SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the fiscal year ended October 31, 1996.
- --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File Number 33-01406
BUCK HILL FALLS COMPANY
(Exact name of registrant as specified in its charter)
Pennsylvania 24-0536840
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
Cresco Road
Buck Hill Falls, Pennsylvania 18323
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (717) 595-7511.
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months; and (2) has been subject to the filing
requirements for the past 90 days. YES _X_ NO ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]
Aggregate market value of voting stock held by non-affiliates of the
Registrant as of January 22, 1997: $1,878,932.*
Number of Shares of Common Stock and Class A Common Stock, outstanding on
January 22, 1997: 96,297.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
______________
* Calculated by excluding all shares held by executive officers, directors and
five percent shareholders of the registrant without conceding that all such
persons are "affiliates" of registrant for purposes of the Federal securities
laws. Computation of market value is based on the closing bid quotations as of
January 23, 1997.
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PART I
ITEM 1 - BUSINESS
Buck Hill Falls Company (the "Company") is engaged in the provision of
a variety of services, 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 Falls community and the general public.
The recreational facilities owned and operated by the Company are as
follows:
Golf. The Company owns and operates a 27 hole golf course facility
which also includes a clubhouse and restaurant. The restaurant has a capacity
for 50 persons and can seat an additional 20 persons at an adjoining patio.
Tennis. The Company's tennis facilities consist of 10 clay tennis
courts, a tennis clubhouse and a small dining room that can accommodate 20
persons.
Swimming. The Company owns and operates an olympic-sized outdoor
swimming pool along with a small bath house and dressing rooms.
Bowling Greens. The Company owns and operates two lawn bowling greens.
Miscellaneous. The Company administers deer hunting on its properties
and stocks streams on its properties for trout fishing. The Company also
operates a day camp for children, including children of residents of Buck Hill
Falls, on weekdays during the months of June, July and August.
Of the Company's recreational facilities, its golf facilities are by
far the most significant, generally accounting for more than 50% of the
Company's revenues from its recreational facilities.
Residents of Buck Hill Falls pay annual or daily use fees to the
Company for each of the facilities that they utilize. In recent years, revenues
from the general public and various groups that utilize the Company's golf
facilities have become increasingly important.
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Water and Sewage Operations
Through its wholly owned subsidiary, Buck Hill Water Company ("BHW"),
the Company supplies water to residential customers. As of December 31, 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
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.
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
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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
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and to meet certain other of the Company's obligations. The Company set dues for
the fiscal year ended October 31, 1995 at $2,400 per resident. In July 1995, the
Association and certain individual property owners brought suit against the
Company and certain of its officers and directors challenging the right of the
Company to make assessments and dues charges and seeking to enjoin certain
collection actions instituted by the Company to collect unpaid dues. On June 8,
1996, an agreement was signed by the Association and the Company recognizing the
obligation of residents to pay dues to the Company for services rendered for
their benefit and giving the Association a role in setting the amount. Under the
Agreement a joint committee is to be established, consisting of two members
nominated by the Chairman of the Company, two members nominated by the President
of the Association, and a fifth member chosen by mutual agreement of the Company
Chairman and the Association President. The committee is to make recommendations
to the Company's Board of Directors as to the level of dues to be assessed. As a
result of this process, dues were increased to $2,800 for fiscal 1997. 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 generally 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 generally 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
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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. The Company believes this
transfer took place.
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 began 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 1996. 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 January 15, 1997, the Company had 17 persons employed on a full
year basis. An additional 42 persons were employed on a seasonal basis during
the summer season in 1996 (demand for the Company's services increases
substantially during the summer months).
ITEM 2 - PROPERTIES
Aside from the various facilities described above, the Company owns
approximately 4,000 acres of undeveloped wooded land contiguous to the Buck Hill
Falls community and The Cottages. Of the 4,000 acres, approximately 2,400 acres
are owned by BHW and serve as a watershed. Company management does not believe
that development of the watershed land is feasible in the foreseeable future.
Over 98 percent of the Company's land was acquired prior to 1947, and no land
has been acquired in the last 30 years. The land is zoned residential. The
Company has mortgaged approximately 2,600 acres of the land together with
certain of its amenities to its principal lending bank as collateral for amounts
borrowed under a line of credit. However, the mortgage is subordinated to the
rights of community members of Buck Hill Falls under a non-exclusive easement
granted to such persons for access to and use of certain areas (consisting of
various recreational amenities and various roads, pathways and private
rights-of-ways in Buck Hill Falls).
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ITEM 3 - LEGAL PROCEEDINGS
In October, 1996 Charles Czaplinski and Constance Seebach, owners of
cottages at Buck Hill Falls, brought suit against the Company in the Court of
Common Pleas of Monroe County, Pennsylvania alleging that the Company has
fraudulently sought to collect dues and assessments in excess of amounts
necessary to maintain the community, that dues, fees and assessments are not
uniform among property owners, that the Company is using amounts collected from
property owners to meet its general expenses and that the acts of the directors
in the management of the Company have been illegal, oppressive and fraudulent
and have sought to benefit a minority of large shareholders at the expense of
minority shareholders who are owners of property in the Buck Hill community. The
plaintiffs request the Court to dissolve the Company and to appoint a receiver
to carry out the maintenance of the community on a not-for-profit basis. The
plaintiffs also asked the Court to review the action of the Company's nominating
committee in declining to nominate Mr. Czaplinski for election to the Board of
Directors. The Company has filed an answer denying all material allegations and
requesting that the suit be dismissed.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SECURITY HOLDER MATTERS
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 $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; $31.00 during the period from
February 1, 1996 through April 30, 1996; $31.00 to $20.50 during the period from
May 1, 1996 through July 31, 1996; and $25.00 during the period from August 1,
1996 through October 31, 1996.
These quotations reflect inter-dealer prices, without retail markup,
mark-down or commission and may not necessarily reflect actual transactions.
