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 January 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 January 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 THREE MONTHS ENDED JANUARY 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
<PAGE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JANUARY 31, 1999 AND OCTOBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
<S> <C> <C>
Cash $ 239,998 $ 109,159
Temporary investments 62,542 308,103
Total Cash & Temporary Investments $ 302,540 $ 417,262
Accounts and notes receivable, net of
allowances of $57,492 171,772 199,483
Mortgage notes receivable 475,172 497,918
Capitalized development costs 4,830,251 5,282,662
Capitalized house construction costs,
net of allowances 3,908,269 3,606,597
Prepaid expenses and deposits 107,511 78,445
Property not currently under development,
net of allowances of 123,788 in 1997 3,275,410 3,038,721
Deferred income tax assets 2,079,429 2,096,129
Property, Buildings &
Equipment
Land $ 484,756 $ 484,756
Buildings 1,294,345 1,294,345
Equipment and furnishings 848,243 845,934
Total Property, Buildings and
Equipment $ 2,627,344 $ 2,625,035
Accumulated Depreciation (609,167) (581,633)
Total Property, Buildings and
Equipment, Net of Accumulated
Depreciation $ 2,018,177 $ 2,043,402
Total Assets $ 17,168,531 $ 17,260,619
</TABLE>
<PAGE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
<CAPTION>
1999 1998
<S> <C> <C>
Accounts payable and accrued expenses $ 262,368 $ 586,672
Accrued estimated costs related to
developed lots and buildings sold 916,664 1,041,873
Notes payable - credit lines 454,000 196,000
Mortgages payable 994,772 972,461
Customer deposits and advances 159,049 106,245
General unsecured subordinated debt -
minority investors 9,501,710 9,501,710
Total Liabilities $ 12,288,563 $ 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) 7,256,273 7,231,963
Total Shareholders' Equity $ 4,879,968 $ 4,855,658
Total Liabilities and
Shareholders' Equity $ 17,168,531 $ 17,260,619
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JANUARY 31, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Gross Revenue
Rental income $ 22,402 $ 128,108
Fees & other operating income 12,950 19,281
Water revenue 47,749 39,619
Developed lot and house sales 1,815,060 2,656,713
Townhouse unit sales 3,967,900
$ 1,898,161 $ 6,811,621
Costs & Expenses
Cost of Developed Lots &
Houses Sold $ 1,493,852 $ 2,322,706
Cost of Townhouses Sold $ 1,843,638
Other Operating Expenses* $ 118,756 $ 216,286
General & Administrative Expenses* $ 227,887 $ 223,506
Depreciation Expense $ 27,534 $ 98,798
Operating Income $ 30,132 $ 2,106,687
Interest Expense* $ (5,328) $ (31,624)
Interest Income $ 16,206 $ 10,343
Income Before Provision for Income Taxes $ 41,010 $ 2,085,406
Provision for Income Taxes $ 16,700 $ 835,500
Net Income $ 24,310 $ 1,249,906
Net Income Per Share,
Basic and Fully Diluted .01 .36
Weighted Average Number of Shares 2,905,514 2,905,514
<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 JANUARY 31, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 176,679 $ 180,828
Repairs & maintenance 32,648 31,239
Utilities 27,851 25,603
Insurance 24,200 30,360
Property taxes 6,250 58,069
Other operating supplies & services 11,472 33,199
Total Other Operating Expenses $ 297,100 $ 359,298
Less Costs Capitalized To
Development and House Construction (160,344) (143,012)
Net Operating Expenses $ 118,756 $ 216,286
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 112,069 $ 94,320
Professional fees 41,069 45,026
Other general and administrative
expenses 86,527 101,317
Total General and Administrative
Expenses $ 239,665 $ 240,663
Less Costs Capitalized To
Development and Construction (11,778) (17,157)
Net General and Administrative
Expenses $ 227,887 $ 223,506
Interest Expense
Total Interest Expense $ 19,791 $ 59,451
Less Interest Capitalized to
Development and House
Construction (14,463) (27,827)
Net Interest Expense $ 5,328 $ 31,624
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 1999 AND 1998
<CAPTION>
1999 1998
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 24,310 $ 1,249,906
Provision for deferred income taxes 16,700 835,500
Depreciation 27,534 98,798
Capitalized development costs incurred (252,540) (216,431)
Capitalized house construction
costs incurred (1,269,651) (1,152,557)
Cost of lots & houses sold 1,436,241 2,262,159
Changes in other assets & liabilities:
Other assets (1,355) 340,802
Other liabilities (396,709) (552,796)
Net Cash Flows Provided By (Used In)
Operating Activities $ (415,470) $ 2,865,381
Cash Flows From Investing Activities:
Additions to property, buildings and
equipment $ (2,309) $ (58,818)
