<PAGE>
Rule 424(b)(3)
File No. 333-10207
PROSPECTUS
-----
Up To 31,463 Shares
BUCK HILL FALLS COMPANY
Common Stock
(No Par Value)
Buck Hill Falls Company (the "Company") is about to complete an offering of
Class A Common Stock (the "Class A Stock") limited to those persons who own
Common Stock in the Company and are an owner or co-owner of a cottage and/or
lot in the Buck Hill Falls community ("Qualified Owners"). At November 7, 1996,
a total of 27,800 shares of Class A Stock had been subscribed by Qualified
Owners at an average price of $18.06 per share. For a description of the terms
of the offering of Class A Stock, see "The Offering -- Class A Stock." The
shares of Class A Stock are identical to the shares of the Company's Common
Stock offered hereby except that the Class A Stock may, with certain
exceptions, only be held by or transferred to a Qualified Owner. See
"Description of Capital Stock."
The purpose of this offering is to give the holders of the Company's Common
Stock of record on the date of the offering of Class A Stock, and who are not
Qualified Owners, the opportunity to purchase at $20 per share up to that
number of additional shares of Common Stock which, in the judgment of the
Company, would enable each such person who so desires to maintain his or her
percentage interest in the Company. For more information concerning this
offering and how to subscribe, see "The Offering -- Common Stock."
The Common Stock offered hereby involves a high degree of risk. See "Risk
Factors."
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY SUCH STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
==============================================================================
Price to Underwriting Proceeds to
Public(1) Discount(2) Company(1)(3)
- -------------------------------------------------------------------------------
Per Share $20.00 $ None $20.00
Total $629,260 $ None $629,260
===============================================================================
(1) Assumes all shares are sold. There is no minimum number of shares that
must be sold if any shares are to be sold.
(2) This offering is made directly by the Company through its regular officers
and directors. No commissions or fees will be paid.
(3) Before deducting expenses of the offering to be paid by the Company,
estimated at $5,000.
The date of this Prospectus is September 11, 1996.<PAGE>
<PAGE>
Until October 21, 1996 all dealers effecting transactions in the
registered securities, whether or not participating in this distribution,
may be required to deliver a prospectus.
TABLE OF CONTENTS
-----------------
PAGE
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . 3
Selected Consolidated Financial Data . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . 8
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Security Ownership of Certain Beneficial Owners and Management . . . 20
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . 21
The Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Additional Information . . . . . . . . . . . . . . . . . . . . . . . 25
Index to Financial Statements . . . . . . . . . . . . . . . . . . . F-1
AVAILABLE INFORMATION
---------------------
The Company is subject to the reporting requirements of the
Securities Exchange Act of 1934 ("Exchange Act") and in accordance
therewith files reports and other information with the Securities and
Exchange Commission (the "Commission"). Such reports and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at its regional offices located
at Seven World Trade Center, 13th Floor, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may also be obtained at prescribed rates from the Public
Reference Section of the Commission, Washington, D.C. 20549.
The Company delivers to its shareholders annual reports
containing audited financial statements with a report thereon by its
independent certified public accountants.
2<PAGE>
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE
IN THIS PROSPECTUS. AS USED IN THIS PROSPECTUS, THE TERM "COMPANY"
INCLUDES BUCK HILL FALLS COMPANY AND ITS WHOLLY-OWNED SUBSIDIARY, BUCK
HILL WATER COMPANY, UNLESS THE CONTEXT OTHERWISE INDICATES.
THE COMPANY
Buck Hill Falls Company is engaged in the provision of a variety
of services, many of which are for the benefit of residents of Buck Hill
Falls, Barrett Township, Pennsylvania. In addition, certain of the
Company's facilities are made available to the general public. The
Company's services include (a) provision of recreational facilities, (b)
provision of various water and sewage services and (c) miscellaneous
maintenance services.
The principal executive office of the Company is located at P. O.
Box 426, Cresco Road, Buck Hill Falls, Pennsylvania 18323. Its telephone
number is 717-595-7511.
THE OFFERING
Type of security offered Class A Common Stock
Number of shares offered 75,000
Shares to be outstanding after the offering(1) 75,000 shares of
Class A Common Stock
73,537 shares of
Common Stock
Use of Proceeds Reduction of debt
- ---------------
(1) Assumes all shares are sold. There is no specified minimum number
that will be sold. Upon completion of this offering of Class A
Stock, the Company intends to offer up to 31,463 additional shares
of Common Stock to the holders of Common Stock who are not
Qualified Owners. See"The Offering."
Shares of Class A Stock will be offered only to persons who
are owners or co-owners of a lot and/or cottage in the Buck Hill Falls
community. See "The Offering".
RISK FACTORS
An investment in Class A Stock involves substantial risks in
addition to the risks associated with ownership of the Company's Common
Stock. The transferability of the Class A Stock is severely limited. See
"Risk Factors."
3<PAGE>
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for each of the
fiscal years in the five year period ended October 31, 1995, have been
derived from audited consolidated financial statements of the Company. The
following selected consolidated financial data for the six months ended April
30, 1996 and April 30, 1995 have been derived from unaudited
consolidated financial statements of the Company. This information should be
read in conjunction with the Consolidated Financial Statements and related
notes and Managements' Discussion and Analysis of Financial Condition and
Results of Operations appearing elsewhere in this Prospectus.
<TABLE>
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue $2,218,139 $2,203,529 $2,048,529 $1,938,239 $1,874,303
Income (loss) from
operations 37,094 136,294 133,895 (3,201) 51,131
Other income
(expense) (125,834) (67,914) (34,412) 147,846 (99,620)
Income (loss) before
extraordinary credit (88,740) 33,080 65,683 (64,982) (82,070)
Extraordinary credit - - 33,800 138,000 19,000
Cumulative effect of
accounting change - 21,600 - - -
---------- ---------- ---------- --------- ----------
Net income (loss) $ (88,740) $ 54,680 $ 99,483 $ 73,018 $ (63,070)
========== ========== ========== ========== ==========
PER SHARE DATA:
Income (loss) before
extraordinary credit $ (1.21) $ .45 $ .89 $ (.88) $ (1.12)
Extraordinary credit - - .46 1.87 .26
Cumulative effect of
accounting change - .29 - - -
---------- ---------- ---------- ---------- ----------
Net income (loss) $ (1.21) $ .74 $ 1.35 $ .99 $ (.86)
========== ========== ========== ========== ==========
OCTOBER 31,
-------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
FINANCIAL POSITION DATA:
Working capital $ (772,266) $ (973,993) $ (822,191) $(1,082,662) $ (516,834)
Total assets 3,149,870 3,104,106 2,536,541 2,299,853 2,373,373
Total long-term
liabilities 1,170,018 921,804 599,360 176,111 865,347
Stockholders' equity 900,529 989,269 934,589 835,106 762,088
4<PAGE>
<PAGE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30
----------------------------
1996 1995
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<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue $ 631,603 $ 633,715
Income (loss) from
operations (212,123) (234,943)
Other income
(expense) (48,725) 7,687
Income (loss) before
extraordinary credit (260,848) (227,256)
Extraordinary credit - -
Cumulative effect of
accounting change - -
------------ ------------
Net income (loss) $ (260,848) $ (227,256)
============ ============
PER SHARE DATA:
Income (loss) before
extraordinary credit $ (3.55) $ (3.09)
Extraordinary credit - -
Cumulative effect of
accounting change - -
------------ ------------
Net income (loss) $ (3.55) $ (3.09)
=========== ===========
April 30
----------------------------
1996 1995
---- ----
FINANCIAL POSITION DATA
Working capital $ (977,714) $(1,251,338)
Total assets 3,093,347 3,151,450
Total long-term
liabilities 1,177,860 943,571
Stockholders' equity 639,682 762,011
</TABLE>
5<PAGE>
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMPANY INVOLVES A HIGH DEGREE OF RISK. THE
FOLLOWING FACTORS, IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS, SHOULD BE CAREFULLY CONSIDERED BEFORE MAKING AN INVESTMENT
DECISION.
1. FINANCIAL CONDITION. The Company incurred a net loss of
$88,740 for the fiscal year ended October 31, 1995 as compared to a net
income of $54,680 for the preceding fiscal year. It incurred a net loss
of $260,848 for the six months amended April 30, 1996 as compared to a net
loss of 227,256 for the corresponding period of the prior year. At April
30, 1996 the Company had a cumulative deficit of $1,410,915 and a working
capital deficiency of $977,714. While, due to the seasonal nature of the
company's business, the Company's revenues and cost of revenues typically
increase significantly in its third and fourth fiscal quarters, the
continuation of the Company as a going concern is dependent upon continued
compliance with its debt terms, its ability to obtain additional financing
if needed and the eventual achievement of sustained profitable operations.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
2. NO DIVIDENDS ANTICIPATED. The Company has not paid a
dividend since 1966. The Company anticipates that its revenues will be
used primarily to maintain the various facilities it operates and for debt
service and it does not expect to pay dividends in the foreseeable future.
In addition, debt instruments to which the Company is a party restrict the
payment of dividends.
3. RESTRICTIONS ON TRANSFERABILITY. Under the Articles of
Incorporation of the Company, as amended in July 1996, the shares of Class
A Stock may only be issued to, transferred to, or be held by a person,
company or other entity that it an owner or co-owner of a cottage and/or
lot in the Buck Hill Falls community (a "Qualified Owner"); provided,
however, that a holder of Class A Stock may transfer the shares to the
Company, to the Buck Hill Conservation Foundation, or to any other person
with the specific approval of the Board of Directors of the Company and
the holders of a majority of the other Class A shares. The Company will
not recognize any purported transfer in violation of these provisions.
With this limited universe of transferees it is highly unlikely that any
trading market will develop, or that a Class A stockholder in need of
liquidity would be able to effect an expeditious sale of his or her
shares.
4. DEPENDENCE ON DUES AND FEES PAID BY PROPERTY OWNERS. In
addition to fees that residents of Buck Hill Falls pay to the Company for
water and sewer services and for the use of recreational facilities,
property owners pay dues to the Company in connection with road
maintenance, trash collection, security, general maintenance and other
services provided by the Company, and are subject to special assessments
in certain situations. Deed covenants are not uniform in this regard.
Residents have recently instituted litigation challenging the right of the
Company to levy dues and assessments. While a settlement agreement was
signed in June 1996, continued opposition could have a material adverse
effect on the Company. See "Business -- Dues and Fees Paid by Property
Owners".
