<PAGE>
Rule 424(b)(3)
File No. 333-10207
PROSPECTUS ---
75,000 Shares
BUCK HILL FALLS COMPANY
Class A Common Stock
(No Par Value)
The Class A Common Stock (the "Class A Stock") is being offered by
Buck Hill Falls Company (the "Company") only to those persons who own
Common Stock in the Company and are an owner or co-owner of a cottage
and/or lot in the Buck Hill Falls community ("Qualified Owners").
Qualified Owners are offered the opportunity to purchase 200 shares per
property for $20 per share or an aggregate price of $4,000, payable over
five years at $800 annually or, if paid in full by October 31, 1996, for
$17.50 per share or an aggregate price of $3500 for 200 shares. All 200
shares must be purchased by a Qualified Owner if any are purchased. If
all shares of Class A Stock are not subscribed within 15 days after the
date of this Prospectus, the Company intends to offer Qualified Owners who
did subscribe the opportunity to purchase up to 200 additional shares per
property on the same terms. See "The Offering." The shares of Class A
Stock are identical to the outstanding shares of the Company's Common
Stock except that the Class A Stock may, with certain exceptions, only be
held by or transferred to a Qualified Owner. See "Description of Capital
Stock."
Upon completion of this offering, the Company intends to offer the
holders of its Common Stock who are not Qualified Owners the opportunity
to purchase additional shares of Common Stock at $17.50 per share. See
"The Offering".
There is no market for the Class A Stock and, because its
transferability is severely restricted, none is expected to develop
following this offering.
THE CLASS A COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS."
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY SUCH STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
==========================================================================
Price to Underwriting Proceeds to
Public (1) Discount (2) Company (1)(3)
- --------------------------------------------------------------------------
Per Share $20.00 $ None $ 20.00
Total $1,500,000 $ None $1,500,000
==========================================================================
(1) Assumes all shares are subscribed and are paid for over five
years. If payment for all shares is made on or prior to
October 31, 1996, the Price to Public would be $17.50 per share
and the total Proceeds to Company would be $1,312,500 (less
expenses). There is no minimum number of shares that must be sold
if any shares are to be sold.<PAGE>
<PAGE>
(2) This offering is made directly by the Company through its regular
officers and directors. No commissions or fees will be paid.
(3) Before deducting expenses of the offering to be paid by the
Company, estimated at $50,000.
The date of this Prospectus is September 11, 1996.
<PAGE>
<PAGE>
Until October 21, 1996 all dealers effecting transactions in the
registered securities, whether or not participating in this distribution,
may be required to deliver a prospectus.
TABLE OF CONTENTS
-----------------
PAGE
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . 3
Selected Consolidated Financial Data . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . 8
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Security Ownership of Certain Beneficial Owners and Management . . . 20
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . 21
The Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Additional Information . . . . . . . . . . . . . . . . . . . . . . . 25
Index to Financial Statements . . . . . . . . . . . . . . . . . . . F-1
AVAILABLE INFORMATION
---------------------
The Company is subject to the reporting requirements of the
Securities Exchange Act of 1934 ("Exchange Act") and in accordance
therewith files reports and other information with the Securities and
Exchange Commission (the "Commission"). Such reports and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at its regional offices located
at Seven World Trade Center, 13th Floor, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may also be obtained at prescribed rates from the Public
Reference Section of the Commission, Washington, D.C. 20549.
The Company delivers to its shareholders annual reports
containing audited financial statements with a report thereon by its
independent certified public accountants.
2<PAGE>
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE
IN THIS PROSPECTUS. AS USED IN THIS PROSPECTUS, THE TERM "COMPANY"
INCLUDES BUCK HILL FALLS COMPANY AND ITS WHOLLY-OWNED SUBSIDIARY, BUCK
HILL WATER COMPANY, UNLESS THE CONTEXT OTHERWISE INDICATES.
THE COMPANY
Buck Hill Falls Company is engaged in the provision of a variety
of services, many of which are for the benefit of residents of Buck Hill
Falls, Barrett Township, Pennsylvania. In addition, certain of the
Company's facilities are made available to the general public. The
Company's services include (a) provision of recreational facilities, (b)
provision of various water and sewage services and (c) miscellaneous
maintenance services.
The principal executive office of the Company is located at P. O.
Box 426, Cresco Road, Buck Hill Falls, Pennsylvania 18323. Its telephone
number is 717-595-7511.
THE OFFERING
Type of security offered Class A Common Stock
Number of shares offered 75,000
Shares to be outstanding after the offering(1) 75,000 shares of
Class A Common Stock
73,537 shares of
Common Stock
Use of Proceeds Reduction of debt
- ---------------
(1) Assumes all shares are sold. There is no specified minimum number
that will be sold. Upon completion of this offering of Class A
Stock, the Company intends to offer up to 31,463 additional shares
of Common Stock to the holders of Common Stock who are not
Qualified Owners. See"The Offering."
Shares of Class A Stock will be offered only to persons who
are owners or co-owners of a lot and/or cottage in the Buck Hill Falls
community. See "The Offering".
RISK FACTORS
An investment in Class A Stock involves substantial risks in
addition to the risks associated with ownership of the Company's Common
Stock. The transferability of the Class A Stock is severely limited. See
"Risk Factors."
3<PAGE>
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for each of the
fiscal years in the five year period ended October 31, 1995, have been
derived from audited consolidated financial statements of the Company. The
following selected consolidated financial data for the six months ended April
30, 1996 and April 30, 1995 have been derived from unaudited
consolidated financial statements of the Company. This information should be
read in conjunction with the Consolidated Financial Statements and related
notes and Managements' Discussion and Analysis of Financial Condition and
Results of Operations appearing elsewhere in this Prospectus.
<TABLE>
YEAR ENDED OCTOBER
31,
- -------------------------------------------------------------
1995 1994 1993
1992 1991
---- ---- ----
---- ----
<S> <C> <C> <C>
<C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue $2,218,139 $2,203,529 $2,048,529
$1,938,239 $1,874,303
Income (loss) from
operations 37,094 136,294 133,895
(3,201) 51,131
Other income
(expense) (125,834) (67,914) (34,412)
147,846 (99,620)
Income (loss) before
extraordinary credit (88,740) 33,080 65,683
(64,982) (82,070)
Extraordinary credit - - 33,800
138,000 19,000
Cumulative effect of
accounting change - 21,600
- - -
---------- ---------- ----------
- ---------- ----------
Net income (loss) $ (88,740) $ 54,680 $ 99,483
$ 73,018 $ (63,070)
========== ========== ==========
========== ==========
PER SHARE DATA:
Income (loss) before
extraordinary credit $ (1.21) $ .45 $ .89
$ (.88) $ (1.12)
Extraordinary credit - - .46
1.87 .26
Cumulative effect of
accounting change - .29 -
- -
---------- ---------- ----------
- ---------- ----------
Net income (loss) $ (1.21) $ .74 $ 1.35
$ .99 $ (.86)
========== ========== ==========
========== ==========
OCTOBER 31,
- -------------------------------------------------------------
1995 1994 1993
1992 1991
---- ---- ----
---- ----
FINANCIAL POSITION DATA:
Working capital $ (772,266) $ (973,993) $ (822,191)
$(1,082,662) $ (516,834)
Total assets 3,149,870 3,104,106 2,536,541
2,299,853 2,373,373
Total long-term
liabilities 1,170,018 921,804 599,360
176,111 865,347
Stockholders' equity 900,529 989,269 934,589
835,106 762,088
4<PAGE>
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<CAPTION>
SIX MONTHS ENDED
APRIL 30
----------------------------
1996 1995
---- ----
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue $ 631,603 $ 633,715
Income (loss) from
operations (212,123) (234,943)
Other income
(expense) (48,725) 7,687
Income (loss) before
extraordinary credit (260,848) (227,256)
Extraordinary credit - -
Cumulative effect of
accounting change - -
------------ ------------
Net income (loss) $ (260,848) $ (227,256)
============ ============
PER SHARE DATA:
Income (loss) before
extraordinary credit $ (3.55) $ (3.09)
Extraordinary credit - -
Cumulative effect of
accounting change - -
------------ ------------
Net income (loss) $ (3.55) $ (3.09)
=========== ===========
April 30
----------------------------
1996 1995
---- ----
FINANCIAL POSITION DATA
Working capital $ (977,714) $(1,251,338)
Total assets 3,093,347 3,151,450
Total long-term
liabilities 1,177,860 943,571
Stockholders' equity 639,682 762,011
</TABLE>
5<PAGE>
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMPANY INVOLVES A HIGH DEGREE OF RISK. THE
FOLLOWING FACTORS, IN ADDITION TO THE OTHER INFORMATION CONTAINED
IN THIS PROSPECTUS, SHOULD BE CAREFULLY CONSIDERED BEFORE MAKING AN INVESTMENT
DECISION.
1. FINANCIAL CONDITION. The Company incurred a net loss of $88,740
for the fiscal year ended October 31, 1995 as compared to a net income of
$54,680 for the preceding fiscal year. It incurred a net loss of $260,848 for
the six months amended April 30, 1996 as compared to a net loss of 227,256 for
the corresponding period of the prior year. At April 30, 1996 the Company had
a cumulative deficit of $1,410,915 and a working capital deficiency of
$977,714. While, due to the seasonal nature of the company's business, the
Company's revenues and cost of revenues typically increase significantly in its
third and fourth fiscal quarters, the continuation of the Company as a going
concern is dependent upon continued compliance with its debt terms, its ability
to obtain additional financing if needed and the eventual achievement of
sustained profitable operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
2. NO DIVIDENDS ANTICIPATED. The Company has not paid a dividend
since 1966. The Company anticipates that its revenues will be used primarily
to maintain the various facilities it operates and for debt service and it does
not expect to pay dividends in the foreseeable future. In addition, debt
instruments to which the Company is a party restrict the payment of dividends.
3. RESTRICTIONS ON TRANSFERABILITY. Under the Articles of
Incorporation of the Company, as amended in July 1996, the shares of Class A
Stock may only be issued to, transferred to, or be held by a person, company or
other entity that it an owner or co-owner of a cottage and/or lot in the Buck
Hill Falls community (a "Qualified Owner"); provided, however, that a holder of
Class A Stock may transfer the shares to the Company, to the Buck Hill
Conservation Foundation, or to any other person with the specific approval of
the Board of Directors of the Company and the holders of a majority of the
other Class A shares. The Company will not recognize any purported transfer in
violation of these provisions. With this limited universe of transferees it is
highly unlikely that any trading market will develop, or that a Class A
stockholder in need of liquidity would be able to effect an expeditious sale of
his or her shares.
