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, 1999.
[ ] 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 2,905,514 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, 1999 AND 1998
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 APRIL 30, 1999 AND OCTOBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
<S> <C> <C>
Cash $ 9,961 $ 109,159
Temporary investments 712,136 308,103
Total Cash & Temporary Investments $ 722,097 $ 417,262
Accounts and notes receivable, net of
allowances of $57,492 108,164 199,483
Mortgage notes receivable 459,918 497,918
Capitalized development costs 4,384,281 5,282,662
Capitalized house construction costs,
net of allowances 3,709,088 3,606,597
Prepaid expenses and deposits 109,581 78,445
Property not currently under development 3,296,122 3,038,721
Deferred income tax assets 2,061,385 2,096,129
Property, Buildings &
Equipment
Land $ 484,756 $ 484,756
Buildings 1,294,345 1,294,345
Equipment and furnishings 850,169 845,934
Total Property, Buildings and
Equipment $ 2,629,270 $ 2,625,035
Accumulated Depreciation (636,486) (581,633)
Total Property, Buildings and
Equipment, Net of Accumulated
Depreciation $ 1,992,784 $ 2,043,402
Total Assets $ 16,843,420 $ 17,260,619
</TABLE>
<PAGE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
<CAPTION>
1999 1998
<S> <C> <C>
Accounts payable and accrued expenses $ 195,201 $ 586,672
Accrued estimated costs related to
developed lots and townhouses sold 942,947 1,041,873
Notes payable - credit lines 196,000
Mortgages payable 1,006,064 972,461
Customer deposits and advances 290,384 106,245
General unsecured debt -
minority investors 9,501,710 9,501,710
Total Liabilities $ 11,936,306 $ 12,404,961
<CAPTION>
SHAREHOLDERS' EQUITY
<S> <C> <C>
Common stock, $1 par value,
10,000,000 shares authorized,
2,905,514 shares issued
and outstanding $ 2,905,514 $ 2,905,514
Additional Paid In Capital 46,953,580 46,953,580
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) 7,283,419 7,231,963
Total Shareholders' Deficiency $ 4,907,114 $ 4,855,658
Total Liabilities and
Shareholders' Equity $ 16,843,420 $ 17,260,619
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 30, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Gross Revenue
Rental Income $ 22,403 $ 18,613
Fees & other operating income 19,438 13,338
Water revenue 44,696 41,808
Developed lot and house sales 2,720,886 1,584,362
Townhouse unit sales 167,686
$ 2,807,423 $ 1,825,807
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 2,424,721 $ 1,411,211
Cost of Townhouses Sold $ 69,329
Other Operating Expenses* $ 96,096 $ 123,649
General & Administrative Expenses* $ 237,191 $ 217,223
Depreciation Expense $ 27,319 $ 34,922
Operating Income (Loss) $ 22,096 $ (30,527)
Interest Expense* $ 5,328 $ (9,152)
Interest Income $ 17,766 $ 20,663
Income (Loss) Before Provision
for Income Taxes $ 45,190 $ (19,016)
Provision for Income Taxes $ 18,044
Net Income (Loss) $ 27,146 $ (19,016)
Net Income (Loss) Per Share,
Basic and Fully Diluted .01 (.01)
Weighted Average Number of Shares 2,905,514 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, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 158,528 $ 161,677
Repairs & maintenance 39,997 28,749
Utilities 33,662 23,449
Insurance 24,400 23,160
Property taxes 6,040 5,640
Other operating supplies & services 10,468 31,230
Total Other Operating Expenses $ 273,095 $ 273,905
Less Costs Capitalized To
Development and House Construction (176,999) (150,256)
Net Operating Expenses $ 96,096 $ 123,649
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 100,768 $ 123,953
Professional fees 44,370 32,396
Other general and administrative
expenses 103,831 78,031
Total General and Administrative
Expenses $ 248,969 $ 234,380
Less Costs Capitalized To
Development and Construction (11,778) (17,157)
Net General and Administrative
Expenses $ 237,191 $ 217,223
Interest Expense
Total Interest Expense $ 27,242 $ 34,332
Less Interest Capitalized to
Development and House
Construction (32,570) (25,180)
