FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended JANUARY 31, 1998
OR
[ ] 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 33-1406
BUCK HILL FALLS COMPANY
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 24-0536840
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
CRESCO ROAD, BUCK HILL FALLS, PENNSYLVANIA 18323
(Address of principal executive offices)(Zip Code)
(717) 595-7511
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
As of January 31, 1998, the registrant had 79,811 shares of Common
Stock and 24,400 shares of Common Stock Class A, no par value, issued and
outstanding.
<PAGE>
FORM 10-Q
BUCK HILL FALLS COMPANY
INDEX
Page
Part I: Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheet -
January 31, 1998 and October 31, 1997 1
Condensed Consolidated Statement of Operations -
Three Months Ended January 31, 1998 and 1997 2
Condensed Consolidated Statement of Cash Flows -
Three Months Ended January 31, 1998 and 1997 3
Notes to Condensed Consolidated Financial Statements 4-5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-9
Part II: Other Information 10
Signatures 11
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BUCK HILL FALLS COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
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JANUARY 31,
1998 OCTOBER 31,
(UNAUDITED) 1997 *
- -------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 59,377 $ 76,973
Accounts receivable, net 328,416 328,854
Prepaid expenses and other current assets 24,406 21,659
----------- -----------
Total current assets 412,199 427,486
RESTRICTED CASH 77,577 69,122
PROPERTY, PLANT AND EQUIPMENT, Net 2,616,584 2,643,058
DEFERRED COSTS, Net 1,959 3,143
----------- -----------
TOTAL $ 3,108,319 $ 3,142,809
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 444,606 $ 504,268
Accounts payable, trade 39,655 124,095
Accrued expenses and other 289,794 92,411
6-1/4% subordinated notes 140,000 140,000
----------- -----------
Total current liabilities 914,055 860,774
CUSTOMER DEPOSITS 77,577 69,122
LONG-TERM DEBT 903,578 912,812
----------- -----------
Total liabilities 1,895,210 1,842,708
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock 1,720,661 1,720,661
Contributed capital 799,227 799,227
Deficit (1,306,779) (1,219,787)
----------- -----------
Total stockholders' equity 1,213,109 1,300,101
----------- -----------
TOTAL $ 3,108,319 $ 3,142,809
=========== ===========
*Condensed from audited financial statements
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</TABLE>
See notes to condensed consolidated financial statements.
-1-
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
- ----------------------------------------------------------------------
THREE MONTHS ENDED
JANUARY 31,
1998 1997
- ----------------------------------------------------------------------
REVENUES $ 328,150 $ 323,914
COST OF REVENUES 344,614 355,154
--------- ---------
GROSS LOSS FROM OPERATIONS (16,464) (31,240)
GENERAL AND ADMINISTRATIVE EXPENSES 54,385 81,461
--------- ---------
LOSS FROM OPERATIONS (70,849) (112,701)
--------- ---------
OTHER (EXPENSE) INCOME:
Interest expense (32,634) (49,503)
Miscellaneous 14,476 13,949
Gain on sale of equipment 2,015 --
--------- ---------
Other expense, net (16,143) (35,554)
--------- ---------
NET LOSS $ (86,992) $(148,255)
========= =========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 101,090 80,093
========= =========
NET LOSS PER COMMON SHARE:
Basic $ (0.86) $ (1.85)
========= =========
Diluted $ (0.86) $ (1.85)
========= =========
- --------------------------------------------------------------------------------
See notes to condensed consolidated financial statements.
-2-
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
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THREE MONTHS ENDED
JANUARY 31,
1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY:
OPERATIONS:
Net loss $ (86,992) $(148,255)
Gain on sale of equipment (2,015)
Adjustments for noncash charges,
Depreciation and amortization 53,044 55,209
Changes in assets and liabilities 111,818 194,530
--------- ---------
Net cash provided by operations 75,855 101,484
--------- ---------
INVESTING:
Purchase of property and equipment (26,570) (13,753)
Proceeds from sale of equipment 2,015
--------- ---------
Net cash used in investing (24,555) (13,753)
--------- ---------
FINANCING:
Proceeds from issuance of debt 115,338 100,000
Repayment of debt (184,234) (199,479)
Proceeds from issuance of stock 41,579
--------- ---------
Net cash used in financing (68,896) (57,900)
--------- ---------
(DECREASE) INCREASE IN CASH (17,596) 29,831
CASH, BEGINNING OF PERIOD 76,973 106,703
--------- ---------
CASH, END OF PERIOD $ 59,377 $ 136,534
========= =========
CASH PAID FOR,
Interest $ 32,634 $ 49,503
========= =========
</TABLE>
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See notes to condensed consolidated financial statements.