The Company has not declared or paid dividends on its Common Stock in
thirty years and anticipates that all earnings will be retained for use in its
business. The Company does not anticipate that dividends will be declared or
paid in the foreseeable future.
As of January 24, 1997, the Company had approximately 493 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.
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ITEM 6 - SELECTED FINANCIAL DATA
The selected financial data set forth below are derived from financial
statements of the Company and should be read in conjunction with such financial
statements and Management's Discussion and Analysis of Financial Condition and
Results of Operations appearing elsewhere in this report.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues $ 2,175,475 $ 2,218,139 $ 2,203,529 $ 2,048,529 $ 1,938,239
Income (loss) from operations 26,107 37,094 136,294 133,895 (3,201)
Other income (expense) (151,236) (125,834) (67,914) (34,412) 147,846
Income (loss) before extraordinary
credit (125,129) (88,740) 33,080 65,683 (64,982)
Extraordinary credit -- -- -- 33,800 138,000
Cumulative effect of accounting
change -- -- -- 21,600 --
----------- ----------- ----------- ----------- -----------
Net income (loss) $ (125,129) $ (88,740) $ 54,680 $ 99,483 $ 73,018
=========== =========== =========== =========== ===========
PER SHARE DATA:
Income (loss) before extraordinary
credit $ (1.68) $ (1.21) $ .45 $ .89 $ (.88)
Extraordinary credit -- -- -- .46 1.87
Cumulative effect of accounting
change -- -- .29 -- --
----------- ----------- ----------- ----------- -----------
Net income (loss) $ (1.68) $ (1.21) $ .74 $ 1.35 $ .99
=========== =========== =========== =========== ===========
FINANCIAL POSITION DATA:
Working capital $ (577,628) $ (772,267) $ (973,993) $ (822,191) $(1,082,662)
Total assets 3,172,579 3,149,870 3,104,106 2,536,541 2,299,853
Total long-term liabilities 1,148,560 1,170,018 921,804 559,360 176,111
Stockholders equity 1,042,994 900,529 989,269 934,589 835,106
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The Company's business, insofar as it relates to the provision of
recreational facilities, is largely seasonal in nature. As a result, the
Company's revenues and cost of revenues typically increase significantly in its
third and fourth fiscal quarters.
Results of Operations
Year Ended October 31, 1996 Compared to Year Ended October31, 1995.
Revenues decreased approximately $43,000 in 1996 as compared to 1995,
principally due to a reduction in annual dues billed to the 290 residents of
Buck Hill Falls from $2,400 to $2,300 resulting in a decrease of approximately
$27,000. Lawn bowling revenues decreased $7,000 during 1996 due to less
favorable weather conditions. Lumbering sales decreased $23,000 due to less
timbering in fiscal 1996. Golf cart rentals decreased $33,000 principally due to
less rounds played during 1996 and, in addition, members took advantage of
discounted seasonal cart rentals. There was also a decrease in interest income
of $5,100 and in bad debt recoveries of $6,600. These decreases were partially
offset by increases in revenues of approximately $32,800 in membership fees due
primarily to an increase in country club membership fees, of $7,600 in water
operations as a result of a rate increase, of $19,000 in snow plowing revenues
as a result of heavy snowfall amounts in 1996, and of $1,300 in pro shop income.
Cost of revenues increased 9% in 1996 as compared to 1995.
Depreciation expense increased approximately $32,000 due to capital improvements
to the water system which was put into operation in February 1995 and salaries
and wages increased approximately $30,000 due to a reallocation of
administrative salaries to the related community service operations to which the
employees are currently performing services. In addition, snow plowing costs
increased $15,000 and road and path maintenance increased $12,250 as a result of
severe weather conditions during 1996. General maintenance and repairs increased
approximately $33,000 during 1996 due to less favorable weather conditions and
the Company's efforts to improve the Community including an increase of $6,000
in the contract with landscapers. Materials and supplies increased approximately
$17,900 due to new sand for the golf course and additional sand for the sewer
plant. There was also an increase in insurance expense of $ 10,000 due to an
increase in workers' compensation insurance and the addition of two new
vehicles. There was also an increase in professional fees of approximately
$6,000 related to the continued testing of the water supply.
General and administrative costs decreased 36% in 1996 as compared to
1995. Administrative salaries decreased approximately $30,000 as discussed
above. Bad debt expense decreased $84,000 due to uncollectible accounts relating
to the Buck Hill Inn and other accounts receivable being written off in 1995.
During 1995, legal and accounting fees were incurred primarily for an evaluation
of a purchase offer from the Lot and Cottages Owner's Association. Such
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costs were not incurred during 1996, resulting in a decrease in legal and
accounting fees of approximately $33,000. During 1995, the Company also incurred
legal fees of $16,500 for general legal consultation related to its utility
operations and assistance with a water rate increase which were not present
during 1996. Also legal and accounting fees were incurred in 1995 related to
Securities and Exchange Commission filings which were not incurred in 1996.
These fees amounted to a decrease in expenses of approximately $15,700 and
$2,000, respectively. During 1995, the Company incurred approximately $5,000 of
repairs due to a pipe breakage. Efforts made by the Company to reduce costs
resulted in a decrease in office supplies of $1,000, travel and entertainment of
$1,200, and data processing of $1,200.
Other income decreased 40% during 1996. During 1996, vending machine
revenues, commissions and miscellaneous income increased approximately $ 6,000.
During 1995, there was a gain on sale of land of approximately $25,400 which was
not present in 1996.
Interest expense increased 8% primarily as a result of interest on
borrowings related to the water system capital improvements loan.
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.
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
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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.
Inflation.
Inflation has not had a significant impact on the Company's
comparative results of operation.
Liquidity and Capital Resources
At October 31, 1996, the Company had a working capital deficiency of
$577,628. Included in current liabilities is the entire $791,320 outstanding on
the Company's $1,000,000 line of credit with a bank (described in the following
paragraph), which is payable on demand. An additional $38,619 in scheduled
principal payments on long-term debt are due within the next twelve months.
