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 APRIL 30, 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 April 30, 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 -
April 30, 1998 and October 31, 1997 1
Condensed Consolidated Statement of Operations -
Six Months and Three Months Ended April 30, 1998
and 1997 2
Condensed Consolidated Statement of Cash Flows -
Six Months Ended April 30, 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 6-10
Part II: Other Information 11
Signatures 12-13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BUCK HILL FALLS COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
APRIL 30, 1998 OCTOBER 31
(UNAUDITED) 1997*
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 58,955 $ 76,973
Accounts receivable, net 390,617 328,854
Prepaid expenses and other current assets 32,094 21,659
----------- -----------
Total current assets 481,666 427,486
RESTRICTED CASH 85,491 69,122
PROPERTY, PLANT AND EQUIPMENT, Net 2,657,345 2,643,058
DEFERRED COSTS, Net 774 3,143
----------- -----------
TOTAL $ 3,225,276 $ 3,142,809
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 439,554 $ 504,268
Accounts payable, trade 128,241 124,095
Deferred revenue 210,178
Accrued expenses and other 141,242 92,411
6-1/4% Subordinated Notes 140,000 140,000
----------- -----------
Total current liabilities 1,059,215 860,774
CUSTOMER DEPOSITS 85,491 69,122
LONG-TERM DEBT 903,362 912,812
----------- -----------
Total liabilities 2,048,068 1,842,708
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock 1,720,661 1,720,661
Contributed capital 869,227 799,227
Deficit (1,412,680) (1,219,787)
----------- -----------
Total stockholders' equity 1,177,208 1,300,101
----------- -----------
TOTAL $ 3,225,276 $ 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>
- ----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED THREE MONTHS ENDED
.........APRIL 30.......... ..........APRIL 30.........
1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES $ 668,730 $ 665,417 $ 340,580 $ 341,503
COST OF REVENUES 624,727 672,877 280,113 317,723
--------- --------- --------- ---------
GROSS (LOSS) PROFIT FROM
OPERATIONS 44,003 (7,460) 60,467 23,780
GENERAL AND ADMINISTRATIVE
EXPENSES 209,940 183,763 155,555 102,302
--------- --------- --------- ---------
LOSS FROM OPERATIONS (165,937) (191,223) (95,088) (78,522)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Miscellaneous income (expense) 5,653 9,508 (8,823) (4,441)
Gain on sale of asset 2,015 53,500 2,015 53,500
Interest expense (64,433) (82,004) (31,799) (32,501)
--------- --------- --------- ---------
Other income (expense), net (56,765) (18,996) (38,607) 16,558
--------- --------- --------- ---------
LOSS BEFORE EXTRAORDINARY
ITEM (222,702) (210,219) (133,695) (61,964)
EXTRAORDINARY ITEM- GAIN FROM
CASUALTY (FIRE) 29,809 29,809
--------- --------- --------- ---------
NET LOSS $(192,893) $(210,219) $(103,886) $ (61,964)
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 104,211 86,674 104,211 86,674
========= ========= ========= =========
NET LOSS PER COMMON SHARE
BEFORE EXTRAORDINARY ITEM
Basic $ (2.14) $ (2.43) $ (1.28) $ (0.71)
========= ========= ========= =========
Diluted $ (2.14) $ (2.43) $ (1.28) $ (0.71)
========= ========= ========= =========
NET LOSS PER COMMON SHARE
AFTER EXTRAORDINARY ITEM
Basic $ (1.85) $ (2.43) $ (1.00) $ (0.71)
========= ========= ========= =========
Diluted $ (1.85) $ (2.43) $ (1.00) $ (0.71)
========= ========= ========= =========
</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>
- ------------------------------------------------------------------------------------------
SIX MONTHS ENDED
............APRIL 30............