-3-
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
- ------------------------------------------------------------------------------
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, 1997.
NOTE 2: CHANGES IN COMPONENTS OF COMMON STOCK CLASS A
<TABLE>
<CAPTION>
STOCK
...COMMON STOCK... .STOCK SUBSCRIBED. SUBSCRIPTION
SHARES AMOUNT SHARES AMOUNT RECEIVABLE
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1997 24,400 $343,811 4,200 $84,190 $(84,190)
Common Stock Issued
Common Stock Subscribed
------ -------- ----- ------- --------
Balance, January 31, 1998 24,400 $343,811 4,200 $84,190 $(84,190)
====== ======== ===== ======= ========
</TABLE>
-4-
<PAGE>
BUCK HILL FALLS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
- ------------------------------------------------------------------------------
NOTE 3: EARNINGS PER SHARE
In 1997, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share," which changed the computation
of earnings per share ("EPS") and requires presentation of two new amounts,
basic and diluted EPS, and additional informational disclosures. The adoption of
SFAS No. 128 is required for all reporting periods after December 15, 1997 and
requires restatement for all prior periods The adoption of SFAS No. 128 resulted
in the restatement of the Company's January 31, 1997 EPS, as follows:
Previously reported
Primary fully diluted $(1.85)
Restated amounts:
Basic EPS $(1.85)
Diluted EPS $(1.85)
The following data show the amounts used in computing earnings per
share and the effects of income and the weighted average number of shares of
dilutive potential common stock for the years ended January 31, 1998 and 1997:
INCOME COMMON SHARES
NUMERATOR DENOMINATOR EPS
January 31, 1998
Basic and diluted EPS
Net loss $(86,992) 101,090 $(.86)
========= ========= =====
January 31, 1997
Basic and diluted EPS
Net loss $(148,255) 80,093 $(1.85)
========= ========= =====
The 4,200 shares of Common Stock A Subscriptions Receivable were not
included in computing diluted EPS because their effects were antidilutive.
-5-
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<PAGE>
FORM 10-Q
BUCK HILL FALLS COMPANY AND SUBSIDIARY
ITEM 2. 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 FOR THE THREE MONTHS ENDED
JANUARY 31, 1998
COMPARED TO THE THREE MONTHS ENDED
JANUARY 31, 1997
Revenues increased approximately $4,300 for the three months ended
January 31, 1998, as compared to the same period in the prior fiscal year. The
Company had an increase of $2,400 in its cottage inspections due to management
increasing opportunities to bill on a more timely and accurate basis, and a
$4,000 increase in finance charges. Additionally, a $7,600 increase in plowing
and cindering revenues was due to a policy change whereby plowing and cindering
will no longer be included in the dues, but instead invoiced separately. These
increases were offset by a $9,700 decrease in the company's dues which was the
effect of a management decision to treat unimproved lots as being exempt from
dues. The decision was based on an evaluation by management which identified a
lack of continuity in the billing for unimproved lots which was a primary reason
for collection efforts to become increasingly difficult.
Cost of revenues decreased approximately $10,500 for the three months
ended January 31, 1998, as compared to the same period in the prior fiscal year.
Salaries increased $20,000 due to the hiring of a new full time mechanic for
golf maintenance, the increased salary of the new general manager and a
management decision to keep four golf course workers on the payroll until
December in order to take advantage of good weather and further reduce the
amount of work that will be necessary to prepare the greens for the spring
season. Snowplowing expenses increased $2,800 due to the plowing expenses
associated with the golf cottage community as discussed above. Auto expense also
increased $2,500 due to major repairs required for three trucks and a new
preventative maintenance program instituted in an effort to extend the lives of
the companies vehicles. Offsetting the increases in the above expenses was an
$8,000 decrease in repairs and maintenance expense which was related to the
utilization of the full-time mechanic. Also, there was a substantial reduction
in the cost of insurance of $6,100 due to an aggressive effort by management to
reduce insurance expense through a restructuring of the existing policies which
began in fiscal 1997 but the benefit of which is being realized in fiscal 1998.