Payments on notes receivable 22,746
Sale of property, buildings & equipment 757,674
Total Cash Flows Provided By
Investing Activities $ 20,437 $ 698,856
Cash Flows From Financing Activities:
Net borrowings(repayments)on Credit Lines 258,000
Proceeds from borrowings 32,500 250,000
Repayments of loans payable (10,189) (1,340,874)
Total Cash Flows Provided By(Used In)
Financing Activities $ 280,311 $ (1,090,874)
Net Increase (Decrease)in Cash and
Temporary Investments $ (114,722) $ 2,473,363
Cash & Temporary Investments,
Beginning of Period $ 417,262 $ 423,606
Cash & Temporary Investments,
End of Period $ 302,540 $ 2,896,969
Interest Expense Included in Net
Income Above $ 5,328 $ 31,624
Interest Paid & Included in Capitalized
Development & House Construction Costs $ 14,463 $ 27,827
Total Interest Paid $ 19,791 $ 59,451
</TABLE>
<PAGE>
<TABLE>
SEVEN FIELDS DEVELOPMENT (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE THREE MONTHS ENDED
JANUARY 31, 1999
<CAPTION>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<S> <C>
Retained earnings - beginning $ 7,231,963
Net income for the three month period 24,310
Retained earnings - ending $ 7,256,273
</TABLE>
<PAGE>
SEVEN FIELDS DEVELOPMENT (PA), INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 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.
<PAGE>
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 Three Months Ended January 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
January 31, 1999 and 1998 is as follows:
[CAPTION]
1999 1998
[S] [C] [C]
Consolidated Net income $ 24,310 $1,249,906
Less Net Income Accruing to
Minority Interest in Trust (17%) 4,039 207,643
Net Income Applicable to Seven Fields
(PA), Inc. Shareholders $ 20,271 $1,042,263
Net Income Per Share,
Basic and Fully Diluted .01 .36
Weighted Average Shares Outstanding 2,905,514 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 slightly due to generation of
net profit of over $24,000 in the first three months of 1999. The Company
purchased one additional single family lot in the Nevillewood sub-division
for $61,000, of which a mortgage note of $32,000 was granted to the seller.
Cash borrowed from credit lines totalled $350,000 for the quarter, while
$92,000 was repaid on such notes resulting in a $258,000 increase to cash.
Inventory at the end of the first quarter of 1999 consists of thirteen
single family homes, in various stages of construction, including ten 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, ten homes under agreement of sale
and twenty homes available for sale.
Results of Operations for the Three Month Periods
In 1999, rental income decreased from the prior year's period by over
$105,000 due to the sale of townhouse units in January, 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 $3,967,900 in 1998. Developed lot and house sales
decreased from 1998 to 1999 by nearly $842,000 due to sales of eight lots,
two houses, six multi-family units, and one commercial parcels in
1999, compared with six lots, four houses and eleven multi-family units a
year earlier. As a result of the above and other minor variations, total
gross revenue in the period decreased by over $4.9 million from the prior
year's period.
Cost of developed lots and houses sold decreased by almost $830,000 from
1998 to 1999 and cost of townhouses sold was over $1.8 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 nearly $100,000
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 $71,000 due primarily to the first quarter 1998 sale of
the remainder of the townhouses.
Gross interest expense decreased from 1998 to 1999 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 $2.0
million.
The Company recognized a provision for income tax in 1999 of $16,700; 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.
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
January 31, 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: March 3, 1999 By: PAUL VOYTIK, PRESIDENT
Date: March 3, 1999 By: LYNN HOFFMAN-KYLE, CHIEF FINANCIAL OFFICER
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JAN-31-1999
<CASH> 302,540
<SECURITIES> 0
<RECEIVABLES> 704,436
<ALLOWANCES> (57,492)
<INVENTORY> 12,013,930
<CURRENT-ASSETS> 0
<PP&E> 2,627,344
<DEPRECIATION> (609,167)
<TOTAL-ASSETS> 17,168,531
<CURRENT-LIABILITIES> 0
<BONDS> 10,496,482
0
0
<COMMON> 2,905,514
<OTHER-SE> 1,974,454
<TOTAL-LIABILITY-AND-EQUITY> 17,168,531
<SALES> 1,862,809
<TOTAL-REVENUES> 1,898,161
<CGS> 1,493,852
<TOTAL-COSTS> 1,868,029
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,328
<INCOME-PRETAX> 41,010
<INCOME-TAX> 16,700
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,310
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
