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_______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1995.
----------------
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________.
COMMISSION FILE NUMBER 33-01406
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BUCK HILL FALLS COMPANY
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 24-0536840
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
CRESCO ROAD
BUCK HILL FALLS, PENNSYLVANIA 18323
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (717) 595-7511.
Securities registered pursuant to Section 12(b) of the Act: NONE.
Securities registered pursuant to Section 12(g) of the Act: NONE.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months; and (2) has been subject to the filing
requirements for the past 90 days. YES X NO
----- ______
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]
Aggregate market value of voting stock held by non-affiliates of the
Registrant as of January 31, 1996 : $1,970,298.*
Number of Shares of Common Stock, no par value, outstanding on January 31,
1996: 73,537.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
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* Calculated by excluding all shares held by executive officers, directors and
five percent shareholders of the registrant without conceding that all such
persons are "affiliates" of registrant for purposes of the Federal securities
laws. Computation of market value is based on the closing bid quotations as of
January 31, 1996, the last date for which any quotations are available to the
Company.
_______________________________________________________________________________
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PART I
ITEM 1 - BUSINESS
Buck Hill Falls Company (the "Company") is engaged in the
provision of a variety of services, much 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 consist of (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.
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. In the past
the Company has also supplied water to Buck Hill Inn Corporation ("Inn
Co."), an unaffiliated entity that owns the Buck Hill Inn, a non-operational
hotel located in Buck Hill Falls. As of October 31, 1995, the Company had
289 residential and two commercial customers, including all owners of
residences in Buck Hill Falls that do not use well water. The
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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.
Background. 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
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.
Recent Action. 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 upon the earlier of (a) 48 months after any identification of
certain specified problems relating to the water supply or (b) 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
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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. As of February 7, 1995, the
Company received approval from the DEP to begin, and did begin, operation
of the filtration plant. Because of the delays, the Company sought an
extension of the date by which compliance with the regulations under the
Water Act Amendments must occur, but the extension was denied by the DEP.
If the Company is deemed to be in violation of the applicable regulations,
it could be subject to monetary penalties of up to $5,000 per day as a
result of the noncompliance. In addition, the Company for a period in 1993
utilized a source of water which it had stated to the DEP would not be
utilized until the filtration plant was in operation. If penalties are
imposed, the Company will attempt to negotiate a consent order with the DEP
with respect to this matter. There can be no assurance that such a consent
order will be issued or, if issued, that the consent order will not involve
monetary penalties to be paid by the Company.
Although additional costs relating to construction of the water
filtration plant are expected to continue to accrue, the Company currently
estimates that the cost of the plant and related improvements will total
over $900,000. The Company obtained bank financing for the water treatment
facility and related improvements, discussed under "Financing," below.
Financing. In August 1993, BHW, the Company's wholly owned
subsidiary, entered into a Loan Agreement with Penn Security Bank and Trust
Company ("Penn Bank"), providing for a secured term loan in the amount of
$650,000 (the "Term Loan"). The purpose of the Term Loan was to enable BHW
to make improvements to its water and sewage system, primarily related to
construction of the water filtration plant. In May 1995, the Loan Agreement
was amended to increase the amount of the borrowing to $900,000 to enable
the Company to complete the improvements. Interest on the Term Loan is
payable monthly at a rate equal to Penn Bank's base rate (8.75% as of
October 31,1995) plus 1.5%. Principal is repaid monthly according to an
amortization schedule set forth in the Promissory Note evidencing the Term
Loan, with payments concluding in 2015.
The Term Loan is secured by a first lien mortgage (the "Mortgage")
on approximately 2,200 acres of real estate owned by the Company and the
improvements thereon, in addition to a collateral assignment to Penn Bank of
all revenues and assessments of BHW. The Term Loan is guaranteed by the
Company in accordance with a Guaranty and Surety Agreement executed by the
Company and Penn Bank concurrently with the execution of the Loan Agreement.
All obligations under the Term Loan may be accelerated and become
immediately payable, and Penn Bank may foreclose on the Mortgage, upon the
occurrence of certain events of default, including the bankruptcy or
appointment of a receiver of BHW, certain defaults in payment of principal
or interest, and any inaccuracy of the various representations and
warranties of BHW contained in the Loan Agreement. Penn Bank may cancel the
Term Loan upon a change of control of BHW or the Company.
Rates for Water and Sewer Services. In the fiscal year ended
October 31, 1993, BHW sought and obtained 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 was granted rates that are expected to produce additional annual
revenues of $82,000, effective July 20, 1995.
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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.
EXCHANGE OFFER
In 1968, the Company issued its 4% Subordinated Debentures due
July 1, 1993 (the "1993 Debentures"). In 1977, Buck Hill Inn Corporation
("Inn Co.") agreed to purchase the Buck Hill Inn from the Company. As part
of the consideration for its purchase, Inn Co. agreed to assume the
Company's obligations under the 1993 Debentures. Inn Co. subsequently
failed to make payments under the 1993 Debentures and later declared
bankruptcy. See "Agreement With Buck Hill Inn Corporation" under this item.
The $757,000 of 1993 Debentures matured on July 1, 1993. As a
result of the Inn Co. bankruptcy, the Company determined that it would bear
responsibility for repayment of principal and interest under the 1993
Debentures. The Company in June 1993 tendered an exchange offer (the
"Exchange Offer") to the holders of the 1993 Debentures under which the 1993
Debentures would be exchanged for 6 1/4% Subordinated Notes Due July 1, 1998
(the "1998 Notes"). The 1998 Notes are unsecured obligations of the Company
in the principal amount of $140,000 and mature 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 1998 Notes may be declared immediately due and payable upon
certain events of default, provided that the Company receives written notice
from holders constituting at least 30% principal amount of the 1998 Notes.
Such events of default include failure to make interest payments for 30
days; failure to pay principal when due; certain events of bankruptcy,
insolvency or reorganization; and default in the performance of other
covenants for a period of 25 days after receipt of written notice of such
default from holders of at least 25% principal amount of the 1998 Notes.
Not all of the 1993 Debentures were exchanged in the Exchange
Offer. The Company elected to utilize funds available under its secured
revolving line of credit to pay, upon the maturity of the Debentures,
principal and interest on 1993 Debentures that were not exchanged for 1998
Notes. An aggregate of $617,000 of funds available under this line of
credit were used for this purpose.
