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, 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, Seven Fields, 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 20,1997 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 NINE MONTHS ENDED JULY 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
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JULY 31, 1997 AND OCTOBER 31, 1996
<CAPTION>
ASSETS
<S> <C> <C>
1997 1996
Cash $ 120,263 $ 252,504
Temporary investments 383,725 149,825
Total Cash & Temporary Investments $ 503,988 $ 402,329
Certificate of deposit $ 336 $ 53,755
Accounts and notes receivable, net of
allowances of $57,589 and $57,552 207,034 168,614
Mortgage notes receivable 61,398 61,807
Capitalized development costs 5,191,557 5,020,059
Capitalized house construction costs 3,493,311 2,842,203
Prepaid expenses and deposits 268,446 481,519
Property not currently under
development 2,983,671 2,791,363
Tenant security deposits 41,770 51,485
Deferred income tax assets 3,606,000 3,992,000
Property, Buildings &
Equipment
Land $ 370,869 $ 386,789
Buildings 3,596,404 3,914,327
Equipment and furnishings 1,406,960 1,347,903
Construction in progress 382,774
Total Property, Buildings and
Equipment $ 5,757,007 $ 5,649,019
Accumulated Depreciation (2,106,211) (2,083,587)
Total Property, Buildings and
Equipment, Net of Accumulated
Depreciation $ 3,650,796 $ 3,565,432
Total Assets $ 20,008,307 $ 19,430,566
</TABLE>
<PAGE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
<CAPTION>
1997 1996
<S> <C> <C>
Accounts payable and accrued expenses $ 104,504 $ 509,923
Accrued estimated costs related to
developed lots and townhouses sold 1,060,555 590,920
Loans payable - lines of credit 1,185,125 130,000
Mortgage payable 1,854,466 1,958,581
Customer deposits and advances 89,098 95,137
Tenant security deposits 41,770 51,485
General unsecured subordinated debt 9,897,933 10,067,744
Total Liabilities $ 14,233,451 $ 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) 6,218,710 5,642,510
Total Shareholders' Equity $ 5,774,856 $ 6,026,776
Total Liabilities and
Shareholders' Equity $ 20,008,307 $ 19,430,566
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JULY 31, 1997 AND 1996
<CAPTION>
1997 1996
<S> <C> <C>
Gross Revenue
Apartment rentals $ 129,323 $ 173,204
Fees & other operating income 17,165 17,582
Water revenue 44,207 34,959
Developed lot and house sales 2,481,337 1,527,583
Townhouse unit sales 393,250 913,876
$ 3,065,282 $ 2,667,204
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 1,760,649 $ 1,206,654
Cost of Townhouses Sold $ 187,134 $ 456,054
Other Operating Expenses* $ 233,315 $ 214,798
General & Administrative Expenses* $ 178,382 $ 155,495
Depreciation Expense $ 72,411 $ 74,547
Operating Income $ 633,391 $ 559,656
Interest Expense* $ (19,637) $ (12,598)
Interest Income $ 7,792 $ 13,254
Income Before Provision
for Income Taxes $ 621,546 $ 560,312
Provision For Income Taxes $ 240,000
Net Income $ 381,546 $ 560,312
Earnings per Share .11 .16
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, 1997 AND 1996
<CAPTION>
1997 1996
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 201,826 $ 183,634
Repairs & maintenance 53,873 77,029
Utilities 32,064 32,791
Insurance 40,565 34,200
Property taxes 36,030 40,615
Other operating supplies & services 31,138 14,791
Total Other Operating Expenses $ 395,496 $ 383,060
Less Costs Capitalized To
Development and House Construction (162,181) (168,262)
Net Operating Expenses $ 233,315 $ 214,798
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 107,268 $ 94,810
Professional fees 14,039 16,138
Professional fees related to litigation
and pre-reorganization issues 800
Other general and administrative
expenses 72,519 53,275
Total General and Administrative
Expenses $ 193,826 $ 165,023
Less Costs Capitalized To
Development and Construction (15,444) (9,528)
Net General and Administrative
Expenses $ 178,382 $ 155,495
Interest Expense
Total Interest Expense $ 69,364 $ 42,025
Less Interest Capitalized to
Development and House
Construction $ (49,727) $ (29,427)
Net Interest Expense $ 19,637 $ 12,598
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JULY 31, 1997 AND 1996