4. DEPENDENCE ON DUES AND FEES PAID BY PROPERTY OWNERS. In addition
to fees that residents of Buck Hill Falls pay to the Company for water and
sewer services and for the use of recreational facilities, property owners pay
dues to the Company in connection with road maintenance, trash collection,
security, general maintenance and other services provided by the Company, and
are subject to special assessments in certain situations. Deed covenants are
not uniform in this regard. Residents have recently instituted litigation
challenging the right of the Company to levy dues and assessments. While a
settlement agreement was signed in June 1996, continued opposition could have a
material adverse effect on the Company. See "Business -- Dues and Fees Paid by
Property Owners".
5. COMPETITION. Revenues derived from the use of the Company's
recreational facilities (particularly the golf course) by members of the
general public have become increasingly important in recent years. In this
regard the Company is in competition with a number of resorts in the Pocono
Mountains area.
6<PAGE>
<PAGE>
6. GOVERNMENT REGULATION. The Company's water and sewer services are
subject to regulation by state and federal environmental regulatory bodies,
primarily the Pennsylvania Department of Environmental Protection ("DEP"), and
the Company's water services are regulated by the Pennsylvania Public Utility
Commission ("PUC") which, among other things, fixes the rates charged by the
Company. In 1995 the Company completed the installation of a water filtration
plant ordered by the DEP at a cost to the Company of approximately $900,000.
See "Business -- Government Regulation". The Company could be subjected to
significant and unanticipated expenses in the future.
FOR THESE REASONS, THE COMPANY BELIEVES THAT THE SHARES OF CLASS
A STOCK OFFERED BY THIS PROSPECTUS ARE SUITABLE INVESTMENTS ONLY FOR
BUCK HILL FALLS PROPERTY OWNERS WHO BELIEVE THAT THE CONTINUED VIABILITY OF THE
COMPANY IS IMPORTANT TO THE HEALTH AND WELFARE OF THE COMMUNITY.
USE OF PROCEEDS
The maximum net proceeds to be received by the Company from this
offering are estimated to be approximately $1,450,000. There is no minimum and
the total net proceeds could be substantially less. The net proceeds will be
used primarily for the reduction of indebtedness.
At June 30, 1996 the Company had an outstanding, unpaid balance of
$690,900 on its $1,000,000 revolving credit facility with a bank, all of which
is classified as a current liability on the Company's financial statements.
This line of credit bears interest at prime (8.25% at June 30, 1996) plus 1.25%
and is secured by a mortgage and by a pledge of all dues, assessments and fee
revenues. Approximately $617,000 was drawn on this facility in 1993 to fund
the payment at maturity of debentures (the "1993 Debentures") issued by the
Company in 1968. Liability for the payment of the 1993 Debentures had been
assumed in 1977 by an unrelated entity, the Buck Hill Inn Corporation (the "Inn
Co.") as part of its consideration for the purchase of the Buck Hill Inn from
the Company. The Inn Co. subsequently filed for protection under the
bankruptcy laws. Approximately $140,000 in principal amount of the 1993
Debentures were exchanged by the holders for unsecured 6 1/4% Subordinated
Notes of the Company due July 1, 1998 (the "1998 Notes") and the balance of the
1993 Debentures were paid by the Company. The revolving credit facility has
also been used to fund the Company's working capital deficiency which normally
intensifies during the first and second quarter of each fiscal year due to the
seasonal nature of much of the Company's activity.
In May of 1995 the Company entered into an additional $900,000 loan
agreement with a bank to refinance existing debt incurred in connection with
the required improvements to its water system and to fund the completion of
those improvements. The loan is payable in monthly installments through May
2015 and bears interest at prime (8.25% at June 30, 1996) plus 1.50%, and is
secured by a real estate mortgage and all revenues of the Company's water
operations.
The Company expects to apply the net proceeds of the offering first to
the payment of all or a substantial portion of its revolving credit facility.
The balance may be applied to reduce the term loan and for general corporate
purposes, primarily involving the maintenance of the Company's various
facilities, and possibly for repayment of the 1998 Notes upon their maturity.
Proceeds, if any, from the sale of Common Stock will be used for the
same purposes.
7<PAGE>
<PAGE>
Pending the use of the proceeds for the purposes set forth above, the
Company may invest or deposit such sums as it deems appropriate.
DILUTION
The following table sets forth the effect of the Company's issuance of
Class A Stock in this offering on net tangible book value per share of the
Company's Common Stock as of April 30, 1996, as adjusted to reflect the
immediate dilution which the purchasers of the Class A Stock offered hereby
will experience if all shares are sold at $20.00 per share. Dilution will be
greater if fewer shares are sold at that price. Dilution per share will be
less with respect to shares purchased at $17.50 per share. See "The Offering."
Offering price per share $20.00
Net tangible book value per share at
April 30, 1996(1) $8.37
Increase in net tangible book value attributable
to estimated proceeds to the Company per
share from its sale of Class A Stock 5.54
-----
Net tangible book value per share after offering 13.91
------
Dilution of shareholders purchasing shares after
the date of this Prospectus(2) $ 6.09
======
(1) Net tangible book value per share is determined by dividing the number of
shares of Common Stock of both classes outstanding into the tangible net worth
(total tangible assets less total liabilities) of the Company.
(2) "Dilution" means the difference between the offering price of the Class A
Stock and the net tangible book value per share of the Common Stock of both
classes after giving effect to the offering and payment of the estimated
expenses of the offering.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company's business, insofar as it relates to the provision of
recreational facilities, is largely seasonal in nature. As a result, the
Company's revenues and cost of revenues typically increase in its third and
fourth fiscal quarters.
RESULTS OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1996 COMPARED TO THE SIX MONTHS ENDED
APRIL 30,1995
Revenues for the six months ended April 30, 1996, were comparable to
the same period in the prior year. The Company had an increase of $9,812 in
its water operations revenues as a result of a rate increase, and an increase
of $19,000 in snow plowing revenues as a result of heavy snowfall amounts in
8<PAGE>
1996, but these increases were offset by
a decrease in golf cart rentals of $8,626 as a result of weather conditions
in 1996 and a decrease in golf and tennis dues revenues of approximately
$3,000 as a result of the Company's not offering a 5% discount for early
payment of dues as was done in 1995. The Company also reduced annual dues
billed to the residents at Buck Hill Falls from $2,400 to $2,300 in 1996.
Cost of revenues increased 12% as compared to the same period in the
previous fiscal year, primarily due to an increase in depreciation expense of
$34,000 related to capital improvements to the water system which was put into
operation in February 1995 and to the reallocation of approximately $30,000 in
administrative salaries to the related community service operations to which
the employees are currently performing services. In addition, snow plowing
costs increased $15,000 due to severe weather conditions during 1996.
General and administrative costs decreased 37% in the first six months
of 1996 as compared to the same period in 1995. This decrease relates to the
reallocation of administrative salaries discussed above. Bad debts decreased
$29,814 due to the write off of uncollectible accounts in 1995. During 1995,
legal and accounting fees were incurred primarily for an evaluation of a
purchase offer from the Lot and Cottages Owners' Association. Such costs were
not incurred during 1996, resulting in a decrease in legal and accounting fees
of $32,615.
Other income decreased 33% during 1996. During 1995, there was a gain
on sale of land of $15,013, proceeds from the sale of timber of $11,202 and a
bad debt recovery of $3,000, which were not present in 1996. This decrease was
partially offset by an increase in interest income of $10,000.
Interest expense increased 71% as a result of interest of $37,680 on
borrowings related to the water filtration system which was placed in service
in February 1995. There was also capitalized interest in 1995, which is not
present in 1996 due to the completion of the water filtration system.
YEAR ENDED OCTOBER 31, 1995 COMPARED TO YEAR ENDED OCTOBER 31, 1994
Revenues increased 0.7% in 1995 as compared to 1994, principally due to
increased golf and pool revenues, annual dues, lumber sales, water and sewer
service revenues. Revenues from golf and pool increased approximately $92,500
due to an increase in the annual membership fee and the number of memberships.
Management believes that golf memberships have increased as a result of
improvements made to the golf course. In addition, due to more favorable
weather in 1995, more rounds were played and, as a consequence, revenues from
greens fees and cart rentals increased. The Company increased annual dues
billed to residents at Buck Hill Falls from $2,200 in 1994 to $2,400 in 1995.
The $200 increase resulted in additional revenues of approximately $58,000 in
1995. Lumber sales increased approximately $24,100 due to additional timbering
in fiscal 1995. Revenues from water and sewer services increased approximately
$13,000 due to an increase in water rate in 1995. The increase in revenues was
partially offset by a decrease in snow plowing revenues of approximately
$16,500 due to more favorable weather in 1995, decreased tennis and camp
revenues of approximately $9,600 attributable to decreased participation and
decreased special assessment revenues of approximately $126,700 due to no
special assessments raised in 1995. In addition, a change in the Company's
water and sewer billing policy to Inn Co. resulted in a decrease in water and
sewer service revenues of approximately $20,200.
9<PAGE>
<PAGE>
Cost of revenue increased 3.8% in 1995 as compared to 1994 due to a
variety of factors. The operating expenses of golf increased approximately
$44,500, primarily due to additional lease payments of $26,300 on golf carts.
In addition, the cost of maintenance and material and supplies expenses
increased approximately $18,200 due to increased rounds played in 1995. The
operating expenses of camp club increased approximately $4,300 due to increased
repair and maintenance expenses on play grounds. The operating expenses of
water and sewer service increased approximately $4,800, principally due to
increased sewer plant repair and maintenance expenses. However, the increased
expenses related to sewer service operations were offset by a decrease of
approximately $13,400 in salary expense because of one employee's disability
absence for six months in 1995. Lumber commission expense and real estate taxes
increased approximately $2,100 and $7,500 in 1995, respectively. The cost of
contracted security services and repair and maintenance expenses related to
security vehicle increased approximately $6,600. Maintenance expenses
associated with the Cottages at Buck Hill Falls increased approximately
$12,500, primarily due to an increase in the price of contracted services and
additional cleaning services. Depreciation expense increased approximately
$34,300 resulting from the completion of water system capital improvements in
March 1995. The increase in cost of revenues was partially offset by an
insurance refund of approximately $17,500, decreased road repair work of
approximately $12,100 in Buck Hill Falls community, decreased snow plowing
expense of approximately $10,200 and decreases in a variety of minor expenses
relating to cost of revenues.
General and administrative expenses increased 11.2% in 1995 as compared
to 1994, principally resulting from increases in legal and accounting fees, bad
debt expense and depreciation expense. Legal and accounting fees increased
approximately $64,700, primarily due to Securities and Exchange Commission
filings in 1995, legal services on the water rate increase in 1995, consulting
services rendered on the examination of the Company's rights in the setting of
dues and assessments on the cottages at Buck Hill Falls. Bad debt expense
increased approximately $10,500 because of increased provision for
uncollectible receivables. The purchase of property and equipment in 1995
resulted in an increase of approximately $2,900 in depreciation expense.