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The Company entered into a loan agreement with a bank relating to a
secured revolving line of credit in the amount of $1,000,000. Amounts borrowed
bear interest at the prime rate (8.25% at October 31, 1996) plus 1-1/4%.
Pursuant to the loan agreement, approximately 2,600 acres of land and land
improvements located in Barrett Township, Monroe County, Pennsylvania, are
pledged as collateral, along with dues, assessments and fee revenues. The line
of credit is available through May 31, 1997, contingent upon the Company
maintaining a satisfactory financial position and subject to annual review 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 has been required to make certain improvements in its
water system. In May 1995, the Company entered into a $900,000 loan agreement
with a bank to refinance existing water system debt 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 October 31, 1996) plus 1-1/4%. The loan matures in May 2015 and is secured by
a first mortgage on approximately 2,600 acres of land and land improvements
located in Barrett Township, Monroe County, Pennsylvania and a collateral
assignment of all revenue and assessments of the Company's water operations.
Cash increased $75,243 during fiscal 1996. Cash provided by operating
activities of $1,828, borrowings of $580,000 under the Company's revolving line
of credit, $41,885 in additional long-term debt, and proceeds of $267,594 from
issuance of Class A Common Stock was used to make scheduled principal payments
of $655,544 on long-term debt and capital expenditures of $165,352. Such capital
expenditures included purchase of furniture and equipment for the golf club of
approximately $49,100, water meters of approximately $18,000, improvements to
roads and paving of $58,022, and purchase of two automobiles for $36,499.
At October 31, 1996, the Company had drawn $791,320 on its $1,000,000
line of credit, leaving $208,680 available. The outstanding balance was $651,320
on January 23, 1997.
The Company incurred a net loss of $125,129 for the year ended October
31, 1996 and at October 31, 1996, the Company has a cumulative deficit of
$1,275,197 and a working capital deficiency of $577,628. 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 an increase in Lot and Cottage dues from $2,300 to
$2,800 per year, and the receipt of the proceeds of the stock offering described
below, 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.
-13-
<PAGE>
Recent Stock Offering
Beginning in September 1996, the Company made an offering of shares of
its Class A Common Stock limited to those persons who owned Common Stock in the
Company and were an owner or co-owner of a cottage and/or lot in the Buck Hill
Falls community ("Qualified Owners"). Qualified Owners were 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 had to be
purchased by a Qualified Owner if any were purchased. All Qualified Owners who
did subscribe were then offered 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. The shares of Class A Stock are identical to the
shares of the Company's Common Stock except that the Class A Stock may, with
certain exceptions, only be held by or transferred to a Qualified Owner. All
certificates representing Class A Stock 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 were not Qualified Owners objected to the proposal, asserting
that the proposed offering price was inadequate and that the Company should make
a rights offering to all its shareholders. The Board concluded that the offering
of Class A Stock to Qualified Owners was fair and in the best interest of the
Company and its shareholders. The Common Stock does not have any pre-emptive
right to subscribe to new securities. After discussion, the amendment was
approved by the Common shareholders by a vote of 31,766 for and 11,375 against,
with 11,836 abstentions.
Upon completion of the offering of the Class A Stock to Qualified
Owners, the Company offered to all holders of its Common Stock (other than
Qualified Owners) the opportunity to purchase at $20 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, based upon (i) the number of Class A shares
sold by the Company (ii) the number of shares of Common Stock held by the
subscribing Common holders and (iii) any maximum specified by a subscribing
Common holder.
Qualified Owners subscribed for a total of 29,200 shares of Class A
Common Stock, and the holders of 9,426 shares of Common Stock who were not
Qualified Owners exercised their rights to purchase sufficient additional shares
of Common Stock to maintain their respective
-14-
<PAGE>
percentage interests in the Company. A purchase of 0.60 of a share for each
share held would maintain their pre-offering position. One holder of 50 shares
of Common Stock elected to purchase only 10 shares. Accordingly, a total of
5,636 shares of Common Stock will be issued to these persons upon reciept of
payment of $20 per share.
The Company has received proceeds of $402,200 from the sale of the
Class A Stock and expects to receive an additional $124,000 as installment
subscriptions are paid over the next four years. The Company expects to receive
additional proceeds of $112,720 from the sale of the additional Common Stock.
Net proceeds received to date have been applied to reduction of the outstanding
balance on the Company's line of credit, ameliorating the effect of seasonal
variations in the Company's operating cash flow.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to theTable of Contents on page F-1.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
-15-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Term as
Director
Name Age Position Expires
<S> <C> <C> <C>
David B. Ottaway 56 Chairman 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
Floyd R. Hunter, Jr. 52 General Manager N/A
</TABLE>
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 Oficer 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.
-16-
<PAGE>
Dr. Dracos has been a director of the Company since 1992. He was
elected Vice President Operations and Chief Operating Officer in July 1996. Dr.
Dracos has been a practicing orthopedic surgeon with Pocono Orthopedic for over
five years. He is also a director of Mellon Bank (Northeast).
Mr. Unger was elected to the Board and as Secretary of the Company in
July 1996. He is an attorney practicing in West Conshohocken, Pennsylvania.
Until forming his own firm in 1995, he was for many years a partner in the
Philadelphia based firm of Duane, Morris & Hecksher.
Mr. Byron has been a director of the Company since 1992. Mr. Byron has
been co-owner of Lord Byron, Inc., a manufacturer of hospital linens and nuclear
energy protective clothing, for over five years.
Mr. Gee has been a director of the Company since 1995. Mr. Gee retired
as Chairman of the Board of International Paper in 1985. He is currently the
Chairman and a director of Oncogene Science, Inc.
Mrs. Godshalk has been a director of the Company since March, 1995 and
she was elected President of BHW in July 1996. Mrs. Godshalk has been the Vice
President of Ultra-Mold Corporation in Yardley, Pennsylvania, since 1984. For
the past eighteen years, she has been an elected Supervisor of Lower Makefield
Township, Bucks County, Pennsylvania.
