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 April 30, 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 May 28, 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 SIX MONTHS ENDED APRIL 30, 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
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF APRIL 30, 1997 AND OCTOBER 31, 1996
<CAPTION>
ASSETS
1997 1996
<S> <C> <C>
Cash $ 21,005 $ 252,504
Temporary investments 107,811 149,825
Total Cash & Temporary Investments $ 128,816 $ 402,329
Certificate of deposit $ 65,906 $ 53,755
Accounts and notes receivable, net of
allowances of $57,552 193,666 168,614
Mortgage notes receivable 61,508 61,807
Capitalized development costs 4,995,699 5,020,059
Capitalized house construction costs,
net of allowances 3,204,713 2,842,203
Prepaid expenses and deposits 321,956 481,519
Property not currently under
development 2,711,784 2,791,363
Tenant security deposits 40,540 51,485
Deferred income tax assets 3,846,000 3,992,000
Property, Buildings &
Equipment
Land $ 378,829 $ 386,789
Buildings 3,755,365 3,914,327
Equipment and furnishings 1,328,800 1,347,903
Construction in progress 309,798
Total Property, Buildings and
Equipment $ 5,772,792 $ 5,649,019
Accumulated Depreciation (2,119,776) (2,083,587)
Total Property, Buildings and
Equipment, Net of Accumulated
Depreciation $ 3,653,016 $ 3,565,432
Total Assets $ 19,223,604 $ 19,430,566
</TABLE>
<PAGE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
<CAPTION>
1997 1996
<S> <C> <C>
Accounts payable and accrued expenses $ 75,596 $ 509,923
Accrued estimated costs related to
developed lots and townhouses sold 682,433 590,920
Notes payable - credit lines 1,108,875 130,000
Mortgages payable 1,888,878 1,958,581
Customer deposits and advances 136,039 95,137
Tenant security deposits 40,540 51,485
General unsecured subordinated debt -
minority investors 9,897,933 10,067,744
Total Liabilities $ 13,830,294 $ 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) 5,837,164 5,642,510
Total Shareholders' Equity $ 5,393,310 $ 6,026,776
Total Liabilities and
Shareholders' Equity $ 19,223,604 $ 19,430,566
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 30, 1997 AND 1996
<CAPTION>
1997 1996
<S> <C> <C>
Gross Revenue
Rental Income $ 126,405 $ 186,493
Fees & other operating income 17,175 17,056
Water revenue 36,661 32,360
Developed lot and house sales 1,174,366 1,356,310
Townhouse unit sales 308,574 647,569
$ 1,663,181 $ 2,239,788
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 1,057,075 $ 1,159,461
Cost of Townhouses Sold $ 168,512 $ 343,587
Other Operating Expenses* $ 168,515 $ 154,412
General & Administrative Expenses* $ 191,765 $ 224,435
Depreciation Expense $ 72,073 $ 84,940
Operating Income $ 5,241 $ 272,953
Interest Expense* $ (36,203) $ (20,597)
Interest Income $ 6,956 $ 13,190
Net Income(Loss) $ (24,006) $ 265,546
Net Income (Loss) Per Share (.01) .08
<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 APRIL 30, 1997 AND 1996
<CAPTION>
1997 1996
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 159,938 $ 146,711
Repairs & maintenance 40,849 42,683
Utilities 32,997 33,362
Insurance 31,445 34,200
Property taxes 37,761 27,753
Other operating supplies & services 23,187 18,327
Total Other Operating Expenses $ 326,177 $ 303,036
Less Costs Capitalized To
Development and House Construction (157,662) (148,624)
Net Operating Expenses $ 168,515 $ 154,412
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 89,443 $ 92,175
Professional fees 37,603 49,621
Professional fees related to litigation
and pre-reorganization issues 27,672
Other general and administrative
expenses 80,163 64,495
Total General and Administrative
Expenses $ 207,209 $ 233,963
Less Costs Capitalized To
Development and Construction (15,444) (9,528)
Net General and Administrative
Expenses $ 191,765 $ 224,435
Interest Expense
Total Interest Expense $ 53,036 $ 48,788
Less Interest Capitalized to
Development and House
Construction (16,833) (28,191)
Net Interest Expense $ 36,203 $ 20,597
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1997 AND 1996
<CAPTION>
1997 1996
<S> <C> <C>
Gross Revenue
Apartment rentals $ 264,309 $ 391,845
Fees & other operating income 34,249 33,970
Water revenue 72,794 64,390
Developed lot and house sales 3,542,807 2,453,052
Townhouse unit sales 385,474 1,455,044
$ 4,299,633 $ 4,398,301