Additionally, repair and maintenance expenses increased approximately $10,100,
due to water pipe leakage in the residential area. Bank charges on credit card
collection increased approximately $4,700. The increase in expense was
partially offset by an insurance refund of approximately $4,800 and a $34,800
decrease in salary expense and related payroll tax, fringe benefits and travel
and entertainment due to the resignation of the Company's President in January
1994.
Miscellaneous income increased 173.8%, principally due to an increase
on a gain from the sale of property and equipment of approximately $23,000.
The increase in other expense is attributable primarily to increased
interest expense resulting from increased interest rates and borrowings in
fiscal 1995 as well as interest expense on the water system capital
improvements loan.
YEAR ENDED OCTOBER 31, 1994 COMPARED TO YEAR ENDED OCTOBER 31, 1993
Revenues increased 7.0% in 1994 compared to 1993, principally due to
increased golf revenues, special assessments and water and sewer revenues.
Golf revenues increased approximately $29,000 due to an increase in the number
of memberships and more favorable weather in 1994. Management believes that
10<PAGE>
<PAGE>
memberships have increased as a result of improvements made to the golf course,
as well as more aggressive marketing efforts by the Company. In addition, due
to more favorable weather 10<PAGE>
<PAGE>
conditions experienced in 1994, more rounds were played and, as a consequence,
revenues from greens fees and cart rentals
increased. In order to fund expenditures of major repairs and replacements in
the community, the Company raised special assessments from $400 in 1993 to $650
in 1994. The $250 increase resulted in additional revenues of approximately
$77,000 in 1994. Water and sewer service revenues increased approximately
$48,000 in 1994. In March 1993, the Company obtained an approval from the PUC
to increase water rates. The increased revenues resulted from a full year
increase in the water rate during 1994.
Cost of revenues increased 5.2% in 1994 compared to 1993, principally
due to increased salary expenses and related payroll tax of approximately
$88,000, insurance costs of approximately $16,000 and snowplowing expenses of
approximately $12,000. Salary and salary related expenses of golf operations
increased approximately $53,100, primarily due to an increase in the number of
rounds played in 1994, as discussed above, which resulted in increased manpower
for maintenance in connection with golf operations. Additionally, more
maintenance employees were hired in 1994. In addition, salary and related
expenses increased in 1994 due to a 3% to 5% increase in wages.
During fiscal 1994, the Company changed the premium period for its
insurance policies from a fiscal to calendar year, which accounts for the
additional insurance costs. Snowplowing services were contracted to an outside
contractor in 1994 which accounts for the increase. The increases were offset
by reduced maintenance expenses of approximately $30,000 due to hiring a new
contractor at reduced rates.
General and administrative expenses increased 18%, principally due to
increased legal expense. Legal expense increased approximately $56,600,
primarily due to increased legal services rendered on the evaluation of a
purchase offer from the Lot & Cottage Owners' Association for the Company's
properties and preparation of the agreement between the Company and New Hope
Lodge (a potential buyer) relating to assumption of Inn Co.'s obligations to
the Company. However, no agreement was consummated on the sale of the
Company's properties. In addition, administrative salaries and related
benefits increased approximately $12,300 due to a 3% to 5% increase in wages
during 1994. A variety of minor expenditures relating to general and
administrative services also contributed to the increase in general and
administrative expenses.
The increase in other expense is attributable primarily to increased
interest expense resulting from increased interest rates and borrowings in
1994. Additionally, in 1993 the Company received a real estate tax refund of
$13,253 as a result of a real estate tax appeal.
The provision for income taxes reflects state income taxes due on 1994
taxable income and deferred federal taxes resulting from utilization of net
operating loss carryforwards.
Beginning in fiscal 1994, the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), Accounting for Income Taxes. The
adoption of SFAS 109 resulted in a tax benefit of approximately $21,600.
INFLATION.
Inflation has not had a significant impact on the Company's comparative
results of operation.
11<PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1996, the Company had a working capital deficiency of
$977,714. Included in current liabilities was the entire $911,120 outstanding
on the Company's $1,000,000 line of credit with a bank (described in the
following paragraph), which is payable on demand. At June 30, 1996 the
outstanding balance had been reduced to $690,900. An additional $35,442 in
scheduled principal payments on long-term debt are due by May 1, 1997.
On July 24, 1992, the Company entered into a loan agreement with a bank
relating to a secured revolving line of credit in the amount of $1,000,000 (the
"Revolving Credit Facility"). Amounts borrowed under the Revolving Credit
Facility bear interest at the prime rate (8.25% at
April 30, 1996) plus 1-1/2%. Pursuant to the loan agreement, approximately
2,600 acres of land and land improvements located in Barrett Township, Monroe
County, Pennsylvania, are pledged as collateral, along with dues, assessments
and fee revenues. The Revolving Credit Facility is available through May 31,
1997, contingent upon the Company maintaining a satisfactory financial position
and subject to annual review of the Company's financial statements by the bank.
The loan agreement with the bank provides that if, in the opinion of the
authorized lending officers of the bank, the Company's credit worthiness
materially declines, the credit line will cease to be available for future
draws, and any existing balance will be required to be fully amortized over a
reasonable term.
The Company was required to make certain improvements in its water
system. See "Business -- Government Regulation". In May of 1995, the Company
entered into a $900,000 term loan agreement with a bank to refinance existing
debt incurred for this project and to complete the improvements. Principal is
payable in monthly installments of $8,985 over a 20-year amortization period.
Interest is payable at the bank's base rate (8.25% at April 30, 1996) plus
1.50%. The loan matures in May 2015 and is secured by a first mortgage on
approximately 2,200 acres of land and land improvements and a collateral
assignment of all revenue and assessments of the Company's water operations.
The term loan is guaranteed by the Company.
The 1998 Notes in the aggregate principal amount of $140,000 are
unsecured obligations of the Company maturing on July 1, 1998. The 1998 Notes
accrue interest at an annual rate of 6-1/4%. Payments of principal and
interest on the Notes are subordinated to payments of other indebtedness of the
Company. Upon written notice to the holders thereof, the 1998 Notes are
redeemable in whole or in part by the Company at any time at 100% of their
principal amount, plus interest accrued to the date of redemption.
The Company expects to meet its current liabilities (other than payment
of the entire $911,120 under the Revolving Credit Facility, which, although not
currently due, is classified as a current liability because of the Revolving
Credit Facility's demand terms) through increased collections as a result of
the seasonal increase in revenues which typically occurs during the Company's
third and fourth quarters through the provision of recreational services. The
Company does not anticipate that the bank will demand payment under the
Revolving Credit Facility.
Cash increased $32,692 for the six months ended April 30, 1996. Cash
provided by borrowings of $95,000 under the Company's revolving line
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of credit and $16,000 in additional long-term debt was used to make scheduled
principal payments of $15,811 on long-term debt, pay operating expenditures of
$12,490 and capital expenditures of $50,007. Such capital expenditures
included improvements to roads and paving of $16,832, purchase of a new
automobile for $17,816 and purchase of furniture and equipment for the golf
club of $15,359.
The Company incurred a net loss of $260,848 for the six months ended
April 30, 1996 and at April 30, 1996, the Company had a cumulative deficit of
$1,410,915 and a working capital deficiency of $977,714. Although the
Company's line of credit is available through May 31, 1997, the ability to
borrow under the line is contingent upon certain factors. As a result,
continuation of the Company in its present form is dependent upon the continued
compliance with its debt terms, its ability to obtain additional financing if
needed and the eventual achievement of sustained profitable operations.
Management believes that revisions in the Company's operating
requirements, including rate increases for amenities and the effect of the
water rate increase implemented in August 1995, provide the opportunity for the
Company to continue as a going concern. However, there is no assurance that
management's actions will be successful or, if they are not successful, that
the Company would be able to continue as a going concern.
BUSINESS
Buck Hill Falls Company (the "Company") is engaged in the provision of
a variety of services, many of which are for the benefit of residents of Buck
Hill Falls, Pennsylvania. In addition, certain of the Company's facilities are
made available to the general public. The Company's services include (a)
provision of recreational facilities, (b) provision of various water and sewage
services and (c) miscellaneous maintenance services.
RECREATIONAL FACILITIES
The Company provides and maintains various recreational facilities for
the use of residents of the Buck Hill community and the general public.
The recreational facilities owned and operated by the Company are as
follows:
GOLF. The Company owns and operates a 27 hole golf course facility
which also includes a clubhouse and restaurant. The restaurant has a capacity
for 50 persons and can seat an additional 20 persons at an adjoining patio.
TENNIS. The Company's tennis facilities consist of 10 clay tennis
courts, a tennis clubhouse and a small dining room that can accommodate 20
persons.
SWIMMING. The Company owns and operates an olympic-sized outdoor
swimming pool along with a small bath house and dressing rooms.
BOWLING GREENS. The Company owns and operates two lawn bowling greens.
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MISCELLANEOUS. The Company administers deer hunting on its properties
and stocks streams on its properties for trout fishing. The Company also
operates a day camp for children, including children of residents of Buck Hill
Falls, on weekdays during the months of June, July and August.
Of the Company's recreational facilities, its golf facilities are by
far the most significant, generally accounting for more than 50% of the
Company's revenues from its recreational facilities.
Residents of Buck Hill Falls pay annual or daily use fees to the
Company for each of the facilities that they utilize. In recent years,
revenues from the general public and various groups that utilize the Company's
golf facilities have become increasingly important.
WATER AND SEWAGE OPERATIONS
Through its wholly owned subsidiary, Buck Hill Water Company ("BHW"),
the Company supplies water to residential customers. As of June 30, 1996, the
Company had 290 residential customers and one commercial customer (the post
office), including all owners of residences in Buck Hill Falls that do not use
well water and some residences outside the community. The operations of BHW
are subject to regulation by the Pennsylvania Department of Environmental
Protection (the "DEP") and the Pennsylvania Public Utility Commission (the
"PUC"). See "Government Regulations."
For the purposes of supplying water to its customers, the Company owns
a reservoir with a 550,000 gallon capacity, a filtration plant, a chlorinator
pump house and distribution system. The reservoir is fed by Buck Hill Creek, a
spring and one or more wells. The Company also operates a sewage treatment
facility that serves most of the residences in Buck Hill Falls and formerly
served the Buck Hill Inn.
Because a substantial majority of the residents of the Buck Hill Falls
community occupy their units on a seasonal basis, the demand for the Company's
water and sewage services is significantly greater in the summer months.
GOVERNMENT REGULATION
The Company's water and sewer services are subject to regulation by the
DEP and the Company's water services are regulated by the PUC.
The DEP regulates all sewage treatment plants in Pennsylvania, annually
inspects sewage treatment facilities and issues annual permits for the
operation of such facilities. It has authority to cause changes to be made in
the operation of a facility and to require capital improvements to ensure that
the facility is operating in accordance with its standards. In addition, the
DEP evaluates the water quality provided to residents of Buck Hill Falls by
BHW, the Company's wholly-owned subsidiary. The DEP has the authority to
mandate changes in the operation of BHW or its facilities to ensure that the
water supply provided to the Buck Hill Falls community remains within the
standards adopted by the DEP. In the event that the DEP were to mandate any
changes in the Company's
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sewage treatment plant or in the facilities operated by BHW, the Company would
be required to make the necessary capital expenditures in order to ensure that
the sewage and water facilities meet with applicable regulations.