<CAPTION>
1997 1996
<S> <C> <C>
Gross Revenue
Apartment rentals $ 393,632 $ 565,049
Fees & other operating income 51,414 51,552
Water revenue 117,001 99,349
Developed lot and house sales 6,024,144 3,980,635
Townhouse unit sales 778,724 2,368,920
$ 7,364,915 $ 7,065,505
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 4,512,386 $ 3,266,499
Cost of Townhouses Sold $ 427,869 $ 1,172,266
Other Operating Expenses* $ 579,073 $ 538,894
General & Administrative Expenses* $ 591,162 $ 604,245
Depreciation Expense $ 216,714 $ 253,285
Operating Income $ 1,037,711 $ 1,230,316
Interest Expense* $ (95,912) $ (60,343)
Interest Income $ 20,401 $ 44,284
Income Before Provision
For Income Taxes $ 962,200 $ 1,214,257
Provision For Income Taxes $ 386,000
Net Income $ 576,200 $ 1,214,257
Earnings per Share .17 .35
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, 1997 AND 1996
<CAPTION>
1997 1996
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 575,394 $ 504,846
Repairs & maintenance 139,650 154,081
Utilities 90,723 86,714
Insurance 101,535 102,600
Property taxes 112,939 106,566
Other operating supplies & services 69,687 52,083
Total Other Operating Expenses $ 1,089,928 $ 1,006,890
Less Costs Capitalized To
Development and House Construction (510,855) (467,996)
Net Operating Expenses $ 579,073 $ 538,894
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 306,668 $ 301,453
Professional fees 105,806 107,140
Professional fees related to litigation
and pre-reorganization issues 43,079
Other general and administrative
expenses 225,020 181,157
Total General and Administrative
Expenses $ 637,494 $ 632,829
Less Costs Capitalized To
Development and Construction (46,332) (28,584)
Net General and Administrative
Expenses $ 591,162 $ 604,245
Interest Expense
Total Interest Expense $ 171,155 $ 142,921
Less Interest Capitalized to
Development and House
Construction $ (75,243) $ (82,578)
Net Interest Expense $ 95,912 $ 60,343
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
AND ADDITIONAL PAID IN CAPITAL
FOR THE NINE MONTHS ENDED
JULY 31, 1997
<CAPTION>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<S> <C>
Retained earnings - beginning $ 5,642,510
Net income for the nine month period 576,200
ended July 31
Retained earnings - ending $ 6,218,710
<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. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1997 AND 1996
[CAPTION]
<TABLE> 1997 1996
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 576,200 $ 1,214,257
Provision for deferred income taxes 386,000
Depreciation 216,714 253,285
Capitalized development costs incurred (1,496,389) (1,642,929)
Capitalized construction
costs incurred (3,757,247) (2,453,546)
Cost of lots & houses sold 4,238,722 2,873,110
Changes in other assets & liabilities:
Restricted cash 184,550
Mortgage notes receivable 409 124,090
Other assets 237,787 117,641
Other liabilities 48,462 (293,660)
Net Cash Flows From Operating Activities $ 450,658 $ 376,798
Cash Flows From Investing Activities:
Additions to property, buildings and
equipment $ (490,554) $ (99,681)
Sale of property, buildings & equipment 188,476 692,309
Total Cash Flows From Investing Activities $ (302,078) $ 592,628
Cash Flows From Financing Activities:
Repayment of investor debt $ (169,811) $ (339,237)
Return of capital to shareholders (828,120) (1,656,241)
Repayment of mortgages payable (554,490) (404,155)
Proceeds of new mortgage 1,505,500 750,000
Total Cash Flows From Financing Activities $ (46,921) $(1,649,633)
Net Change in Cash And
Temporary Investments $ 101,659 $ (680,207)
Cash & Temporary Investments,
Beginning of Period $ 402,329 $ 1,208,806
Cash & Temporary Investments,
End of Period $ 503,988 $ 528,599
Interest Expense Included in Net Income
From Operating Activities Above $ 95,912 $ 60,343
Interest Paid & Included in Capitalized
Development Costs & Houses Under
Construction $ 75,243 $ 82,578
Total Interest Paid $ 171,155 $ 142,921
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, 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), 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, 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 July 31,
