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 JULY 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 July 31, 1998, the registrant had 79,811 shares of Common Stock,
no par value and 24,960 shares of Class A Common Stock, 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 -
July 31, 1998 and October 31, 1997 1
Condensed Consolidated Statement of Operations -
Nine Months and Three Months Ended July 31, 1998
and 1997 2
Condensed Consolidated Statement of Cash Flows -
Nine Months Ended July 31, 1998 and 1997 3
Notes to Condensed Consolidated Financial Statements 4-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-9
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>
- ----------------------------------------------------------------------------------------------------------------------
JULY 31,
1998 OCTOBER 31,
(UNAUDITED) 1997*
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 77,455 $ 76,973
Accounts receivable, net 497,209 328,854
Prepaid expenses and other
current assets 18,324 21,659
----------- -----------
Total current assets 592,988 427,486
RESTRICTED CASH 79,889 69,122
PROPERTY, PLANT AND EQUIPMENT, Net 2,808,281 2,643,058
DEFERRED COSTS, Net - 3,143
----------- -----------
TOTAL $ 3,481,158 $ 3,142,809
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 55,554 $ 504,268
Accounts payable, trade 274,856 124,095
Deferred revenue 536,351 -
Accrued expenses and other 88,167 92,411
6-1/4% Subordinated Notes - 140,000
----------- -----------
Total current liabilities 954,928 860,774
CUSTOMER DEPOSITS 79,889 69,122
6 - 1/4% SUBORDINATED NOTES 116,000 -
LONG-TERM DEBT 891,847 912,812
----------- -----------
Total liabilities 2,042,664 1,842,708
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock 1,731,861 1,720,661
Contributed capital 874,227 799,227
Deficit (1,167,594) (1,219,787)
----------- -----------
Total stockholders' equity 1,438,494 1,300,101
----------- -----------
TOTAL $ 3,481,158 $ 3,142,809
=========== ===========
</TABLE>
* Condensed from audited financial statements
The accompanying notes are an integral part of these
condensed consolidated financial statements.
- 1 -
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED THREE MONTHS ENDED
.......JULY 31......... .......JULY 31.........
1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES $ 1,532,413 $ 1,479,933 $ 863,683 $ 814,516
COST OF REVENUES 1,312,817 1,249,260 688,093 576,383
----------- ----------- --------- ---------
GROSS PROFIT FROM
OPERATIONS 219,596 230,673 175,590 238,133
GENERAL AND ADMINISTRATIVE
EXPENSES 294,467 217,936 84,526 34,173
----------- ----------- --------- ---------
(LOSS) INCOME FROM
OPERATIONS (74,871) 12,737 91,064 203,960
----------- ----------- --------- ---------
OTHER INCOME (EXPENSE):
Miscellaneous income 24,846 53,102 19,191 43,594
Gain on sale of asset 2,015 53,500
Interest expense (101,794) (119,446) (37,358) (37,442)
----------- ----------- --------- ---------
Other income (expense), net (74,933) (12,844) (18,167) 6,152
----------- ----------- --------- ---------
(LOSS) INCOME BEFORE
EXTRAORDINARY ITEM (149,804) (107) 72,897 210,112
EXTRAORDINARY ITEM - GAIN
FROM CASUALTY (FIRE) 201,997 -- 172,188 --
----------- ----------- --------- ---------
NET INCOME (LOSS) $ 52,193 $ (107) $ 245,085 $ 210,112
----------- ----------- --------- ---------
NET INCOME (LOSS) PER
COMMON SHARE BEFORE
EXTRAORDINARY ITEM
Basic $ (1.44) $ -- $ 0.70 $ 2.12
=========== =========== ========= =========
Diluted $ (1.44) $ -- $ 0.67 $ 1.98
=========== =========== ========= =========
NET INCOME (LOSS) PER
COMMON SHARE AFTER
EXTRAORDINARY ITEM
Basic $ 0.50 $ -- $ 2.35 $ 2.12
=========== =========== ========= =========
Diluted $ 0.48 $ -- $ 2.25 $ 1.98
=========== =========== ========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
- 2 -
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED
......JULY 31......