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 2,751,737 $ 2,059,845
Cost of Townhouses Sold $ 240,735 $ 716,212
Other Operating Expenses* $ 345,758 $ 324,096
General & Administrative Expenses* $ 412,780 $ 448,750
Depreciation Expense $ 144,303 $ 178,738
Operating Income $ 404,320 $ 670,660
Interest Expense* $ (76,275) $ (47,745)
Interest Income $ 12,609 $ 31,030
Income Before
Provision for Income Taxes $ 340,654 $ 653,945
Provision for Income Taxes $ 146,000 $
Net Income $ 194,654 $ 653,945
Net Income Per Share .06 .19
<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 SIX MONTHS ENDED APRIL 30, 1997 AND 1996
<CAPTION>
1997 1996
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 373,568 $ 321,212
Repairs & maintenance 85,777 77,052
Utilities 58,659 53,923
Insurance 60,970 68,400
Property taxes 76,909 65,951
Other operating supplies & services 38,549 37,292
Total Other Operating Expenses $ 694,432 $ 623,830
Less Costs Capitalized To
Development and Construction (348,674) (299,734)
Net Other Operating Expenses $ 345,758 $ 324,096
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 199,400 $ 206,643
Professional fees 91,767 91,002
Professional fees related to litigation
and pre-reorganization issues 42,279
Other general and administrative
expenses 152,501 127,882
Total General and Administrative
Expenses $ 443,668 $ 467,806
Less Costs Capitalized To
Development and Construction (30,888) (19,056)
Net General and Administrative
Expenses $ 412,780 $ 448,750
Interest Expense
Total Interest Expense $ 101,791 $ 100,896
Less Interest Capitalized to
Development and House
Construction (25,516) (53,151)
Net Interest Expense $ 76,275 $ 47,745
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 1997 AND 1996
<CAPTION>
1997 1996
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 194,654 $ 653,945
Provision for deferred income taxes 146,000
Depreciation 144,303 178,738
Capitalized development costs incurred (514,002) (662,342)
Capitalized house construction
costs incurred (2,354,523) (1,524,398)
Cost of lots & houses sold 2,609,954 1,938,021
Changes in other assets & liabilities:
Restricted cash 184,550
Mortgage notes receivable 299 59,696
Other assets 133,305 173,935
Other liabilities (312,857) (142,280)
Net Cash Flows Provided By
Operating Activities $ 47,133 $ 859,865
Cash Flows From Investing Activities:
Additions to property, buildings and
equipment $ (325,174) $ (36,857)
Sale of property, buildings & equipment 93,287 430,031
Total Cash Flows Provided By
(Used In) Investing Activities $ (231,887) $ 393,174
Cash Flows From Financing Activities:
Repayment of investor debt $ (169,811) $ (339,237)
Return of capital distribution (828,120) (1,656,241)
Repayment of mortgages payable (224,078) (371,302)
Proceeds from borrowings 1,133,250 750,000
Total Cash Flows Used In
Financing Activities $ (88,759) $(1,616,780)
Net Decrease in Cash And
Temporary Investments $ (273,513) $ (363,741)
Cash & Temporary Investments,
Beginning of Period $ 402,329 $ 1,208,806
Cash & Temporary Investments,
End of Period $ 128,816 $ 845,065
Interest Expense Included in Net Income
From Operating Activities Above $ 76,275 $ 47,745
Interest Paid & Included in Capitalized
Development Costs & Houses Under
Construction $ 25,516 $ 53,151
Total Interest Paid $ 101,791 $ 100,896
Supplemental Schedule of Noncash
Investing and Financing Activities:
Other Investor Adjustments $ 5,138
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
AND ADDITIONAL PAID IN CAPITAL
FOR THE SIX MONTHS ENDED
APRIL 30, 1997
<CAPTION>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<S> <C>
Retained earnings - beginning $ 5,642,510
Net income for the six months
ended April 30 194,654
Retained earnings - ending $ 5,837,164
<CAPTION>
CONSOLIDATED STATEMENT OF ADDITIONAL PAID IN CAPITAL
<S> <C>
Additional paid in capital - beginning $ 49,713,983
Return of capital distribution to shareholders (828,120)
Additional paid in capital - ending $ 48,885,863
</TABLE>
<PAGE>
SEVEN FIELDS DEVELOPMENT (PA), INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTH PERIODS ENDED APRIL 30,1997 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 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), 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>
Notes to Financial Statements for the Six Months
Ended April 30, 1997 and 1996 (Cont.)