5. COMPETITION. Revenues derived from the use of the Company's
recreational facilities (particularly the golf course) by members of the
general public have become increasingly important in recent years. In
this regard the Company is in competition with a number of resorts in the
Pocono Mountains area.
6<PAGE>
<PAGE>
6. GOVERNMENT REGULATION. The Company's water and sewer
services are subject to regulation by state and federal environmental
regulatory bodies, primarily the Pennsylvania Department of Environmental
Protection ("DEP"), and the Company's water services are regulated by the
Pennsylvania Public Utility Commission ("PUC") which, among other things,
fixes the rates charged by the Company. In 1995 the Company completed the
installation of a water filtration plant ordered by the DEP at a cost to
the Company of approximately $900,000. See "Business -- Government
Regulation". The Company could be subjected to significant and
unanticipated expenses in the future.
FOR THESE REASONS, THE COMPANY BELIEVES THAT THE SHARES OF CLASS A
STOCK OFFERED BY THIS PROSPECTUS ARE SUITABLE INVESTMENTS ONLY FOR BUCK
HILL FALLS PROPERTY OWNERS WHO BELIEVE THAT THE CONTINUED VIABILITY OF THE
COMPANY IS IMPORTANT TO THE HEALTH AND WELFARE OF THE COMMUNITY.
USE OF PROCEEDS
The maximum net proceeds to be received by the Company from this
offering are estimated to be approximately $1,450,000. There is no
minimum and the total net proceeds could be substantially less. The net
proceeds will be used primarily for the reduction of indebtedness.
At June 30, 1996 the Company had an outstanding, unpaid balance of
$690,900 on its $1,000,000 revolving credit facility with a bank, all of
which is classified as a current liability on the Company's financial
statements. This line of credit bears interest at prime (8.25% at June 30,
1996) plus 1.25% and is secured by a mortgage and by a pledge of all dues,
assessments and fee revenues. Approximately $617,000 was drawn on this
facility in 1993 to fund the payment at maturity of debentures (the "1993
Debentures") issued by the Company in 1968. Liability for the payment of
the 1993 Debentures had been assumed in 1977 by an unrelated entity, the
Buck Hill Inn Corporation (the "Inn Co.") as part of its consideration for
the purchase of the Buck Hill Inn from the Company. The Inn Co.
subsequently filed for protection under the bankruptcy laws.
Approximately $140,000 in principal amount of the 1993 Debentures were
exchanged by the holders for unsecured 6 1/4% Subordinated Notes of the
Company due July 1, 1998 (the "1998 Notes") and the balance of the 1993
Debentures were paid by the Company. The revolving credit facility has
also been used to fund the Company's working capital deficiency which
normally intensifies during the first and second quarter of each fiscal
year due to the seasonal nature of much of the Company's activity.
In May of 1995 the Company entered into an additional $900,000
loan agreement with a bank to refinance existing debt incurred in
connection with the required improvements to its water system and to fund
the completion of those improvements. The loan is payable in monthly
installments through May 2015 and bears interest at prime (8.25% at June
30, 1996) plus 1.50%, and is secured by a real estate mortgage and all
revenues of the Company's water operations.
The Company expects to apply the net proceeds of the offering
first to the payment of all or a substantial portion of its revolving
credit facility. The balance may be applied to reduce the term loan and
for general corporate purposes, primarily involving the maintenance of the
Company's various
facilities, and possibly for repayment of the 1998 Notes upon their
maturity.
Proceeds, if any, from the sale of Common Stock will be used for
the same purposes.
7<PAGE>
<PAGE>
Pending the use of the proceeds for the purposes set forth above,
the Company may invest or deposit such sums as it deems appropriate.
DILUTION
The following table sets forth the effect of the Company's
issuance of Class A Stock in this offering on net tangible book value per
share of the Company's Common Stock as of April 30, 1996, as adjusted to
reflect the immediate dilution which the purchasers of the Class A Stock
offered hereby will experience if all shares are sold at $20.00 per share.
Dilution will be greater if fewer shares are sold at that price. Dilution
per share will be less with respect to shares purchased at $17.50 per
share. See "The Offering."
Offering price per share $20.00
Net tangible book value per share at
April 30, 1996(1) $8.37
Increase in net tangible book value attributable
to estimated proceeds to the Company per
share from its sale of Class A Stock 5.54
-----
Net tangible book value per share after offering 13.91
------
Dilution of shareholders purchasing shares after
the date of this Prospectus(2) $ 6.09
======
(1) Net tangible book value per share is determined by dividing the
number of shares of Common Stock of both classes outstanding into the
tangible net worth (total tangible assets less total liabilities) of the
Company.
(2) "Dilution" means the difference between the offering price of the
Class A Stock and the net tangible book value per share of the Common
Stock of both classes after giving effect to the offering and payment of
the estimated expenses of the offering.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company's business, insofar as it relates to the provision of
recreational facilities, is largely seasonal in nature. As a result, the
Company's revenues and cost of revenues typically increase in its third
and fourth fiscal quarters.
RESULTS OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1996 COMPARED TO THE SIX MONTHS ENDED
APRIL 30,1995
Revenues for the six months ended April 30, 1996, were comparable
to the same period in the prior year. The Company had an increase of
$9,812 in its water operations revenues as a result of a rate increase,
and an increase of $19,000 in snow plowing revenues as a result of heavy
snowfall amounts in 1996, but these increases were offset by a decrease in
8<PAGE>
<PAGE>
golf cart rentals of $8,626 as a result of weather conditions in 1996 and
a decrease in golf and tennis dues revenues of approximately $3,000 as a
result of the Company's not offering a 5% discount for early payment of
dues as was done in 1995. The Company also reduced annual dues billed to
the residents at Buck Hill Falls from $2,400 to $2,300 in 1996.
Cost of revenues increased 12% as compared to the same period in
the previous fiscal year, primarily due to an increase in depreciation
expense of $34,000 related to capital improvements to the water system
which was put into operation in February 1995 and to the reallocation of
approximately $30,000 in administrative salaries to the related community
service operations to which the employees are currently performing
services. In addition, snow plowing costs increased $15,000 due to severe
weather conditions during 1996.
General and administrative costs decreased 37% in the first six
months of 1996 as compared to the same period in 1995. This decrease
relates to the reallocation of administrative salaries discussed above.
Bad debts decreased $29,814 due to the write off of uncollectible accounts
in 1995. During 1995, legal and accounting fees were incurred primarily
for an evaluation of a purchase offer from the Lot and Cottages Owners'
Association. Such costs were not incurred during 1996, resulting in a
decrease in legal and accounting fees of $32,615.
Other income decreased 33% during 1996. During 1995, there was a
gain on sale of land of $15,013, proceeds from the sale of timber of
$11,202 and a bad debt recovery of $3,000, which were not present in 1996.
This decrease was partially offset by an increase in interest income of
$10,000.
Interest expense increased 71% as a result of interest of $37,680
on borrowings related to the water filtration system which was placed in
service in February 1995. There was also capitalized interest in 1995,
which is not present in 1996 due to the completion of the water filtration
system.
YEAR ENDED OCTOBER 31, 1995 COMPARED TO YEAR ENDED OCTOBER 31, 1994
Revenues increased 0.7% in 1995 as compared to 1994, principally
due to increased golf and pool revenues, annual dues, lumber sales, water
and sewer service revenues. Revenues from golf and pool increased
approximately $92,500 due to an increase in the annual membership fee and
the number of memberships. Management believes that golf memberships have
increased as a result of improvements made to the golf course. In
addition, due to more favorable weather in 1995, more rounds were played
and, as a consequence, revenues from greens fees and cart rentals
increased. The Company increased annual dues billed to residents at Buck
Hill Falls from $2,200 in 1994 to $2,400 in 1995. The $200 increase
resulted in additional revenues of approximately $58,000 in 1995. Lumber
sales increased approximately $24,100 due to additional timbering
in fiscal 1995. Revenues from water and sewer services increased
approximately $13,000 due to an increase in water rate in 1995. The
increase in revenues was partially offset by a decrease in snow plowing
revenues of approximately $16,500 due to more favorable weather in 1995,
decreased tennis and camp revenues of approximately $9,600 attributable to
decreased participation and decreased special assessment revenues of
approximately $126,700 due to no special assessments raised in 1995. In
addition, a change in the Company's water and sewer billing policy to Inn
Co. resulted in a decrease in water and sewer service revenues of
approximately $20,200.
9<PAGE>
<PAGE>
Cost of revenue increased 3.8% in 1995 as compared to 1994 due to
a variety of factors. The operating expenses of golf increased
approximately $44,500, primarily due to additional lease payments of
$26,300 on golf carts. In addition, the cost of maintenance and material
and supplies expenses increased approximately $18,200 due to increased
rounds played in 1995. The operating expenses of camp club increased
approximately $4,300 due to increased repair and maintenance expenses on
play grounds. The operating expenses of water and sewer service increased
approximately $4,800, principally due to increased sewer plant repair and
maintenance expenses. However, the increased expenses related to sewer
service operations were offset by a decrease of approximately $13,400 in
salary expense because of one employee's disability absence for six months
in 1995. Lumber commission expense and real estate taxes increased
approximately $2,100 and $7,500 in 1995, respectively. The cost of
contracted security services and repair and maintenance expenses related
to security vehicle increased approximately $6,600. Maintenance expenses
associated with the Cottages at Buck Hill Falls increased approximately
$12,500, primarily due to an increase in the price of contracted services
and additional cleaning services. Depreciation expense increased
approximately $34,300 resulting from the completion of water system
capital improvements in March 1995. The increase in cost of revenues was
partially offset by an insurance refund of approximately $17,500,
decreased road repair work of approximately $12,100 in Buck Hill Falls
community, decreased snow plowing expense of approximately $10,200 and
decreases in a variety of minor expenses relating to cost of revenues.
General and administrative expenses increased 11.2% in 1995 as
compared to 1994, principally resulting from increases in legal and
accounting fees, bad debt expense and depreciation expense. Legal and
accounting fees increased approximately $64,700, primarily due to
Securities and Exchange Commission filings in 1995, legal services on the
water rate increase in 1995, consulting services rendered on the
examination of the Company's rights in the setting of dues and assessments
on the cottages at Buck Hill Falls. Bad debt expense increased
approximately $10,500 because of increased provision for uncollectible
receivables. The purchase of property and equipment in 1995 resulted in an
increase of approximately $2,900 in depreciation expense. Additionally,
repair and maintenance expenses increased approximately $10,100, due to
water pipe leakage in the residential area. Bank charges on credit card
collection increased approximately $4,700. The increase in expense was
partially offset by an insurance refund of approximately $4,800 and a
$34,800 decrease in salary expense and related payroll tax, fringe
benefits and travel and entertainment due to the resignation of the
Company's President in January 1994.
