UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
( ) ANNUAL REPORTS* PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended
OR
(X) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from 4/01/01 to 10/31/01
0-2844 (Blue Ridge)
Commission File No. 0-2843 (Big Boulder)
BLUE RIDGE REAL ESTATE COMPANY
BIG BOULDER CORPORATION
(exact name of Registrants as specified in their charters)
State or other jurisdiction of incorporation or organization:
Pennsylvania
24-0854342 (Blue Ridge)
I.R.S. Employer Identification Number: 24-0822326 (Big Boulder)
Address of principal executive office: Blakeslee, Pennsylvania
Zip Code: 18610
Registrants' telephone number, including area code:570-443-8433
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value, stated value $.30 per combined share*
Page - 1
Indicate by check mark whether the registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such 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/A or any amendment to
this Form 10-K. (X)
The aggregate market value of common stock, without par value, stated value
$.30 per combined share, held by non- affiliates at February 8, 2002, was
$21,088,980. The market value per share is based upon the per share cost of
shares as indicated over the counter on October 31, 2001. There is no
established public trading market for the Companies' stock.
Number of shares outstanding of each of the issuer's classes of common stock.
Class Outstanding February 8, 2002
Common Stock, without par value 1,917,180
Shares stated value $.30 per
combined share
DOCUMENTS INCORPORATED BY REFERENCE
Specified portions of the Companies' 2001 Annual Report to Shareholders are
incorporated by reference into Part II hereof.
Specified portions of the Companies' definitive Proxy Statement for the
2001 Transition Period Meetings of Shareholders to be filed pursuant to
Regulation 14A with the Securities and Exchange Commission not later than 120
days after the end of the fiscal year covered by this report and is incorporated
herein by reference.
__________________
*Under a Security Combination Agreementbetween Blue Ridge Real Estate
Company ("Blue Ridge") and Big Boulder Corporation ("Big Boulder") (the
"Corporations") and under the By-Laws of the Corporations, shares of the
Corporations are combined in unit certificates, each certificate representing
the same number of shares of each of the Corporations. Shares of each
Corporation may be transferred only together with an equal number of shares of
the other Corporation. For this reason, a combined Blue Ridge /Big Boulder Form
10-K is being filed. Except as otherwise indicated, all information applies to
both Corporations.
Page - 2
FORM 10-K
PART I
ITEM 1. BUSINESS
BLUE RIDGE REAL ESTATE COMPANY
Blue Ridge Real Estate Company ("Blue Ridge"), which was incorporated in
Pennsylvania in 1911, is believed to be one of the largest owners of investment
property in Northeastern Pennsylvania. It owns 18,709 acres of land which are
predominately located in the Pocono Mountains. These lands are held entirely as
investment property. Income is derived from these lands through leases,
selective timbering by others, condemnation, sales, and other dispositions. Blue
Ridge also owns the Jack Frost Mountain Ski Area, which is leased to Jack Frost
Mountain Company, a 225-site campground, a retail store leased to Wal-Mart and a
shopping center. The ski area, campground, retail store and shopping center are
more fully described under Item 2.
Jack Frost Mountain Company, a wholly-owned subsidiary of Blue Ridge was
incorporated in Pennsylvania in 1980 and commenced operations on June 1, 1981.
It was created to lease and operate the Jack Frost Mountain Ski Area and to
provide certain services to other facilities, such as the Snow Ridge resort
community, and to operate recreational facilities located within the Jack Frost
Mountain tract.
Northeast Land Company, a wholly owned subsidiary of Blue Ridge, was
incorporated in Pennsylvania in 1967. The major assets of the company consist of
103 acres of land in Northeast Pennsylvania. Revenues are from managing the
rental homes at Snow Ridge, Blue Heron, Laurelwoods and Midlake as resort
accommodations, from real estate commissions for the sale of homes at these
resort communities, and from Trust and Condo fees for Services to these resort
communities. Northeast Land Company also receives revenue from a land lease to a
Burger King franchise, and leased space on a 196-foot communication tower.
BRRE Holdings, Inc., a wholly-owned subsidiary of Blue Ridge, was
incorporated in Delaware in 1986. It was established for investment purposes.
Blue Ridge employs 24 full-time employees. Jack Frost Mountain Company,
which operates the Jack Frost Mountain Ski Area, has 44 full-time employees and
during the skiing season there are approximately 500 additional employees.
Northeast Land Company has 20 full-time employees.
Page - 3
BIG BOULDER CORPORATION
Big Boulder Corporation ("Big Boulder") was incorporated in Pennsylvania in
1949. The major assets of the company are 929 acres of land, which includes a
175-acre lake, the Big Boulder Ski Area, and the Mountain's Edge. The principal
source of revenue for Big Boulder is derived from the Big Boulder Ski Area which
is leased to Lake Mountain Company.