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 currently pays 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. In recent years, the
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utilization by the Company of certain of the dues and assessments has been
contested by certain members of 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. Certain residents objected to the
imposition of the $2,400 annual dues and indicated that annual dues of only
$2,000 should be assessed. 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. In January 1996,
an agreement was reached between 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. The Agreement was approved by the
Boards of both the Company and the Association, and the Company expects the
Agreement to be approved by the Association members. While the Company
believes it is legally entitled to charge dues, fees and assessments to most
residents of the Buck Hill Falls community without input from the
Association, the Company believes that such an action would involve
practical difficulties and, therefore, the Company would prefer to determine
the amount of such charges and their expenditure in an amicable manner with
the Association. Continued opposition by the Association to increases, or
opposition by the Association to budgeted expenditures by the Company could
make it more difficult for the Company to fulfill its obligations.
Purchasers 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 units in The Cottages, 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 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 required to pay the same
dues as all owners of residences.
MARKETING AND COMPETITION
The Company's marketing efforts generally have been limited (and
should not be confused with the marketing efforts relating to the sale of
residences and lots in The Cottages, which are not being developed by the
Company). However, in recent years, the Company has increased its efforts
to have
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various groups use its facilities (principally its golf facilities) at times
other than summer months. The Company's marketing efforts involve
advertisements through the Pocono Mountains Vacation Bureau and in the
Barrett Business Association Visitors Guide. Moreover, the Company has
entered into arrangements with several inns and hotels in the Pocono
Mountains area pursuant to which the Company makes its golf course available
to guests of such inns and hotels at a group rate. The Company's marketing
efforts also include advertisements in local newspapers, telephone books and
travel brochures.
Revenues derived from the use of the Company's recreational
facilities (particularly the Company's 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. Many of the Company's competitors have substantially greater
financial and marketing resources than the Company.
EMPLOYEES
As of January 31, 1996, the Company had 17 persons employed on a
full year basis. An additional 59 persons were employed on a seasonal basis
during the summer season in 1995 (demand for the Company's services
increases substantially during the summer months).
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 have been suspended.
If completed as originally planned, The Cottages would have been
constructed in two phases. The Company does not know whether phase one of
the development, which was designed to include 230 single family townhouses
and 30 single family homes, will ever be completed. As of January 31, 1996,
a total of 85 residences, including 56 townhouses and 29 detached homes,
have been sold (one of the residences was constructed by a contractor
retained by the purchaser of a lot). In addition, four lots have been sold
and one new home is currently under construction.
As initially contemplated by one of the Company's agreements with
the Partnership, if the development of phase one were successfully
completed, and if the Company consented, phase two would be developed and
would include up to 100 townhouses and 60 single family lots. The agreement
further provided that, if phase two were not approved by the Company, that
portion of the transferred property that was not developed pursuant to phase
one may, at the request of the Company, be reconveyed to the Company,
subject to certain limitations on the Company's ability to develop the
property. However, as a result of the transfer by the Partnership to the
Bank of land that includes property designated for phase two, the Bank may
dispute whether Company's right to reconveyance of the land applies to the
Bank.
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Pursuant to the agreements relating to the sale of land by the
Company, the Partnership agreed to make certain repairs and improvements in
accordance with a Schematic Master Plan (the "Plan") as a contribution to
BHW, certain of which were completed before the Partnership's transfer of
the undeveloped property to the Bank. Under these agreements, the
Partnership received land, as discussed above, and 14,300 shares of Common
Stock of the Company.
Prior to 1991, and pursuant to agreements with the Partnership, a
purchaser of residences or lots at The Cottages was required to purchase
shares of Common Stock from the Company. As additional consideration for the
purchase price of the home or lot, the purchaser also received additional
shares of the Company's Common Stock out of shares held by the Partnership.
Except for shares of Common Stock delivered from time to time by the Company
to the Partnership pursuant to such agreements for purchasers of properties
in The Cottages prior to 1991, the Partnership was not entitled to receive
any shares of Company Common Stock until completion of the improvements and
repairs pursuant to the Plan. The Bank claims that it has succeeded to the
Partnership's rights under such agreements. Because of the Company's claims
that the Partnership did not complete the required improvements and repairs
under the Plan, as well as the Company's position that certain required
expenditures were not made, it is the Company's position that the Bank (as
the claimed successor to the Partnership) is not entitled to receive any
additional shares of Common Stock of the Company.
The Company has negotiated with the Bank in an attempt to resolve
various issues relating to the development of The Cottages. Among other
issues subject to discussion are the disposition of the remaining 9,569
shares that were to be delivered to the Partnership upon completion of
repairs and improvements as required by the Plan, and whether shares will
continue to be sold to purchasers of properties in The Cottages. Management
determined that the sale of Company Common Stock in connection with the sale
of properties in The Cottages was no longer desirable, since the sale of its
stock has engendered regulatory expenses and burdens that the Company
believes are too great in view of the benefits received. Accordingly, in
1990, the Company terminated sales of its Common Stock and issuance of
shares to the Partnership for delivery to purchasers.
AGREEMENT WITH BUCK HILL INN CORPORATION
Pursuant to an agreement in 1977 with Inn Co. (the "1977
Agreement"), the Company sold the Buck Hill Inn to Inn Co. As part of that
agreement, Inn Co. was granted certain rights to use the Company's
recreational and other facilities. As part of the consideration for its
purchase, Inn Co. agreed to assume the Company's obligations under its 4%
Subordinated Debentures due July 1, 1993 (the "1993 Debentures"). In
addition, Inn Co. agreed to bear certain maintenance, repair, sewer and
expansion costs relating to those portions of the sewer system on its
properties.
Inn Co. is currently subject to bankruptcy proceedings. It closed
the Buck Hill Inn during 1990, and the Company has been informed that the
Bank, which is Inn Co.'s principal lender and holds a mortgage on the Buck
Hill Inn securing Inn Co.'s obligation, has obtained a judgment by
confession against Inn Co. Inn Co. failed to make certain interest payments
on the 1993 Debentures and failed to make other payments due to the Company
on obligations outstanding since 1989. In 1990, the Company instituted a
lawsuit against Inn Co., seeking a judgment in the aggregate amount of
approximately $109,000 for unpaid recreational facility and water and sewer
charges. In addition, in 1992, the Company instituted litigation against
Inn Co. in connection with Inn Co.'s failure to make the July 1, 1991
interest payment on the 1993 Debentures. The Company's litigation has been
stayed, however, due to the pendency of bankruptcy proceeding involving Inn
Co.