Miscellaneous income increased 173.8%, principally due to an
increase on a gain from the sale of property and equipment of
approximately $23,000.
The increase in other expense is attributable primarily to
increased interest expense resulting from increased interest rates and
borrowings in fiscal 1995 as well as interest expense on the water system
capital improvements loan.
YEAR ENDED OCTOBER 31, 1994 COMPARED TO YEAR ENDED OCTOBER 31, 1993
Revenues increased 7.0% in 1994 compared to 1993, principally due
to increased golf revenues, special assessments and water and sewer
revenues. Golf revenues increased approximately $29,000 due to an
increase in the number of memberships and more favorable weather in 1994.
Management believes that memberships have increased as a result of
10<PAGE>
<PAGE>
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 expenses of approximately $30,000 due
to hiring a new contractor at reduced rates.
General and administrative expenses increased 18%, principally due
to increased legal expense. Legal expense increased approximately
$56,600, primarily due to increased legal services rendered on the
evaluation of a purchase offer from the Lot & Cottage Owners' Association
for the Company's properties and preparation of the agreement between the
Company and New Hope Lodge (a potential buyer) relating to assumption of
Inn Co.'s obligations to the Company. However, no agreement was
consummated on the sale of the Company's properties. In addition,
administrative salaries and related benefits increased approximately
$12,300 due to a 3% to 5% increase in wages during 1994. A variety of
minor expenditures relating to general and administrative services also
contributed to the increase in general and administrative expenses.
The increase in other expense is attributable primarily to
increased interest expense resulting from increased interest rates and
borrowings in 1994. Additionally, in 1993 the Company received a real
estate tax refund of $13,253 as a result of a real estate tax appeal.
The provision for income taxes reflects state income taxes due on
1994 taxable income and deferred federal taxes resulting from utilization
of net operating loss carryforwards.
Beginning in fiscal 1994, the Company adopted Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), Accounting for Income
Taxes. The adoption of SFAS 109 resulted in a tax benefit of
approximately $21,600.
INFLATION.
Inflation has not had a significant impact on the Company's
comparative results of operation.
11<PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1996, the Company had a working capital deficiency of
$977,714. Included in current liabilities was the entire $911,120
outstanding on the Company's $1,000,000 line of credit with a bank
(described in the following paragraph), which is payable on demand. At
June 30, 1996 the outstanding balance had been reduced to $690,900. An
additional $35,442 in scheduled principal payments on long-term debt are
due by May 1, 1997.
On July 24, 1992, the Company entered into a loan agreement with a
bank relating to a secured revolving line of credit in the amount of
$1,000,000 (the "Revolving Credit Facility"). Amounts borrowed under the
Revolving Credit Facility bear interest at the prime rate (8.25% at
April 30, 1996) plus 1-1/2%. Pursuant to the loan agreement,
approximately 2,600 acres of land and land improvements located in Barrett
Township, Monroe County, Pennsylvania, are pledged as collateral, along
with dues, assessments and fee revenues. The Revolving Credit Facility is
available through May 31, 1997, contingent upon the Company maintaining a
satisfactory financial position and subject to annual review of the
Company's financial statements by the bank. The loan agreement with the
bank provides that if, in the opinion of the authorized lending officers
of the bank, the Company's credit worthiness materially declines, the
credit line will cease to be available for future draws, and any existing
balance will be required to be fully amortized over a reasonable term.
The Company was required to make certain improvements in its water
system. See "Business -- Government Regulation". In May of 1995, the
Company entered into a $900,000 term loan agreement with a bank to
refinance existing debt incurred for this project and to complete the
improvements. Principal is payable in monthly installments of $8,985 over
a 20-year amortization period. Interest is payable at the bank's base
rate (8.25% at April 30, 1996) plus 1.50%. The loan matures in May 2015
and is secured by a first mortgage on approximately 2,200 acres of land
and land improvements and a collateral assignment of all revenue and
assessments of the Company's water operations. The term loan is guaranteed
by the Company.
The 1998 Notes in the aggregate principal amount of $140,000 are
unsecured obligations of the Company maturing on July 1, 1998. The 1998
Notes accrue interest at an annual rate of 6-1/4%. Payments of principal
and interest on the Notes are subordinated to payments of other
indebtedness of the Company. Upon written notice to the holders thereof,
the 1998 Notes are redeemable in whole or in part by the Company at any
time at 100% of their principal amount, plus interest accrued to the date
of redemption.
The Company expects to meet its current liabilities (other than
payment of the entire $911,120 under the Revolving Credit Facility, which,
although not currently due, is classified as a current liability because
of the Revolving Credit Facility's demand terms) through increased
collections as a result of the seasonal increase in revenues which
typically occurs during the Company's third and fourth quarters through
the provision of recreational services. The Company does not anticipate
that the bank will demand payment under the Revolving Credit Facility.
Cash increased $32,692 for the six months ended April 30, 1996.
Cash provided by borrowings of $95,000 under the Company's revolving line
of credit and $16,000 in additional long-term debt was used to make
scheduled principal payments of $15,811 on long-term debt, pay operating
12<PAGE>
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expenditures of $12,490 and capital expenditures of $50,007. Such capital
expenditures included improvements to roads and paving of $16,832,
purchase of a new automobile for $17,816 and purchase of furniture and
equipment for the golf club of $15,359.
The Company incurred a net loss of $260,848 for the six months
ended April 30, 1996 and at April 30, 1996, the Company had a cumulative
deficit of $1,410,915 and a working capital deficiency of $977,714.
Although the Company's line of credit is available through May 31, 1997,
the ability to borrow under the line is contingent upon certain factors.
As a result, continuation of the Company in its present form is dependent
upon the continued compliance with its debt terms, its ability to obtain
additional financing if needed and the eventual achievement of sustained
profitable operations.
Management believes that revisions in the Company's operating
requirements, including rate increases for amenities and the effect of the
water rate increase implemented in August 1995, provide the opportunity
for the Company to continue as a going concern. However, there is no
assurance that management's actions will be successful or, if they are not
successful, that the Company would be able to continue as a going concern.
BUSINESS
Buck Hill Falls Company (the "Company") is engaged in the
provision of a variety of services, many of which are for the benefit of
residents of Buck Hill Falls, Pennsylvania. In addition, certain of the
Company's facilities are made available to the general public. The
Company's services include (a) provision of recreational facilities, (b)
provision of various water and sewage services and (c) miscellaneous
maintenance services.
RECREATIONAL FACILITIES
The Company provides and maintains various recreational facilities
for the use of residents of the Buck Hill community and the general
public.
The recreational facilities owned and operated by the Company are
as follows:
GOLF. The Company owns and operates a 27 hole golf course
facility which also includes a clubhouse and restaurant. The restaurant
has a capacity for 50 persons and can seat an additional 20 persons at an
adjoining patio.
TENNIS. The Company's tennis facilities consist of 10 clay tennis
courts, a tennis clubhouse and a small dining room that can accommodate 20
persons.
SWIMMING. The Company owns and operates an olympic-sized outdoor
swimming pool along with a small bath house and dressing rooms.
BOWLING GREENS. The Company owns and operates two lawn bowling
greens.
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.
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Of the Company's recreational facilities, its golf facilities are
by far the most significant, generally accounting for more than 50% of the
Company's revenues from its recreational facilities.
Residents of Buck Hill Falls pay annual or daily use fees to the
Company for each of the facilities that they utilize. In recent years,
revenues from the general public and various groups that utilize the
Company's golf facilities have become increasingly important.
WATER AND SEWAGE OPERATIONS
Through its wholly owned subsidiary, Buck Hill Water Company
("BHW"), the Company supplies water to residential customers. As of June
30, 1996, the Company had 290 residential customers and one commercial
customer (the post office), including all owners of residences in Buck
Hill Falls that do not use well water and some residences outside the
community. The operations of BHW are subject to regulation by the
Pennsylvania Department of Environmental Protection (the "DEP") and the
Pennsylvania Public Utility Commission (the "PUC"). See "Government
Regulations."
For the purposes of supplying water to its customers, the Company
owns a reservoir with a 550,000 gallon capacity, a filtration plant, a
chlorinator pump house and distribution system. The reservoir is fed by
Buck Hill Creek, a spring and one or more wells. The Company also
operates a sewage treatment facility that serves most of the residences in
Buck Hill Falls and formerly served the Buck Hill Inn.
Because a substantial majority of the residents of the Buck Hill
Falls community occupy their units on a seasonal basis, the demand for the
Company's water and sewage services is significantly greater in the summer
months.
GOVERNMENT REGULATION
The Company's water and sewer services are subject to regulation
by the DEP and the Company's water services are regulated by the PUC.
The DEP regulates all sewage treatment plants in Pennsylvania,
annually inspects sewage treatment facilities and issues annual permits
for the operation of such facilities. It has authority to cause changes
to be made in the operation of a facility and to require capital
improvements to ensure that the facility is operating in accordance with
its standards. In addition, the DEP evaluates the water quality provided
to residents of Buck Hill Falls by BHW, the Company's wholly-owned
subsidiary. The DEP has the authority to mandate changes in the operation
of BHW or its facilities to ensure that the water supply provided to the
Buck Hill Falls community remains within the standards adopted by the DEP.
In the event that the DEP were to mandate any changes in the Company's
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.
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Pursuant to amendments to the Pennsylvania Safe Drinking Water Act
enacted in 1989 (the "Water Act Amendments"), public water systems using
unfiltered surface water sources were required to install
filtration-disinfection systems for unfiltered surface water supplies not
later than December 31, 1995. In 1993, the Company was informed by the
DEP that its water system exceeded the maximum contaminant level specified
for coliform bacteria under regulations enacted pursuant to the Water Act
Amendments, and that the Company would be required to install and begin
operation of continuous filtration and disinfection in accordance with
applicable regulations, or abandon its surface water source no later than
May 17, 1993. Pursuant to these requirements, the Company commenced
construction of a water filtration plant for Buck Hill Creek. In
addition, pursuant to applicable regulations, the Company was required to
cover its reservoir, which was accomplished in 1993. While the DEP is
responsible for enforcing the requirements of the Water Act Amendments,
the PUC regulates water aesthetics, and may require BHW to take certain
actions or install facilities to maintain standards of water aesthetics in
excess of the requirements of the Water Act Amendments.
