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, 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, Seven Fields, 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 July 31, 1999 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 NINE MONTHS ENDED JULY 31, 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
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JULY 31, 1999 AND OCTOBER 31, 1998
<CAPTION>
ASSETS
1999 1998
<S> <C> <C>
Cash $ 725,957 $ 109,159
Temporary investments 1,741,907 308,103
Total Cash & Temporary Investments $ 2,467,864 $ 417,262
Accounts and notes receivable, net of
allowances of $57,492 145,361 199,483
Mortgage notes receivable 422,418 497,918
Capitalized development costs 3,699,445 5,282,662
Capitalized house construction costs,
net of allowances 2,864,291 3,606,597
Prepaid expenses and deposits 49,493 78,445
Property not currently under development 3,350,379 3,038,721
Deferred income tax assets 1,975,535 2,096,129
Property, Buildings &
Equipment
Land $ 484,756 $ 484,756
Buildings 1,294,345 1,294,345
Equipment and furnishings 860,693 845,934
Total Property, Buildings and
Equipment $ 2,639,794 $ 2,625,035
Accumulated Depreciation (650,214) (581,633)
Total Property, Buildings and
Equipment, Net of Accumulated
Depreciation $ 1,989,580 $ 2,043,402
Total Assets $ 16,964,366 $ 17,260,619
</TABLE>
<PAGE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
<CAPTION>
1999 1998
<S> <C> <C>
Accounts payable and accrued expenses $ 84,621 $ 586,672
Accrued estimated costs related to
developed lots and buildings sold 1,024,152 1,041,873
Notes payable - credit lines 196,000
Mortgages payable 998,142 972,461
Customer deposits and advances 320,037 106,245
General unsecured subordinated debt -
minority investors 9,501,710 9,501,710
Total Liabilities $ 11,928,662 $ 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) 7,412,009 7,231,963
Total Shareholders' Equity $ 5,035,704 $ 4,855,658
Total Liabilities and
Shareholders' Equity $ 16,964,366 $ 17,260,619
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JULY 31, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Gross Revenue
Rental income $ 22,402 $ 18,961
Fees & other operating income 7,759 17,296
Water revenue 63,997 47,413
Developed lot and house sales 4,348,493 2,430,595
$ 4,442,651 $ 2,514,265
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 3,907,359 $ 2,091,332
Cost of Townhouses Sold $ 503
Other Operating Expenses* $ 118,899 $ 127,712
General & Administrative Expenses* $ 189,812 $ 153,976
Depreciation Expense $ 27,644 $ 32,262
Operating Income $ 198,937 $ 108,480
Interest (Expense)/Credit* $ (7,463) $ 9,568
Interest Income $ 22,966 $ 19,375
Income Before Provision for Income Taxes $ 214,440 $ 137,423
Provision for Income Taxes $ 85,850 $ 46,352
Net Income $ 128,590 $ 91,071
Net Income Per Share,
Basic and Fully Diluted .04 .03
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 JULY 31, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 174,590 $ 171,965
Repairs & maintenance 30,792 38,695
Utilities 42,842 28,682
Insurance 22,800 23,460
Property taxes 6,263 6,745
Other operating supplies & services 13,792 27,910
Total Other Operating Expenses $ 291,079 $ 297,457
Less Costs Capitalized To
Development and House Construction (172,180) (169,745)
Net Operating Expenses $ 118,899 $ 127,712
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 104,299 $ 93,283
Professional fees 13,523 15,524
Other general and administrative
expenses 83,768 62,326
Total General and Administrative
Expenses $ 201,590 $ 171,133
Less Costs Capitalized To
Development and Construction (11,778) (17,157)
Net General and Administrative
Expenses $ 189,812 $ 153,976
Interest Expense
Total Interest Expense $ 18,754 $ 30,079
Less Interest Capitalized to
Development and House
Construction (11,291) (39,647)
Net Interest Expense/(Credit) $ 7,463 $ (9,568)
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JULY 31, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Gross Revenue
Rental income $ 67,207 $ 165,682
Fees & other operating income 40,147 49,915
Water revenue 156,442 128,840
Developed lot and house sales 8,884,439 6,671,670
Townhouse unit sales 4,135,586
$ 9,148,235 $ 11,151,693
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 7,825,932 $ 5,825,249
Cost of Townhouses Sold $ 1,913,470
Other Operating Expenses* $ 333,751 $ 467,647
General & Administrative Expenses* $ 654,890 $ 594,705
Depreciation Expense $ 82,497 $ 165,982
Operating Income $ 251,165 $ 2,184,640
Interest Expense* $ (7,463) $ (31,208)
Interest Income $ 56,938 $ 50,379
Income Before
Provision for Income Taxes $ 300,640 $ 2,203,811
Provision for Income Taxes $ 120,594 $ 881,852
Net Income $ 180,046 $ 1,321,959
Net Income Per Share,
Basic and Fully Diluted .05 .38
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 NINE MONTHS ENDED JULY 31, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 509,797 $ 514,470
Repairs & maintenance 103,437 98,683
Utilities 104,355 77,734
Insurance 71,400 76,980
Property taxes 18,553 70,454
Other operating supplies & services 35,732 92,339
Total Other Operating Expenses $ 843,274 $ 930,660
Less Costs Capitalized To
Development and Construction (509,523) (463,013)
Net Other Operating Expenses $ 333,751 $ 467,647
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 317,136 $ 311,556
Professional fees 98,962 92,946
Other general and administrative
expenses 274,126 241,674
Total General and Administrative
Expenses $ 690,224 $ 646,176
Less Costs Capitalized To
Development and Construction (35,334) (51,471)
Net General and Administrative
Expenses $ 654,890 $ 594,705
Interest Expense
Total Interest Expense $ 65,787 $ 123,862