The PUC regulates the quality of the water service provided by BHW, and
the rates charged for such services. The PUC establishes, upon application,
the rates that BHW may charge for water service. Any requests for an increase
in water rates must be submitted to and approved by the PUC prior to the
effectiveness of such increases.
Pursuant to amendments to the Pennsylvania Safe Drinking Water Act
enacted in 1989 (the "Water Act Amendments"), public water systems using
unfiltered surface water sources were required to install
filtration-disinfection systems for unfiltered surface water supplies not later
than December 31, 1995. In 1993, the Company was informed by the DEP that its
water system exceeded the maximum contaminant level specified for coliform
bacteria under regulations enacted pursuant to the Water Act Amendments, and
that the Company would be required to install and begin operation of continuous
filtration and disinfection in accordance with applicable regulations, or
abandon its surface water source no later than May 17, 1993. Pursuant to these
requirements, the Company commenced construction of a water filtration plant
for Buck Hill Creek. In addition, pursuant to applicable regulations, the
Company was required to cover its reservoir, which was accomplished in 1993.
While the DEP is responsible for enforcing the requirements of the Water Act
Amendments, the PUC regulates water aesthetics, and may require BHW to take
certain actions or install facilities to maintain standards of water aesthetics
in excess of the requirements of the Water Act Amendments.
As a result of delays in the review process and delays in construction
and start up of the filtration plant, the filtration plant was first placed
into service in February 1995. The cost of approximately $900,000 was financed
through a term bank loan. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
In the fiscal year ended October 31, 1993, BHW sought and obtained PUC
approval to raise the rates charged for water services by 121%. During the
same period, the Company raised the rates charged for sewer services by 100%.
On January 18, 1995, BHW filed an application with the PUC to increase its
rates for water service effective March 20, 1995, partially to offset the costs
associated with construction of the water filtration facility. The Company
sought approval of rates that would produce $114,828 in additional annual
revenue, but, effective July 20, 1995, was granted rates that are expected to
produce additional annual revenues of $82,000.
OTHER OPERATIONS
In addition to the services described above, the Company also provides
road maintenance for approximately 23 miles of paved roads presently in the
Buck Hill Falls community, plowing and cindering, trash pickups, street
lighting and 24 hour security patrols. Costs of such services are borne by
residents of Buck Hill Falls. See "Dues and Fees Paid By Property Owners,"
below.
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DUES AND FEES PAID BY PROPERTY OWNERS
In addition to fees which residents of Buck Hill Falls pay to the
Company for water and sewer services and the use of recreational facilities,
each of the property owners is assessed dues to the Company in connection with
road maintenance, trash collection, security and other general maintenance
services provided by the Company for the Buck Hill Falls community. The
utilization by the Company of certain of the dues and assessments has been
contested by certain residents and by the Lot and Cottage Owners Association of
Buck Hill Falls, Inc. (the "Association"), a non-profit organization whose
members consist of most owners, other than the Company, of homes or lots in
Buck Hill Falls. The Association has also expressed opposition to increases in
such charges that the Company believed were necessary to provide for operation
of Company facilities in the community and to meet certain other of the
Company's obligations. The Company set dues for the fiscal year ended October
31, 1995 at $2,400 per resident. In July 1995, the Association and certain
individual property owners brought suit against the Company and certain of its
officers and directors challenging the right of the Company to make assessments
and dues charges and seeking to enjoin certain collection actions instituted by
the Company to collect unpaid dues. On June 8, 1996, an agreement was signed
by the Association and the Company recognizing the obligation of residents to
pay dues to the Company for services rendered for their benefit and giving the
Association a role in setting the amount. Under the Agreement a joint
committee is to be established, consisting of two members nominated by the
Chairman of the Company, two members nominated by the President of the
Association, and a fifth member chosen by mutual agreement of the Company
Chairman and the Association President. The committee is to make
recommendations to the Company's Board of Directors as to the level of dues to
be assessed. The Agreement provides that special assessments to repay debt,
acquire property for development purposes, purchase Company Stock and develop
land will only be considered if the Company grants property owners an option to
purchase Common Stock, or a new class of stock, in consideration for payment
of the special assessment. Both sides agreed to dismiss their litigation.
Owners of properties in The Cottages at Buck Hill Falls ("The
Cottages"), a separate residential complex in Buck Hill Falls, pay an
additional fee of $100 - $125 per month, depending on the type of residence, a
portion of which is placed in a restricted reserve fund for long range capital
improvements for these properties, and the remainder of which is used for
exterior maintenance of such residences. Exterior maintenance services are not
provided to other residents of Buck Hill Falls.
Purchasers of lots in The Cottages who have not yet had the design of
their proposed home approved by the Company pay an amount equal to 25% of the
total dues charged to owners of residences in the first year following their
purchase of a lot, 50% in the second year and 75% in the third year.
Thereafter, lot owners at The Cottages pay approximately the same dues as
owners of residences. However, once the design of a proposed residence has
been approved by the Company, the owner of the lot is in most cases required to
pay the same dues as all owners of residences.
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DEVELOPMENT OF THE COTTAGES
Pursuant to a series of agreements executed in May 1985, the Company
transferred 600 acres of its land to Buck Hill Falls Associates (the
"Partnership"), a Pennsylvania limited partnership in which the Company had a
29% limited partnership interest. Thereafter, the Partnership developed The
Cottages on the transferred property. However, the sales of properties in The
Cottages ran significantly behind expectations, and the Partnership was not
able to pay the principal amount due on certain loan obligations incurred in
connection with the development of The Cottages. As a result, the Partnership
ceased development of The Cottages in 1990, and in early 1991 gave to First
Eastern Bank (now PNC Bank, N.A.) (the "Bank"), its principal lender, a deed on
the remaining property it held, in lieu of foreclosure on the property. The
Partnership dissolved in 1991, and all selling efforts relating to The Cottages
was suspended. In April 1996 the Company was advised that the Bank had agreed
to convey the property to a purchaser for $900,000.
MARKETING AND COMPETITION
The Company's marketing efforts generally have been limited in recent
years and directed primarily to promoting the use of its recreational
facilities, principally its golf course. Marketing of homes for sales and
rentals in the community has been left to local realtors, but the depressed
market for second homes in the area has slowed real estate sales generally,
particularly in Barrett Township where Buck Hill Falls is located. However, in
1996 the Company undertook a study on ways and means to promote the community
as a whole and identified various steps it could pursue in the coming years to
achieve this goal. These include the formation of a real estate group composed
of a number of local and regional realtors committed to working together for
both the sales and rentals of homes. This group is scheduled to begin
functioning in the Fall of 1996. Other steps under serious consideration
include a joint effort between the Company and this group of realtors to
advertise and promote the community, including the production of a video tape
featuring the homes and facilities of the community, and utilization of the
Internet to promote sales and rentals.
Revenues derived from the use of the Company's golf course by members
of the general public have become increasingly important in recent years,
accounting for about 65 percent of total golf revenues in 1995. The company is
in competition with a number of resorts in the Pocono Mountains area, and many
of its competitors have substantially greater financial and marketing
resources.
17<PAGE>
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EMPLOYEES
As of April 30, 1996, the Company had 17 persons employed on a full
year basis. An additional 42 persons are employed on a seasonal basis during
the summer season in 1996 (demand for the Company's services increases
substantially during the summer months).
OTHER PROPERTIES
Aside from the various facilities described above, the Company owns
approximately 4,000 acres of undeveloped wooded land contiguous to the Buck
Hill Falls community and The Cottages. Of the 4,000 acres, approximately 2,400
acres are owned by BHW and serve as a watershed. Company management does not
believe that development of the watershed land is feasible in the foreseeable
future. Over 98 percent of the Company's land was acquired prior to 1947, and
no land has been acquired in the last 30 years. The land is zoned residential.
The Company has mortgaged approximately 2,600 acres of the land together with
certain of its amenities to its principal lending bank as collateral for
amounts borrowed under a line of credit. However, the mortgage is subordinated
to the rights of community members of Buck Hill Falls under a non-exclusive
easement granted to such persons for access to and use of certain areas
(consisting of various recreational amenities and various roads, pathways and
private rights-of-ways in Buck Hill Falls).
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as follows:
Term as
Director
Name Age Position Expires
- ---- --- -------- --------
David B. Ottaway 56 Chairman of the Board 1998
and President, Director
Anthony C. Bowe 39 Vice President, Treasurer 1999
and Chief Financial Officer,
Director
Frank J. Dracos, M.D. 66 Vice President Operations 1998
and Chief Operating Officer,
Director
Richard C. Unger, Jr. 44 Secretary, Director 1999
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George J. Byron 72 Director 1998
Edwin A. Gee 76 Director 1997
Grace M. Godshalk 58 Director 1997
Clifford Press 42 Director 1997
James T. Sygenda 63 Director 1999
Carl R. Benasutti 54 General Manager N/A
Mr. Ottaway was elected Chairman and Chief Executive Officer in July
1995, and President in 1996. Mr. Ottaway has been employed by the Washington
Post for the past 25 years and is currently an investigative reporter.
Mr. Bowe was elected to the Board and as Vice President, Treasurer and
Chief Financial Officer in July 1996. He is a Managing Director of Bankers
Trust Company, New York City, and has held a variety of line and management
positions with that firm for more than the past five years.
Dr. Dracos has been a director of the Company since 1992. He was
elected Vice President Operations and Chief Operating Officer in July 1996.
Dr. Dracos has been a practicing orthopedic surgeon with Pocono Orthopedic for
over five years. He is also a director of Mellon Bank (Northeast).
Mr. Unger was elected to the Board and as Secretary of the Company in
July 1996. He is an attorney practicing in West Conshohocken, Pennsylvania.
Until forming his own firm in 1995, he was for many years a partner in the
Philadelphia based firm of Duane, Morris & Hecksher.
Mr. Byron has been a director of the Company since 1992. Mr. Byron has
been co-owner of Lord Byron, Inc., a manufacturer of hospital linens and
nuclear energy protective clothing, for over five years.
Mr. Gee has been a director of the Company since 1995. Mr. Gee retired
as Chairman of the Board of International Paper in 1985. He is currently the
Chairman and a director of Oncogene Science, Inc.
Mrs. Godshalk has been a director of the Company since March, 1995 and
she was elected President of BHW in July 1996. Mrs. Godshalk has been the Vice
President of Ultra-Mold Corporation in Yardley, Pennsylvania, since 1984. For
the past eighteen years, she has been an elected Supervisor of Lower Makefield
Township, Bucks County, Pennsylvania.