1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY OPERATING
ACTIVITIES:
Net income (loss) $ 52,193 $ (107)
Adjustments for noncash charges:
Depreciation and amortization 173,833 167,858
Gain from casualty fire (201,997)
Gain from disposition of assets (2,015) (53,669)
Changes in assets and liabilities 520,992 304,031
-------- ---------
Net cash provided by operating
activities 543,006 418,113
-------- ---------
INVESTING ACTIVITIES:
Insurance proceeds from fire loss 235,485
Purchase of property and equipment (372,545) (93,443)
Proceeds from sale of asset 2,015 53,880
-------- ---------
Net cash provided by (used in)
investing activities (135,045) (39,563)
-------- ---------
FINANCING ACTIVITIES:
Repayment of debt (493,679) (697,697)
Proceeds from additional paid in capital 75,000
Proceeds from issuance of stock 11,200 190,206
Proceeds from issuance of debt 205,042
-------- ---------
Net cash used in financing activities (407,479) (302,449)
-------- ---------
INCREASE IN CASH 482 76,101
CASH, BEGINNING OF PERIOD 76,973 106,703
-------- ---------
CASH, END OF PERIOD $ 77,455 $ 182,804
======== =========
CASH PAID FOR INTEREST $ 99,478 $ 119,446
======== =========
</TABLE>
The accompanying notes are an integral part of these
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 560 11,200
Common Stock Subscribed -- -- (560) (11,200) 11,200
-------- -------- -------- -------- --------
Balance, July 31, 1998 24,960 $355,010 3,640 $72,990 $(72,990)
======== ======== ======== ======== ========
</TABLE>
-4-
<PAGE>
BUCK HILL FALLS COMPANY AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 3: EARNINGS PER SHARE
In fiscal 1998, 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 July 31, 1997 EPS, as follows:
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
ENDED ENDED
JULY 31, 1997 JULY 31, 1997
------------- -------------
<S> <C> <C>
Previously reported
Primary fully diluted $ -- $2.12
==== =====
Fully diluted $ -- $2.12
==== =====
Restated amounts:
Basic EPS $ -- $2.12
==== =====
Diluted EPS $ -- $1.98
==== =====
</TABLE>
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 July 31, 1998 and 1997:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS FOR THE THREE MONTHS
.......ENDED JULY 31, 1998................ ........ENDED JULY 31, 1997........
COMMON COMMON
INCOME SHARES INCOME SHARES
NUMERATOR DENOMINATOR EPS NUMERATOR DENOMINATOR EPS
July 31, 1998
Before extraordinary item:
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $(149,804) 104,291 $(1.44) $ 72,897 104,291 $ .70
========= ======= ====== ======== ======= =====
Diluted EPS $(149,804) 108,811 $(1.44) $ 72,897 108,811 $ .67
========= ======= ====== ======== ======= =====
After extraordinary item:
Basic EPS $ 52,193 104,291 $ .50 $245,085 104,291 $2.35
======== ======= ======= ======== ======= =====
Diluted EPS $ 52,193 108,811 $ .48 $245,085 108,811 $2.25
======== ======= ======= ======== ======= =====
- 5 -
<PAGE>
FOR THE NINE MONTHS FOR THE THREE MONTHS
.......ENDED JULY 31, 1998................ ........ENDED JULY 31, 1997........
COMMON COMMON
INCOME SHARES INCOME SHARES
NUMERATOR DENOMINATOR EPS NUMERATOR DENOMINATOR EPS
July 31, 1997
Before and after extraordinary
item:
Basic EPS $ (107) 98,931 $ -- $210,112 98,931 $2.12
====== ======== ========= ======== ======== =====
Diluted EPS $ (107) 105,961 $ -- $210,112 105,961 $1.98
====== ======== ========= ======== ======== =====
</TABLE>
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-6-
<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 NINE MONTHS ENDED
JULY 31, 1998 AS COMPARED TO THE NINE MONTHS ENDED
JULY 31, 1997
- --------------------------------------------------------------------------------
In March 1998, the Company experienced a catastrophic fire. The process
of rebuilding and the replacement of the assets destroyed is nearly complete.