As a result of delays in the review process and delays in
construction and start up of the filtration plant, the filtration plant
was first placed into service in February 1995. The cost of approximately
$900,000 was financed through a term bank loan. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
In the fiscal year ended October 31, 1993, BHW sought and obtained
PUC approval to raise the rates charged for water services by 121%.
During the same period, the Company raised the rates charged for sewer
services by 100%. On January 18, 1995, BHW filed an application with the
PUC to increase its rates for water service effective March 20, 1995,
partially to offset the costs associated with construction of the water
filtration facility. The Company sought approval of rates that would
produce $114,828 in additional annual revenue, but, effective July 20,
1995, was granted rates that are expected to produce additional annual
revenues of $82,000.
OTHER OPERATIONS
In addition to the services described above, the Company also
provides road maintenance for approximately 23 miles of paved roads
presently in the Buck Hill Falls community, plowing and cindering, trash
pickups, street lighting and 24 hour security patrols. Costs of such
services are borne by residents of Buck Hill Falls. See "Dues and Fees
Paid By Property Owners," below.
DUES AND FEES PAID BY PROPERTY OWNERS
In addition to fees which residents of Buck Hill Falls pay to the
Company for water and sewer services and the use of recreational
facilities, each of the property owners is assessed dues to the Company in
connection with road maintenance, trash collection, security and other
general maintenance services provided by the Company for the Buck Hill
Falls community. The utilization by the Company of certain of the dues
and assessments has been contested by certain residents and by the Lot and
Cottage Owners Association of Buck Hill Falls, Inc. (the "Association"), a
non-profit organization whose members consist of most owners, other than
the Company, of homes or lots in Buck Hill Falls. The Association has
also expressed opposition to increases in such charges that the Company
believed were necessary to provide for operation of Company facilities in
the community and to meet certain other of the Company's obligations.
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The Company set dues for the fiscal year ended October 31, 1995 at $2,400
per resident. In July 1995, the Association and certain individual
property owners brought suit against the Company and certain of its
officers and directors challenging the right of the Company to make
assessments and dues charges and seeking to enjoin certain collection
actions instituted by the Company to collect unpaid dues. On June 8,
1996, an agreement was signed by the Association and the Company
recognizing the obligation of residents to pay dues to the Company for
services rendered for their benefit and giving the Association a role in
setting the amount. Under the Agreement a joint committee is to be
established, consisting of two members nominated by the Chairman of the
Company, two members nominated by the President of the Association, and a
fifth member chosen by mutual agreement of the Company Chairman and the
Association President. The committee is to make recommendations to the
Company's Board of Directors as to the level of dues to be assessed. The
Agreement provides that special assessments to repay debt, acquire
property for development purposes, purchase Company Stock and develop land
will only be considered if the Company grants property owners an option to
purchase Common Stock, or a new class of stock, in consideration for
payment of the special assessment. Both sides agreed to dismiss their
litigation.
Owners of properties in The Cottages at Buck Hill Falls ("The
Cottages"), a separate residential complex in Buck Hill Falls, pay an
additional fee of $100 - $125 per month, depending on the type of
residence, a portion of which is placed in a restricted reserve fund for
long range capital improvements for these properties, and the remainder of
which is used for exterior maintenance of such residences. Exterior
maintenance services are not provided to other residents of Buck Hill
Falls.
Purchasers of lots in The Cottages who have not yet had the design
of their proposed home approved by the Company pay an amount equal to 25%
of the total dues charged to owners of residences in the first year
following their purchase of a lot, 50% in the second year and 75% in the
third year. Thereafter, lot owners at The Cottages pay approximately the
same dues as owners of residences. However, once the design of a proposed
residence has been approved by the Company, the owner of the lot is in
most cases required to pay the same dues as all owners of residences.
DEVELOPMENT OF THE COTTAGES
Pursuant to a series of agreements executed in May 1985, the
Company transferred 600 acres of its land to Buck Hill Falls Associates
(the "Partnership"), a Pennsylvania limited partnership in which the
Company had a 29% limited partnership interest. Thereafter, the
Partnership developed The Cottages on the transferred property. However,
the sales of properties in The Cottages ran significantly behind
expectations, and the Partnership was not able to pay the principal amount
due on certain loan obligations incurred in connection with the
development of The Cottages. As a result, the Partnership ceased
development of The Cottages in 1990, and in early 1991 gave to First
Eastern Bank (now PNC Bank, N.A.) (the "Bank"), its principal lender, a
deed on the remaining property it held, in lieu of foreclosure on the
property. The Partnership dissolved in 1991, and all selling efforts
relating to The Cottages was suspended. In April 1996 the Company was
advised that the Bank had agreed to convey the property to a purchaser for
$900,000.
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MARKETING AND COMPETITION
The Company's marketing efforts generally have been limited in
recent years and directed primarily to promoting the use of its
recreational facilities, principally its golf course. Marketing of homes
for sales and rentals in the community has been left to local realtors,
but the depressed market for second homes in the area has slowed real
estate sales generally, particularly in Barrett Township where Buck Hill
Falls is located. However, in 1996 the Company undertook a study on ways
and means to promote the community as a whole and identified various steps
it could pursue in the coming years to achieve this goal. These include
the formation of a real estate group composed of a number of local and
regional realtors committed to working together for both the sales and
rentals of homes. This group is scheduled to begin functioning in the
Fall of 1996. Other steps under serious consideration include a joint
effort between the Company and this group of realtors to advertise and
promote the community, including the production of a video tape featuring
the homes and facilities of the community, and utilization of the Internet
to promote sales and rentals.
Revenues derived from the use of the Company's golf course by
members of the general public have become increasingly important in recent
years, accounting for about 65 percent of total golf revenues in 1995.
The company is in competition with a number of resorts in the Pocono
Mountains area, and many of its competitors have substantially greater
financial and marketing resources.
EMPLOYEES
As of April 30, 1996, the Company had 17 persons employed on a
full year basis. An additional 42 persons are employed on a seasonal
basis during the summer season in 1996 (demand for the Company's services
increases substantially during the summer months).
OTHER PROPERTIES
Aside from the various facilities described above, the Company
owns approximately 4,000 acres of undeveloped wooded land contiguous to
the Buck Hill Falls community and The Cottages. Of the 4,000 acres,
approximately 2,400 acres are owned by BHW and serve as a watershed.
Company management does not believe that development of the watershed land
is feasible in the foreseeable future. Over 98 percent of the Company's
land was acquired prior to 1947, and no land has been acquired in the last
30 years. The land is zoned residential. The Company has mortgaged
approximately 2,600 acres of the land together with certain of its
amenities to its principal lending bank as collateral for amounts borrowed
under a line of credit. However, the mortgage is subordinated to the
rights of community members of Buck Hill Falls under a non-exclusive
easement granted to such persons for access to and use of certain areas
(consisting of various recreational amenities and various roads, pathways
and private rights-of-ways in Buck Hill Falls).
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as
follows:
Term as
Director
Name Age Position Expires
- ---- --- -------- --------
David B. Ottaway 56 Chairman of the Board 1998
and President, Director
Anthony C. Bowe 39 Vice President, Treasurer 1999
and Chief Financial Officer,
Director
Frank J. Dracos, M.D. 66 Vice President Operations 1998
and Chief Operating Officer,
Director
Richard C. Unger, Jr. 44 Secretary, Director 1999
George J. Byron 72 Director 1998
Edwin A. Gee 76 Director 1997
Grace M. Godshalk 58 Director 1997
Clifford Press 42 Director 1997
James T. Sygenda 63 Director 1999
Carl R. Benasutti 54 General Manager N/A
Mr. Ottaway was elected Chairman and Chief Executive Officer in
July 1995, and President in 1996. Mr. Ottaway has been employed by the
Washington Post for the past 25 years and is currently an investigative
reporter.
Mr. Bowe was elected to the Board and as Vice President, Treasurer
and Chief Financial Officer in July 1996. He is a Managing Director of
Bankers Trust Company, New York City, and has held a variety of line and
management positions with that firm for more than the past five years.
Dr. Dracos has been a director of the Company since 1992. He was
elected Vice President Operations and Chief Operating Officer in July
1996. Dr. Dracos has been a practicing orthopedic surgeon with Pocono
Orthopedic for over five years. He is also a director of Mellon Bank
(Northeast).
Mr. Unger was elected to the Board and as Secretary of the Company
in July 1996. He is an attorney practicing in West Conshohocken,
Pennsylvania. Until forming his own firm in 1995, he was for many years a
partner in the Philadelphia based firm of Duane, Morris & Hecksher.
Mr. Byron has been a director of the Company since 1992. Mr.
Byron has been co-owner of Lord Byron, Inc., a manufacturer of hospital
linens and nuclear energy protective clothing, for over five years.
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Mr. Gee has been a director of the Company since 1995. Mr. Gee
retired as Chairman of the Board of International Paper in 1985. He is
currently the Chairman and a director of Oncogene Science, Inc.
Mrs. Godshalk has been a director of the Company since March, 1995
and she was elected President of BHW in July 1996. Mrs. Godshalk has been
the Vice President of Ultra-Mold Corporation in Yardley, Pennsylvania,
since 1984. For the past eighteen years, she has been an elected
Supervisor of Lower Makefield Township, Bucks County, Pennsylvania.
Mr. Press has been a director of the Company since 1994. Since
1986, Mr. Press has served as President of Hyde Park Holdings, Inc. Mr.
Press also has served as a director of High Voltage Engineering
Corporation since 1988.
Mr. Sygenda has been a director of the Company since 1993. Mr.
Sygenda was district sales manager and national account manager for UARCO
Business Forms until he retired in 1993.
Mr. Benasutti has been general manager of the Company since 1994.
Mr. Benasutti also served as community manager for Pine Crest Development
Corp. from 1988 through 1993.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation for services rendered by the Company's General Manager. The
Company's other executive officers serve on a voluntary basis and are not
compensated.
SUMMARY COMPENSATION TABLE
<TABLE>
Annual Compensation
-----------------------
Other Annual Other
Name and Principal Position Year Salary Compensation Compensation
- --------------------------- ---- ------ ------------ ------------
<S> <C> <C> <C> <C>
Carl Benasutti............. 1995 $43,000 $ 1,000 ---
General Manager(1) 1994 $31,826 $ 2,403(2) ---
1993 --- --- ---
</TABLE>
- ------------
(1) Mr. Benasutti has been compensated as General Manager since
January 1994, although formally elected to this position in July
1994.