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Mr. Press has been a director of the Company since 1994. Since 1986,
Mr. Press has served as President of Hyde Park Holdings, Inc. Mr. Press also
has served as a director of High Voltage Engineering Corporation since 1988.
Mr. Sygenda has been a director of the Company since 1993.
Mr. Sygenda was district sales manager and national account manager for UARCO
Business Forms until he retired in 1993.
Mr. Benasutti has been general manager of the Company since 1994. Mr.
Benasutti also served as community manager for Pine Crest Development Corp.
from 1988 through 1993.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation for services rendered by the Company's General Manager. The
Company's other executive officers serve on a voluntary basis and are not
compensated.
SUMMARY COMPENSATION TABLE
<TABLE>
Annual Compensation
-----------------------
Other Annual Other
Name and Principal Position Year Salary Compensation Compensation
- --------------------------- ---- ------ ------------ ------------
<S> <C> <C> <C> <C>
Carl Benasutti............. 1995 $43,000 $ 1,000 ---
General Manager(1) 1994 $31,826 $ 2,403(2) ---
1993 --- --- ---
</TABLE>
- ------------
(1) Mr. Benasutti has been compensated as General Manager since
January 1994, although formally elected to this position in July
1994.
(2) Received for the period from November 1, 1993 through January 2,
1994, during which Mr. Benasutti served in an informal capacity as
assistant to the President.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information concerning ownership
of the Common Stock of the Company as of April 30, 1996 by each shareholder
known to the Company to own beneficially more than 5% of its Common Stock, each
director of the Company and all directors and executive officers of the Company
as a group. Except as otherwise noted, each
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person listed below has sole voting and dispositive power with respect to the
shares listed next to his or her name. All persons listed below are directors
of the Company.
Shares
Beneficially
Name Owned Percent of Class
- ---- ------------ ----------------
David B. Ottaway . . . . . . . . 5,980(1) 8.1%
Anthony C. Bowe. . . . . . . . . 100(2) *
Frank J. Dracos, M.D . . . . . . 400(3) *
Richard C. Unger, Jr . . . . . . 100(2) *
George J. Byron. . . . . . . . . 100 *
Edwin A. Gee . . . . . . . . . . 2,321(4) 3.2%
Grace M. Godshalk . . . . . . . 90(5) *
Clifford Press . . . . . . . . . 100 *
James T. Sygenda . . . . . . . . 100(2) *
All executive officers and
directors as a group . . . . . 9,291 12.6%
- -------------
* Less than 1%
(1) Includes 1,583 shares held by Mr. Ottaway and 4,397 shares held by
a non-profit charitable Trust of which Mr. Ottaway is President
and a trustee. Mr. Ottaway disclaims beneficial ownership of the
shares held by the Trust. Mr. Ottaway's address is 327 A Street,
S.E., Washington, D.C. 20003.
(2) Held jointly with wife.
(3) Includes 100 shares held by Dr. Dracos' wife and 100 shares held by
an adult son, as to which shares Dr. Dracos disclaims beneficial
ownership.
(4) Includes 25 shares held by Mr. Gee's wife, 105 shares held jointly
with his wife and 80 shares held by Mr. and Mrs. Gee in trusts for
the benefit of their children. Does not include an additional
502 shares held by other family members, as to which shares
Mr. Gee disclaims beneficial ownership.
(5) Includes 50 shares held jointly with Mrs. Godshalk's husband.
DESCRIPTION OF CAPITAL STOCK
The authorized capital of the Company consists of 105,000 shares of
Common Stock and 100,000 shares of Class A Common Stock. All shares are
entitled to participate equally and ratably in dividends, when and as declared
by the Board of Directors out of assets legally available
21<PAGE>
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therefore, and in distributions upon liquidation. Each share is entitled to
one vote for all matters on which shareholders may vote other than the election
of directors. Cumulative voting rights apply in the election of directors,
which means that each share is entitled to as many votes as is equal to the
number of directors to be elected, and all votes may be cast for a single
director or may be distributed among any number of directors. However, because
the Board of Directors of the Company consists of three classes, the number of
votes to which each share is entitled in the election of directors as a result
of the cumulative voting rights is either 30% or 40% (depending on the number
of directors standing for election) as large as would be the case if the Board
of Directors was not classified. There are no preemptive, conversion, or
redemption rights.
The Company's Articles of Incorporation, as amended by the shareholders
on July 7, 1996, provide that the shares of Common Stock and the shares of
Class A Common Stock each have one vote per share and are equal in all other
respects except that the shares of Class A Common Stock may only be issued to,
transferred to or held by any person, company or other entity that is an owner
or co-owner of a cottage and/or lot in the Buck Hill Falls community (a
"Qualified Owner"); provided, however, that (i) the Company and The Buck Hill
Conservation Foundation may acquire and hold shares of Class A Common Stock;
(ii) a holder of Class A Common Stock may transfer shares of Class A Common
Stock other than to a Qualified Owner if the transferee and the terms of the
transfer are disclosed to, and approved by, the Board of Directors of the
Company and, upon recommendation of the Board of Directors, approved by the
affirmative vote of the holders of a majority of the outstanding shares of
Class A Common Stock other than those proposed to be transferred; and (iii) a
transferee of Class A Common Stock pursuant to the approvals required by clause
(ii) above may hold the Class A Common Stock but may not transfer them,
willfully, by operation of law or otherwise, except as permitted by the
foregoing provisions.
MARKET QUOTATIONS FOR COMMON STOCK
The Company believes that market transactions in its Common Stock occur
very infrequently, rendering it unlikely that there exists an established
trading market for the Common Stock, and that quotations would be markedly
affected by a modest volume of transactions.
Based upon information provided to the Company by the National
Quotation Bureau, Inc., quotations reported by the National Daily Quotation
Service and the National Association of Securities Dealers, Inc. Non-NASDAQ OTC
Bulletin Board indicate a range of bid prices of $11.00 to $16.00 during the
period from November 1, 1993 through January 31, 1994; $11.00 to $17.00 during
the period from February 1, 1994 through April 29, 1994; $15.00 to $18.00
during the period from May 2, 1994 through July 29, 1994; $15.00 to $25.00
during the period from August 1, 1994 through October 31, 1994; $21.00 to
$26.00 during the period from November 1, 1994 through January 31, 1995; $25.00
to $28.00 during the period from February 1, 1995 through April 30, 1995;
$28.00 to $31.00 during the period from May 1, 1995 through July 31, 1995;
$28.00 to $31.00 during the period from August 1, 1995 through October 31,
1995; $31.00 during the
22<PAGE>
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period from November 1, 1995 through January 31, 1996; and $31.00 during the
period from February 1, 1996 through April 30, 1996.
These quotations reflect inter-dealer prices, without retail markup,
mark-down or commission and may not necessarily reflect actual transactions.
The Company has not declared or paid dividends on its Common Stock in
thirty years and anticipates that all earnings will be retained for use in its
business. The Company does not anticipate that dividends will be declared or
paid in the foreseeable future.
As of April 30, 1996, the Company had approximately 497 shareholders of
record.
Since the transferability of the Class A Stock is essentially
restricted to Qualified Owners it is unlikely that any trading market will
develop for that class. The Company will act as the transfer agent for the
Class A Stock.
THE OFFERING
CLASS A STOCK
The shares of Class A Stock offered by this Prospectus will be offered
only to those persons who own Common Stock in the Company and are an owner or
co-owner of a cottage and/or lot in the Buck Hill Falls community ("Qualified
Owner"). Qualified Owners are offered the opportunity to purchase 200 shares
per property for $20 per share or an aggregate price of $4,000, payable over
five years at $800 annually or, if paid in full by October 31, 1996, with a
$500 discount. All 200 shares must be purchased by a Qualified Owner if any
are purchased. If all shares of Class A Stock are not subscribed within 15
days after the date of this Prospectus (as set forth on the cover page) then it
is the current intention of the Board of Directors to offer Qualified Owners
who did subscribe the opportunity to purchase up to 200 additional shares per
property (up to a total purchase of 400 shares of Class A Stock per property)
on the same terms, subject to pro rata reduction if subscriptions are received
for more than 75,000 Class A shares. There is no minimum number of shares that
must be sold.
All subscribers electing to pay over the five year term will be
required to sign a subscription agreement irrevocably obligating them to
complete payment for the shares. This will be a legally binding obligation of
the subscriber and the unpaid balance will be represented by a promissory note
payable to the Company. Share certificates will be issued within 30 days after
payment is made and, in the case of installment payments, will be issued pro
rata within 30 days after each installment is made. No voting or other rights
of share ownership will attach until share certificates are issued.
All certificates representing Class A Stock will contain a legend
calling attention to the restrictions on transferability set forth in the
Company's Articles of Incorporation.
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The offering price of the Class A Stock was determined by the Board of
Directors of the Company based upon the historical prices of the Common Stock,
the inactive nature of that market, the restrictions on transferability of the
Class A Stock and the unlikely prospect of any dividend being paid.
The amendment to the Company's Articles of Incorporation authorizing
the Class A Stock was proposed by the Board of Directors for adoption by the
shareholders at the annual meeting held on July 7, 1996. The Company
distributed proxy materials describing the proposed amendment and the Company's
intentions with respect to this offering if the amendment were approved.
Certain shareholders who are not Qualified Owners objected to the proposal,
asserting that the proposed offering price was inadequate and that the Company
should make a rights offering to all its shareholders. The Board concluded
that the offering of Class A Stock to Qualified Owners was fair and in the best
interest of the Company and its shareholders. The Common Stock does not have
any pre-emptive right to subscribe to new securities. After discussion, the
amendment was approved by the Common shareholders by a vote of 31,766 for and
11,375 against, with 11,375 abstentions.
COMMON STOCK
Upon completion of the offering of the Class A Stock to Qualified
Owners as set forth above, expected to be in September 1996, the Company
intends to offer to all holders of its Common Stock (other than Qualified
Owners) the opportunity to purchase at $17.50 per share that number of shares
of Common Stock which, in the judgment of the Company, would be sufficient to
enable each such holder of Common Stock to maintain his or her percentage
interest in the Company. A record date for this offering of Common Stock will
be fixed to coincide with the date of this Prospectus as set forth on the cover
page.
Upon completion of the offering of Class A Stock the Company intends to
send to each holder of record of the Common Stock on the record date a notice
and subscription form by which such holder can subscribe to purchase that
number of shares necessary to maintain such holder's percentage interest in the
Company on the record date. The subscribing holder would also be able to
specify a maximum number of shares to be purchased. This right to purchase
additional shares of Common Stock will not be transferable and must be
exercised by return of the executed subscription within ten days, after which
time the right will expire. Upon expiration of this ten day period, the
Company will determine the number of additional shares of Common Stock
purchased by each subscribing holder based upon (i) the number of Class A
shares sold by the Company (ii) the number of shares of Common Stock held on
the record date by the subscribing Common holders and (iii) any maximum
specified by a subscribing Common holder.