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. Hunter became general manager of the Company in January 1997. From
1979 until joining the Company, he was the President and owner of Hunter
Associates, a management and marketing consultant to the hospitality, travel and
tourism industries.
ITEM 12. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation for services rendered by the Company's General Manager during each
of the last three fiscal years. The Company's other executive officers serve on
a voluntary basis and are not compensated.
-17-
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
Other Annual Other
Name and Principal Position Year Salary Compensation Compensation
<S> <C> <C> <C> <C>
Carl Benasutti (1) 1995 $43,000 $ 1,000 ---
General Manager(2) 1994 $31,826 $ 2,403(3) ---
<FN>
(1) Mr. Benasutti died in December 1996.
(2) Mr. Benasutti was compensated as General Manager since January 1994,
although formally elected to this position in July 1994.
(3) 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.
</FN>
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning
ownership of the Common Stock and Class A Common Stock of the Company as of
January 22, 1997 by each shareholder known to the Company to own beneficially
more than 5% of its stock, each director of the Company and all directors and
executive officers of the Company as a group. Except as otherwise noted, each
person listed below has sole voting and dispositive power with respect to the
shares listed next to his or her name. All persons listed below are directors of
the Company.
-18-
<PAGE>
<TABLE>
<CAPTION>
Shares
Beneficially
Na me Owned Percent of Class
<S> <C> <C>
David B. Ottaway .................................. 6,380(1) 6.6%
Anthony C. Bowe.................................... 300(2)(3) *
Frank J. Dracos, M.D............................... 600(4) *
Richard C. Unger, Jr............................... 300(2)(5) *
George J. Byron.................................... 100 *
Edwin A. Gee....................................... 2,321(6) 2.4%
Grace M. Godshalk................................. 290(7)(5) *
Clifford Press..................................... 500(8) *
James T. Sygenda................................... 100(2) *
All executive officers and
directors as a group............................. 10,891 11.3%
<FN>
* 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. Also includes 400 shares of Class A Common Stock. Mr. Ottaway's
address is 327 A Street, S.E., Washington, D.C. 20003.
(2) Held jointly with wife.
(3) Includes 200 shares of Class A Stock.
(4) 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.
Also includes 200 shares of Class A Stock.
(5) Includes 200 shares of Class A Stock of which 40 shares have been paid for
and issued.
(6) 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.
(7) Includes 50 shares held jointly with Mrs. Godshalk's husband.
(8) Includes 400 shares of Class A Stock.
</FN>
</TABLE>
-19-
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements - See the Table of Contents on page F-1
2. Financial Statement Schedules - See the Index to Consolidated
Financial Statement Schedules on page F-1.
3. Exhibits
Exhibit
No.
3.1 Articles of Incorporation, as amended - Incorporated by reference to
Exhibit 3.1 to the Company's Registration Statement on Form S-1,
Commission File No. 333- 10207, filed with the Commission on August
15, 1996.
3.2 By-laws, as amended - Incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1, Commission File No.
333-10207, filed with the Commission on August 15, 1996.
10.1.1 Loan Agreement, dated July 24, 1992, between Penn Security Bank and
Trust Company and the Company - Incorporated by reference to Exhibit
10.6.1 to the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1992, filed with the Commission on February 24,
1993.
10.1.2 Promissory Note, dated July 24, 1992, issued by the Company to Penn
Security Bank and Trust Company - Incorporated by reference to Exhibit
10.6.2 to the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1992, filed with the Commission on February 24,
1993.
10.1.3 Open-End Mortgage, dated July 24, 1992, issued by the Company to Penn
Security Bank and Trust Company - Incorporated by reference to Exhibit
10.6.3 to
-20-
<PAGE>
the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1992, filed with the Commission on February 24, 1993.
10.1.4 Collateral Assignment of Dues, Assessments and Fee Income, dated July
24, 1992, issued by the Company to Penn Security Bank and Trust
Company Incorporated by reference to Exhibit 10.6.4 to the Company's
Annual Report on Form 10-K for the fiscal year ended October 31, 1992,
filed with the Commission on February 24, 1993.
10.2 Loan Agreement, dated August 12, 1993, between the Company and Penn
Security Bank and Trust Company, incorporated by reference to Exhibit
10.8 to the Company's Annual Report on Form 10-K for the fiscal years
ended October 31, 1994 and 1993.
10.3 Loan Agreement, dated May 4, 1995, between the Buck Hill Water Company
and Penn Security Bank and Trust Company, incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1995.
10.4 Agreement dated June 8, 1996, between the Company and the Lot and
Cottage Owners' Association of Buck Hill Falls, Inc. - Incorporated by
reference to Exhibit 10.4 to the Company's Registration Statement on
Form S-1, Commission File No. 333-10207, filed with the Commission on
August 15, 1996.
21 List of Subsidiaries of the Company - Incorporated by reference to
Exhibit 21 to the Company's Registration Statement on Form S-1,
Commission File No. 333- 10207, filed with the Commission on August
15, 1996.
____________________
(b) No reports on Form 8-K were filed by the Company during the last
quarter of the period covered by this report.
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BUCK HILL FALLS COMPANY
Date: January 27, 1997 By:/s/ David B. Ottaway
--------------------
David B. Ottaway,
Chairman and President
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ David B. Ottaway Chairman and President, Jan. 27, 1997
David B. Ottaway Director (Principal
Executive Officer)
/s/ Anthony C. Bowe Vice President, Treasurer and Jan. 27, 1997
Anthony C. Bowe Chief Financial Officer (Principal
Financial and Accounting Officer),
Director
Director Jan. , 1997
George J. Byron
Director Jan. , 1997
Frank J. Dracos, M.D.
/s/ Edwin A. Gee Director Jan. 27, 1997
Edwin A. Gee
Director Jan. , 1997
Grace M. Godshalk
Director Jan. , 1997
Clifford Press
/s/ James T. Sygenda Director Jan. 27, 1997
James T. Sygenda
/s/ Richard C. Unger, Jr. Director Jan. 24, 1997
Richard C. Unger, Jr.