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As a result of the Inn Co. bankruptcy, the Company determined that
it would bear responsibility for repayment of principal and interest under
the 1993 Debentures. The Company in June 1993 tendered an exchange offer to
the holders of the 1993 Debentures under which the 1993 Debentures would be
exchanged for 6 1/4% Subordinated Notes Due July 1, 1998 (the "1998 Notes").
See "Exchange Offer."
ITEM 2 - 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).
ITEM 3 - LEGAL PROCEEDINGS
As described under 'Agreement with Buck Hill Inn Corporation" in
Item 1 above, the Company is the plaintiff in litigation brought against the
Inn Co. now stayed due to the bankruptcy proceeding of the Inn Co.
The Company is a defendant in a declaratory judgment action filed
in the Court of Common Pleas of Monroe County Pennsylvania in July 1995,
wherein the plaintiffs, the Lot and Cottage Owners' Association and certain
property owners at Buck Hill Falls, ask for a declaratory judgment
determining the rights of the individual plaintiffs and other under certain
covenants imposed by the Company, rights to the use of Company owned common
areas and the right of 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 Association have common
ownership rights, interest or easement rights in all Company property.
While no monetary damages are sought, a judgment in favor of the plaintiffs
would have a material adverse effect on the Company. As discussed under
"Dues and Fees Paid by Property Owners" in Item 1 above, a tentative
settlement has been reached.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY
HOLDER MATTERS
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; and $28.00 to $31.00 during the period from August 1, 1995 through
October 31, 1995.
These quotations reflect inter-dealer prices, without retail
markup, mark-down or commission and may not necessarily reflect actual
transactions. 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.
The Company has not recently declared or paid dividends on its
Common Stock 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 the near future.
As of January 31, 1996, the Company had 509 shareholders of
record.
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ITEM 6 - SELECTED FINANCIAL DATA
The selected financial data set forth below are derived from
financial statements of the Company and should be read in conjunction with
such financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations appearing elsewhere in this
report.
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YEAR ENDED OCTOBER 31,
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1995 1994 1993 1992 1991
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STATEMENT OF OPERATIONS DATA:
Revenues....................... $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)
========== ========== ========== =========== ==========
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
</TABLE>
-11-
<PAGE>
ITEM 7. 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
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 290 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.
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.
-12-
<PAGE>
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 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 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 expense of approximately
$30,000 due to hiring a new contractor at reduced rates.
-13-
<PAGE>
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 obligation 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.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1995, the Company had a working capital deficiency
of $772,266. Included in current liabilities is the entire $816,120
outstanding on the Company's $1,000,000 line of credit with a bank
(described in the following paragraph), which is payable on demand. The
outstanding balance increased by $18,412, primarily due to additional funds
required for increased operational costs in fiscal 1995. An additional
$31,266 in scheduled principal payments on long-term debt are due within the
next twelve months.
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. Amounts
borrowed under the line of credit bear interest at the prime rate (8.75% at
October 31, 1995) 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 line of credit is available through May
31, 1997, contingent upon the Company maintaining a satisfactory financial
position and subject to annual review by the bank of the Company's financial
statements. 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 crease to be available
for future draws, and any existing balance will be required to be fully
amortized over a reasonable term. The Company does not anticipate that the
bank will demand payment on the line of credit.
As discussed under "Business - Government Regulation," the Company
is required to make certain improvements in its water system. During 1993,
the Company entered into a $650,000 loan agreement with a bank to finance
the improvements. On May 4, 1995, the Company entered into a $900,000
secured term loan. The proceeds were used to refinance the $650,000 loan
agreement and pay for additional improvements to the Company's water system.
Principal and interest are payable in monthly installments of $8,985.
Interest is payable at the bank's base rate (8.75% at October 31, 1995) plus
1-1/2%. The loan matures in February 2015 and is secured by a first mortgage
on approximately 2,200 acres of land and
-14-
<PAGE>
land improvements located in Barrett Township, Monroe County, Pennsylvania
and a collateral assignment of all revenues and assessments of the Company's
water operations.
Cash increased $11,266 during 1995. Cash used in operating
activities of $106,420, borrowings of $448,000 under the Company's revolving
line of credit, borrowings of $38,612 under the Company's $10,700 and
$27,912 bank loans and borrowings of $250,000 under the Company's $900,000
bank loan were used to reduce the Company's line of credit by $429,589, to
make scheduled principal payments on long-term debt of $19,779 and to make
capital expenditures of $188,298. Such expenditures included $48,109
incurred for construction period interest costs, engineering fees and
filtration plant installation costs to complete water system improvements,
$100,062 incurred primarily for improvements to roads, sewer facilities and
amenities in the community, and $40,127 for the purchase of business and
security vehicles.
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. 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Index to Financial Statements on page
F-1.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
-15-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as
follows:
<TABLE>
<CAPTION>
Term as
Director
Name Age Position Expires
- ------------------------------ --- -------------------------- --------
<S> <C> <C> <C>
David B. Ottaway 56 Chairman and Chief 1998
Executive Officer, Director
George J. Byron 72 President and Chief 1998
Operating Officer, Director
Grace M. Godshalk 58 Vice President, Secretary, 1997
Director
Patricia J. Rauch 61 Vice President, Treasurer, 1996
Director
Frank J. Dracos, M.D. 66 Director 1998
Edwin A. Gee 80 Director 1997
Clifford Press 42 Director 1997
James T. Sygenda 63 Director 1996
James J. Wilson 62 Director 1996
Carl R. Benasutti 54 General Manager N/A
</TABLE>
Mr. Ottaway was elected Chairman and Chief Executive Officer in
July 1995. Mr. Ottaway has been employed by the Washington Post for the
past 25 years and is currently an investigative reporter.
Mr. Byron has been a director of the Company since 1992 and was
President from 1994 to July 1995, at which time he was elected Chairman.
Mr. Byron served as Treasurer from 1993 to 1994. Mr. Byron has been co-
owner of Lord Byron, Inc., a manufacturer of hospital linens and hot air
balloons, for over five years.
Mrs. Godshalk has been a director of the Company since March,
1995. 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.
-16-
<PAGE>
Dr. Dracos has been a director of the Company since 1992 and was
Chairman of the Board in 1993. Dr. Dracos has been a practicing orthopedic
surgeon with Pocono Orthopedic for over five years. Dr. Dracos is also a
director of Mellon Bank (Northeast).