Minority Interest Adjustment and Earnings Per Share (Cont.)
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 (loss) per share for the three months ended
April 30, 1997 and 1996 is as follows:
[CAPTION]
1997 1996
[S] [C] [C]
Net Income (Loss) $ (24,006) $ 265,546
Less Net Income (Loss) Accruing to
Minority Interest in Seven
Fields Development Company (4,081) 44,114
Net Income Applicable to Seven Fields
(PA), Inc. Shareholders $ (19,925) $ 221,432
Earnings(Loss)Per Share (.01) .08
Weighted Average Shares Outstanding 2,905,682 2,905,682
The computation of earnings per share for the six months ended April 30, 1997
and 1996 is as follows:
[CAPTION]
1997 1996
[S] [C] [C]
Net Income $ 194,654 $ 653,945
Less Net Income Accruing to
Minority Interest in Seven
Fields Development Company 33,091 108,637
Net Income Applicable to Seven Fields
(PA), Inc. Shareholders $ 161,563 $ 545,308
Earnings Per Share .06 .19
Weighted Average Shares Outstanding 2,905,682 2,905,682
<PAGE>
Part I - Item 2 Management Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition
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 was used to
fund repayment of general unsecured debt of $169,811 and return of capital of
$828,120. Over $1.1 million has been borrowed during 1997 to fund
construction.
Inventory at the end of the second quarter of 1997 consisted of thirteen
single family homes in various stages of construction including two model
homes, four homes under agreement of sale, and seven homes available for
sale. Also included in inventory are thirty-four multi-family homes, in
various stages of construction, including two model homes, nine homes under
agreement of sale and twenty-three homes available for sale.
Results of Operations for Six Month Periods
In 1997, rental income decreased from the prior year's period by $127,536 due
to the sale of townhouse units. Since five of these townhouse units were sold
in 1997 and twenty were sold in 1996, gross revenue from townhouse unit sales
decreased in 1997 by $1,069,570. Management believes that decreased townhouse
sales are a result of increased competition and slightly unfavorable market
conditions. Additionally, management believes that due to the availability of
its newly constructed multi-family units, buyers are opting to purchase the
higher-priced units instead of the townhouse units.
Developed lot and house sales increased from 1996 to 1997 by $1,089,755 due
to sales of ten lots, eight houses, nine multi-family units and one
commercial lot in 1997, compared with ten lots, five houses, and seven multi-
family units a year earlier. As a result of the above and other minor
variations, total gross revenue in the six month period decreased by $98,668
from the prior year's period.
The cost of developed lots and houses sold increased by $691,892 in 1997 and
the cost of townhouses sold decreased by $475,477 in 1997; both such
variations are due to corresponding proportionate changes in sales volumes.
While gross other operating expense increased by $70,602 from 1996 to 1997
due to increased maintenance costs and rising activity levels in home
construction and water company activities, net other operating expenses only
increased by $21,662 due to greater capitalization of expenses in 1997.
General and administrative expenses decreased from 1996 to 1997 because of
higher 1996 fees associated with the reorganization.
While gross interest expense remained about the same in 1996 and 1997, net
interest expense increased in 1997, due to greater capitalization in 1996
because of land development projects underway at that time.
<PAGE>
Part I - Item 2(Cont.)
Management Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations for Six Month Periods (Cont.)
As a result of the stated variations and due primarily to the decrease of
townhouse sales, the Company's income before provision for income taxes
decreased from 1996 to 1997 by $313,291.
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 the future
period. 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
<PAGE>
Part II - Item 1 Legal Proceedings
None
<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
April 30, 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
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1997
<CASH> 21,005
<SECURITIES> 107,811
<RECEIVABLES> 251,218
<ALLOWANCES> (57,552)
<INVENTORY> 10,912,196
<CURRENT-ASSETS> 0
<PP&E> 5,772,792
<DEPRECIATION> (2,119,776)
<TOTAL-ASSETS> 19,223,604
<CURRENT-LIABILITIES> 0
<BONDS> 12,895,686
0
0
<COMMON> 2,905,682
<OTHER-SE> 2,487,628
<TOTAL-LIABILITY-AND-EQUITY> 19,223,604
<SALES> 4,001,075
<TOTAL-REVENUES> 4,299,633
<CGS> 2,992,472
<TOTAL-COSTS> 3,895,313
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,275
<INCOME-PRETAX> 340,654
<INCOME-TAX> 146,000
<INCOME-CONTINUING> 194,654
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 194,654
<EPS-PRIMARY> .06
<EPS-DILUTED> 0
</TABLE>