</TABLE>
-22-
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED
WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY
REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
No annual report covering the Registrant's last fiscal year and no
proxy statement, form of proxy or other soliciting material relating to the
Registrant's 1997 Annual Meeting of Shareholders has been sent to the
Registrant's shareholders. The Registrant intends to send a report to
shareholders for the period covered by this report and a proxy statement and
proxy with respect to the Registrant's next Annual Meeting of Shareholders. The
Registrant will furnish copies of such material when such material is sent to
its shareholders. Such material shall not be deemed to be "filed" with the
Commission or otherwise subject to the liabilities of Section 18 of the
Securities Exchange Act of 1934.
-23-
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-2
CONSOLIDATED FINANCIAL STATEMENTS:
Balance Sheet as of October 31, 1996 and 1995 F-3
Statement of Operations for the Years Ended October 31, 1996,
1995 and 1994 F-4
Statement of Changes in Stockholders' Equity for the Years Ended
October 31, 1996, 1995 and 1994 F-5
Statement of Cash Flows for the Years Ended October 31, 1996,
1995 and 1994 F-6
Notes to Consolidated Financial Statements F-7
INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Property and Equipment for the Years Ended October 31, 1996,
1995 and 1994 F-15
Accumulated Depreciation of Property and Equipment for the
Years Ended October 31, 1996, 1995 and 1994 F-16 Valuation and Qualifying
Accounts for the Years Ended October 31,
1996, 1995 and 1994 F-17
Short-term Borrowings for the Years Ended October 31, 1996,
1995 and 1994 F-18
Supplementary Statement of Operations Information for the Years
Ended October 31, 1996, 1995 and 1994 F-19
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Buck Hill Falls Company:
We have audited the accompanying consolidated balance sheets of Buck Hill
Falls Company and subsidiary as of October 31, 1996 and 1995, 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, 1996. 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, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended October 31, 1996 in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for income taxes by adopting Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes," in
1994.
Our audits referred to above also included audits of the financial
statement schedules listed under Item 14(a)(2). In our opinion those financial
statement schedules present fairly, in all material respects, in relation to the
basic consolidated financial statements taken as a whole, the information
required to be stated therein.
PARENTE, RANDOLPH, ORLANDO, CAREY & ASSOCIATES
Wilkes-Barre, Pennsylvania
December 11, 1996
F-2
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
OCTOBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 106,703 $ 31,460
Accounts receivable, net of
allowance for doubtful accounts of
$100,445 and $79,860 in 1996 and
1995, respectively 253,278 245,369
Prepaid expenses and other 43,416 30,227
---------- ----------
Total current assets 403,397 307,056
RESTRICTED CASH 68,556 73,800
PROPERTY AND EQUIPMENT 2,692,743 2,756,391
DEFERRED COSTS, Net of accumulated
amortization of $15,800 and $11,060
in 1996 and 1995, respectively 7,883 12,623
---------- ----------
TOTAL $3,172,579 $3,149,870
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Demand note payable, 5%, unsecured $ 11,300 $ 11,300
Current portion of long-term debt 829,939 847,385
Accounts payable 47,942 37,283
Accrued expenses and other 91,844 183,355
---------- ----------
Total current liabilities 981,025 1,079,323
CUSTOMER DEPOSITS 68,556 73,800
LONG-TERM DEBT 940,004 956,218
6-1/4% SUBORDINATED NOTES 140,000 140,000
---------- ----------
Total liabilities 2,129,585 2,249,341
STOCKHOLDERS' EQUITY 1,042,994 900,529
---------- ----------
TOTAL $3,172,579 $3,149,870
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
REVENUES $ 2,175,475 $ 2,218,139 $ 2,203,529
COST OF REVENUES 1,810,206 1,653,362 1,592,863
----------- ----------- -----------
GROSS PROFIT 365,269 564,777 610,666
GENERAL AND ADMINISTRATIVE EXPENSES 339,162 527,683 474,372
----------- ----------- -----------
INCOME FROM OPERATIONS 26,107 37,094 136,294
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest, net of capitalized interest of $21,455 and
$49,996 in 1995 and 1994, respectively (172,631) (161,515) (80,944)
Miscellaneous 21,395 35,681 13,033
----------- ----------- -----------
Other expense (151,236) (125,834) (67,914)
----------- ----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE (125,129) (88,740) 68,380
PROVISION FOR INCOME TAXES 35,300
----------- ----------- -----------
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING (125,129) (88,740) 33,080
PRINCIPLE
CUMULATIVE EFFECT OF ACCOUNTING 21,600
----------- ----------- -----------
CHANGE
NET INCOME (LOSS) $ (125,129) $ (88,740) $ 54,680
=========== =========== ===========
EARNINGS (LOSS) PER COMMON SHARE:
Before extraordinary credit $ (1.68) $ (1.21) $ 0.45
Extraordinary credit
Cumulative effect of accounting change 0.29
----------- ----------- -----------
NET INCOME (LOSS) PER COMMON SHARE $ (1.68) $ (1.21) $ 0.74
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Common Stock (1) Common Stock Class A(2) Common Stock Class A (2)
Shares Amount Total
Shares Shares Additional Sub- Sub- Stockholders'
Issued Amount Issued Amount Capital scribed scribed Deficit Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 31, 1993 75,537 $ 1,251,370 $799,227 $(1,116,008) $934,589
NET LOSS 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
COMMON STOCK ISSUED 18,620 $267,594 267,594
COMMON STOCK SUBSCRIBED 9,380 $182,700 182,700
STOCK SUBSCRIPTION RECEIVABLE (182,700) (182,700)
NET LOSS (125,129) (125,129)
------ ----------- ------ -------- -------- ----- ------- ----------- ----------
BALANCE, OCTOBER 31, 1996 73,537 $ 1,251,370 18,620 $267,594 $799,227 9,380 $ $(1,275,197) $1,042,994
====== =========== ====== ======== ======== ===== ======= =========== ==========
<FN>
(1) NO PAR VALUE; AUTHORIZED 105,000 SHARES
(2) NO PAR VALUE; AUTHORIZED 75,000 SHARES
</FN>
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (125,129) $ (88,740) $ 54,680
----------- ----------- -----------
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation 225,088 193,234 160,778
Amortization 4,740 4,740 4,740
Gain on sale of property and equipment (920) (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 (7,909) (69,611) (33,563)
Prepaid expenses and other (13,188) (7,230) 1,824
Restricted cash 5,243 32,077 (5,814)