Management is confident that, with the fire renovations complete, the increased
demand for the Company's amenities experienced during the later portion of June
and July will continue through the final fiscal period of 1998.
Revenues increased $52,480 for the nine months ended July 31, 1998, as
compared to the same period in the prior year. In 1998, the Company had an
increase in membership revenue of nearly $20,000 due to increased members as
well as an increase in daily fees. Additionally, revenues from townhouse
maintenance fees were $13,000 higher in 1998 as compared to 1997, mostly
attributable to an increase in the yearly fee charged to the cottagers. Also,
the number of rounds of golf increased, resulting in an additional $6,500 of
green fees in 1998. Finally, there was an increase of nearly $11,000 in snow
plowing revenues resulting from a new policy excluding snowplowing as a part of
the annual maintenance fee agreement. Mitigating the above increases was a
decrease of nearly $26,000 in the Company's dues which was the result of a new
policy where dues are no longer assessed on undeveloped lots and "footprints".
Cost of revenues increased $63,557 for the nine months ended July 31,
1998 as compared to the same period in 1997. Repairs and maintenance expense
increased approximately $10,500 due to repairs made on the tennis tea and golf
course. Electricity expense increased approximately $6,500 due to the loss of
the automatic irrigation system in the fire. Without the automated system, the
irrigation system operated inefficiently resulting in an increase in operating
costs. Road and path expense increased $5,000 due to continued efforts by the
Company to improve the road and path system throughout the community. Offsetting
these increases was a decrease in security expense of approximately $7,500 due
to a new agreement negotiated by the Company to provide office space for use by
the security firm in return for a reduction of overall rates. Insurance expense
decreased approximately $15,500 due to the bidding of all insurance policies in
the prior year, the effect of which is being recognized in fiscal 1998.
- 7 -
<PAGE>
General and administrative costs increased $76,530 in the first nine
months of 1998 as compared to the same period in 1997. A portion of the increase
was the result of expenses of $23,000 in office and computer equipment
associated with the conversion of the Company's accounting software.
Additionally, there was an increase of approximately $24,000 in payroll expense
due to the hiring of additional personnel and an across the board increase of
approximately five percent in wages for fiscal 1998. There was a substantial
decrease in professional fees of approximately $19,000 due to a nonrecurring
executive search that was required in 1997. Other income decreased $79,743
primarily due to realized revenues in 1997 of $53,000 from the sale of land.
There was a substantial drop in interest expense of $19,000 due to the Company's
continued effort to substantially reduce outstanding debt.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
JULY 31, 1998 COMPARED TO THE THREE MONTHS ENDED
JULY 31, 1997
- --------------------------------------------------------------------------------
Revenues increased $49,167 during the three months ended July 31, 1998.
As explained above, the increase was due primarily to an increase in memberships
and daily fees.
Cost of revenues increased $111,710 for the three months ended July 31,
1998 primarily from the increase in demand throughout the community for the
Company's numerous amenities which resulted in increases in various departmental
expenses as explained above.
General and administrative expenses increased $50,353 for the three
months ended July 31, 1998 primarily due to the increase in expenditures for the
upgrade in the Company's computer system and increases in payroll expense.
LIQUIDITY AND CAPITAL RESOURCES
At July 31,1998, the Company had a working capital deficiency of $
361,941. Included in current liabilities is $55,554 in scheduled principal
payments on long -term debt that 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 (8.25% at July 31,1998) plus 1-1/2%.
Pursuant to the loan agreement, approximately 2,600 acres of land and land
improvements located in Barrett Township, Monroe County, Pennsylvania, are
pledged as collateral, along with dues, assessments and fee revenues. The
Revolving Credit Facility is available through May 24, 1999, 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.