Road and path expense also decreased $4,200 due to a milder winter but also less
-6-
<PAGE>
maintenance was required since the roads throughout the grounds are in better
condition due to road maintenance programs instituted in fiscal 1997. Contracted
maintenance decreased $4,000 due to an effort to better utilize the company's
personnel for repairs where more expensive contractors may have been used in the
past. Fuel expense decreased approximately $2,300 due to prior policy of
refueling all machinery at the close of the season which was not continued in
fiscal 98 and an overall drop in fuel prices as compared to the same period in
1997. Supplies expense also decreased $2,500 due to increased control and better
utilization of existing inventories while miscellaneous expense decreased $8,700
due to better allocation of expenditures among expense categories by management.
General and administrative costs decreased approximately $27,000 due to
a substantial drop in professional fees of $21,100 in particular legal fees
associated with the issuance of the common stock A subscription that were later
allocated to the issuance. Also, there was a $4,100 decrease in payroll due to a
more accurate allocation from administration expense to cost of sales while
supplies expense decreased $1,800 due to better utilization and controls of
unused supplies.
Other income/expense decreased approximately $19,000 due almost
entirely to the $17,000 decrease in interest expense caused by management's
continued policy to utilize available cash to pay down the line of credit which
has been reduced substantially when compared to the same period ending 1997.
-7-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At January 31,1998, the Company had a working capital deficiency of
$501,856 as compared to $649,143 in the first quarter of 1997. Included in
current liabilities is the entire $374,000 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 $55,554 in scheduled principal
payments on long-term debt are due within the next twelve months.
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 (8.5% at January 31,1998) 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
Revolving Credit Facility is available through May 24, 1998, 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 the existing 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 (8.5% at January 31,1998) 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.
The Company expects to meet its current liabilities (other than payment
of the entire $374,000 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.
-8-
<PAGE>
Overall cash for the quarter ended January 31, 1998 decreased $17,596
as compared to an increase of $29,831 for the same period in 1997. Cash used for
investing activities increased $10,802 as capital projects including the
purchase of computer equipment of $2,200, golf maintenance equipment of $18,849
and water pumping equipment of $5,921 accounted for the majority of the change.
Net repayment of debt amounted to $68,896 in 1998 as compared to $94,479 in
1997. However, in 1997 an additional $41,579 was provided from the issuance of
Class A common stock resulting in the majority of the decrease in cash of
$47,247 between 1998 and 1997.
At January 31, 1998, the Company had drawn $374,000 on its $1,000,000
line of credit, leaving $626,000 available.
The Company incurred a loss of $86,992 for the three months ended
January 31, 1998 and at January 31, 1998, the Company has a cumulative deficit
of $1,306,779 and a working capital deficiency of $486,804. Although the
Company's line of credit is available through May 24, 1998, 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 dues from $2,800 to $2,950 provides 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.
-9-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
-10-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUCK HILL FALLS COMPANY
(Registrant)
Date: March 12, 1998 By: /s/ David B. Ottaway, Chairman
David B. Ottaway, Chairman
Date: March 14, 1998 By: /s/ Anthony C. Bowe
Anthony C. Bowe, Vice-President,
Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BUCK HILL
FALLS COMPANY'S QUARTERLY FORM 10-Q FOR THE QUARTER ENDED JANUARY 31, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 59,377
<SECURITIES> 0
<RECEIVABLES> 397,862
<ALLOWANCES> 69,446
<INVENTORY> 0
<CURRENT-ASSETS> 412,199
<PP&E> 5,129,300
<DEPRECIATION> 2,512,716
<TOTAL-ASSETS> 2,616,584
<CURRENT-LIABILITIES> 914,055
<BONDS> 0
0
0
<COMMON> 1,720,661
<OTHER-SE> (507,552)
<TOTAL-LIABILITY-AND-EQUITY> 3,108,319
<SALES> 328,150
<TOTAL-REVENUES> 328,150
<CGS> 382,508
<TOTAL-COSTS> 382,508
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,634
<INCOME-PRETAX> (86,992)
<INCOME-TAX> 0
<INCOME-CONTINUING> (86,992)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (86,992)
<EPS-PRIMARY> (0.86)
<EPS-DILUTED> (0.86)
</TABLE>
