> 0
<PP&E> 5,828,273
<DEPRECIATION> (2,138,622)
<TOTAL-ASSETS> 18,699,232
<CURRENT-LIABILITIES> 0
<BONDS> 11,822,575
<COMMON> 2,905,682
0
0
<OTHER-SE> 2,511,634
<TOTAL-LIABILITY-AND-EQUITY> 18,699,232
<SALES> 2,481,474
<TOTAL-REVENUES> 2,636,452
<CGS> 1,766,885
<TOTAL-COSTS> 2,237,373
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,072
<INCOME-PRETAX> 364,660
<INCOME-TAX> 146,000
<INCOME-CONTINUING> 218,660
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 218,660
<EPS-PRIMARY> .06
<EPS-DILUTED> 0
</TABLE>