Net Interest Expense $ (5,328) $ 9,152
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Gross Revenue
Rental Income $ 44,805 $ 146,721
Fees & other operating income 32,388 32,619
Water revenue 92,445 81,427
Developed lot and house sales 4,535,946 4,241,075
Townhouse unit sales 4,135,586
$ 4,705,584 $ 8,637,428
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 3,918,573 $ 3,733,917
Cost of Townhouses Sold $ 1,912,967
Other Operating Expenses* $ 214,852 $ 339,935
General & Administrative Expenses* $ 465,078 $ 440,729
Depreciation Expense $ 54,853 $ 133,720
Operating Income $ 52,228 $ 2,076,160
Interest Expense* $ (40,776)
Interest Income $ 33,972 $ 31,004
Income Before
Provision for Income Taxes $ 86,200 $ 2,066,388
Provision for Income Taxes $ 34,744 $ 835,500
Net Income $ 51,456 $ 1,230,888
Net Income Per Share,
Basic and Fully Diluted .01 .35
Weighted Average Number of Shares 2,905,514 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, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 335,207 $ 342,505
Repairs & maintenance 72,645 59,988
Utilities 61,513 49,052
Insurance 48,600 53,520
Property taxes 12,290 63,709
Other operating supplies & services 21,940 64,429
Total Other Operating Expenses $ 552,195 $ 633,203
Less Costs Capitalized To
Development and Construction (337,343) (293,268)
Net Other Operating Expenses $ 214,852 $ 339,935
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 212,837 $ 218,273
Professional fees 85,439 77,422
Other general and administrative
expenses 190,358 179,348
Total General and Administrative
Expenses $ 488,634 $ 475,043
Less Costs Capitalized To
Development and Construction (23,556) (34,314)
Net General and Administrative
Expenses $ 465,078 $ 440,729
Interest Expense
Total Interest Expense $ 47,033 $ 93,783
Less Interest Capitalized to
Development and House
Construction (47,033) (53,007)
Net Interest Expense $ 0 $ 40,776
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 51,456 $ 1,230,888
Provision for deferred income taxes 34,744 835,500
Depreciation 54,853 133,720
Capitalized development costs incurred (288,512) (362,803)
Capitalized house construction
costs incurred (2,969,023) (2,236,036)
Cost of lots & houses sold 3,796,024 3,596,161
Changes in other assets & liabilities:
Other assets 60,183 (86,858)
Other liabilities (306,258) (561,797)
Net Cash Flows Provided By
Operating Activities $ 433,467 $ 2,548,775
Cash Flows From Investing Activities:
Additions to property, buildings and
equipment $ (4,235) $ (77,836)
Payments on notes receivable 38,000
Sale of property, buildings & equipment 1,349,219
Total Cash Flows Provided By
Investing Activities $ 33,765 $ 1,271,383
Cash Flows From Financing Activities:
Repayment of investor debt $ (396,223)
Return of capital distribution (1,932,282)
Net Borrowings (repayments) on
credit lines $ (196,000)
Proceeds from borrowings 87,500 280,000
Repayments of existing mortgages (53,897) (1,494,990)
Total Cash Flows Used In
Financing Activities $ (162,397) $(3,543,495)
Net Increase in Cash and
Temporary Investments $ 304,835 $ 276,663
Cash & Temporary Investments,
Beginning of Period $ 417,262 $ 423,606
Cash & Temporary Investments,
End of Period $ 722,097 $ 700,269
Interest Expense Included in Net Income
From Operating Activities Above $ 40,776
Interest Paid & Included in Capitalized
Development Costs & Houses Under
Construction $ 47,033 $ 53,007
Total Interest Paid $ 47,033 $ 93,783
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
FOR THE SIX MONTHS ENDED
APRIL 30, 1999
<CAPTION>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<S> <C>
Retained earnings - beginning $ 7,231,963
Net income for the six months
ended April 30 51,456
Retained earnings - ending $ 7,283,419
</TABLE>
<PAGE>
SEVEN FIELDS DEVELOPMENT (PA), INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 AND 1998
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, 1998.
For comparative purposes certain 1998 amounts have been reclassified to
conform to the presentation adopted in 1999.