Accounts payable 10,658 (77,087) (5,250)
Accrued expenses and other (91,511) (36,332) 59,046
Customer deposits (5,244) (32,082) 5,032
----------- ----------- -----------
Total adjustments 126,957 (17,680) 184,793
----------- ----------- -----------
Net cash provided by
(used in) operating activities 1,828 (106,420) 239,473
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (165,352) (188,297) (688,630)
Proceeds from sale of property and equipment 4,832 25,888 2,000
----------- ----------- -----------
Net cash used in
investing activities (160,520) (162,409) (686,630)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (655,544) (1,106,517) (460,056)
Proceeds from issuance of debt 621,885 1,386,612 914,023
Proceeds from issuance of common stock 267,594
----------- ----------- -----------
Net cash provided by financing activities 233,935 280,095 453,967
----------- ----------- -----------
INCREASE IN CASH 75,243 11,266 6,810
CASH, BEGINNING OF YEAR 31,460 20,194 13,384
----------- ----------- -----------
CASH, END OF YEAR $ 106,703 $ 31,460 $ 20,194
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (refunded) for:
Interest $ 90,810 $ 164,375 $ 129,634
=========== =========== ===========
Income taxes $ 12,496 $ $ (500)
=========== =========== ===========
SUPPLEMENTAL NONCASH INVESTING ACTIVITY:
Liabilities incurred for
purchase of property and equipment $ $ $ 61,711
=========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
F-6
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Buck Hill Falls Company and Subsidiary (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.
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 $125,129 for the year ended October 31,
1996 and at October 31, 1996, the Company has a cumulative deficit of
$1,275,197 and a working capital deficiency of $577,629. 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 an increase in Lot and Cottage Association dues
form $2,300 to $2,800 per year will 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Accordingly, actual results could differ
from those estimates.
F-7
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PROPERTY 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.
EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share is based on the weighted average number
of shares outstanding (74,585 in 1996 and 73,537 in 1995 and 1994).
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.
F-8
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company seeks the advice of a special committee of property owners
regarding the management of these funds.
3. PROPERTY AND EQUIPMENT
The components of property and equipment at October 31, 1996 and 1995 are
summarized as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Land $ 445,831 $ 445,831
Buildings 941,913 941,913
Recreational facilities 1,442,378 1,384,356
Sewer and water facilities 1,344,801 1,340,588
Machinery and equipment 444,178 381,285
Automotive equipment 191,346 163,069
Furniture and fixtures 96,253 92,528
----------- -----------
Total 4,906,700 4,749,570
Less accumulated depreciation (2,213,957) (1,993,179)
----------- -----------
Property and equipment $ 2,692,743 $ 2,756,391
=========== ===========
</TABLE>
4. LONG-TERM DEBT
Long-term debt at October 31, 1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Borrowings under revolving loan agreement (see below) $ 791,320 $ 816,120
Note payable - bank, payable in monthly installments of
$8,985 including interest at the bank's base rate (8.25%
at October 31, 1996) plus 1-1/4% maturing May 4, 2015. The
loan is secured by a first mortgage on approximately 2,600
acres of land and land improvements located in Barrett
Township, Monroe County, Pennsylvania, along with
assessments and fee revenues 876,212 892,852
</TABLE>
F-9
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Note payable - bank, payable in monthly installments of
$1,250 including interest at the bank's base rate (8.25% at
October 31, 1996) 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 $49,596 $55,697
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 $13,398 21,084 26,056
Note payable - bank, payable in monthly installments of $391
including interest at 8%, maturing January 31, 1999; secured
by equipment with a depreciated cost of $14,253 12,778
Note payable - bank, payable in monthly installments of $351
including interest at 8.75%, maturing September 1, 1999;
secured by equipment with a depreciated cost of $13,239 10,449
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
$5,384 8,504 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% 2,690
---------- ----------
Total 1,769,943 1,803,603
Less current portion 829,939 847,385
---------- ----------
Long-term debt $ 940,004 $ 956,218
========== ==========
</TABLE>
F-10
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
(8.25% at October 31, 1996) plus 1-1/4%. Approximately 2,600 acres of land
and land improvements located in Barrett Township, Monroe County,
Pennsylvania are pledged as collateral, along with dues, assessments and
fee revenues.
The line of credit is available through May 31, 1997, although amounts
borrowed are payable on demand. The ability to borrow under the line is
contingent upon the Company maintaining a satisfactory financial position
and subject to annual review, by the bank, of the Company's financial
statements. If, in the opinion of the authorized lending officers of the
bank, the Company's credit worthiness materially declines, the credit line
will cease to be available for future draws and any existing balance will
be required to be fully amortized over a reasonable term.
The aggregate principal payments required on long-term debt at October 31,
1996 are as follows:
YEARS ENDING OCTOBER 31:
1997 $ 829,939
1998 41,815
1999 44,542
2000 36,276
2001 32,713
Thereafter 784,658
------------
Total $1,769,943
==========
5. ACCRUED EXPENSES AND OTHER
CURRENT LIABILITIES
Accrued expenses and other current liabilities are comprised of the
following at October 31, 1996 and 1995:
1996 1995
Professional fees $ 40,632 $ 21,780
Wages and employee withholdings 19,683 15,923
Interest 11,643 9,673
Unearned revenue 9,058 51,796
Other taxes 6,026 5,898
Vacation pay 4,802 11,406
Real estate taxes 66,879
-------- --------
Total $ 91,844 $183,355
======== ========
F-11
<PAGE>
6. SUBORDINATED DEBT
The 6-1/4% subordinated notes are due July 1, 1998. The notes may be
redeemed prior to maturity at the election of the Company upon at least 30
days written notice to the holders thereof, in whole or in multiples of
$1,000. The redemption price is equal to the principal amount plus accrued
interest to the date fixed for redemption. No premium is payable upon
redemption.