1997 and 1996 is as follows:
[CAPTION]
1997 1996
[S] [C] [C]
Net Income $ 381,546 $ 560,312
Less Net Income Accruing to
Minority Interest in Seven
Fields Development Company 62,631 93,083
Net Income Applicable to Seven Fields
(PA), Inc. Shareholders $ 318,915 $ 467,229
Earnings Per Share .11 .16
Weighted Average Shares Outstanding 2,905,682 2,905,682
The computation of earnings per share for the nine months ended July 31, 1997
and 1996 is as follows:
[CAPTION]
1997 1996
[S] [C] [C]
Net Income $ 576,200 $1,214,257
Less Net Income Accruing to
Minority Interest in Seven
Fields Development Company 95,722 201,720
Net Income Applicable to Seven Fields
(PA), Inc. Shareholders $ 480,478 $1,012,537
Earnings Per Share .17 .35
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. Over $1.5 million
has been borrowed during 1997 to fund construction, while approximately $.5
million of loans payable have been repaid. Cash was also used to fund
repayment of general unsecured debt of $169,811 and return of capital of
$828,120. Land development for and construction of an office building
continued during the quarter. Such building shall be leased to the real
estate company which is responsible for all of the Company's residential
sales.
Inventory at the end of the third quarter of 1997 consisted of thirteen
single family homes in various stages of construction including one model
home, four homes under agreement of sale, and eight homes available for sale.
Also included in inventory are thirty-four multi-family homes, in various
stages of construction, including three model homes, ten homes under
agreement of sale and twenty-one homes available for sale.
Results of Operations for Nine Month Periods
In 1997, rental income decreased from the prior year's period by $171,417 due
to the sale of townhouse units. Since ten of these townhouse units were sold
in 1997 and 32 were sold in 1996, gross revenue from townhouse unit sales
decreased in 1997 by $1,590,196. 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 $2,043,509 due
to sales of fourteen lots, ten houses, seventeen multi-family units and three
commercial lot in 1997, compared with sixteen lots, seven houses, and
thirteen multi-family units a year earlier. As a result of the above and
other minor variations, total gross revenue in the nine month period
increased by $299,410 from the prior year's period.
The cost of developed lots and houses sold increased by $1,245,887 in 1997
and the cost of townhouses sold decreased by $744,397 in 1997; both such
variations are due to corresponding proportionate changes in sales volumes.
While gross other operating expense increased by $83,038 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 $40,179 due to greater capitalization of expenses in 1997.
Interest expense increased in 1997 because of increased borrowing for
construction activities.
<PAGE>
Part I - Item 2(Cont.) Management Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations for Nine 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 $252,057.
The Company recognized a provision for income tax in 1997 of $386,000; 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
periods. 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>
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, 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:September 8, 1997 By:George K. Wright
George K. Wright, Vice-President
Date:September 8, 1997 By:Darell L. Craig
Darell L. Craig, Chief Operating Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JUL-31-1997
<CASH> 503,988
<SECURITIES> 336
<RECEIVABLES> 264,623
<ALLOWANCES> (57,589)
<INVENTORY> 8,684,868
<CURRENT-ASSETS> 0
<PP&E> 5,757,007
<DEPRECIATION> (2,106,211)
<TOTAL-ASSETS> 20,008,307
<CURRENT-LIABILITIES> 0
<BONDS> 11,752,399
0
0
<COMMON> 2,905,682
<OTHER-SE> 2,869,174
<TOTAL-LIABILITY-AND-EQUITY> 20,008,307
<SALES> 6,802,868
<TOTAL-REVENUES> 7,364,915
<CGS> 4,940,255
<TOTAL-COSTS> 6,327,204
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 95,912
<INCOME-PRETAX> 962,200
<INCOME-TAX> 386,000
<INCOME-CONTINUING> 576,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 576,200
<EPS-PRIMARY> .17
<EPS-DILUTED> 0
</TABLE>
