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, 1998.
[ ] 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 (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 May 29, 1998 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, 1998 AND 1997
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, 1998 AND OCTOBER 31, 1997
<CAPTION>
ASSETS
1998 1997
<S> <C> <C>
Cash $ 417,185 $ 227,896
Temporary investments 283,084 195,710
Total Cash & Temporary Investments $ 700,269 $ 423,606
Accounts and notes receivable, net of
allowances of $58,789 and $57,589 164,621 197,688
Mortgage notes receivable 548,266 61,114
Capitalized development costs 4,813,187 5,365,267
Capitalized house construction costs,
net of allowances 3,153,593 3,687,231
Prepaid expenses and deposits 65,113 391,600
Property not currently under development,
net of allowances of $123,788 3,165,529 3,077,133
Tenant security deposits 40,740
Deferred income tax assets 2,648,284 3,483,784
Property, Buildings &
Equipment
Land $ 481,860 $ 359,725
Buildings 1,294,346 3,373,859
Equipment and furnishings 869,235 1,393,155
Construction in progress 449,757
Total Property, Buildings and
Equipment $ 2,645,441 $ 5,576,496
Accumulated Depreciation (529,541) (2,055,493)
Total Property, Buildings and
Equipment, Net of Accumulated
Depreciation $ 2,115,900 $ 3,521,003
Total Assets $ 17,374,762 $ 20,249,166
</TABLE>
<PAGE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
<CAPTION>
1998 1997
<S> <C> <C>
Accounts payable and accrued expenses $ 142,928 $ 701,176
Accrued estimated costs related to
developed lots and townhouses sold 852,357 812,427
Notes payable - credit lines 529,000 918,157
Mortgages payable 959,737 1,785,570
Customer deposits and advances 130,307 133,046
Tenant security deposits 40,740
General unsecured subordinated debt -
minority investors 9,501,710 9,897,933
Total Liabilities $ 12,116,039 $ 14,289,049
<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 46,953,570 48,885,852
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) 7,634,870 6,403,982
Total Shareholders' Equity $ 5,258,723 $ 5,960,117
Total Liabilities and
Shareholders' Equity $ 17,374,762 $ 20,249,166
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 30, 1998 AND 1997
<CAPTION>
1998 1997
<S> <C> <C>
Gross Revenue
Rental Income $ 18,613 $ 126,405
Fees & other operating income 13,338 17,175
Water revenue 41,808 36,661
Developed lot and house sales 1,584,362 1,174,366
Townhouse unit sales 167,686 308,574
$ 1,825,807 $ 1,663,181
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 1,411,211 $ 1,057,075
Cost of Townhouses Sold $ 69,329 $ 168,512
Other Operating Expenses* $ 123,649 $ 168,515
General & Administrative Expenses* $ 217,223 $ 191,765
Depreciation Expense $ 34,922 $ 72,073
Operating Income (Loss) $ (30,527) $ 5,241
Interest Expense* $ (9,152) $ (36,203)
Interest Income $ 20,663 $ 6,956
Net Loss $ (19,016) $ (24,006)
Net Loss Per Share,
Basic and Fully Diluted (.01) (.01)
Weighted Average Number of Shares 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 APRIL 30, 1998 AND 1997
<CAPTION>
1998 1997
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 161,677 $ 159,938
Repairs & maintenance 28,749 40,849
Utilities 23,449 32,997
Insurance 23,160 31,445
Property taxes 5,640 37,761
Other operating supplies & services 31,230 23,187
Total Other Operating Expenses $ 273,905 $ 326,177
Less Costs Capitalized To
Development and House Construction (150,256) (157,662)
Net Operating Expenses $ 123,649 $ 168,515
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 123,953 $ 89,443
Professional fees 32,396 37,603
Other general and administrative
expenses 78,031 80,163
Total General and Administrative
Expenses $ 234,380 $ 207,209
Less Costs Capitalized To
Development and Construction (17,157) (15,444)
Net General and Administrative
Expenses $ 217,223 $ 191,765
Interest Expense
Total Interest Expense $ 34,332 $ 53,036
Less Interest Capitalized to
Development and House
Construction (25,180) (16,833)
Net Interest Expense $ 9,152 $ 36,203
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1998 AND 1997
<CAPTION>
1998 1997
<S> <C> <C>
Gross Revenue
Apartment rentals $ 146,721 $ 264,309
Fees & other operating income 32,619 34,249
Water revenue 81,427 72,794
Developed lot and house sales 4,241,075 3,542,807
Townhouse unit sales 4,135,586 385,474