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 sheets 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 statements 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 statements 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 SIX MONTHS ENDED APRIL 30, 1999 AND 1998
Minority Interest Adjustment and Earnings Per Share (Continued)
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 sheets or statements 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, 1999 and 1998 is as follows:
[CAPTION]
1999 1998
[S] [C] [C]
Net Income $ 27,146 $ (19,016)
Less Net Income (Loss) Accruing to
Minority Interest in Trust 4,510 (3,159)
Net Income (Loss) Applicable to
Seven Fields(PA), Inc. Shareholders $ 22,636 $ (15,857)
Earnings Per Share,
Basic and Fully Diluted .01 (.01)
Weighted Average Shares Outstanding 2,905,514 2,905,682
The computation of earnings per share for the six months ended April 30, 1999
and 1998 is as follows:
[CAPTION]
1999 1998
[S] [C] [C]
Net Income $ 51,456 $1,230,888
Less Net Income Accruing to
Minority Interest in Seven
Fields Development Company 8,548 204,483
Net Income Applicable to Seven Fields
(PA), Inc. Shareholders $ 42,908 $1,026,405
Net Income Per Share,
Basic and Fully Diluted .01 .35
Weighted Average Shares Outstanding 2,905,514 2,905,682
<PAGE>
SEVEN FIELDS DEVELOPMENT (PA), INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 AND 1998
Part I - Item 2 Management Discussion and Analysis
of Financial Condition and Results
of Operations
Financial Condition
The Company's financial condition improved slightly due to generation of net
income of over $51,000 in the first six months of 1999. The Company purchased
two additional single family lots for $110,000 in the Nevillewood sub-division
of which mortgage notes of $55,000 were granted to the seller. Credit lines
for units under construction were paid off in full during the
quarter.
Inventory at the end of the second quarter of 1999 consists of eleven single
family homes, in various stages of construction, including eight homes under
agreement of sale and three homes available for sale. Also in inventory are
thirty-two multi-family homes, in various stages of construction, including
two model homes, sixteen homes under agreement of sale and fourteen homes
available for sale.
Results of Operations for the Six Month Periods
In 1999, rental income decreased from the prior year's period by nearly
$102,000 due to the sale of townhouse units in January/February, 1998. Since
71 of these townhouse units were sold in the first quarter of 1998 and the
remainder of three units were sold in February 1998, gross revenue from
townhouse unit sales was $4,135,586 in 1998. Developed lot and house sales
increased from 1998 to 1999 by nearly $295,000 due to sales of sixteen lots,
seven houses, eleven multi-family units, and one commercial parcel in 1999,
compared with eleven lots, six houses, sixteen multi-family units, and two
commercial parcels a year earlier. As a result of the above and other minor
variations, total gross revenue in the period decreased by over $3.9 million
from the prior year's period.
Cost of developed lots and houses sold increased by almost $185,000 from 1998
to 1999 and cost of townhouses sold was over $1.9 million in 1998; both such
variations are due primarily to corresponding proportionate changes in sales
volumes.
From 1998 to 1999, other operating expenses decreased by over $125,000 due to
decreased costs related to the townhouses and greater capitalization of costs
related to home construction in 1999. Depreciation expense also decreased by
over $79,000 due primarily to the 1998 sale of the remainder of the
townhouses.
Gross interest expense decreased from 1998 to 1999 by almost $47,000 due to
payoffs of the townhouse mortgage and credit lines. All interest expense in
1999 was capitalized to development and house construction.
Due to the variations previously indicated, the Company's income before
provision for income taxes decreased from 1998 to 1999 by nearly $2.0
million.
<PAGE>
SEVEN FIELDS DEVELOPMENT (PA), INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 AND 1998
Results of Operations for Six Month Periods (Continued)
The Company recognized a provision for income tax in 1999 of $34,744 and in
1998, $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>
SEVEN FIELDS DEVELOPMENT (PA), INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 AND 1998
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
April 30, 1999.
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:PAUL VOYTIK, PRESIDENT
Date: By:LYNN HOFFMAN-KYLE, CHIEF FINANCIAL OFFICER
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> APR-30-1999
<CASH> 722,097
<SECURITIES> 0
<RECEIVABLES> 625,574
<ALLOWANCES> (57,492)
<INVENTORY> 11,389,491
<CURRENT-ASSETS> 0
<PP&E> 2,629,270
<DEPRECIATION> (636,486)
<TOTAL-ASSETS> 16,843,420
<CURRENT-LIABILITIES> 0
<BONDS> 10,507,774
0
0
<COMMON> 2,905,514
<OTHER-SE> 2,001,600
<TOTAL-LIABILITY-AND-EQUITY> 16,843,420
<SALES> 4,628,391
<TOTAL-REVENUES> 4,705,584
<CGS> 3,918,573
<TOTAL-COSTS> 4,653,356
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 86,200
<INCOME-TAX> 34,744
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,456
<EPS-BASIC> .01
<EPS-DILUTED> 0
</TABLE>