Mr. Gee has been a director of the Company since 1995. Mr. Gee
retired as Chief Executive Officer of International Paper Co. in 1985.
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 has also served as a director of High Voltage Engineering Corporation
since 1988.
Mr. Sygenda has been a director of the Company since 1993 and has
served as Vice President since 1994. Mr. Sygenda was district sales manager
and national account manager for UARCO Business Forms until 1992. Mr.
Sygenda retired in 1993.
Mr. Wilson has been a director of the Company since 1993. Mr.
Wilson also has served as the Chief Executive Officer of Interstate General
Company LP since 1987.
Mr. Benasutti has been general manager of the Company since 1994
and has served as President of BHW since 1994. Mr. Benasutti also served as
community manager for Pine Crest Development Corp. from 1988 through 1993.
ITEM 11. 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>
<CAPTION>
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.
-17-
<PAGE>
ITEM 12. 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 January 31, 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 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.
<TABLE>
<CAPTION>
Shares
Beneficially
Name Owned Percent of Class
- -------------------------------- --------------- -----------------
<S> <C> <C>
David B. Ottaway............ 5,980(1) 8.1%
George J. Byron............. 100 *
Grace M. Godshalk.......... 90(2) *
Patricia J. Rauch........... 115 *
Frank J. Dracos, M.D........ 400(3) *
Edwin A. Gee................ 2,301(4) 3.1%
Clifford Press.............. 100 *
James T. Sygenda............ 100(5) *
James J. Wilson............. 793(6) 1.1%
All executive officers and
directors as a group...... 9,979 13.6%
- -------------------------
</TABLE>
* 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 SE, Washington D.C. 20003.
(2) Includes 50 shares held jointly with Mrs. Godshalk's husband.
(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 60 shares held by Mr. and Mrs. Gee in trusts for the benefit of
their children. Does not include an additional 4,002 shares held by other
family members, as to which shares Mr. Gee disclaims beneficial ownership.
(5) Held jointly with Mr. Sygenda's wife.
(6) Includes 300 shares held jointly by Mr. Wilson and his wife and 493
shares held by a corporation controlled by Mr. Wilson.
-18-
<PAGE>
ITEM 13. CERTAIN BUSINESS RELATIONSHIPS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements - See the Index to Financial Statements
on page F-1
2. Financial Statement Schedules - See the Index to Consolidated
Financial Statement Schedules on page F-1.
3. Exhibits
Exhibit No.
-----------
3.1 Articles of Incorporation, as amended - Incorporated by
reference to Exhibit 3.1 to Amendment No. 1 to the
Registrant's Registration Statement on Form S-18 filed
with the Commission on March 6, 1986
3.2 By-Laws, as amended - Incorporated by reference to
Exhibit 3.2 to the Registrant's Annual Report on Form
10-K for the fiscal year ended October 31, 1992, filed
with the Commission on February 24, 1993.
4.1 Indenture between the Registrant and Fidelity Bank, as
Trustee, dated July 1, 1968 - Incorporated by reference
to Exhibit 4.1 to the Registrant's Registration
Statement on Form S-18, filed with the Commission on
November 7, 1983
4.2 First Supplemental Indenture between the Registrant,
Buck Hill Inn Corporation and Fidelity Bank, as trustee,
dated October 31, 1977 -Incorporated by reference to
Exhibit 4.2 to the Registrant's Registration Statement
on Form S-18, filed with the Commission on November 7,
1983
10.1 Agreement between the Registrant and Buck Hill Inn
Corporation dated August 10, 1977 - Incorporated by
reference to Exhibit 10.1 to the Registrant's
Registration Statement on Form S-18, filed with the
Commission on November 7, 1983
-19-
<PAGE>
10.2 Agreement between Glencoe Associates and the Registrant,
dated as of May 28, 1985 - Incorporated by reference to
Exhibit 10.2 to Amendment No. 1 to the Registrant's
Registration Statement, filed with the Commission on
March 6, 1986
10.3 Stock Subscription Agreement, between the Registrant and
Buck Hill Falls Associates, dated as of May 28, 1985 -
Incorporated by reference to Exhibit 10.4 to Amendment
No. 1 to the Registrant's Registration Statement, filed
with the Commission on March 6, 1986
10.4 Installment Sale Agreement between the Registrant and
Buck Hill Falls Associates, dated as of May 28, 1985 -
Incorporated by reference to Exhibit 10.5 to Amendment
No. 1 to the Registrant's Registration Statement, filed
with the Commission on March 6, 1986
10.5 Contribution Agreement between BHW and Buck Hill Falls
Associates, dated as of May 28, 1985 - Incorporated by
reference to Exhibit 10.6 to Amendment No. 1 to the
Registrant's Registration Statement, filed with the
Commission on March 6, 1986
10.6.1 Loan Agreement, dated July 24, 1992, between Penn
Security Bank and Trust Company and the Registrant -
Incorporated by reference to Exhibit 10.6.1 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1992, filed with the Commission
on February 24, 1993.
10.6.2 Promissory Note, dated July 24, 1992, issued by the
Registrant to Penn Security Bank and Trust Company -
Incorporated by reference to Exhibit 10.6.2 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1992, filed with the Commission
on February 24, 1993.
10.6.3 Open-End Mortgage, dated July 24, 1992, issued by the
Registrant to Penn Security Bank and Trust Company -
Incorporated by reference to Exhibit 10.6.3 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1992, filed with the Commission
on February 24, 1993.
10.6.4 Collateral Assignment of Dues, Assessments and Fee
Income, dated July 24, 1992, issued by the Registrant to
Penn Security Bank and Trust Company - Incorporated by
reference to Exhibit 10.6.4 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended October
31, 1992, filed with the Commission on February 24,
1993.
10.7.1 Proposal and Contract, dated February 24, 1992 and
countersigned May 21, 1992, between Infilco Degremont
Inc. and the Registrant, together with acceptance letter
of the Registrant dated May 21, 1992 and revision letter
agreement, dated June 24, 1992 - Incorporated by
reference to Exhibit 10.7.1 to the Registrant's Annual
Report on Form 10-K for the
-20-
<PAGE>
fiscal year ended October 31, 1992, filed with the
Commission on February 24, 1993.
10.8 Loan Agreement, dated August 12, 1993, between the
Registrant and Penn Security Bank and Trust Company,
incorporated by reference to Exhibit 10.8 to the
Registrant's Annual Report on Form 10-K for the fiscal
years ended October 31, 1994 and 1993.