1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES:
Net loss $(192,893) $(210,219)
Adjustments for noncash charges:
Depreciation and amortization 96,013 109,360
Gain from casualty fire (29,809) --
Gain on disposition of assets -- (53,669)
Changes in assets and liabilities 164,752 173,161
--------- ---------
Net cash provided by
operating activities 38,063 18,633
--------- ---------
INVESTING ACTIVITIES:
Purchase of property and equipment (114,826) (30,156)
Insurance proceed from fire loss 62,909 --
Proceeds from sale of land -- 53,879
--------- ---------
Net cash provided by (used in)
investing activities (51,917) 23,723
--------- ---------
FINANCING ACTIVITIES:
Repayment of debt (74,164) (408,607)
Proceeds of additional paid in capital 70,000
Proceeds from issuance of stock -- 179,005
Proceeds from issuance of debt -- 175,000
--------- ---------
Net cash used in
financing activities (4,164) (54,602)
--------- ---------
DECREASE IN CASH (18,018) (12,246)
CASH, BEGINNING OF PERIOD 76,973 106,703
--------- ---------
CASH, END OF PERIOD $ 58,955 $ 94,457
========= =========
CASH PAYMENTS FOR:
Interest $ 64,433 $ 79,912
========= =========
</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
Common Stock Subscribed
------ -------- ----- -------- --------
Balance, April 30, 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 April 30, 1998 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 April 30, 1998 and 1997:
INCOME COMMON SHARES
NUMERATOR DENOMINATOR EPS
April 30, 1998
Basic and diluted EPS
Net loss $(192,893) 104,211 $ (1.85)
========= ========= ========
April 30, 1997
Basic and diluted EPS
Net loss $(210,219) 86,674 $ (2.43)
========= ========= ========
The 4,200 shares of Common Stock A Subscriptions Receivable were not
included in computing diluted EPS because their effects were antidilutive.
- --------------------------------------------------------------------------------
-5-
<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 SIX MONTHS ENDED
APRIL 30, 1998
COMPARED TO THE SIX MONTHS ENDED
APRIL 30, 1997
During this period the company experienced a catastrophic fire. Substantial
progress has been made in the rebuilding and replacement of all loses and a
complete recovery is expected for the upcoming busy summer months. Management is
aggressively preparing for what they believe will be a very active final two
fiscal periods of 1998 and is making the necessary expenditures and preparations
to improve the facilities and its amenities. This should be considered when
comparing the current period ending 1998 to the same period ending 1997 when the
new management was at its inception.
Overall, revenues increased approximately $3,000 for the six months ended
April 30, 1998, as compared to the same period in the prior fiscal year. The
company experienced an increase in billing fees of approximately $26,000 due to
an increase in the services performed, additional cottages on the inspection
list and an increase in the rates. Additionally, plowing and cindering was
previously included in cottage dues where it is now billed separately
contributing to the increase. Mitigating this increase, the company experienced
a decrease in revenues from its dues collections of $14,500. This decrease was
the result of a change in policy whereby owners of undeveloped lots are no
longer required to pay dues until final construction plans are approved.
Additionally, there was a decrease in fairway grille income of $7,000 due to a
new practice of billing for the use of the facilities. Finally, there was a
small decrease in conservation income of $1,500
-6-
<PAGE>
Cost of revenues decreased nearly $48,000 as compared to the same period in
1998. A substantial portion of the decrease was due to a drop in maintenance
expense of approximately $36,000 due to the absence of the cleanup and
rehabilitation of the Companies' grounds that was required to be done in the
prior spring season. Insurance expense also decreased by $16,000 due to
management's efforts in soliciting bids for the policies. Additionally, there
was a decrease in depreciation expense of $14,500 partially attributable to the
assets destroyed in the fire. Repair expense decreased $3,000 due the hiring of
a full time mechanic which reduced the need to seek outside services. Road and
path expense decreased $1,100 due to the rehabilitation of the road system in
the community which requires for less repairs and maintenance. The cost of
refuse removal also decreased $2,400 due to the removal of several large
dumpsters that were previously rented during the off season at a time when they
were not needed while interest expense decreased $2,300 due to the repayment of
outstanding debt. Lab fees decreased $1,500 since the company was previously
required to have an expensive weekly test performed on the water quality.
However due to the new treatment plant, the rehabilitation of the water lines
and close monitoring of the water quality, the Department of Environmental
Resources has released the company from this weekly requirement and reduced it
to an annual test. Offsetting these decreases was an increase in payroll and
employee benefits expense due to several maintenance personnel remaining
employed longer into the fall to reduce the heavy work load usually experienced
during the spring. Auto expense increased $3,500, since a significant amount of
repairs were required to maintain an older fleet of vehicles. Telephone expense
increased $1,300 due to repairs to some communication devices and the addition
of new lines and modems.