(2) Received for the period from November 1, 1993 through January 2,
1994, during which Mr. Benasutti served in an informal capacity as
assistant to the President.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information concerning
ownership of the Common Stock of the Company as of April 30, 1996 by each
shareholder known to the Company to own beneficially more than 5% of its
Common Stock, each director of the Company and all directors and executive
officers of the Company as a group. Except as otherwise noted, each
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person listed below has sole voting and dispositive power with respect to
the shares listed next to his or her name. All persons listed below are
directors of the Company.
Shares
Beneficially
Name Owned Percent of Class
- ---- ------------ ----------------
David B. Ottaway . . . . . . . . 5,980(1) 8.1%
Anthony C. Bowe. . . . . . . . . 100(2) *
Frank J. Dracos, M.D . . . . . . 400(3) *
Richard C. Unger, Jr . . . . . . 100(2) *
George J. Byron. . . . . . . . . 100 *
Edwin A. Gee . . . . . . . . . . 2,321(4) 3.2%
Grace M. Godshalk . . . . . . . 90(5) *
Clifford Press . . . . . . . . . 100 *
James T. Sygenda . . . . . . . . 100(2) *
All executive officers and
directors as a group . . . . . 9,291 12.6%
- -------------
* Less than 1%
(1) Includes 1,583 shares held by Mr. Ottaway and 4,397 shares held by
a non-profit charitable Trust of which Mr. Ottaway is President
and a trustee. Mr. Ottaway disclaims beneficial ownership of the
shares held by the Trust. Mr. Ottaway's address is 327 A Street,
S.E., Washington, D.C. 20003.
(2) Held jointly with wife.
(3) Includes 100 shares held by Dr. Dracos' wife and 100 shares held
by an adult son, as to which shares Dr. Dracos disclaims
beneficial ownership.
(4) Includes 25 shares held by Mr. Gee's wife, 105 shares held jointly
with his wife and 80 shares held by Mr. and Mrs. Gee in trusts for
the benefit of their children. Does not include an additional
502 shares held by other family members, as to which shares
Mr. Gee disclaims beneficial ownership.
(5) Includes 50 shares held jointly with Mrs. Godshalk's husband.
DESCRIPTION OF CAPITAL STOCK
The authorized capital of the Company consists of 105,000 shares
of Common Stock and 100,000 shares of Class A Common Stock. All shares
are entitled to participate equally and ratably in dividends, when and as
declared by the Board of Directors out of assets legally available
therefore, and in distributions upon liquidation. Each share is entitled
to one vote for all matters on which shareholders may vote other than the
election of directors. Cumulative voting rights apply in the election of
directors, which means that each share is entitled to as many votes as is
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equal to the number of directors to be elected, and all votes may be cast
for a single director or may be distributed among any number of directors.
However, because the Board of Directors of the Company consists of three
classes, the number of votes to which each share is entitled in the
election of directors as a result of the cumulative voting rights is
either 30% or 40% (depending on the number of directors standing for
election) as large as would be the case if the Board of Directors was not
classified. There are no preemptive, conversion, or redemption rights.
The Company's Articles of Incorporation, as amended by the
shareholders on July 7, 1996, provide that the shares of Common Stock and
the shares of Class A Common Stock each have one vote per share and are
equal in all other respects except that the shares of Class A Common Stock
may only be issued to, transferred to or held by any person, company or
other entity that is an owner or co-owner of a cottage and/or lot in the
Buck Hill Falls community (a "Qualified Owner"); provided, however, that
(i) the Company and The Buck Hill Conservation Foundation may acquire and
hold shares of Class A Common Stock; (ii) a holder of Class A Common Stock
may transfer shares of Class A Common Stock other than to a Qualified
Owner if the transferee and the terms of the transfer are disclosed to,
and approved by, the Board of Directors of the Company and, upon
recommendation of the Board of Directors, approved by the affirmative vote
of the holders of a majority of the outstanding shares of Class A Common
Stock other than those proposed to be transferred; and (iii) a transferee
of Class A Common Stock pursuant to the approvals required by clause (ii)
above may hold the Class A Common Stock but may not transfer them,
willfully, by operation of law or otherwise, except as permitted by the
foregoing provisions.
MARKET QUOTATIONS FOR COMMON STOCK
The Company believes that market transactions in its Common Stock
occur very infrequently, rendering it unlikely that there exists an
established trading market for the Common Stock, and that quotations would
be markedly affected by a modest volume of transactions.
Based upon information provided to the Company by the National
Quotation Bureau, Inc., quotations reported by the National Daily
Quotation Service and the National Association of Securities Dealers, Inc.
Non-NASDAQ OTC Bulletin Board indicate a range of bid prices of $11.00 to
$16.00 during the period from November 1, 1993 through January 31, 1994;
$11.00 to $17.00 during the period from February 1, 1994 through April 29,
1994; $15.00 to $18.00 during the period from May 2, 1994 through July 29,
1994; $15.00 to $25.00 during the period from August 1, 1994 through
October 31, 1994; $21.00 to $26.00 during the period from November 1, 1994
through January 31, 1995; $25.00 to $28.00 during the period from
February 1, 1995 through April 30, 1995; $28.00 to $31.00 during the
period from May 1, 1995 through July 31, 1995; $28.00 to $31.00 during the
period from August 1, 1995 through October 31, 1995; $31.00 during the
period from November 1, 1995 through January 31, 1996; and $31.00 during
the period from February 1, 1996 through April 30, 1996.
These quotations reflect inter-dealer prices, without retail
markup, mark-down or commission and may not necessarily reflect actual
transactions.
The Company has not declared or paid dividends on its Common Stock
in thirty years and anticipates that all earnings will be retained for use
in its business. The Company does not anticipate that dividends will be
declared or paid in the foreseeable future.
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As of April 30, 1996, the Company had approximately 497
shareholders of record.
Since the transferability of the Class A Stock is essentially
restricted to Qualified Owners it is unlikely that any trading market will
develop for that class. The Company will act as the transfer agent for
the Class A Stock.
THE OFFERING
CLASS A STOCK
The shares of Class A Stock offered by this Prospectus will be
offered only to those persons who own Common Stock in the Company and are
an owner or co-owner of a cottage and/or lot in the Buck Hill Falls
community ("Qualified Owner"). Qualified Owners are offered the
opportunity to purchase 200 shares per property for $20 per share or an
aggregate price of $4,000, payable over five years at $800 annually or, if
paid in full by October 31, 1996, with a $500 discount. All 200 shares
must be purchased by a Qualified Owner if any are purchased. If all
shares of Class A Stock are not subscribed within 15 days after the date
of this Prospectus (as set forth on the cover page) then it is the current
intention of the Board of Directors to offer Qualified Owners who did
subscribe the opportunity to purchase up to 200 additional shares per
property (up to a total purchase of 400 shares of Class A Stock per
property) on the same terms, subject to pro rata reduction if
subscriptions are received for more than 75,000 Class A shares. There is
no minimum number of shares that must be sold.
All subscribers electing to pay over the five year term will be
required to sign a subscription agreement irrevocably obligating them to
complete payment for the shares. This will be a legally binding
obligation of the subscriber and the unpaid balance will be represented by
a promissory note payable to the Company. Share certificates will be
issued within 30 days after payment is made and, in the case of
installment payments, will be issued pro rata within 30 days after each
installment is made. No voting or other rights of share ownership will
attach until share certificates are issued.
All certificates representing Class A Stock will contain a legend
calling attention to the restrictions on transferability set forth in the
Company's Articles of Incorporation.
The offering price of the Class A Stock was determined by the
Board of Directors of the Company based upon the historical prices of the
Common Stock, the inactive nature of that market, the restrictions on
transferability of the Class A Stock and the unlikely prospect of any
dividend being paid.
The amendment to the Company's Articles of Incorporation
authorizing the Class A Stock was proposed by the Board of Directors for
adoption by the shareholders at the annual meeting held on July 7, 1996.
The Company distributed proxy materials describing the proposed amendment
and the Company's intentions with respect to this offering if the
amendment were approved. Certain shareholders who are not Qualified
Owners objected to the proposal, asserting that the proposed offering
price was inadequate and that the Company should make a rights offering to
23<PAGE>
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all its shareholders. The Board concluded that the offering of Class A
Stock to Qualified Owners was fair and in the best interest of the Company
and its shareholders. The Common Stock does not have any pre-emptive
right to subscribe to new securities. After discussion, the amendment was
approved by the Common shareholders by a vote of 31,766 for and 11,375
against, with 11,375 abstentions.
COMMON STOCK
Upon completion of the offering of the Class A Stock to Qualified
Owners as set forth above, expected to be in September 1996, the Company
intends to offer to all holders of its Common Stock (other than Qualified
Owners) the opportunity to purchase at $17.50 per share that number of
shares of Common Stock which, in the judgment of the Company, would be
sufficient to enable each such holder of Common Stock to maintain his or
her percentage interest in the Company. A record date for this offering
of Common Stock will be fixed to coincide with the date of this Prospectus
as set forth on the cover page.
Upon completion of the offering of Class A Stock the Company
intends to send to each holder of record of the Common Stock on the record
date a notice and subscription form by which such holder can subscribe to
purchase that number of shares necessary to maintain such holder's
percentage interest in the Company on the record date. The subscribing
holder would also be able to specify a maximum number of shares to be
purchased. This right to purchase additional shares of Common Stock will
not be transferable and must be exercised by return of the executed
subscription within ten days, after which time the right will expire.
Upon expiration of this ten day period, the Company will determine the
number of additional shares of Common Stock purchased by each subscribing
holder based upon (i) the number of Class A shares sold by the Company
(ii) the number of shares of Common Stock held on the record date by the
subscribing Common holders and (iii) any maximum specified by a
subscribing Common holder.
The Company's authorized capital includes 105,000 shares of Common
Stock, of which 73,537 shares are issued and outstanding. Accordingly,
subscriptions for additional shares of Common Stock will be subject to pro
rata reduction if more than 31,463 shares are subscribed.
LEGAL MATTERS
Wolf, Block, Schorr and Solis-Cohen, Philadelphia, Pennsylvania,
has rendered its opinion to the Company that the Class A Common Stock and
Common Stock to be sold by the Company, when issued and paid for in
accordance with the plan of distribution described herein, will be duly
authorized, validly issued, fully paid and non-assessable.
EXPERTS
The audited consolidated financial statements of Buck Hill Falls
Company included in this Prospectus have been so included in reliance on
the report of Parente, Randolph, Orlando, Carey & Associates, independent
accountants, given on the authority of said firm as experts in accounting
and auditing.