10.9 Loan Agreement, dated May 4, 1995, between the Buck Hill
Water Company and Penn Security Bank and Trust Company.
(b) No reports on Form 8-K were filed by the registrant during the
last quarter of the period covered by this report.
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BUCK HILL FALLS COMPANY
Date: February 11, 1996 By: /s/ David B. Ottaway
----------------------------------------
David B. Ottaway, Chairman and Chief
Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ George J. Byron
- -----------------------
GEORGE J. BYRON President and Chief February 9, 1996
Operating
Officer, Director
(Principal Financial Officer)
/s/ Edwin A. Gee Director February 13, 1996
- -----------------------
EDWIN A. GEE
/s/ Grace M. Godshalk Director February 13, 1996
- -----------------------
GRACE M. GODSHALK
/s/ James T. Sygenda Director February 9, 1996
- -----------------------
JAMES T. SYGENDA
/s/ James J. Wilson Director February 9, 1996
- -----------------------
JAMES J. WILSON
/s/ Patricia J. Rauch Director February 11, 1996
- -----------------------
PATRICIA J. RAUCH
/s/ Clifford Press Director February 13, 1996
- -----------------------
CLIFFORD PRESS
/s/ Frank J. Dracos, M.D. Director February 12, 1996
- -----------------------
FRANK J. DRACOS, M.D.
-22-
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED
WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY
REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
No annual report covering the Registrant's last fiscal year and no proxy
statement, form of proxy or other soliciting material relating to the
Registrant's 1996 Annual Meeting of Shareholders has been sent to the
Registrant's shareholders. The Registrant intends to send a report to
shareholders for the period covered by this report and a proxy statement and
proxy with respect to the Registrant's next Annual Meeting of Shareholders.
The Registrant will furnish copies of such material when such material is
sent to its shareholders. Such material shall not be deemed to be "filed"
with the Commission or otherwise subject to the liabilities of Section 18 of
the Securities Exchange Act of 1934.
-23-
<PAGE>
TABLE OF CONTENTS
=================
<TABLE>
<CAPTION>
Page
----
<S> <C>
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-4
Statement of Changes in Stockholders' Equity for the
Years Ended October 31, 1995, 1994 and 1993........................ F-5
Statement of Cash Flows for the Years Ended
October 31, 1995, 1994 and 1993.................................... F-6
Notes to Consolidated Financial Statements............................. F-7
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
===================================================
<S> <C>
Property, Plant and Equipment for the Years Ended
October 31, 1995, 1994 and 1993........................................ F-17
Accumulated Depreciation of Property, Plant and
Equipment for the Years Ended October 31, 1995,
1994 and 1993.......................................................... F-18
Valuation and Qualifying Accounts for the Years Ended
October 31, 1995, 1994 and 1993........................................ F-19
Short-term Borrowings for the Years Ended
October 31, 1995, 1994 and 1993........................................ F-20
Supplementary Statement of Operations Information for
the Years Ended October 31, 1995, 1994 and 1993........................ F-21
</TABLE>
-----------------------------------------------
F-1
<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.
Our audits referred to above also included audits of the financial
statement schedules listed under Item 14(a)(2). In our opinion, those financial
statement schedules present fairly, in all material respects, in relation to the
basic consolidated financial statements taken as a whole, the information
required to be stated therein.
PARENTE, RANDOLPH, ORLANDO,
CAREY & ASSOCIATES
Wilkes-Barre, Pennsylvania
December 13, 1995
F-2
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
CONSOLIDATED BALANCE SHEET
OCTOBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
ASSETS
======
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
========== ==========
<CAPTION>
1995 1994
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
====================================
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-3
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
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 or property, plant
and equipment................................. 25,389 - -
---------- ---------- ----------
Other income (expenses)................... (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
years' 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 Statements
F-4
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
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 1,251,370 799,277 (1,116,008) 934,269
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-5
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
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........................ (162,409) 239,473 203,532
----------- --------- -----------
CASH FLOW 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)
----------- --------- -----------
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 Consolidated Financial Statements
F-6
<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-7
<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-8
<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>
<CAPTION>
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>
<CAPTION>
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 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 -
</TABLE>
F-9
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
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 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>
<CAPTION>
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>
F-10
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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>
<CAPTION>
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.
7. INCOME TAXES:
Significant components of the Company's deferred tax assets as of
October 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
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
</TABLE>
F-11
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
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>
<CAPTION>
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................................... $ - $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-12
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
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.
F-13
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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>
<CAPTION>
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.
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.
F-14
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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.
F-15
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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-16
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
BALANCE AT OTHER CHANGES-
BEGINNING ADDITIONS ADD (DEDUCT)- BALANCE AT
CLASSIFICATION OF YEAR AT COST (1) RETIREMENTS DESCRIBE END OF YEAR
- -----------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED
OCTOBER 31, 1995
------------------
<S> <C> <C> <C> <C> <C>
Land.................................. $ 446,330 $ (500) $ 445,831
Buildings............................. 932,136 $ 9,777 941,913
Recreational facilities............... 1,356,771 27,585 1,384,356
Sewer and water facilities............ 423,168 37,100 $ 880,320 (2) 1,340,588
Machinery and equipment............... 407,605 25,600 (51,920) 381,285
Automotive equipment.................. 122,943 40,126 163,069
Furniture and fixtures................ 92,528 92,528
Construction in progress.............. 832,211 48,109 (882,320) (2) -
---------- ----------- --------- --------- -----------
TOTALS................................ $4,613,692 $ 188,297 $ (52,420) $ (2,000) $ 4,749,570
========== =========== ========= ========= ===========
<CAPTION>
FOR THE YEAR ENDED
OCTOBER 31, 1994
------------------
<S> <C> <C> <C> <C> <C>
Land.................................. $ 446,330 $ 446,330
Buildings............................. 913,356 $ 18,780 932,136
Recreational facilities............... 1,253,568 103,203 1,356,771
Sewer and water facilities............ 407,854 15,314 423,168
Machinery and equipment............... 397,080 10,525 407,605
Automotive equipment.................. 121,127 18,091 $ (16,275) 122,943
Furniture and fixtures................ 79,042 13,486 92,528
Construction in progress.............. 322,980 509,231 (1) 832,211
---------- ----------- --------- --------- -----------
TOTALS................................ $3,941,337 $ 688,630 $ (16,275) $ - $ 4,613,692
========== =========== ========= ========= ===========
<CAPTION>
FOR THE YEAR ENDED
OCTOBER 31, 1993
------------------
<S> <C> <C> <C> <C> <C>
Land.................................. $ 446,330 $ 446,330
Buildings............................. 911,756 $ 1,600 913,356
Recreational facilities............... 1,196,063 57,505 1,253,568
Sewer and water facilities............ 405,035 2,819 407,854
Machinery and equipment............... 368,641 28,439 397,080
Automotive equipment.................. 98,637 22,490 121,127
Furniture and fixtures................ 78,388 654 79,042
Construction in progress.............. 54,700 268,280 (1) 322,980
---------- ----------- --------- --------- -----------
TOTALS................................ $3,559,550 $ 381,787 $ - $ - $ 3,941,337
========== =========== ========= ========= ===========
</TABLE>
(1) Installation of water treatment system.