Less Interest Capitalized to
Development and House
Construction (58,324) (92,654)
Net Interest Expense $ 7,463 $ 31,208
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 180,046 $ 1,321,959
Provision for deferred income taxes 120,594 881,852
Depreciation 82,497 165,982
Capitalized development costs incurred (399,903) (939,999)
Capitalized house construction
costs incurred (5,170,681) (3,625,738)
Cost of lots & houses sold 7,584,449 5,580,360
Changes in other assets & liabilities:
Other assets 83,074 (95,481)
Other liabilities (305,980) (498,676)
Net Cash Flows Provided By
Operating Activities $ 2,174,096 $ 2,790,259
Cash Flows From Investing Activities:
Additions to property, buildings and
equipment $ (28,675) $ (80,666)
Payments on notes receivable 75,500
Sale of property, buildings & equipment 1,349,219
Total Cash Flows Provided By
Investing Activities $ 46,825 $ 1,268,553
Cash Flows From Financing Activities:
Repayment of investor debt (396,223)
Return of capital distribution (1,932,282)
Proceeds from borrowings 87,500 310,000
Net repayments on credit lines (196,000)
Repayments of existing mortgages (61,819) (1,711,286)
Total Cash Flows Used In
Financing Activities $ (170,319) $ (3,729,791)
Net Increase in Cash and
Temporary Investments $ 2,050,602 $ 329,021
Cash & Temporary Investments,
Beginning of Period $ 417,262 $ 423,606
Cash & Temporary Investments,
End of Period $ 2,467,864 $ 752,627
Interest Expense Included in Net
Income Above $ 7,463 $ 31,208
Interest Paid & Included in Capitalized
Development & House Construction Costs $ 58,324 $ 92,654
Total Interest Paid $ 65,787 $ 123,862
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE NINE MONTHS ENDED JULY 31, 1999
<CAPTION>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<S> <C>
Retained earnings - beginning $ 7,231,963
Net income for the nine month period 180,046
Retained earnings - ending $ 7,412,009
</TABLE>
<PAGE>
SEVEN FIELDS DEVELOPMENT (PA), INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 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. do 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, 1999 AND 1998
Notes to Financial Statements for
the Nine Months Ended July 31,
1999 and 1998 (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
July 31, 1999 and 1998 is as follows:
[CAPTION]
1999 1998
[S] [C] [C]
Consolidated Net income $ 128,590 $ 91,071
Less Net Income Accruing to
Minority Interest in Trust (17%) 21,363 15,129
Net Income Applicable to Seven Fields
(PA), Inc. Shareholders $ 107,227 $ 75,942
Net Income Per Share,
Basic and Fully Diluted .04 .03
Weighted Average Shares Outstanding 2,905,514 2,905,682
The computation of earnings per share for the nine months ended July 31,
1999 and 1998 is a follows:
[CAPTION]
1999 1998
[S] [C] [C]
Consolidated Net income $ 180,046 $ 1,321,959
Less Net Income Accruing to
Minority Interest in Trust (17%) 29,912 219,613
Net Income Applicable to Seven Fields
(PA), Inc. Shareholders $ 150,134 $ 1,102,346
Net Income Per Share,
Basic and Fully Diluted .05 .38
Weighted Average Shares Outstanding 2,905,514 2,905,682
<PAGE>
SEVEN FIELDS DEVELOPMENT (PA), INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 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 profit of $180,046 in the first nine months of 1999. Inventory at the
end of the third quarter of 1999 consists of eight single family homes, in
various stages of construction, including six homes under agreement of sale
and two homes available for sale. Also in inventory are forty-two
multi-family homes, in various stages of construction, including two model
homes, twenty-four homes under agreement of sale and sixteen homes
available for sale.
Results of Operations for the Nine Month Periods
In 1999, rental income decreased from the prior year's period by nearly
$100,000 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 over $2.2 million due to sales of
twenty-seven lots, thirteen houses, twenty-five multi-family units, and one
commercial parcel in 1999, compared with fourteen lots, ten houses,
twenty-two 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 $2.0 million from the prior year's period.
Cost of developed lots and houses sold increased by over $2.0 million 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 almost $134,000
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 $83,000 due primarily to the 1998 sale of the remainder
of the townhouses.
Gross interest expense decreased from 1998 to 1999 by over $58,000 due to
payoffs of the townhouse mortgage and credit lines.
Due to the variations previously indicated, the Company's income before
provision for income taxes decreased from 1998 to 1999 by over $1.9
million.
The Company recognized a provision for income tax in 1999 of $120,594 and
in 1998, $881,852; 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
July 31, 1999.
<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: 8/31/99 By: PAUL VOYTIK, PRESIDENT
Date: 8/31/99 By:LYNN HOFFMAN-KYLE, CHIEF FINANCIAL OFFICER
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JUL-31-1999
<CASH> 2,467,864
<SECURITIES> 0
<RECEIVABLES> 625,271
<ALLOWANCES> (57,492)
<INVENTORY> 9,914,115
<CURRENT-ASSETS> 0
<PP&E> 2,639,794
<DEPRECIATION> (650,214)
<TOTAL-ASSETS> 16,964,366
<CURRENT-LIABILITIES> 0
<BONDS> 10,499,852
0
0
<COMMON> 2,905,514
<OTHER-SE> 2,130,190
<TOTAL-LIABILITY-AND-EQUITY> 16,964,366
<SALES> 9,040,881
<TOTAL-REVENUES> 9,148,235
<CGS> 7,825,932
<TOTAL-COSTS> 8,897,070
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,463
<INCOME-PRETAX> 300,640
<INCOME-TAX> 120,594
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 180,046
<EPS-BASIC> .05
<EPS-DILUTED> 0
</TABLE>