24<PAGE>
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement on Form S-1 under the
Securities Act of 1933, as amended, with respect to the shares of Class A
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company
and the Class A Common Stock, reference is made to the Registration
Statement, and the exhibits and schedules thereto, which may be inspected
and copied at the public reference facilities maintained by the Commission
at Room 1024, 450 Fifth Street, NW, Washington, DC 20549, and at the
Commission's Regional Offices located at 7 World Trade Center, 13th Floor,
New York, New York 10048, and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can
also be obtained at prescribed rates from the Public Reference Section of
the Commission, 450 Fifth Avenue, NW, Washington, DC 20549. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete and, in each instance, reference is
made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all
respects by such reference.
25<PAGE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
=============================
AUDITED FINANCIAL STATEMENTS: Page
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS . . . . . . . . . F-2
CONSOLIDATED FINANCIAL STATEMENTS:
Balance Sheet as of October 31, 1995 and 1994. . . . . . . . . . . F-3
Statement of Operations for the Years Ended
October 31, 1995, 1994 and 1993. . . . . . . . . . . . . . . . . F-5
Statement of Changes in Stockholders' Equity for the
Years Ended October 31, 1995, 1994 and 1993. . . . . . . . . . . F-6
Statement of Cash Flows for the Years Ended
October 31, 1995, 1994 and 1993. . . . . . . . . . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . F-9
UNAUDITED INTERIM FINANCIAL DATA:
Condensed Consolidated Balance Sheet -
April 30, 1996 and October 31, 1995. . . . . . . . . . . . . . . F-18
Condensed Consolidated Statement of Operations -
Six Months and Three Months Ended April 30, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-19
Condensed Consolidated Statement of Cash Flows -
Six months Ended April 30, 1996 and 1995 . . . . . . . . . . . . F-20
Notes to Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . F-21
-----------------
F-1<PAGE>
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
============================
To the Board of Directors and Stockholders of Buck Hill Falls Company:
We have audited the accompanying consolidated balance sheets of
Buck Hill Falls Company and subsidiary as of October 31, 1995 and 1994,
and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years in the
period ended October 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Buck Hill Falls Company and subsidiary as of October 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the
three years in the period ended October 31, 1995 in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements,
the Company changed its method of accounting for income taxes by adopting
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," in 1994.
PARENTE, RANDOLPH, ORLANDO, CAREY & ASSOCIATES
Wilkes-Barre, Pennsylvania
December 13, 1995
F-2<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
<TABLE>
CONSOLIDATED BALANCE SHEET
October 31, 1995 and 1994
- --------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------
ASSETS
======
<S> <C> <C>
CURRENT ASSETS:
Cash. . . . . . . . . . . . . . . . . . . . $ 31,460 $ 20,194
Accounts receivable, trade net of
allowance for doubtful accounts of
$79,860 in 1995 and $35,000 in 1994 . . . 245,369 175,758
Prepaid expenses:
Insurance . . . . . . . . . . . . . . . . 25,683 19,822
Other . . . . . . . . . . . . . . . . . . 4,545 3,176
---------- ----------
Total current assets . . . . . . . 307,057 218,950
RESTRICTED CASH . . . . . . . . . . . . . . . 73,799 105,876
PROPERTY, PLANT AND EQUIPMENT . . . . . . . . 2,756,391 2,761,827
DEFERRED COSTS, net of accumulated
amortization of $11,060 and
$6,320 in 1995 and 1994,
respectively. . . . . . . . . . . . . . . . 12,623 17,363
---------- ----------
TOTAL . . . . . . . . . . . . . . . $3,149,870 $3,104,016
========== ==========
F-3<PAGE>
<PAGE>
- --------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
====================================
<S> <C> <C>
CURRENT LIABILITIES:
Demand note payable, 5%, unsecured . . . . $ 11,300 $ 11,300
Current portion of long-term debt. . . . . 847,385 847,586
Accounts payable, trade. . . . . . . . . . 37,283 114,370
Accrued expenses and other . . . . . . . . 183,355 219,687
---------- ----------
Total current liabilities. . . . . 1,079,323 1,192,943
CUSTOMER DEPOSITS. . . . . . . . . . . . . . 73,800 105,882
LONG-TERM DEBT . . . . . . . . . . . . . . . 956,218 675,922
6-1/4% SUBORDINATED NOTES. . . . . . . . . . 140,000 140,000
---------- ----------
Total liabilities. . . . . . . . . 2,249,341 2,114,747
COMMITMENTS. . . . . . . . . . . . . . . . .
STOCKHOLDERS' EQUITY . . . . . . . . . . . . 900,529 989,269
---------- ----------
TOTAL. . . . . . . . . . . . . . . $3,149,870 $3,104,016
========== ==========
</TABLE>
- --------------------------------------------------------------------------
See notes to Consolidated Financial Statements
F-4<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES . . . . . . . . . . . . . . . $2,218,139 $2,203,529 $2,048,295
COST OF REVENUES . . . . . . . . . . . 1,653,362 1,592,863 1,513,458
---------- ---------- ----------
GROSS PROFIT . . . . . . . . . . . . . 564,777 610,666 534,837
GENERAL AND ADMINISTRATIVE EXPENSES. . 527,683 474,372 400,942
---------- ---------- ----------
INCOME FROM OPERATIONS . . . . . . . . 37,094 136,294 133,895
---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest expense, net of capitalized
interest of $21,455 and $49,096 in
1995 and 1994, respectively. . . . (161,515) (80,944) (61,497)
Miscellaneous. . . . . . . . . . . . 10,292 13,030 13,832
Real estate tax refund . . . . . . . - - 13,253
Gain on sale of property, plant
and equipment. . . . . . . . . . . 25,389 - -
---------- ---------- ----------
Other income (expense). . . . . (125,834) (67,914) (34,412)
---------- ---------- ----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES, EXTRAORDINARY CREDIT AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE. . (88,740) 68,380 99,483
PROVISION FOR INCOME TAXES. . . . . . - 35,300 33,800
---------- ---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY
CREDIT AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE. . . (88,740) 33,080 65,683
EXTRAORDINARY CREDIT - Reduction of income
taxes arising from carry-forward of
prior year's operating losses. - - 33,800
---------- ---------- ----------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE . . . (88,740) 33,080 99,483
CUMULATIVE EFFECT OF ACCOUNTING CHANGE. . - 21,600 -
---------- ---------- ----------
NET INCOME (LOSS) . . . . . . . . . . $ (88,740) $ 54,680 $ 99,483
========== ========== ==========
EARNINGS (LOSS) PER COMMON SHARE:
Before extraordinary credit. . . . . $ (1.21) $ .45 $ .89
Extraordinary credit . . . . . . . . - - .46
Cumulative effect of accounting change - .29 -
---------- ---------- ----------
NET INCOME (LOSS) PER COMMON SHARE . . $ (1.21) $ .74 $ 1.35
========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------
See Notes to Consolidated Financial Statement
F-5<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------------------
.COMMON STOCK (1). TOTAL
SHARES ADDITIONAL STOCKHOLDERS'
ISSUED AMOUNT CAPITAL DEFICIT EQUITY
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 31, 1992 . . . 73,537 $1,251,370 $ 799,227 $(1,215,491) $ 835,106
NET INCOME. . . . . . . . . . . 99,483 99,483
------- ---------- ---------- ----------- ----------
BALANCE, OCTOBER 31, 1993 . . . 73,537 1,251,370 799,227 (1,116,008) 934,589
NET INCOME. . . . . . . . . . . 54,680 54,680
------- ---------- ---------- ----------- ----------
BALANCE, OCTOBER 31, 1994 . . . 73,537 1,251,370 799,227 (1,061,328) 989,269
NET LOSS. . . . . . . . . . . . (88,740) (88,740)
------- ---------- ---------- ----------- ----------
BALANCE, OCTOBER 31, 1995 . . . 73,537 $1,251,370 $799,227 $(1,150,068) $900,529
======= ========== ========== =========== ==========
</TABLE>
(1) No par value; authorized 105,000 shares.
- -------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
F-6<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss). . . . . . . . . $ (88,740) $ 54,680 $ 99,483
----------- ---------- ----------
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation . . . . . . . . . 193,234 160,778 156,232
Amortization . . . . . . . . . 4,740 4,740 1,580
Gain on sale of property, plant
and equipment. . . . . . . . (25,389) (2,000) -
Cumulative effect of change in
accounting principle . . . . - (21,600) -
Deferred tax expense . . . . . - 21,600 -
Changes in assets and
liabilities:
Accounts receivable, trade . (69,611) (33,563) (2,003)
Prepaid expenses and other . (7,230) 1,824 36,386
Restricted cash. . . . . . . 32,077 (5,814) (14,003)
Deferred costs . . . . . . . - - (23,683)
Accounts payable, trade. . . (77,087) (5,250) 52,201
Accrued expenses and other . (36,332) 59,046 (115,807)
Customer deposits. . . . . . (32,082) 5,032 13,146
----------- ---------- ----------
Total adjustments . . . . . (17,680) 184,793 104,049
----------- ---------- ----------
Net cash provided by
(used in) operating
activities. . . . . . . . . (106,420) 239,473 203,532
----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and
equipment. . . . . . . . . . . . (188,297) (688,630) (381,787)
Proceeds from sale of property, plant
and equipment. . . . . . . . . . . 25,888 2,000 -
----------- ---------- ----------
Net cash used in investing
activities . . . . . . . . (162,409) (686,630) (381,787)
----------- ---------- ----------
F-7<PAGE>
<PAGE>
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt. . . . . . . . . (1,106,517) (460,056) (1,151,554)
Proceeds from issuance of debt . . 1,386,612 914,023 1,339,219
----------- ---------- ----------
Net cash provided by
financing activities . . . 280,095 453,967 187,665
----------- ---------- ----------
NET INCREASE IN CASH . . . . . . . . 11,266 6,810 9,410
CASH, BEGINNING OF YEAR. . . . . . . 20,194 13,384 3,974
----------- ---------- ----------
CASH, END OF YEAR. . . . . . . . . . $ 31,460 $ 20,194 $ 13,384
=========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid (refunded) for:
Interest . . . . . . . . . . . $ 164,375 $ 129,634 $ 70,065
=========== ========== ==========
Income taxes . . . . . . . . . . $ - $ (500)$ 25,546
=========== ========== ==========
SUPPLEMENTAL NONCASH INVESTING
ACTIVITY:
Liabilities incurred for purchase
of property, plant and equipment . $ - $ 61,711 $ -
=========== ========== ==========
</TABLE>
- -------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
F-8<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Buck
Hill Falls Company and its wholly-owned subsidiary, Buck Hill
Water Company (the "Company"). All significant intercompany
balances and transactions are eliminated.