(2) Reclassification.
F-17
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
SCHEDULE VI
ACCUMULATED DEPRECIATION OF
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
BALANCE AT ADDITIONS OTHER CHANGES-
BEGINNING CHARGED TO ADD (DEDUCT)- BALANCE AT
CLASSIFICATION OF YEAR COSTS AND EXPENSES RETIREMENTS DESCRIBE END OF YEAR
- -----------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED
OCTOBER 31, 1995
------------------
<S> <C> <C> <C> <C> <C>
Buildings............................. $ 358,388 $ 18,470 $ 376,858
Recreational facilities............... 712,839 77,872 790,711
Sewer and water facilities............ 266,929 46,715 313,644
Machinery and equipment............... 352,683 20,142 $(51,920) 320,905
Automotive equipment.................. 91,893 22,480 114,373
Furniture and fixtures................ 69,133 7,555 76,688
---------- -------- -------- -------- ----------
TOTALS................................ $1,851,865 $193,234 $(51,920) $ - $1,993,179
========== ======== ======== ======== ==========
<CAPTION>
FOR THE YEAR ENDED
OCTOBER 31, 1994
------------------
<S> <C> <C> <C> <C> <C>
Buildings............................. $ 339,606 $ 18,782 $358,388
Recreational facilities............... 644,028 68,811 712,839
Sewer and water facilities............ 255,152 11,777 266,929
Machinery and equipment............... 312,904 39,779 352,683
Automotive equipment.................. 93,744 14,424 $(16,275) 91,893
Furniture and fixtures................ 61,928 7,205 69,133
---------- -------- -------- -------- ----------
TOTALS................................ $1,707,362 $160,778 $(16,275) $ - $1,851,865
========== ======== ======== ======== ==========
<CAPTION>
FOR THE YEAR ENDED
OCTOBER 31, 1993
------------------
<S> <C> <C> <C> <C> <C>
Buildings............................. $ 320,290 $ 19,316 $ 339,606
Recreational facilities............... 584,752 59,276 644,028
Sewer and water facilities............ 243,806 11,346 255,152
Machinery and equipment............... 266,720 46,184 312,904
Automotive equipment.................. 79,687 14,057 93,744
Furniture and fixtures................ 55,875 6,053 61,928
---------- -------- -------- -------- ----------
TOTALS................................ $1,551,130 $156,232 $ - $ - $1,707,362
========== ======== ======== ======== ==========
</TABLE>
F-18
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
SCHEDULE VII
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
ADDITIONS
---------
BALANCE AT CHARGED TO CHARGED TO OTHER CHANGES-
BEGINNING COSTS AND OTHER ACCOUNT- ADD (DEDUCT)- BALANCE AT
YEAR DESCRIPTION OF YEAR EXPENSES DESCRIBE DESCRIBE END OF YEAR
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1995 Allowance for
doubtful acounts....... $35,000 $150,631 $(105,771) (1) $79,860
Accumulated
amortization,
deferred costs......... 17,363 4,740 (2) 12,623
1994 Allowance for
doubtful
accounts............... $35,000 95,241 35,000
Accumulated
amortization,
deferred costs......... 22,103 4,740 (2) (95,241) (1) 17,363
1993 Allowance for
doubtful
accounts............... $25,000 101,420 (91,420) (1) 35,000
Accumulated
amortization,
deferred costs......... 23,683 1,580 (2) 22,103
</TABLE>
(1) Accounts written off.
(2) Amounts represent amortization of deferred costs incurred for issuance of
the 6-1/4% subordinated notes.
F-19
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
SCHEDULE IX
SHORT-TERM BORROWINGS
FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
MAXIMUM AVERAGE WEIGHTED
WEIGHTED AMOUNT AMOUNT AVERAGE
CATEGORY OF AVERAGE OUTSTANDING OUTSTANDING INTEREST
AGGREGATE BALANCE AT INTEREST DURING THE DURING THE RATE DURING
BORROWINGS END OF YEAR RATE YEAR YEAR THE YEAR
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial Paper:
1995 $11,300 5% $11,300 $11,300 5%
1994 11,300 5 11,300 11,300 5
1993 11,300 5 11,300 11,300 5
</TABLE>
Commercial paper represents an unsecured borrowing with no specified repayment
terms from the Lot and Cottage Owners Association of Buck Hill Falls.
The average amount outstanding during the year represents the average monthly
principal balances outstanding during the year.
The weighted average interest rate during the year was computed by dividing the
actual interest expense incurred on short-term borrowings by the average amount
outstanding during the year.
F-20
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
SCHEDULE X
SUPPLEMENTARY STATEMENT OF OPERATIONS INFORMATION
YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
ITEM CHARGED TO COSTS AND EXPENSES
- ---------------------------------------------------------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
Maintenance and repairs.......................... $137,058 $116,301 $145,794
======== ======== ========
Depreciation and amortization of
intangible assets, pre-operating costs and
similar deferrals:
Depreciation..................................... $193,234 $160,778 $156,232
Deferred debt issuance costs..................... 4,740 4,740 1,580
-------- -------- --------
$197,974 $165,518 $157,812
======== ======== ========
Taxes, other than payroll and income
taxes:
Real Estate...................................... $ 83,120 $ 60,746 $ 59,896
Capital stock.................................... 8,647 4,226 4,754
-------- -------- --------
$ 91,767 $ 64,972 $ 64,650
======== ======== ========
</TABLE>
Royalties, amortization and advertising costs are not set forth inasmuch as such
items do not exceed 1% of gross revenues as shown in the consolidated statement
of operations.