$ 8,637,428 $ 4,299,633
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 3,733,917 $ 2,751,737
Cost of Townhouses Sold $ 1,912,967 $ 240,735
Other Operating Expenses* $ 339,935 $ 345,758
General & Administrative Expenses* $ 440,729 $ 412,780
Depreciation Expense $ 133,720 $ 144,303
Operating Income $ 2,076,160 $ 404,320
Interest Expense* $ (40,776) $ (76,275)
Interest Income $ 31,004 $ 12,609
Income Before
Provision for Income Taxes $ 2,066,388 $ 340,654
Provision for Income Taxes $ 835,500 $ 146,000
Net Income $ 1,230,888 $ 194,654
Net Income Per Share,
Basic and Fully Diluted .35 .06
Weighted Average Number of Shares 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 SIX MONTHS ENDED APRIL 30, 1998 AND 1997
<CAPTION>
1998 1997
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 342,505 $ 373,568
Repairs & maintenance 59,988 85,777
Utilities 49,052 58,659
Insurance 53,520 60,970
Property taxes 63,709 76,909
Other operating supplies & services 64,429 38,549
Total Other Operating Expenses $ 633,203 $ 694,432
Less Costs Capitalized To
Development and Construction (293,268) (348,674)
Net Other Operating Expenses $ 339,935 $ 345,758
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 218,273 $ 199,400
Professional fees 77,422 91,767
Other general and administrative
expenses 179,348 152,501
Total General and Administrative
Expenses $ 475,043 $ 443,668
Less Costs Capitalized To
Development and Construction (34,314) (30,888)
Net General and Administrative
Expenses $ 440,729 $ 412,780
Interest Expense
Total Interest Expense $ 93,783 $ 101,791
Less Interest Capitalized to
Development and House
Construction (53,007) (25,516)
Net Interest Expense $ 40,776 $ 76,275
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 1998 AND 1997
<CAPTION>
1998 1997
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 1,230,888 $ 194,654
Provision for deferred income taxes 835,500 146,000
Depreciation 133,720 144,303
Capitalized development costs incurred (362,803) (514,002)
Capitalized house construction
costs incurred (2,236,036) (2,354,523)
Cost of lots & houses sold 3,596,161 2,609,954
Changes in other assets & liabilities:
Mortgage notes receivable (487,152) 299
Other assets 400,294 133,305
Other liabilities (561,797) (312,857)
Net Cash Flows Provided By
Operating Activities $ 2,548,775 $ 47,133
Cash Flows From Investing Activities:
Additions to property, buildings and
equipment $ (77,836) $ (325,174)
Sale of property, buildings & equipment 1,349,219 93,287
Total Cash Flows Provided By
(Used In) Investing Activities $ 1,271,383 $ (231,887)
Cash Flows From Financing Activities:
Repayment of investor debt $ (396,223) $ (169,811)
Return of capital distribution (1,932,282) (828,120)
Net Borrowings on Credit Lines 1,133,250
Proceeds from borrowings 280,000
Repayments of Loans Payable (1,494,990) (224,078)
Total Cash Flows Used In
Financing Activities $ (3,543,495) $ (88,759)
Net Increase (Decrease) in Cash and
Temporary Investments $ 276,663 $ (273,513)
Cash & Temporary Investments,
Beginning of Period $ 423,606 $ 402,329
Cash & Temporary Investments,
End of Period $ 700,269 $ 128,816
Interest Expense Included in Net Income
From Operating Activities Above $ 40,776 $ 76,275
Interest Paid & Included in Capitalized
Development Costs & Houses Under
Construction $ 53,007 $ 25,516
Total Interest Paid $ 93,783 $ 101,791
</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, 1998
<CAPTION>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<S> <C>
Retained earnings - beginning $ 6,403,982
Net income for the six months
ended April 30 1,230,888
Retained earnings - ending $ 7,634,870
<CAPTION>
CONSOLIDATED STATEMENT OF ADDITIONAL PAID IN CAPITAL
<S> <C>
Additional paid in capital - beginning $ 48,885,852
Return of capital distribution to shareholders (1,932,282)
Additional paid in capital - ending $ 46,953,570
</TABLE>
<PAGE>
SEVEN FIELDS DEVELOPMENT (PA), INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED APRIL 30, 1998 AND 1997
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, 1997.
For comparative purposes certain 1997 amounts have been reclassified to
conform to the presentation adopted in 1998.
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>
Notes to Financial Statements for the Six Months
Ended April 30, 1998 and 1997 (Cont.)
Minority Interest Adjustment and Earnings Per Share (Cont.)