The Company's authorized capital includes 105,000 shares of Common
Stock, of which 73,537 shares are issued and outstanding. Accordingly,
subscriptions for additional shares of Common Stock will be subject to pro rata
reduction if more than 31,463 shares are subscribed.
24<PAGE>
<PAGE>
LEGAL MATTERS
Wolf, Block, Schorr and Solis-Cohen, Philadelphia, Pennsylvania, has
rendered its opinion to the Company that the Class A Common Stock and Common
Stock to be sold by the Company, when issued and paid for in accordance with
the plan of distribution described herein, will be duly authorized, validly
issued, fully paid and non-assessable.
EXPERTS
The audited consolidated financial statements of Buck Hill Falls
Company included in this Prospectus have been so included in reliance on the
report of Parente, Randolph, Orlando, Carey & Associates, independent
accountants, given on the authority of said firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act of
1933, as amended, with respect to the shares of Class A Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Class A Common Stock, reference
is made to the Registration Statement, and the exhibits and schedules thereto,
which may be inspected and copied at the public reference facilities maintained
by the Commission at Room 1024, 450 Fifth Street, NW, Washington, DC 20549, and
at the Commission's Regional Offices located at 7 World Trade Center, 13th
Floor, New York, New York 10048, and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
can also be obtained at prescribed rates from the Public Reference Section of
the Commission, 450 Fifth Avenue, NW, Washington, DC 20549. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete and, in each instance, reference is made
to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
25<PAGE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
=============================
AUDITED FINANCIAL STATEMENTS: Page
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS . . . . . . . . . F-2
CONSOLIDATED FINANCIAL STATEMENTS:
Balance Sheet as of October 31, 1995 and 1994. . . . . . . . . . . F-3
Statement of Operations for the Years Ended
October 31, 1995, 1994 and 1993. . . . . . . . . . . . . . . . . F-5
Statement of Changes in Stockholders' Equity for the
Years Ended October 31, 1995, 1994 and 1993. . . . . . . . . . . F-6
Statement of Cash Flows for the Years Ended
October 31, 1995, 1994 and 1993. . . . . . . . . . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . F-9
UNAUDITED INTERIM FINANCIAL DATA:
Condensed Consolidated Balance Sheet -
April 30, 1996 and October 31, 1995. . . . . . . . . . . . . . . F-18
Condensed Consolidated Statement of Operations -
Six Months and Three Months Ended April 30, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-19
Condensed Consolidated Statement of Cash Flows -
Six months Ended April 30, 1996 and 1995 . . . . . . . . . . . . F-20
Notes to Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . F-21
-----------------
F-1<PAGE>
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
============================
To the Board of Directors and Stockholders of Buck Hill Falls Company:
We have audited the accompanying consolidated balance sheets of Buck
Hill Falls Company and subsidiary as of October 31, 1995 and 1994, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the three years in the period ended October 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Buck Hill
Falls Company and subsidiary as of October 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years in the
period ended October 31, 1995 in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for income taxes by adopting Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes," in
1994.
PARENTE, RANDOLPH, ORLANDO, CAREY & ASSOCIATES
Wilkes-Barre, Pennsylvania
December 13, 1995
F-2<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
<TABLE>
CONSOLIDATED BALANCE SHEET
October 31, 1995 and 1994
- --------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------
ASSETS
======
<S> <C> <C>
CURRENT ASSETS:
Cash. . . . . . . . . . . . . . . . . . . . $ 31,460 $ 20,194
Accounts receivable, trade net of
allowance for doubtful accounts of
$79,860 in 1995 and $35,000 in 1994 . . . 245,369 175,758
Prepaid expenses:
Insurance . . . . . . . . . . . . . . . . 25,683 19,822
Other . . . . . . . . . . . . . . . . . . 4,545 3,176
---------- ----------
Total current assets . . . . . . . 307,057 218,950
RESTRICTED CASH . . . . . . . . . . . . . . . 73,799 105,876
PROPERTY, PLANT AND EQUIPMENT . . . . . . . . 2,756,391 2,761,827
DEFERRED COSTS, net of accumulated
amortization of $11,060 and
$6,320 in 1995 and 1994,
respectively. . . . . . . . . . . . . . . . 12,623 17,363
---------- ----------
TOTAL . . . . . . . . . . . . . . . $3,149,870 $3,104,016
========== ==========
F-3<PAGE>
<PAGE>
- --------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
====================================
<S> <C> <C>
CURRENT LIABILITIES:
Demand note payable, 5%, unsecured . . . . $ 11,300 $ 11,300
Current portion of long-term debt. . . . . 847,385 847,586
Accounts payable, trade. . . . . . . . . . 37,283 114,370
Accrued expenses and other . . . . . . . . 183,355 219,687
---------- ----------
Total current liabilities. . . . . 1,079,323 1,192,943
CUSTOMER DEPOSITS. . . . . . . . . . . . . . 73,800 105,882
LONG-TERM DEBT . . . . . . . . . . . . . . . 956,218 675,922
6-1/4% SUBORDINATED NOTES. . . . . . . . . . 140,000 140,000
---------- ----------
Total liabilities. . . . . . . . . 2,249,341 2,114,747
COMMITMENTS. . . . . . . . . . . . . . . . .
STOCKHOLDERS' EQUITY . . . . . . . . . . . . 900,529 989,269
---------- ----------
TOTAL. . . . . . . . . . . . . . . $3,149,870 $3,104,016
========== ==========
</TABLE>
- --------------------------------------------------------------------------
See notes to Consolidated Financial Statements
F-4<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES . . . . . . . . . . . . . . . $2,218,139 $2,203,529 $2,048,295
COST OF REVENUES . . . . . . . . . . . 1,653,362 1,592,863 1,513,458
---------- ---------- ----------
GROSS PROFIT . . . . . . . . . . . . . 564,777 610,666 534,837
GENERAL AND ADMINISTRATIVE EXPENSES. . 527,683 474,372 400,942
---------- ---------- ----------
INCOME FROM OPERATIONS . . . . . . . . 37,094 136,294 133,895
---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest expense, net of capitalized
interest of $21,455 and $49,096 in
1995 and 1994, respectively. . . . (161,515) (80,944) (61,497)
Miscellaneous. . . . . . . . . . . . 10,292 13,030 13,832
Real estate tax refund . . . . . . . - - 13,253
Gain on sale of property, plant
and equipment. . . . . . . . . . . 25,389 - -
---------- ---------- ----------
Other income (expense). . . . . (125,834) (67,914) (34,412)
---------- ---------- ----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES, EXTRAORDINARY CREDIT AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE. . (88,740) 68,380 99,483
PROVISION FOR INCOME TAXES. . . . . . - 35,300 33,800
---------- ---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY
CREDIT AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE. . . (88,740) 33,080 65,683
EXTRAORDINARY CREDIT - Reduction of income
taxes arising from carry-forward of
prior year's operating losses. - - 33,800
---------- ---------- ----------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE . . . (88,740) 33,080 99,483
CUMULATIVE EFFECT OF ACCOUNTING CHANGE. . - 21,600 -
---------- ---------- ----------
NET INCOME (LOSS) . . . . . . . . . . $ (88,740) $ 54,680 $ 99,483
========== ========== ==========
EARNINGS (LOSS) PER COMMON SHARE:
Before extraordinary credit. . . . . $ (1.21) $ .45 $ .89
Extraordinary credit . . . . . . . . - - .46
Cumulative effect of accounting change - .29 -
---------- ---------- ----------
NET INCOME (LOSS) PER COMMON SHARE . . $ (1.21) $ .74 $ 1.35
========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------
See Notes to Consolidated Financial Statement
F-5<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------------------
.COMMON STOCK (1).
TOTAL
SHARES ADDITIONAL
STOCKHOLDERS'
ISSUED AMOUNT CAPITAL DEFICIT
EQUITY
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
<C>
BALANCE, OCTOBER 31, 1992 . . . 73,537 $1,251,370 $ 799,227
$(1,215,491) $
835,106
NET INCOME. . . . . . . . . . .
99,483 99,483
------- ---------- ----------
- ----------- ----------
BALANCE, OCTOBER 31, 1993 . . . 73,537 1,251,370 799,227
(1,116,008) 934,589
NET INCOME. . . . . . . . . . .
54,680 54,680
------- ---------- ----------
- ----------- ----------
BALANCE, OCTOBER 31, 1994 . . . 73,537 1,251,370 799,227
(1,061,328) 989,269
NET LOSS. . . . . . . . . . . .
(88,740) (88,740)
------- ---------- ----------
- ----------- ----------
BALANCE, OCTOBER 31, 1995 . . . 73,537 $1,251,370 $799,227
$(1,150,068)
$900,529
======= ========== ==========
=========== ==========
</TABLE>
(1) No par value; authorized 105,000 shares.
- -------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
F-6<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss). . . . . . . . . $ (88,740) $ 54,680 $ 99,483
----------- ---------- ----------
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation . . . . . . . . . 193,234 160,778 156,232
Amortization . . . . . . . . . 4,740 4,740 1,580
Gain on sale of property, plant
and equipment. . . . . . . . (25,389) (2,000) -
Cumulative effect of change in
accounting principle . . . . - (21,600) -
Deferred tax expense . . . . . - 21,600 -
Changes in assets and
liabilities:
Accounts receivable, trade . (69,611) (33,563) (2,003)
Prepaid expenses and other . (7,230) 1,824 36,386
Restricted cash. . . . . . . 32,077 (5,814) (14,003)
Deferred costs . . . . . . . - - (23,683)
Accounts payable, trade. . . (77,087) (5,250) 52,201
Accrued expenses and other . (36,332) 59,046 (115,807)
Customer deposits. . . . . . (32,082) 5,032 13,146
----------- ---------- ----------
Total adjustments . . . . . (17,680) 184,793 104,049
----------- ---------- ----------
Net cash provided by
(used in) operating
activities. . . . . . . . . (106,420) 239,473 203,532
----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and
equipment. . . . . . . . . . . . (188,297) (688,630) (381,787)
Proceeds from sale of property, plant
and equipment. . . . . . . . . . . 25,888 2,000 -
----------- ---------- ----------
Net cash used in investing
activities . . . . . . . . (162,409) (686,630) (381,787)
----------- ---------- ----------
F-7<PAGE>
<PAGE>
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt. . . . . . . . . (1,106,517) (460,056) (1,151,554)
Proceeds from issuance of debt . . 1,386,612 914,023 1,339,219
----------- ---------- ----------
Net cash provided by
financing activities . . . 280,095 453,967 187,665
----------- ---------- ----------
NET INCREASE IN CASH . . . . . . . . 11,266 6,810 9,410
CASH, BEGINNING OF YEAR. . . . . . . 20,194 13,384 3,974
----------- ---------- ----------
CASH, END OF YEAR. . . . . . . . . . $ 31,460 $ 20,194 $ 13,384
=========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid (refunded) for:
Interest . . . . . . . . . . . $ 164,375 $ 129,634 $ 70,065
=========== ========== ==========
Income taxes . . . . . . . . . . $ - $ (500)$ 25,546
=========== ========== ==========
SUPPLEMENTAL NONCASH INVESTING
ACTIVITY:
Liabilities incurred for purchase
of property, plant and equipment . $ - $ 61,711 $ -
=========== ========== ==========
</TABLE>
- -------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
F-8<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Buck
Hill Falls Company and its wholly-owned subsidiary, Buck Hill
Water Company (the "Company"). All significant intercompany
balances and transactions are eliminated.