The accompanying consolidated financial statements have been
prepared on a going-concern basis which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. The Company incurred a net loss of
$88,740 for the year ended October 31, 1995 and at October 31,
1995, the Company has a cumulative deficit of $1,150,068 and a
working capital deficiency of $772,266. As described in Note 4,
although the Company's line of credit is available through May 31,
1997, the ability to borrow under the line is contingent upon
certain factors. As a result, continuation of the Company in its
present form is dependent upon the successful maintenance of its
debt terms, its ability to obtain additional financing if needed
and the eventual achievement of sustained profitable operations.
Management believes that revisions in the Company's operating
requirements, including rate increases for amenities and the
effect of the water rate increase implemented in August 1995,
provide the opportunity for the Company to continue as a going
concern. However, there is no assurance that management's actions
will be successful, or if they are not successful, that the
Company would be able to continue as a going concern.
PROPERTY, PLANT AND EQUIPMENT
The Company recognizes real and personal property to which it has
title at cost.
Depreciation is computed using both straight-line and accelerated
methods over the estimated useful lives of the assets.
DEFERRED COSTS
Costs incurred for issuance of the 6-1/4% subordinated notes have
been deferred and are amortized using the straight-line method
over the term of the notes.
F-9 <PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------
EARNINGS (LOSS) PER COMMON SHARE
--------------------------------
Earnings (loss) per common share is based on the weighted average
number of shares outstanding (73,537 in 1995, 1994 and 1993).
STATEMENT OF CASH FLOWS
-----------------------
For purposes of the statement of cash flows, restricted cash (Note
2) is not considered to be cash since such funds are restricted in
use for capital improvements and repairs to The Cottages at Buck
Hill Falls.
ACCOUNTING PRINCIPLES
---------------------
In fiscal 1994, the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), Accounting for Income
Taxes. SFAS 109 requires an asset and liability approach for
accounting and reporting for income taxes. The cumulative effect
of the change in accounting principle as of November 1, 1993
resulted in a benefit to net income of approximately $21,600.
2. RESTRICTED CASH AND CUSTOMER DEPOSITS:
The Company is responsible for repairs and replacements at The
Cottages at Buck Hill Falls ("The Cottages"), a residential
development. The Company has a funding program to meet this
obligation, under which purchasers of properties in The Cottages
pay a fee of $100 to $125 per month, depending on the type of
residence. These fees are accounted for as customer deposits. A
portion of the fee is placed in a restricted fund for long-range
capital improvements for units in The Cottages and the balance of
the fee is used for exterior maintenance of such residences.
Under terms of restrictive covenants signed by purchasers of
properties in The Cottages, the Company has management
responsibility for these funds. Accumulated funds are held in
separate savings accounts and are generally not available for
expenditures for normal operations. If additional funds are
needed for long-range capital improvements, the Company has the
right, under the restrictive covenants, to increase regular
assessments, pass special assessments or delay major repairs and
replacements until funds are available. The Company seeks the
advice of a special committee of property owners regarding the
management of these funds.
F-10<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------
3. PROPERTY, PLANT AND EQUIPMENT:
The components of property, plant and equipment at October 31,
1995 and 1994 are summarized as follows:
<TABLE>
1995 1994
---- ----
<S> <C> <C>
Land . . . . . . . . . . . . . . $ 445,831 $ 446,330
Buildings. . . . . . . . . . . . 941,913 932,136
Recreational facilities. . . . . 1,384,356 1,356,771
Sewer and water facilities . . . 1,340,588 423,168
Machinery and equipment . . . . 381,285 407,605
Automotive equipment . . . . . . 163,069 122,943
Furniture and fixtures . . . . . 92,528 92,528
Construction in progress . . . . - 832,211
----------- ----------
Total . . . . . . . . . . 4,749,570 4,613,692
Less accumulated depreciation. . (1,993,179)(1,851,865)
----------- ----------
Property, plant and equipment. . $ 2,756,391 $2,761,827
=========== ==========
</TABLE>
4. LONG-TERM DEBT:
Long-term debt at October 31, 1995 and 1994 is summarized as
follows:
<TABLE>
1995 1994
---- ----
<S> <C> <C>
Borrowings under revolving loan
agreement (see below). . . . . . $ 816,120 $ 797,708
Note payable - bank, payable in
monthly installments of $8,985,
including interest at the bank's
base rate (8.75% at October 31,
1995) plus 1-1/2%, maturing
May 4, 2015. The loan is secured
by a first mortgage on
approximately 2,200 acres of land
and land improvements located in
Barrett Township, Monroe County,
Pennsylvania, along with
assessments and fee revenues . . 892,852 650,000
Note payable - bank, payable in
monthly installments of $1,250
including interest at the bank's
F-11<PAGE>
<PAGE>
base rate (8.75% at October 31,
1995) plus 1-1/4%, maturing
November 2002. The note is
secured by a second mortgage on
approximately 2,600 acres of
land and land improvements
located in Barrett Township,
Monroe County, Pennsylvania.
Additionally, a ten-year lease
between the Company and the U.S.
Postal Service is pledged as
collateral . . . . . . . . . . . 55,697 60,677
Note payable - bank, payable in
monthly installments of $586
including interest at 9.5%,
maturing June 2000; secured by
equipment with a depreciated
cost of $22,330. . . . . . . . . 26,056 -
Note payable - financial
institution, payable in monthly
Installments of $235 including
interest at 11.5%, maturing July
2000; secured by equipment with
a depreciated cost of $8,973 . . . 10,188 -
Note payable - bank, payable in
monthly installments of $199
including interest at the
bank's base rate (8.75% at
October 31, 1995) plus 1-1/2%,
maturing December 15, 1996;
secured by equipment with a
depreciated cost of $2,368 . . . 2,690 4,747
Note payable - bank, repaid in
August 1995. . . . . . . . . . . - 10,376
--------- ----------
Total . . . . . . . . . . . . 1,803,603 1,523,508
Less current portion . . . . . . . 847,385 847,586
---------- ----------
Long-term debt . . . . . . . . . . $ 956,218 $ 675,922
========== ==========
</TABLE>
The Company has a secured revolving line of credit with a bank for
$1,000,000. Borrowings under this agreement bear interest at the
prime rate (8.75% at October 31, 1995) plus 1-1/2%. Approximately
2,600 acres of land and land improvements located in Barrett
Township, Monroe County, Pennsylvania are pledged as collateral,
along with dues, assessments and fee revenues. The line of
credit is available through May 31, 1997, although amounts
borrowed are payable on demand. The ability to borrow under the
line is contingent upon the Company maintaining a satisfactory
F-12<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------
financial position and subject to annual review by the bank of the
Company's financial statements. If, in the opinion of the
authorized lending officers of the bank, the Company's credit
worthiness materially declines, the credit line will cease to be
available for future draws and any existing balance will be
required to be fully amortized over a reasonable term.
The aggregate principal payments required on long-term debt at
October 31, 1995 are as follows:
<TABLE>
YEARS ENDING OCTOBER 31:
-----------------------
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . . $ 847,385
1997 . . . . . . . . . . . . . . . . . . . . . . . 31,889
1998 . . . . . . . . . . . . . . . . . . . . . . . 33,956
1999 . . . . . . . . . . . . . . . . . . . . . . . 36,802
2000 . . . . . . . . . . . . . . . . . . . . . . . 36,022
Thereafter . . . . . . . . . . . . . . . . . . . . 817,549
----------
Total . . . . . . . . . . . . . . . . . $1,803,603
==========
</TABLE>
5. ACCRUED EXPENSES AND OTHER
CURRENT LIABILITIES:
Accrued expenses and other current liabilities are comprised of
the following at October 31, 1995 and 1994:
<TABLE>
1995 1994
----- ----
<S> <C> <C>
Real estate taxes. . . . . . . . . $ 66,879 $ 60,746
Unearned revenue . . . . . . . . . 51,796 70,006
Professional fees. . . . . . . . . 21,780 35,079
Wages and employee withholdings. . 15,923 26,742
Vacation pay . . . . . . . . . . . 11,406 9,002
Interest . . . . . . . . . . . . . 9,673 12,533
Other taxes. . . . . . . . . . . . 5,898 5,579
-------- --------
Total. . . . . . . . . . . . $183,355 $219,687
======== ========
</TABLE>
6. SUBORDINATED DEBT:
The 6-1/4% subordinated notes are due July 1, 1998. The notes may
be redeemed prior to maturity at the election of the Company upon
at least 30 days written notice to the holders thereof, in whole
or in multiples of $1,000. The redemption price is equal to the
principal amount plus accrued interest to the date fixed for
redemption. No premium is payable upon redemption.
F-13<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------
7. INCOME TAXES:
Significant components of the Company's deferred tax assets as of
October 31, 1995 and 1994 are as follows:
<TABLE>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards . . . . . $219,600 $191,000
Allowance for bad debts. . . . . . . . . . 24,700 11,100
Accrued vacation . . . . . . . . . . . . . 800 1,000
Unearned revenue . . . . . . . . . . . . . 13,800 20,000
Depreciation . . . . . . . . . . . . . . . 2,900 14,000
Reorganization cost. . . . . . . . . . . . 42,300 43,700
-------- --------
304,100 280,800
Valuation allowance . . . . . . . . . (304,100) (280,800)
-------- --------
Total . . . . . . . . . . . . . . $ - $ -
======== ========
</TABLE>
The Company has established a valuation allowance for deferred tax
assets. SFAS 109 requires that such a valuation allowance be
recorded when it is more likely than not that the deferred tax
assets will not be realized.
The provision for income taxes is comprised of the following:
<TABLE>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . $ - $ - $33,800
State . . . . . . . . . . . . - 13,700 -
Deferred federal, net of tax
benefit of operating loss
carryforward of approximately
$34,800 in 1995 . . . . . . . - 21,600 -
------ ------- -------
Total . . . . . . . . . . 0 35,300 33,800
====== ======= ======
</TABLE>
A reconciliation between the expected statutory income tax rate
and the effective income tax rate on income before income taxes is
summarized as follows:
F-14<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------
<TABLE>
. . . .1995 . . . . . .1994 . . . . . .1993 . . .