General and administrative costs increased approximately $26,000 due
largely to the increase in wages and employee benefits of approximately $24,000
which was the result of a more accurate allocation of the cost of wages to the
companies' departments. Maintenance expense also increased approximately $4,500
due to retaining employees longer into the fall as discussed above. Equipment
rental increased approximately $5,000 due to an increase in leased equipment as
compared to 1997. Auto expense also increased approximately $1,500 which is the
result of needed repairs to the company's aging vehicles. Also there was an
increase in bad debt expense of $7,400 caused by the write off of bad debts that
were negotiated and settled. Computer equipment and office expense increased in
aggregate $13,000 due to the conversion of the accounting software and computer
upgrades that aside from the internal benefits has allowed the Company to become
fully compatible for all year 2000 issues. Offsetting these increases was a
decrease in professional fees of $26,000 due to the search in 1997 for a general
manager and an overall reduction in fees paid for legal and accounting.
-7-
<PAGE>
Other income decreased approximately $55,500 during 1998 due primarily to
the sale of land in the prior period.
Interest expense decreased approximately $17,500 due to management `s
continued efforts to reduce outstanding debt.
As discussed above, the Company received $145,000 of insurance proceeds
which was used to replace certain equipment and materials and supplies. The
capitalized assets which were destroyed in the fire had a net book value of
$31,000 while the Company's replacement of the destroyed materials and supplies
amounted to $84,000 resulting in a net gain on the fire of $30,000. In addition,
the Company may still be entitled to additional proceeds however they are
contingent upon additional expenditures being made by the Company. The Company
is continuing to evaluate its options for this additional reimbursement.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
APRIL 30, 1998
COMPARED TO THE THREE MONTHS ENDED
APRIL 30, 1997
Cost of revenues decreased approximately $38,000 due primarily to necessary
repairs of the Companies' grounds in 1997. This expense was offset by the
reduction in insurance and repairs and maintenance expense during 1998
Miscellaneous income decreased due to nonrecurring income from the sale of
land in 1997.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1998, the Company had a working capital deficiency of $577,549
as compared to $542,578 in the second quarter of 1997. Included in current
liabilities is the entire $384,000 outstanding on the company's $1,000,000 line
of credit with a bank (described in the following paragraph), which is payable
on demand, as well as $55,554 in scheduled principal payments on long-term debt
due within the next twelve months.
-8-
<PAGE>
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 April 30,1998) 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, 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.
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 April 30,1998) 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 $384,000 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 recreational services and related revenues which typically
occurs during the Company's third and fourth quarters. The Company does not
anticipate that the bank will demand payment under the Revolving Credit
Facility.
Overall cash for the quarter ended April 30, 1998 decreased $18,018 as
compared to an increase of $12,246 for the same period in 1997. Cash used for
investing activities increased $75,640 due mostly to the capital expenditures
required to replace the assets that were destroyed by the fire. Net repayment of
debt amounted to $74,164 in 1998 as compared to $233,607 in 1997 and a
substantial portion of the available cash to pay down the debt in 1997 was a
result of the stock issuance. In 1998, $70,000 was received as additional paid
in capital by a stockholder of the Company. The proceeds will be used to
construct a building on the grounds.
-9-
<PAGE>
At April 30, 1998, the Company had drawn $384,000 on its $1,000,000 line of
credit, leaving $616,000 available.
The Company incurred a loss of $192,893 for the six months ended April 30,
1998 and at April 30, 1998, the Company has a cumulative deficit of $1,412,680
and a working capital deficiency of $577,549. 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 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.
-10-
<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
None
-11-
<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: June 15, 1998 By: /s/ David B. Ottaway
David B. Ottaway , Chairman
Date: June 18, 1998 By: /s/ Anthony C. Bowe
Anthony C. Bowe, Vice-President,
Chief Financial Officer
(Principal Financial and Accounting
Officer)
-12-
<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 APRIL 30, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1998
<CASH> 58,955
<SECURITIES> 0
<RECEIVABLES> 464,387
<ALLOWANCES> 73,770
<INVENTORY> 0
<CURRENT-ASSETS> 481,666
<PP&E> 5,133,446
<DEPRECIATION> 2,476,101
<TOTAL-ASSETS> 3,225,276
<CURRENT-LIABILITIES> 1,059,215
<BONDS> 0
0
0
<COMMON> 1,720,661
<OTHER-SE> (543,453)
<TOTAL-LIABILITY-AND-EQUITY> 3,225,276
<SALES> 676,398
<TOTAL-REVENUES> 676,398
<CGS> 834,667
<TOTAL-COSTS> 834,667
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (64,433)
<INCOME-PRETAX> (222,702)
<INCOME-TAX> 0
<INCOME-CONTINUING> (222,702)
<DISCONTINUED> 29,809
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (192,893)
<EPS-PRIMARY> (1.85)
<EPS-DILUTED> (1.85)
</TABLE>