F-21
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
FINANCIAL DATA SCHEDULE
ARTICLE 5 OF REGULATION S-X
FOR THE YEAR ENDED OCTOBER 31, 1995
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS ON PAGES F-3
AND F-4 OF THE COMPANY'S 1995 FORM 10-K ANNUAL REPORT AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
OCTOBER 31,
ITEM NUMBER ITEM DESCRIPTION 1995
- ----------- ---------------- -----------
<S> <C> <C>
5-02(1) Cash and cash items............................. $ 31,460
5-02(2) Marketable securities........................... -
5-02(3) (a) (1) Notes and accounts receivable - trade........... 325,229
5-02(4) Allowances for doubtful accounts................ (79,860)
5-02(6) Inventory....................................... -
5-02(9) Total current assets............................ 307,057
5-02(13) Property, plant and equipment................... 4,749,570
5-02(14) Accumulated depreciation........................ (1,993,179)
5-02(18) Total assets.................................... 3,149,870
5-02(21) Total current liabilities....................... 1,079,323
5-02(22) Bonds, mortgages and similar debt............... 1,954,903
5-02(28) Preferred stock - mandatory redemption.......... -
5-02(29) Preferred stock - no mandatory redemption....... -
5-02(30) Common stock.................................... 1,251,370
5-02(31) Other stockholders' equity...................... (350,841)
5-02(32) Total liabilities and stockholders' equity...... 3,149,870
<CAPTION>
YEAR ENDED
OCTOBER 31,
ITEM NUMBER ITEM DESCRIPTION 1995
- ----------- ---------------- -----------
<S> <C> <C>
5-03(b)1(a) Net sales of tangible products.................. $ 2,218,139
5-03(b)1 Total revenues.................................. 2,218,139
5-03(b)2(a) Cost of tangible goods sold..................... (1,653,362)
5-03(b)2 Total costs and expenses applicable to
sales and revenues............................ (1,653,362)
5-03(b)3 Other costs and expenses........................ -
5-03(b)5 Provision for doubtful accounts and notes....... (105,771)
5-03(b) (8) Interest and amortization of debt discount...... (161,515)
5-03(b) (10) Income before taxes and other items............. (88,740)
5-03(b) (11) Income tax expense.............................. -
5-03(b) (14) Income/loss continuing operations............... (88,740)
5-03(b) (15) Discontinued operations......................... -
5-03(b) (17) Extraordinary items............................. -
5-03(b) (18) Cumulative effect - changes in accounting
principles.................................... -
5-03(b) (19) Net income or loss.............................. (88,740)
5-03(b) (20) Earnings per share - primary.................... (1.21)
5-03(b) (20) Earnings per share - fully diluted.............. (1.21)
</TABLE>
F-22
<PAGE>
BUCK HILL FALLS COMPANY
ANNUAL REPORT ON FORM 10-K
EXHIBIT INDEX
EXHIBIT NO.
- -----------
3.1 Articles of Incorporation, as amended - Incorporated by reference to
Exhibit 3.1 to Amendment No. 1 to the Registrant's Registration
Statement on Form S-18 filed with the Commission on March 6, 1986
3.2 By-Laws, as amended - Incorporated by reference to Exhibit 3.2 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1992, filed with the Commission on February 24, 1993.
4.1 Indenture between the Registrant and Fidelity Bank, as Trustee, dated
July 1, 1968 - Incorporated by reference to Exhibit 4.1 to the
Registrant's Registration Statement on Form S-18, filed with the
Commission on November 7, 1983
4.2 First Supplemental Indenture between the Registrant, Buck Hill Inn
Corporation and Fidelity Bank, as trustee, dated October 31, 1977 -
Incorporated by reference to Exhibit 4.2 to the Registrant's
Registration Statement on Form S-18, filed with the Commission on
November 7, 1983
10.1 Agreement between the Registrant and Buck Hill Inn Corporation dated
August 10, 1977 - Incorporated by reference to Exhibit 10.1 to the
Registrant's Registration Statement on Form S-18, filed with the
Commission on November 7, 1983
10.2 Agreement between Glencoe Associates and the Registrant, dated as of
May 28, 1985 - Incorporated by reference to Exhibit 10.2 to Amendment
No. 1 to the Registrant's Registration Statement, filed with the
Commission on March 6, 1986
10.3 Stock Subscription Agreement, between the Registrant and Buck Hill
Falls Associates, dated as of May 28, 1985 - Incorporated by reference
to Exhibit 10.4 to Amendment No. 1 to the Registrant's Registration
Statement, filed with the Commission on March 6, 1986
10.4 Installment Sale Agreement between the Registrant and Buck Hill Falls
Associates, dated as of May 28, 1985 - Incorporated by reference to
Exhibit 10.5 to Amendment No. 1 to the Registrant's Registration
Statement, filed with the Commission on March 6, 1986
10.5 Contribution Agreement between BHW and Buck Hill Falls Associates,
dated as of May 28, 1985 - Incorporated by reference to Exhibit 10.6
to Amendment No.
<PAGE>
1 to the Registrant's Registration Statement, filed with the
Commission on March 6, 1986
10.6.1 Loan Agreement, dated July 24, 1992, between Penn Security Bank and
Trust Company and the Registrant - Incorporated by reference to
Exhibit 10.6.1 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1992, filed with the Commission on
February 24, 1993.
10.6.2 Promissory Note, dated July 24, 1992, issued by the Registrant to Penn
Security Bank and Trust Company - Incorporated by reference to Exhibit
10.6.2 to the Registrant's Annual Report on Form 10-K for fiscal year
ended October 31, 1992, filed with the Commission on February 24,
1993.
10.6.3 Open-End Mortgage, dated July 24, 1992, issued by the Registrant to
Penn Security Bank and Trust Company - Incorporated by reference to
Exhibit 10.6.3 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1992, filed with the Commission on
February 24, 1993.
10.6.4 Collateral Assignment of Dues, Assessments and Fee Income, dated July
24, 1992, issued by the Registrant to Penn Security Bank and Trust
Company - Incorporated by reference to Exhibit 10.6.4 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1992, filed with the Commission on February 24, 1993.
10.7.1 Proposal and Contract, dated February 24, 1992 and countersigned May
21, 1992, between Infilco Degremont Inc. and the Registrant, together
with acceptance letter of the Registrant dated May 21, 1992 and
revision letter agreement, dated June 24, 1992 - Incorporated by
reference to Exhibit 10.7.1 to the Registrant's Annual Report on Form
10-K for the fiscal year ended October 31, 1992, filed with the
Commission on February 24, 1993.