Earnings per share have been calculated to exclude the effect of 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
April 30, 1998 and 1997 is as follows:
[CAPTION]
1998 1997
[S] [C] [C]
Net Loss $ (19,016) $ (24,006)
Less Loss Accruing to
Minority Interest in Seven
Fields Development Company (3,159) (4,081)
Net Loss Applicable to Seven Fields
(PA), Inc. Shareholders $ (15,857) $ (19,925)
Loss Per Share,
Basic and Fully Diluted (.01) (.01)
Weighted Average Shares Outstanding 2,905,682 2,905,682
The computation of earnings per share for the six months ended April 30, 1998
and 1997 is as follows:
[CAPTION]
1998 1997
[S] [C] [C]
Net Income $1,230,888 $ 194,654
Less Net Income Accruing to
Minority Interest in Seven
Fields Development Company 204,483 33,091
Net Income Applicable to Seven Fields
(PA), Inc. Shareholders $1,026,405 $ 161,563
Net Income Per Share,
Basic and Fully Diluted .35 .06
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's financial condition improved due to generation of net profit of
$1,230,888 in the first six months of 1998. The Company obtained a $250,000
mortgage note from National City Bank. The note is collateralized by the real
estate office building constructed by the Company. The Company was successful
in selling all of the remaining 74 townhouse units in 1998. As part of the
sale of 65 of these units, the Company granted a $487,000 mortgage to the
buyer. The remaining proceeds from the sale were used to pay off the PNC
Bank, N.A. mortgage in full and to fund repayment of investor debt and return
of capital distribution in February, 1998 of over $2.3 million. Additionally,
notes payable on lines of credit were reduced by nearly $490,000 due to pay
offs at the time of sale of the related houses.
Inventory at the end of the second quarter of 1998 consists of eleven single
family homes in various stages of construction including one model home, two
homes under agreement of sale, and eight homes available for sale. Also in
inventory are twenty-eight multi-family homes, in various stages of
construction, including two model homes, ten homes under agreement of sale
and sixteen homes available for sale.
Results of Operations for the Six Month Periods
In 1998, rental income decreased from the prior year's period by almost
$118,000 due to the sale of townhouse units. Since 74 of these townhouse
units were sold in 1998 and five were sold in 1997, gross revenue from
townhouse unit sales increased in 1998 by $3,750,000. Developed lot and house
sales increased from 1997 to 1998 by nearly $700,000 due to sales of eleven
lots, six houses, sixteen multi-family units, and two commercial parcels in
1998, compared with ten lots, eight houses, nine multi-family units and one
commercial lot a year earlier. As a result of the above and other minor
variations, total gross revenue in the period increased by $4,337,795 from
the prior year's period.
Cost of developed lots and houses sold increased by $982,180 in 1998 and cost
of townhouses sold increased by $1,672,232 in 1998; both such variations are
due primarily to corresponding proportionate changes in sales volumes.
Gross other operating expenses decreased from 1997 to 1998 by over $60,000
due primarily to the first quarter sale of the remainder of the townhouses.
General and administrative expenses increased by approximately $28,000 from
1997 to 1998 due to greater recognition of allowances for future costs which
are based on sales volumes in 1998.
<PAGE>
Part I - Item 2 Management Discussion and Analysis
of Financial Condition and Results
of Operations
Results of Operations for Six Month Periods (Con't)
Due to the variations previously indicated, the Company's income before
provision for income taxes increased from 1997 to 1998 by $1,725,734.
The Company recognized a provision for income tax in 1998 of $835,500; 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.
<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, 1998.
<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: 6/9/98 By: George K. Wright, Vice-President
Date: 6/9/98 By: Lynn Hoffman-Kyle, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> APR-30-1998
<CASH> 700,269
<SECURITIES> 0
<RECEIVABLES> 771,676
<ALLOWANCES> (58,789)
<INVENTORY> 11,132,309
<CURRENT-ASSETS> 0
<PP&E> 2,645,441
<DEPRECIATION> (529,541)
<TOTAL-ASSETS> 17,374,762
<CURRENT-LIABILITIES> 0
<BONDS> 10,461,447
0
0
<COMMON> 2,905,682
<OTHER-SE> 2,353,041
<TOTAL-LIABILITY-AND-EQUITY> 17,374,762
<SALES> 8,458,088
<TOTAL-REVENUES> 8,637,428
<CGS> 5,646,884
<TOTAL-COSTS> 6,561,268
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,776
<INCOME-PRETAX> 2,066,388
<INCOME-TAX> 835,500
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,230,888
<EPS-PRIMARY> 0
<EPS-DILUTED> 0.35
</TABLE>