7. INCOME TAXES
Significant components of the Company's deferred tax assets as of October
31, 1996 and 1995 are as follows:
1996 1995
Deferred tax assets:
Net operating loss carryforwards $ 255,000 $ 219,600
Reorganization cost 42,000 42,300
Allowance for bad debts 30,500 24,700
Unearned revenue 900 13,800
Depreciation 400 2,900
Accrued vacation 800
--------- ---------
328,800 304,100
Valuation allowance (328,800) (304,100)
--------- ---------
Total $ $
========= =========
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.
F-12
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current:
Federal $ $ $
State 13,700
Deferred federal, net of tax benefit of operating loss
carryforward of approximately $51,800 and
$34,800 in 1996 and 1995, respectively 21,600
------- ------- -------
Total $ $ $35,300
======= ======= =======
</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:
<TABLE>
<CAPTION>
.........1996....... .........1995........ .......1994........
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
<S> <C> <C> <C> <C> <C> <C>
Provision (credit) at
expected statutory rate (27,500) 22.0% $(19,500) 22.0% $ 15,000 22.0%
State income tax
net of federal income
tax benefit (1,281) 1.0 (8,300) 9.3 11,800 17.3
Change in valuation
allowance 27,500 (22.0) 26,100 29.4 7,500 10.9
Other 1,281 (1.0) 1,700 (1.9) 1,000 1.4
-------- ------ -------- ------ -------- ------
Effective income tax
provision and rate $ % $ % $ 35,300 51.6%
======== ====== ======== ====== ======== ======
</TABLE>
At October 31, 1996, the Company has approximately $828,500 and $933,000 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 2009 and 2011 and the state net operating loss
carryforwards will expire between fiscal 1997 and 1999.
8. COMMITMENTS
The Company is offering up to 31,643 shares of its Common Stock to all
holders of record on the date of the offering of Class A Stock, and who are
not Qualified Owners, the opportunity to purchase at $20 a share up to that
number 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.
F-13
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At October 31, 1996, 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, 1996 are as follows:
YEARS ENDING OCTOBER 31:
1997 $ 54,810
1998 49,876
1999 34,830
---------
Total minimum payments required $139,516
========
Rentals charged to operations were $97,327, $124,151 and $85,230 in 1996,
1995 and 1994, respectively.
9. SIGNIFICANT CONCENTRATIONS OF CREDIT RISK
All cash and restricted cash is maintained in one bank and insured by the
Federal Deposit Insurance Corporation up to $100,000.
10. FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, demand note payable and
accounts payable approximate fair value as of October 31, 1996 because of
the short maturity of these investments. The carrying value of restricted
cash, customer deposits, long-term debt and notes are not materially
different from the estimated fair value of these instruments.
F-14
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
SCHEDULE V
PROPERTY AND EQUIPMENT
FOR THE YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
BALANCE AT OTHER CHANGES -
BEGINNING ADDITIONS ADD (DEDUCT) - BALANCE AT
OF YEAR AT COST (1) RETIREMENT DESCRIBE END OF YEAR
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
OCTOBER 31, 1996
Land $ 445,831 $ 445,831
Buildings 941,913 941,913
Recreational facilities 1,384,356 $ 58,022 1,442,378
Sewer and water facilities 1,340,588 4,213 1,344,801
Machinery and equipment 381,285 62,893 444,178
Automotive equipment 163,069 36,499 $ (8,222) 191,346
Furniture and fixtures 92,528 3,725 96,253
----------- ----------- ----------- ----------- -----------
TOTALS $ 4,749,570 $ 165,352 $ (8,222) $ 4,906,700
=========== =========== =========== =========== ===========
FOR THE YEAR ENDED
OCTOBER 31, 1995
Land $ 446,330 $ (500) $ 445,831
Buildings 932,136 $ 9,777 941,913
Recreational facilities 1,356,771 27,585 1,384,356
Sewer and water facilities 423,168 37,100 $ 880,320(2) 1,340,588
Machinery and equipment 407,605 25,600 (51,920) 381,285
Automotive equipment 122,943 40,126 163,069
Furniture and fixtures 92,528 92,528
Construction in progress 832,211 48,109 (882,320)(2)
----------- ----------- ----------- ----------- -----------
TOTALS $ 4,613,692 $ 188,297 $ (52,420) $ (2,000) $ 4,749,570
=========== =========== =========== =========== ===========
FOR THE YEAR ENDED
OCTOBER 31, 1994
Land $ 446,330 $ 446,330
Buildings 913,356 $ 18,780 932,136
Recreational facilities 1,253,568 103,203 1,356,771
Sewer and water facilities 407,854 15,314 423,168
Machinery and equipment 397,080 10,525 407,605
Automotive equipment 121,127 18,091 $ (16,275) 122,943
Furniture and fixtures 79,042 13,486 92,528
Construction in progress 322,980 509,231(1) 832,211
----------- ----------- ----------- ----------- -----------
TOTALS $ 3,941,337 $ 688,630 $ (16,275) $ 4,613,692
=========== =========== =========== =========== ===========
<FN>
(1) Installation of water treatment system.
(2) Reclassification.