The accompanying consolidated financial statements have been
prepared on a going-concern basis which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. The Company incurred a net loss of
$88,740 for the year ended October 31, 1995 and at October 31,
1995, the Company has a cumulative deficit of $1,150,068 and a
working capital deficiency of $772,266. As described in Note 4,
although the Company's line of credit is available through May 31,
1997, the ability to borrow under the line is contingent upon
certain factors. As a result, continuation of the Company in its
present form is dependent upon the successful maintenance of its
debt terms, its ability to obtain additional financing if needed
and the eventual achievement of sustained profitable operations.
Management believes that revisions in the Company's operating
requirements, including rate increases for amenities and the
effect of the water rate increase implemented in August 1995,
provide the opportunity for the Company to continue as a going
concern. However, there is no assurance that management's actions
will be successful, or if they are not successful, that the
Company would be able to continue as a going concern.
PROPERTY, PLANT AND EQUIPMENT
The Company recognizes real and personal property to which it has
title at cost.
Depreciation is computed using both straight-line and accelerated
methods over the estimated useful lives of the assets.
DEFERRED COSTS
Costs incurred for issuance of the 6-1/4% subordinated notes have
been deferred and are amortized using the straight-line method
over the term of the notes.
F-9 <PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------
EARNINGS (LOSS) PER COMMON SHARE
--------------------------------
Earnings (loss) per common share is based on the weighted average
number of shares outstanding (73,537 in 1995, 1994 and 1993).
STATEMENT OF CASH FLOWS
-----------------------
For purposes of the statement of cash flows, restricted cash (Note
2) is not considered to be cash since such funds are restricted in
use for capital improvements and repairs to The Cottages at Buck
Hill Falls.
ACCOUNTING PRINCIPLES
---------------------
In fiscal 1994, the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), Accounting for Income
Taxes. SFAS 109 requires an asset and liability approach for
accounting and reporting for income taxes. The cumulative effect
of the change in accounting principle as of November 1, 1993
resulted in a benefit to net income of approximately $21,600.
2. RESTRICTED CASH AND CUSTOMER DEPOSITS:
The Company is responsible for repairs and replacements at The
Cottages at Buck Hill Falls ("The Cottages"), a residential
development. The Company has a funding program to meet this
obligation, under which purchasers of properties in The Cottages
pay a fee of $100 to $125 per month, depending on the type of
residence. These fees are accounted for as customer deposits. A
portion of the fee is placed in a restricted fund for long-range
capital improvements for units in The Cottages and the balance of
the fee is used for exterior maintenance of such residences.
Under terms of restrictive covenants signed by purchasers of
properties in The Cottages, the Company has management
responsibility for these funds. Accumulated funds are held in
separate savings accounts and are generally not available for
expenditures for normal operations. If additional funds are
needed for long-range capital improvements, the Company has the
right, under the restrictive covenants, to increase regular
assessments, pass special assessments or delay major repairs and
replacements until funds are available. The Company seeks the
advice of a special committee of property owners regarding the
management of these funds.
F-10<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------
3. PROPERTY, PLANT AND EQUIPMENT:
The components of property, plant and equipment at October 31,
1995 and 1994 are summarized as follows:
<TABLE>
1995 1994
---- ----
<S> <C> <C>
Land . . . . . . . . . . . . . . $ 445,831 $ 446,330
Buildings. . . . . . . . . . . . 941,913 932,136
Recreational facilities. . . . . 1,384,356 1,356,771
Sewer and water facilities . . . 1,340,588 423,168
Machinery and equipment . . . . 381,285 407,605
Automotive equipment . . . . . . 163,069 122,943
Furniture and fixtures . . . . . 92,528 92,528
Construction in progress . . . . - 832,211
----------- ----------
Total . . . . . . . . . . 4,749,570 4,613,692
Less accumulated depreciation. . (1,993,179)(1,851,865)
----------- ----------
Property, plant and equipment. . $ 2,756,391 $2,761,827
=========== ==========
</TABLE>
4. LONG-TERM DEBT:
Long-term debt at October 31, 1995 and 1994 is summarized as
follows:
<TABLE>
1995 1994
---- ----
<S> <C> <C>
Borrowings under revolving loan
agreement (see below). . . . . . $ 816,120 $ 797,708
Note payable - bank, payable in
monthly installments of $8,985,
including interest at the bank's
base rate (8.75% at October 31,
1995) plus 1-1/2%, maturing
May 4, 2015. The loan is secured
by a first mortgage on
approximately 2,200 acres of land
and land improvements located in
Barrett Township, Monroe County,
Pennsylvania, along with
assessments and fee revenues . . 892,852 650,000
Note payable - bank, payable in
monthly installments of $1,250
including interest at the bank's
F-11<PAGE>
<PAGE>
base rate (8.75% at October 31,
1995) plus 1-1/4%, maturing
November 2002. The note is
secured by a second mortgage on
approximately 2,600 acres of
land and land improvements
located in Barrett Township,
Monroe County, Pennsylvania.
Additionally, a ten-year lease
between the Company and the U.S.
Postal Service is pledged as
collateral . . . . . . . . . . . 55,697 60,677
Note payable - bank, payable in
monthly installments of $586
including interest at 9.5%,
maturing June 2000; secured by
equipment with a depreciated
cost of $22,330. . . . . . . . . 26,056 -
Note payable - financial
institution, payable in monthly
Installments of $235 including
interest at 11.5%, maturing July
2000; secured by equipment with
a depreciated cost of $8,973 . . . 10,188 -
Note payable - bank, payable in
monthly installments of $199
including interest at the
bank's base rate (8.75% at
October 31, 1995) plus 1-1/2%,
maturing December 15, 1996;
secured by equipment with a
depreciated cost of $2,368 . . . 2,690 4,747
Note payable - bank, repaid in
August 1995. . . . . . . . . . . - 10,376
--------- ----------
Total . . . . . . . . . . . . 1,803,603 1,523,508
Less current portion . . . . . . . 847,385 847,586
---------- ----------
Long-term debt . . . . . . . . . . $ 956,218 $ 675,922
========== ==========
</TABLE>
The Company has a secured revolving line of credit with a bank for
$1,000,000. Borrowings under this agreement bear interest at the
prime rate (8.75% at October 31, 1995) plus 1-1/2%. Approximately
2,600 acres of land and land improvements located in Barrett
Township, Monroe County, Pennsylvania are pledged as collateral,
along with dues, assessments and fee revenues. The line of
credit is available through May 31, 1997, although amounts
borrowed are payable on demand. The ability to borrow under the
line is contingent upon the Company maintaining a satisfactory
F-12<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------
financial position and subject to annual review by the bank of the
Company's financial statements. If, in the opinion of the
authorized lending officers of the bank, the Company's credit
worthiness materially declines, the credit line will cease to be
available for future draws and any existing balance will be
required to be fully amortized over a reasonable term.
The aggregate principal payments required on long-term debt at
October 31, 1995 are as follows:
<TABLE>
YEARS ENDING OCTOBER 31:
-----------------------
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . . $ 847,385
1997 . . . . . . . . . . . . . . . . . . . . . . . 31,889
1998 . . . . . . . . . . . . . . . . . . . . . . . 33,956
1999 . . . . . . . . . . . . . . . . . . . . . . . 36,802
2000 . . . . . . . . . . . . . . . . . . . . . . . 36,022
Thereafter . . . . . . . . . . . . . . . . . . . . 817,549
----------
Total . . . . . . . . . . . . . . . . . $1,803,603
==========
</TABLE>
5. ACCRUED EXPENSES AND OTHER
CURRENT LIABILITIES:
Accrued expenses and other current liabilities are comprised of
the following at October 31, 1995 and 1994:
<TABLE>
1995 1994
----- ----
<S> <C> <C>
Real estate taxes. . . . . . . . . $ 66,879 $ 60,746
Unearned revenue . . . . . . . . . 51,796 70,006
Professional fees. . . . . . . . . 21,780 35,079
Wages and employee withholdings. . 15,923 26,742
Vacation pay . . . . . . . . . . . 11,406 9,002
Interest . . . . . . . . . . . . . 9,673 12,533
Other taxes. . . . . . . . . . . . 5,898 5,579
-------- --------
Total. . . . . . . . . . . . $183,355 $219,687
======== ========
</TABLE>
6. SUBORDINATED DEBT:
The 6-1/4% subordinated notes are due July 1, 1998. The notes may
be redeemed prior to maturity at the election of the Company upon
at least 30 days written notice to the holders thereof, in whole
or in multiples of $1,000. The redemption price is equal to the
principal amount plus accrued interest to the date fixed for
redemption. No premium is payable upon redemption.
F-13<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------
7. INCOME TAXES:
Significant components of the Company's deferred tax assets as of
October 31, 1995 and 1994 are as follows:
<TABLE>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards . . . . . $219,600 $191,000
Allowance for bad debts. . . . . . . . . . 24,700 11,100
Accrued vacation . . . . . . . . . . . . . 800 1,000
Unearned revenue . . . . . . . . . . . . . 13,800 20,000
Depreciation . . . . . . . . . . . . . . . 2,900 14,000
Reorganization cost. . . . . . . . . . . . 42,300 43,700
-------- --------
304,100 280,800
Valuation allowance . . . . . . . . . (304,100) (280,800)
-------- --------
Total . . . . . . . . . . . . . . $ - $ -
======== ========
</TABLE>
The Company has established a valuation allowance for deferred tax
assets. SFAS 109 requires that such a valuation allowance be
recorded when it is more likely than not that the deferred tax
assets will not be realized.
The provision for income taxes is comprised of the following:
<TABLE>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . $ - $ - $33,800
State . . . . . . . . . . . . - 13,700 -
Deferred federal, net of tax
benefit of operating loss
carryforward of approximately
$34,800 in 1995 . . . . . . . - 21,600 -
------ ------- -------
Total . . . . . . . . . . 0 35,300 33,800
====== ======= ======
</TABLE>
A reconciliation between the expected statutory income tax rate
and the effective income tax rate on income before income taxes is
summarized as follows:
F-14<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------
<TABLE>
. . . .1995 . . . . . .1994 . . .
. . . . .1993 . . .