- 8 -
<PAGE>
The Company was 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 (8.25% at July 31, 1998) plus
1-1/2%. The loan matures in May 2015 and is secured by a first mortgage on
approximately 2,200 acres of land and land improvements located in Barrett
Township, Monroe County, Pennsylvania and a collateral assignment of all
revenues and assessments of the Company's water operations.
The Company expects to meet its current liabilities 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.
Cash remained static for the nine months ended July 31,1998. Cash from
operating activities increased $124,893 primarily from the advance collection of
fees. Cash provided by investing activities decreased $95,482 due to the
insurance proceeds received for the replacement of the assets lost in the fire,
net of the purchase of new fixed assets. Net repayment of debt amounted to
$493,000 in both 1998 and 1997. In 1998, $75,000 was received as additional
paid-in capital by a stockholder of the Company and will be used to construct a
building within the community. Additionally, $11,200 was received for the
payment of Common Stock Class A in 1998 as compared to $190,206 in 1997.
At July 31, 1998, the Company has no outstanding draws on its
$1,000,000 line of credit.
The Company incurred a loss before extraordinary item of $149,804 for
the nine months ended July 31,1998 and at July 31,1998, the Company has a
cumulative deficit of $1,167,594 and a working capital deficiency of $361,940.
Although the Company's line of credit is available through May 24, 1999, 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, 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.
- 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
The Annual Meeting of the shareholders of the Company was held
on July 19, 1998. At the meeting the following persons were
elected as directors of the Company, each receiving the number
of votes indicated next to his or her name:
Sandra Kraus 66,364
Edward Reilly 67,878
Anthony Roberts 61,177
The following additional persons continued as directors of the
Company after the meeting:
Anthony C. Bowe
James T. Sygenda
David C. Toomey
Richard C. Unger, Jr.
Clifford Press
Grace Godshalk
The shareholders also approved the conveyance of a
conservation easement to the Buck Hill Conservation Foundation
by the following vote:
Yes 59,908
No 2,011
No vote/Abstain 14,170
Item 5. Other Information
At its organizational meeting on September 7, 1998, the Board
of Directors elected Richard C. Unger, Jr. as President and
Chairman of the Board of the Company and reelected Anthony C.
Bowe as Vice-President and Chief Financial Officer and David
C. Toomey as secretary.
Item 6. Exhibits and Reports on Form 8-K
None
- 10 -
<PAGE>
SIGNATURES
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: September 14, 1998 By: /s/ Richard C. Unger, Jr.
Richard C. Unger, Jr., President and
Chairman of the Board
Date: September 14, 1998 By: /s/ Anthony C. Bowe
Anthony C. Bowe
Vice President, Chief Financial
Officer (Principal Financial and
Accounting Officer)
- 11 -
<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 JULY 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JUL-31-1998
<CASH> 77,455
<SECURITIES> 0
<RECEIVABLES> 561,469
<ALLOWANCES> 64,260
<INVENTORY> 0
<CURRENT-ASSETS> 592,988
<PP&E> 5,353,218
<DEPRECIATION> 2,544,937
<TOTAL-ASSETS> 3,481,158
<CURRENT-LIABILITIES> 954,928
<BONDS> 0
<COMMON> 1,731,861
0
0
<OTHER-SE> (293,367)
<TOTAL-LIABILITY-AND-EQUITY> 3,481,158
<SALES> 1,559,274
<TOTAL-REVENUES> 1,559,274
<CGS> 1,607,284
<TOTAL-COSTS> 1,607,284
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (101,794)
<INCOME-PRETAX> (149,804)
<INCOME-TAX> 0
<INCOME-CONTINUING> (149,804)
<DISCONTINUED> 0
<EXTRAORDINARY> 201,997
<CHANGES> 0
<NET-INCOME> 52,193
<EPS-PRIMARY> .50
<EPS-DILUTED> .48
</TABLE>