</FN>
</TABLE>
F-15
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
SCHEDULE VI
ACCUMULATED DEPRECIATION OF
PROPERTY AND EQUIPMENT
FOR THE YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
BALANCE AT OTHER CHANGES -
BEGINNING ADDITIONS ADD (DEDUCT) - BALANCE AT
OF YEAR AT COST (1) RETIREMENT DESCRIBE END OF YEAR
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
OCTOBER 31, 1996
Buildings $ 376,858 $ 18,445 $ 395,303
Recreational facilities 790,711 108,020 898,731
Sewer and water facilities 313,644 49,241 362,885
Machinery and equipment 320,905 18,633 339,538
Automotive equipment 114,373 24,583 $ (4,310) 134,646
Furniture and fixtures 76,688 6,166 82,854
---------- ---------- ---------- ----------- ----------
TOTALS $1,993,179 $ 225,088 $ (4,310) $2,213,957
========== ========== ========== =========== ==========
FOR THE YEAR ENDED
OCTOBER 31, 1995
Buildings $ 358,388 $ 18,470 $ 376,858
Recreational facilities 712,839 77,872 790,711
Sewer and water facilities 266,929 46,715 313,644
Machinery and equipment 352,683 20,142 $ (51,920) 320,905
Automotive equipment 91,893 22,480 114,373
Furniture and fixtures 69,133 7,555 76,688
---------- ---------- ---------- ----------- ----------
TOTALS $1,851,865 $ 193,234 $ (51,920) $1,993,179
========== ========== ========== =========== ==========
FOR THE YEAR ENDED
OCTOBER 31, 1994
Buildings $ 339,606 $ 18,782 $ 358,388
Recreational facilities 644,028 68,811 712,839
Sewer and water facilities 255,152 11,777 266,929
Machinery and equipment 312,904 39,779 352,683
Automotive equipment 93,744 14,424 (16,275) 91,893
Furniture and fixtures 61,928 7,205 69,133
---------- ---------- ---------- ----------- ----------
TOTALS $1,707,362 $ 160,778 $ (16,275) $1,851,865
========== ========== ========== =========== ==========
</TABLE>
F-16
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
SCHEDULE VII
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO CHARGED TO OTHER CHANGES -
BEGINNING COSTS AND OTHER ACCOUNT - ADD (DEDUCT) - BALANCE AT
OF YEAR EXPENSES DESCRIBE DESCRIBE END OF YEAR
<C> <S> <C> <C> <C> <C> <C>
1996 Allowance for doubtful accounts $ 79,860 $ 20,585 $ 100,445
Accumulated amortization,
deferred costs 11,060 4,740 (2) 15,800
1995 Allowance for doubtful accounts 35,000 150,631 $ (105,771) (1) 79,860
Accumulated amortization,
deferred costs 6,320 4,740 (2) 11,060
1994 Allowance for doubtful accounts 35,000 95,241 (95,241) (1) 35,000
Accumulated amortization,
deferred costs 1,580 4,740 (2) 6,320
<FN>
(1) Accounts written off.
(2) Amounts represent amortization of deferred costs incurred for issuance of
the 6-1/4% subordinated notes.
</FN>
</TABLE>
F-17
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
SCHEDULE IX
SHORT-TERM BORROWINGS
YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
MAXIMUM AVERAGE WEIGHTED
WEIGHTED AMOUNT AMOUNT AVERAGE
CATEGORY OF AVERAGE OUTSTANDING OUTSTANDING INTEREST
AGGREGATE BALANCE AT INTEREST DURING DURING RATE DURING
BORROWINGS END OF YEAR RATE THE YEAR THE YEAR THE YEAR
<S> <C> <C> <C> <C> <C>
Commercial paper:
1996 $ 11,300 5 % $ 11,300 $ 11,300 5 %
1995 11,300 5 11,300 11,300 5
1994 11,300 5 11,300 11,300 5
</TABLE>
Commercial paper represents an unsecured borrowing with no specified repayment
terms from the Lot and Cottage Owners Association of Buck Hill Falls.
The average amount outstanding during the year represents the average monthly
principal balances outstanding during the year.
The weighted average interest rate during the year was computed by dividing the
actual interest expense incurred on short-term borrowings by the average amount
outstanding during the year.
F-18
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
SCHEDULE X
SUPPLEMENTARY STATEMENT OF OPERATIONS INFORMATION
YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
ITEM CHARGED TO COSTS AND EXPENSES
1996 1995 1994
<S> <C> <C> <C>
Maintenance and repairs $173,295 $137,058 $116,301
======== ======== ========
Depreciation and amortization of intangible assets,
pre-operating costs and similar deferrals:
Depreciation $225,088 $193,234 $160,778
Deferred debt issuance costs 4,740 4,740 4,740
-------- -------- --------
$229,828 $197,974 $165,518
======== ======== ========
Taxes, other than payroll and income taxes:
Real estate $ 89,531 $ 83,120 $ 60,746
Capital stock 9,746 8,647 4,226
-------- -------- --------
$ 99,277 $ 91,767 $ 64,972
======== ======== ========
</TABLE>
Royalties, amortization and advertising costs are not set forth inasmuch as such
items do not exceed 1% of gross revenues as shown in the consolidated statement
of operations.
F-19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and consolidated statement of operations on pages F-3
and F-4 of the Company's 1996 Form 10-K Annual Report and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000783283
<NAME> BUCK HILL FALLS COMPANY
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 106,703
<SECURITIES> 0
<RECEIVABLES> 353,723
<ALLOWANCES> (100,445)
<INVENTORY> 0
<CURRENT-ASSETS> 403,397
<PP&E> 4,906,700
<DEPRECIATION> (2,213,957)
<TOTAL-ASSETS> 3,172,579
<CURRENT-LIABILITIES> 981,025
<BONDS> 1,921,243
0
0
<COMMON> 1,518,964
<OTHER-SE> (475,970)
<TOTAL-LIABILITY-AND-EQUITY> 3,172,579
<SALES> 2,175,475
<TOTAL-REVENUES> 2,175,475
<CGS> (1,810,206)
<TOTAL-COSTS> (1,810,206)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (100,445)
<INTEREST-EXPENSE> (172,631)
<INCOME-PRETAX> (125,129)
<INCOME-TAX> 0
<INCOME-CONTINUING> (125,129)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (125,129)
<EPS-PRIMARY> (1.68)
<EPS-DILUTED> (1.68)
</TABLE>