10.8 Loan Agreement, dated August 12, 1993, between the Registrant and Penn
Security Bank and Trust Company, incorporated by reference to Exhibit
10.8 to the Registrant's Annual Report on Form 10-K for the fiscal
years ended October 31, 1994 and 1993.
10.9 Loan Agreement, dated May 4, 1995, between the Buck Hill Water Company
and Penn Security Bank and Trust Company.
<PAGE>
EXHIBIT 10.9
LOAN AGREEMENT
This agreement made this 4th day of May, 1995, between PENN SECURITY
BANK AND TRUST COMPANY, a bank and trust company Incorporated under the laws of
the Commonwealth of Pennsylvania with principal offices located at 150 North
Washington Avenue, Scranton, Pennsylvania hereinafter referred to as "Bank" and
THE BUCK HILL WATER COMPANY, a/k/a BUCK HILL WATER COMPANY, a corporation
incorporated under the laws of the Commonwealth of Pennsylvania with principal
offices located at Buck Hill Falls, Monroe County, Pennsylvania, hereinafter
referred to as "Borrower".
WITNESSETH:
Bank has agreed to grant financing in the amount of Nine Hundred
Thousand ($900,000.00) Dollars The financing will consist of a secured term loan
in the amount of Nine Hundred Thousand ($900,000.00) Dollars, the proceeds from
which will be used to refinance existing debt and for Improvements made to the
water supply system owned by the Borrower.
The secured term loan will be evidenced by a promissory note of even
date herewith, and will be for a term of twenty (20) years at the Bank's base
rate plus one and one-half (1 1/2%) percent floating. The Bank's base rate
equates to the prime rate of select New York City money center banks.
Principal and interest shall be paid initially in monthly installments
of Eight Thousand Nine Hundred Eighty Five Dollars and Forty Two Cents
($8,985.42) plus 1/12 annual real estate taxes, said payments to be adjusted
annually to installments which would, at the then current rate charged on the
loan amortize the remaining principal fully over the remaining amortization
period (said remaining period to be computed by subtracting the number of years
passed since the loan was granted from the initial amortization period of twenty
(20) years). These aforementioned initial regular monthly payments are based on
the Bank's currant base rate of Nine (9%) Percent.
Borrower has agreed to secure the term loan by a first lien mortgage
on approximately 2200 acres of real estate, including all improvements thereon.
Additionally, Borrower has agreed to further secure the loan with a collateral
assignment to Bank of all revenues and assessments of the The Buck Hill Water
Company, a/k/a Buck Hill Water Company. Buck Hill Falls Company has agreed to
guarantee the loan as evidenced by a Guaranty and Surety Agreement of even date
herewith.
Borrower, In consideration of the Bank making this loan to Borrower,
hereby warrants, represents and agrees as follows;
1. Borrower shall furnish the Bank with corporate financial
statements including Income statements on an annual basis or sooner, if
requested by Bank. Additionally, it is required that a copy of the U.S. Income
Tax Returns be furnished Bank on an annual basis.
<PAGE>
2. Borrower shall maintain adequate fire (including so-called
extended coverage), public liability and other insurance as Bank may require, in
such form and written by such companies as may be satisfactory to Bank, and
shall upon request of Bank deliver to it the policies concerned. All policies
covering property given as security for the loan shall have loss payable clauses
in favor of Bank. It is required also that Title insurance be furnished by any
responsible Title Insurance Company acceptable to the Bank.
3. The execution, delivery and performance hereof and of any security
instruments called for or delivered hereunder are within its corporate powers,
have been duly authorized, are not in contravention of the terms of Borrower's
Articles of Incorporation or Bylaws or capital stock or any amendment thereof
and are not in contravention of law or of any Indenture, agreement or
undertaking to which Borrower is a party or by which Borrower is bound.
4. All financial statements, profit and loss statements, statements
as to ownership and other statements heretofore or hereafter given to Bank in
connection with this agreement, are or will be true and correct, subject to any
limitation stated therein, and Borrower is the owner of all property in which
Borrower has given encumbrances and other security interests, and Borrower will
so own all property in which Borrower now or hereafter gives a security interest
to Bank.
5. Borrower shall be in default under this agreement upon the
happening of any of the following events or conditions: default in the payment
or performance of any obligation, covenant or liability contained or referred to
herein or in any security instrument delivered hereunder or in any bond or note
from Borrower to Bank; any warranty, representation or statement made or
furnished to Bank by or on behalf of Borrower which proves to have been false in
any material respect when made or furnished; dissolution, termination of
existence, insolvency, business failure, appointment of a receiver of any pert
of the property of, assignment for the benefit of creditors by, or the
commencement of any proceedings under any bankruptcy or insolvency laws by or
against, Borrower or any guarantor or surety for Borrower. Upon such default
and at any time thereafter as long as such default is continuing Bank may
declare all obligations of Borrower to Bank immediately due and payable
regardless of the terms of any bond or note evidencing the same, and may
commence action to exercise its rights by foreclosure on the mortgage or may
seek any other remedy according to law.
6. Borrower may at any time prepay in whole or part, with accrued
interest, the unpaid principal amount of the loan without payment of penalty or
premium.
7. The Bank reserves the right to cancel said financing should there
be a change in ownership of The Buck Hill Water Company, a/k/a Buck Hill Water
Company, or Buck Hill Falls Company or should Borrower enter into a merger or
consolidation or sell, lease, assign or otherwise dispose of or transfer any of
the collateral except in the normal course of business.
<PAGE>
8. No waiver hereunder shall be effective unless In writing. No
delay in exercising any right shall operate as a waiver thereof. A waiver on
any one occasion shall not be a waiver of any right or remedy on any future
occasion. This agreement will terminate when all obligations of Borrower to
Bank have been paid in full. This agreement shall be governed by the laws of
the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF and intending to be legally bound hereby, this Loan
Agreement is executed as of the day and year aforesaid.
PENN SECURITY BANK & TRUST CO. THE BUCK HILL WATER COMPANY
a/k/a BUCK HILL WATER COMPANY
/s/ J. Patrick Dietz By: /s/ Carl Benasutti
By________________________________ _______________________________
J. Patrick Dietz Carl Benasutti
Assistant Vice-President President
Attest:_____________________________
(Corporate Seal)