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
<S> <C> <C> <C> <C> <C> <C>
Provision (credit) at expected
statutory rate . . . . . . . . . $(19,500) 22.0% $15,000 22.0% $33,800 34.0%
State income tax, net of federal
income tax benefit . . . . . . . (8,300) - 11,800 17.3 - -
Change in valuation allowance. . . 26,100 22.1 7,500 10.9 - -
Other. . . . . . . . . . . . . . . 1,700 (0.1) 1,000 1.4 - -
-------- ----- ------- ---- ------- ----
Effective income tax provision
and rate . . . . . . . . . . . . $ - - $35,300 51.6% $33,800 34.0%
======== ===== ======= ==== ======= ====
</TABLE>
At October 31, 1995, the Company has approximately $654,000 and
$883,700 of net operating losses available to carryforward for
federal and state income tax purposes, respectively. The federal
net operating loss carryforwards will expire between fiscal 2008
and 2010 and the state net operating loss carryforwards will expire
between fiscal 1996 and 1998.
8. COMMITMENTS:
At October 31, 1995, the Company was obligated under various
noncancelable operating leases for golf carts and office
equipment. The Company anticipates these leases will be replaced
by other leases in the normal course of business. Minimum future
rental obligations under noncancelable operating leases in effect
at October 31, 1995 are as follows:
<TABLE>
YEARS ENDING OCTOBER 31:
-----------------------
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . $ 112,679
1997 . . . . . . . . . . . . . . . . . . . 70,829
1998 . . . . . . . . . . . . . . . . . . . 49,876
1999 . . . . . . . . . . . . . . . . . . . 34,830
---------
Total minimum payments required $ 268,214
=========
</TABLE>
Rentals charged to operations were $124,151, $85,230 and $81,708
in 1995, 1994 and 1993, respectively.
F-15<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------
9. CONTINGENCIES:
The Company was informed by the Department of Environmental
Protection (DEP) that it must install and begin operation of a
continuous water filtration and disinfection system pursuant to
amendments to the Pennsylvania Safe Drinking Water Act enacted in
1989 no later than May 1993. The Company began installation of
the water treatment system, however, due to circumstances beyond
its control, was delayed and not able to meet DEP's deadline. The
filtration system was placed into service, inspected and a final
permit authorizing operation was issued by DEP on February 7,
1995. Under regulations, DEP can assess a civil penalty against
the Company up to $5,000 per day for the violation.
Legal counsel has assisted the Company in discussion with its
consultants and DEP regarding this matter. DEP intended to wait
until the Company complied with the regulations and completed
installation of the system prior to considering any formal action,
including assessing civil penalties against the Company. DEP has
taken no formal action against the Company in regard to its
delayed compliance. In the event a civil penalty is assessed, the
Company has thirty days to appeal by filing an action with the
Environmental Hearing Board to contest either the amount of the
penalty or the fact of the violation. Legal counsel believes
there are defenses on behalf of the Company concerning any claimed
civil penalty. However, management and legal counsel are unable
to determine whether DEP will take any formal action or the
possible effects of this matter, if any.
The Company is a defendant in a declaratory judgment action filed
in 1995 wherein the plaintiffs ask for a declaratory judgment
determining the rights of the individual plaintiffs and others
under certain covenants imposed by the Company, rights to the use
of Company owned common areas and the right to the Company to
assess owners for the purpose of retiring debt. The suit also
challenges the right of the Company to make assessments and dues
charges and seeks an injunction against collection actions filed
by the Company and against the sale or subdivision of any lands
which make up The Buck Hill Falls community, except subdivided
residential building lots in the normal course of business. The
plaintiffs also ask the Court to declare that the Company has
waived all rights to make assessment and dues charges and that
members of the Lot and Cottage Owners' Association of Buck Hill
Falls (the "Association") have common ownership rights, interest
or easement rights in all Company property.
No monetary damages are sought. However, in the opinion of legal
counsel, a judgment in favor of the plaintiffs would have a
material adverse effect on the Company.
F-16<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------
Settlement negotiations are being pursued. The Company and the
Association drafted an agreement which will provide for a joint
committee, consisting of members of the Company and the
Association, who will recommend the amount of annual dues to be
approved by the Company's Board of Directors. Special assessments
related to capital expenditures that benefit the community will be
consolidated with annual dues. Special assessments related to
acquire property, repay debt, develop land, etc., will be
considered if the Company grants property owners an option to
purchase common stock in consideration for payment of this special
assessment. Upon adoption of the draft agreement, the Company
will dismiss its collection actions against those Association
members involved in the declaratory judgment, the Association will
dismiss its declaratory action against the Company, the
Association will exercise efforts to cause individual plaintiffs
to concur in dismissal of the declaratory judgment and to pay in
full their dues assessments. The Company's Board of Directors
unanimously approved the terms of the draft agreement. Management
believes the Association's Board of Directors will adopt the terms
of the draft agreement and the aforementioned declaratory judgment will
be dismissed.
10. SIGNIFICANT CONCENTRATIONS OF CREDIT RISK:
The Company provides recreational facilities, water and sewage
services, and miscellaneous maintenance services, and grants
credit, primarily to residents of Buck Hill Falls, Monroe
County, Pennsylvania.
All cash and restricted cash is maintained in one bank and
insured by the Federal Deposit Insurance Corporation up to
$100,000.
- -----------------------------------------------------------------
F-17<PAGE>
<PAGE>
INTERIM FINANCIAL DATA
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------
APRIL 30,
1996 OCTOBER 31,
(UNAUDITED) 1995*
- --------------------------------------------------------------------------
ASSETS
======
<S> <C> <C>
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . $ 64,152 $ 31,460
Accounts receivable, net . . . . . . . 220,144 245,369
Prepaid expenses and other current assets . 13,795 30,228
---------- ----------
Total current assets . . . . . . . 298,091 307,057
RESTRICTED CASH. . . . . . . . . . . . . 85,616 73,799
PROPERTY, PLANT AND EQUIPMENT, Net . . . 2,699,387 2,756,391
DEFERRED COSTS, Net. . . . . . . . . . . 10,253 12,623
---------- ----------
TOTAL. . . . . . . . . . . . . . . $3,093,347 $3,149,870
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
====================================
CURRENT LIABILITIES:
Note payable, unsecured . . . . . . . $ 11,300 $ 11,300
Current portion of long-term debt . . 946,562 847,385
Accounts payable, trade . . . . . . . 12,356 37,283
Accrued expenses and other. . . . . . 305,587 183,355
---------- ----------
Total current liabilities . . . . 1,275,805 1,079,323
CUSTOMER DEPOSITS . . . . . . . . . . . 85,616 73,800
LONG-TERM DEBT. . . . . . . . . . . . . 952,244 956,218
6-1/4% SUBORDINATED NOTES . . . . . . . 140,000 140,000
---------- ----------
Total liabilities . . . . . . . . 2,453,665 2,249,341
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock. . . . . . . . . . . . . 1,251,370 1,251,370
Contributed capital . . . . . . . . . 799,227 799,227
Deficit . . . . . . . . . . . . . . . (1,410,915) (1,150,068)
---------- ----------
Total stockholders' equity. . . . 639,682 900,529
---------- ----------
TOTAL . . . . . . . . . . . . . $3,093,347 $3,149,870
========== ==========
</TABLE>
*Condensed from audited financial statements
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-18<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
=======================================
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
- ------------------------------------------------------------------------------------
SIX MONTHS ENDED THREE MONTHS ENDED
......APRIL 30...... ......APRIL 30.....
1996 1995 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES . . . . . . . . . . . . . . . $ 631,603 $ 633,715 $ 339,990 $332,524
COST OF REVENUES . . . . . . . . . . . 679,610 607,509 355,654 342,411
--------- --------- --------- ---------
GROSS (LOSS) PROFIT FROM OPERATIONS. . (48,007) 26,206 (15,664) (9,887)
GENERAL AND ADMINISTRATIVE EXPENSES. . 164,116 261,149 101,501 131,946
--------- --------- --------- ---------
LOSS FROM OPERATIONS . . . . . . . . . (212,123) (234,943) (117,165)(141,833)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Miscellaneous. . . . . . . . . . . . 39,367 59,170 16,398 21,974
Interest expense . . . . . . . . . . (88,092) (72,938) (38,767) (31,842)
Capitalized interest . . . . . . . . - 21,455 - 5,528
--------- --------- --------- ---------
Other income (expense), net. . . . (48,725) 7,687 (22,369) (4,340)
--------- --------- --------- ---------
NET LOSS . . . . . . . . . . . . . . . $(260,848) $(227,256) $(139,534) $(146,173)
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING. . . . . . . . . . . . . 73,537 73,537 73,537 73,537
NET LOSS PER COMMON SHARE. . . . . . . $ (3.55) $ (3.09) $ (1.90) $ (1.99)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-19<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
- --------------------------------------------------------------------------
SIX MONTHS ENDED
.......APRIL 30......
1996 1995
- --------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . $(260,848) $(227,256)
Adjustments for noncash charges:
Depreciation and amortization. . . . . . 107,011 89,823
Gain on sale of land . . . . . . . . . . - (15,013)
Changes in assets and liabilities . . . . 141,333 133,478
--------- ---------
Net cash used in operating activities. . (12,504) (18,968)
--------- ---------
INVESTING ACTIVITIES:
Purchase of property and equipment . . . . (50,007) (94,411)
Proceeds from sale of land . . . . . . . . - 15,513
--------- ---------
Net cash used in investing activities. . (50,007) (78,898)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of debt . . . . . . 171,014 102,270
Repayment of debt. . . . . . . . . . . . . (75,811) (7,008)
--------- ---------
Net cash provided by financing
activities . . . . . . . . . . . . . . 95,203 95,262
--------- ---------
INCREASE (DECREASE) IN CASH. . . . . . . . . . 32,692 (2,604)
CASH, BEGINNING OF PERIOD. . . . . . . . . . . 31,460 20,194
--------- ---------
CASH, END OF PERIOD. . . . . . . . . . . . . . $ 64,152 $ 17,590
========= =========
CASH PAYMENTS FOR:
Interest . . . . . . . . . . . . . . . . . . $ 92,467 $ 58,298
========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-20<PAGE>
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
======================================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------
NOTE 1: BASIS OF PRESENTATION
Although the interim condensed consolidated financial
statements of Buck Hill Falls Company and Subsidiary (the "Company") are
unaudited, it is the opinion of the Company's management that all normal
recurring adjustments necessary for a fair statement of the results for
the interim periods presented have been reflected therein. The results of
operations for any interim period are not necessarily indicative of
results that may be expected for the entire year.
These statements should be read in conjunction with the
consolidated financial statements and related notes included in the
Company's annual report on Form 10-K for the year ended October 31, 1995.
F-21