AMOUNT PERCENT AMOUNT
PERCENT AMOUNT
PERCENT
<S> <C> <C> <C> <C>
<C> <C>
Provision (credit) at expected
statutory rate . . . . . . . . . $(19,500) 22.0% $15,000 22.0%
$33,800 34.0%
State income tax, net of federal
income tax benefit . . . . . . . (8,300) - 11,800 17.3
- -
Change in valuation allowance. . . 26,100 22.1 7,500 10.9
- -
Other. . . . . . . . . . . . . . . 1,700 (0.1) 1,000 1.4
- -
-------- ----- ------- ----
------- ----
Effective income tax provision
and rate . . . . . . . . . . . . $ - - $35,300 51.6%
$33,800 34.0%
======== ===== ======= ====
======= ====
</TABLE>
At October 31, 1995, the Company has approximately $654,000 and
$883,700 of net operating losses available to carryforward for
federal and state income tax purposes, respectively. The federal
net operating loss carryforwards will expire between fiscal 2008
and 2010 and the state net operating loss carryforwards will expire
between fiscal 1996 and 1998.
8. COMMITMENTS:
At October 31, 1995, the Company was obligated under various
noncancelable operating leases for golf carts and office
equipment. The Company anticipates these leases will be replaced
by other leases in the normal course of business. Minimum future
rental obligations under noncancelable operating leases in effect
at October 31, 1995 are as follows:
<TABLE>
YEARS ENDING OCTOBER 31:
-----------------------
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . $ 112,679
1997 . . . . . . . . . . . . . . . . . . . 70,829
1998 . . . . . . . . . . . . . . . . . . . 49,876
1999 . . . . . . . . . . . . . . . . . . . 34,830
---------
Total minimum payments required $ 268,214
=========
</TABLE>
Rentals charged to operations were $124,151, $85,230 and $81,708
in 1995, 1994 and 1993, respectively.
F-15<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------
9. CONTINGENCIES:
The Company was informed by the Department of Environmental
Protection (DEP) that it must install and begin operation of a
continuous water filtration and disinfection system pursuant to
amendments to the Pennsylvania Safe Drinking Water Act enacted in
1989 no later than May 1993. The Company began installation of
the water treatment system, however, due to circumstances beyond
its control, was delayed and not able to meet DEP's deadline. The
filtration system was placed into service, inspected and a final
permit authorizing operation was issued by DEP on February 7,
1995. Under regulations, DEP can assess a civil penalty against
the Company up to $5,000 per day for the violation.
Legal counsel has assisted the Company in discussion with its
consultants and DEP regarding this matter. DEP intended to wait
until the Company complied with the regulations and completed
installation of the system prior to considering any formal action,
including assessing civil penalties against the Company. DEP has
taken no formal action against the Company in regard to its
delayed compliance. In the event a civil penalty is assessed, the
Company has thirty days to appeal by filing an action with the
Environmental Hearing Board to contest either the amount of the
penalty or the fact of the violation. Legal counsel believes
there are defenses on behalf of the Company concerning any claimed
civil penalty. However, management and legal counsel are unable
to determine whether DEP will take any formal action or the
possible effects of this matter, if any.
The Company is a defendant in a declaratory judgment action filed
in 1995 wherein the plaintiffs ask for a declaratory judgment
determining the rights of the individual plaintiffs and others
under certain covenants imposed by the Company, rights to the use
of Company owned common areas and the right to the Company to
assess owners for the purpose of retiring debt. The suit also
challenges the right of the Company to make assessments and dues
charges and seeks an injunction against collection actions filed
by the Company and against the sale or subdivision of any lands
which make up The Buck Hill Falls community, except subdivided
residential building lots in the normal course of business. The
plaintiffs also ask the Court to declare that the Company has
waived all rights to make assessment and dues charges and that
members of the Lot and Cottage Owners' Association of Buck Hill
Falls (the "Association") have common ownership rights, interest
or easement rights in all Company property.
No monetary damages are sought. However, in the opinion of legal
counsel, a judgment in favor of the plaintiffs would have a
material adverse effect on the Company.
F-16<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------
Settlement negotiations are being pursued. The Company and the
Association drafted an agreement which will provide for a joint
committee, consisting of members of the Company and the
Association, who will recommend the amount of annual dues to be
approved by the Company's Board of Directors. Special assessments
related to capital expenditures that benefit the community will be
consolidated with annual dues. Special assessments related to
acquire property, repay debt, develop land, etc., will be
considered if the Company grants property owners an option to
purchase common stock in consideration for payment of this special
assessment. Upon adoption of the draft agreement, the Company
will dismiss its collection actions against those Association
members involved in the declaratory judgment, the Association will
dismiss its declaratory action against the Company, the
Association will exercise efforts to cause individual plaintiffs
to concur in dismissal of the declaratory judgment and to pay in
full their dues assessments. The Company's Board of Directors
unanimously approved the terms of the draft agreement. Management
believes the Association's Board of Directors will adopt the terms
of the draft agreement and the aforementioned declaratory judgment will
be dismissed.
10. SIGNIFICANT CONCENTRATIONS OF CREDIT RISK:
The Company provides recreational facilities, water and sewage
services, and miscellaneous maintenance services, and grants
credit, primarily to residents of Buck Hill Falls, Monroe
County, Pennsylvania.
All cash and restricted cash is maintained in one bank and
insured by the Federal Deposit Insurance Corporation up to
$100,000.
- -----------------------------------------------------------------
F-17<PAGE>
<PAGE>
INTERIM FINANCIAL DATA
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------
APRIL 30,
1996 OCTOBER 31,
(UNAUDITED) 1995*
- --------------------------------------------------------------------------
ASSETS
======
<S> <C> <C>
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . $ 64,152 $ 31,460
Accounts receivable, net . . . . . . . 220,144 245,369
Prepaid expenses and other current assets . 13,795 30,228
---------- ----------
Total current assets . . . . . . . 298,091 307,057
RESTRICTED CASH. . . . . . . . . . . . . 85,616 73,799
PROPERTY, PLANT AND EQUIPMENT, Net . . . 2,699,387 2,756,391
DEFERRED COSTS, Net. . . . . . . . . . . 10,253 12,623
---------- ----------
TOTAL. . . . . . . . . . . . . . . $3,093,347 $3,149,870
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
====================================
CURRENT LIABILITIES:
Note payable, unsecured . . . . . . . $ 11,300 $ 11,300
Current portion of long-term debt . . 946,562 847,385
Accounts payable, trade . . . . . . . 12,356 37,283
Accrued expenses and other. . . . . . 305,587 183,355
---------- ----------
Total current liabilities . . . . 1,275,805 1,079,323
CUSTOMER DEPOSITS . . . . . . . . . . . 85,616 73,800
LONG-TERM DEBT. . . . . . . . . . . . . 952,244 956,218
6-1/4% SUBORDINATED NOTES . . . . . . . 140,000 140,000
---------- ----------
Total liabilities . . . . . . . . 2,453,665 2,249,341
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock. . . . . . . . . . . . . 1,251,370 1,251,370
Contributed capital . . . . . . . . . 799,227 799,227
Deficit . . . . . . . . . . . . . . . (1,410,915) (1,150,068)
---------- ----------
Total stockholders' equity. . . . 639,682 900,529
---------- ----------
TOTAL . . . . . . . . . . . . . $3,093,347 $3,149,870
========== ==========
</TABLE>
*Condensed from audited financial statements
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-18<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
=======================================
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
- ------------------------------------------------------------------------------------
SIX MONTHS ENDED THREE MONTHS
ENDED
......APRIL 30...... ......APRIL
30.....
1996 1995 1996
1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES . . . . . . . . . . . . . . . $ 631,603 $ 633,715 $ 339,990 $
332,524
COST OF REVENUES . . . . . . . . . . . 679,610 607,509 355,654
342,411
--------- --------- ---------
- ---------
GROSS (LOSS) PROFIT FROM OPERATIONS. . (48,007) 26,206 (15,664)
(9,887)
GENERAL AND ADMINISTRATIVE EXPENSES. . 164,116 261,149 101,501
131,946
--------- --------- ---------
- ---------
LOSS FROM OPERATIONS . . . . . . . . . (212,123) (234,943) (117,165)
(141,833)
--------- --------- ---------
- ---------
OTHER INCOME (EXPENSE):
Miscellaneous. . . . . . . . . . . . 39,367 59,170 16,398
21,974
Interest expense . . . . . . . . . . (88,092) (72,938) (38,767)
(31,842)
Capitalized interest . . . . . . . . - 21,455 -
5,528
--------- --------- ---------
- ---------
Other income (expense), net. . . . (48,725) 7,687 (22,369)
(4,340)
--------- --------- ---------
- ---------
NET LOSS . . . . . . . . . . . . . . . $(260,848) $(227,256) $(139,534)
$(146,173)
========= ========= =========
=========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING. . . . . . . . . . . . . 73,537 73,537 73,537
73,537
NET LOSS PER COMMON SHARE. . . . . . . $ (3.55) $ (3.09) $ (1.90) $
(1.99)
========= ========= =========
=========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-19<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
- --------------------------------------------------------------------------
SIX MONTHS ENDED
.......APRIL 30......
1996 1995
- --------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . $(260,848) $(227,256)
Adjustments for noncash charges:
Depreciation and amortization. . . . . . 107,011 89,823
Gain on sale of land . . . . . . . . . . - (15,013)
Changes in assets and liabilities . . . . 141,333 133,478
--------- ---------
Net cash used in operating activities. . (12,504) (18,968)
--------- ---------
INVESTING ACTIVITIES:
Purchase of property and equipment . . . . (50,007) (94,411)
Proceeds from sale of land . . . . . . . . - 15,513
--------- ---------
Net cash used in investing activities. . (50,007) (78,898)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of debt . . . . . . 171,014 102,270
Repayment of debt. . . . . . . . . . . . . (75,811) (7,008)
--------- ---------
Net cash provided by financing
activities . . . . . . . . . . . . . . 95,203 95,262
--------- ---------
INCREASE (DECREASE) IN CASH. . . . . . . . . . 32,692 (2,604)
CASH, BEGINNING OF PERIOD. . . . . . . . . . . 31,460 20,194
--------- ---------
CASH, END OF PERIOD. . . . . . . . . . . . . . $ 64,152 $ 17,590
========= =========
CASH PAYMENTS FOR:
Interest . . . . . . . . . . . . . . . . . . $ 92,467 $ 58,298
========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-20<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------
NOTE 1: BASIS OF PRESENTATION
Although the interim condensed consolidated financial
statements of Buck Hill Falls Company and Subsidiary (the "Company") are
unaudited, it is the opinion of the Company's management that all normal
recurring adjustments necessary for a fair statement of the results for
the interim periods presented have been reflected therein. The results of
operations for any interim period are not necessarily indicative of
results that may be expected for the entire year.
These statements should be read in conjunction with the
consolidated financial statements and related notes included in the
Company's annual report on Form 10-K for the year ended October 31, 1995.
F-21