Lake Mountain Company, a wholly-owned subsidiary of Big Boulder Corporation
was incorporated in Pennsylvania in 1983 and commenced operations on June 1,
1983. It was created to lease and operate the Big Boulder Ski Area, and operate
the recreational facilities as they are located within the Big Boulder Lake
tract.
BBC Holdings, Inc., a wholly-owned subsidiary of Big Boulder, was
incorporated in Delaware in 1986. It was established for investment purposes.
Big Boulder has no employees. Lake Mountain Company, which operates the Big
Boulder Ski Area, no longer has any employees. The Lake Mountain Company has
been merged with the payroll of Jack Frost Mountain Company. Big Boulder Ski
area has 11 full- time employees. During the skiing season, there are
approximately 525 additional employees.
INDUSTRY SEGMENT INFORMATION
Information with respect to business segments is presented in Note 13 to
the Registrants' financial statements included in Item 8.
The quarterly results of operations for seven months ended October 31, 2001
and Fiscal years 2001 and 2000 reflect the cyclical nature of the Companies'
business since (a) the Companies' two ski facilities operate principally during
the months of December through March and (b) land dispositions occur
sporadically and do not follow any pattern during the fiscal year. Costs and
expenses, net of revenues received in advance attributable to the ski facilities
for the months of April through November, are deferred and recognized as revenue
and operating expenses, ratably, over the operating period.
ITEM 2. PROPERTIES
A. BLUE RIDGE REAL ESTATE COMPANY
The physical properties of Blue Ridge consist of approximately 18,812 acres
owned by Blue Ridge and Northeast Land Company, the Jack Frost Mountain Ski
Area, the Fern Ridge Campground, the Wal-Mart Store, the Dreshertown Shopping
Center, a sewage treatment facility, corporate headquarters building, and other
miscellaneous facilities.
Page - 4
SKI FACILITIES
The Jack Frost Mountain Ski Area, under lease to Jack Frost Mountain
Company since June 1, 1981, is located near White Haven, Carbon County,
Pennsylvania, and commenced operations in December 1972. The Jack Frost Mountain
Ski Area consists of twenty-one slopes and trails including a snowboard slope,
snowmobile course, snowtubing hill, five double chairlifts, two triple
chairlifts, one quad chairlift, and various buildings including a Summit Lodge
with food service, a cocktail lounge, a ski shop, and a ski rental shop. The
total lift capacity per hour is 12,000 skiers. These lifts are in good condition
and are operated as needed during the ski season. These facilities are situated
on approximately 473 acres owned by Blue Ridge and leased to Jack Frost Mountain
Company. The total capital investment in the ski area is $21,264,704, the major
portion of which represents the cost of the slopes and trails, chairlifts,
snowmaking equipment, water supply, roads and parking areas, and all buildings
including the Summit Lodge. The remainder is for furnishings and equipment for
the Summit Lodge, trucks, maintenance equipment, and miscellaneous outside
equipment. At October 31, 2001 the out-standing debt on the Jack Frost Mountain
Ski Area was $835,860.
REAL ESTATE MANAGEMENT OPERATIONS
The Wal-Mart Store located in Laurens, South Carolina, was acquired in
September 1990 for cash consideration of $2,190,470 which was the total capital
investment at October 31,2001. The building consists of 70,000 square feet,
located on 10.217 acres of land and is leased to Wal-Mart on a triple net basis
through January 31, 2039. At October 31, 2001 a mortgage totaling $1,262,628 was
outstanding on this property.
The Dreshertown Plaza Shopping Center, Dresher, Montgomery County,
Pennsylvania, was acquired in July 1986 for consideration of $4,592,579. The
center consists of approximately 101,233 square feet located on approximately 15
acres of land. On October 31, 2001, the center was 97% occupied under leases
expiring on various dates from November 30, 2001 to October 31, 2021. The total
capital investment in the shopping center is $5,459,641. At October 31, 2001, a
mortgage totaling $4,815,000 was out-standing on this property.
The Fern Ridge Campground is located at the intersection of Route 115 and
Interstate 80 in Monroe County, Pennsylvania. This campground is built on 85
Page - 5
acres and consists of 225 campsites, 75 with water and electric, 25 with rustic
cabins and the remaining 125 are wilderness sites. Its operating period is from
April 1 through September 30. At October 31, 2001, the Companies' investment in
this facility was $994,727.
Blue Ridge owns 18,709 acres of land which are predominately located in the
Pocono Mountains. The majority of this property is leased to various hunting
clubs. Blue Ridge also owns several cottages in the area that are leased to
private individuals.
Blue Ridge owns and leases to Jack Frost Mountain Company a sewage
treatment facility to serve the resort housing at Jack Frost Mountain. The total
investment in this facility at October 31, 2001 was $1,227,655 with outstanding
debt of $88,965.
Blue Ridge also owns The Sports Complex at Jack Frost Mountain which
consists of a swimming pool, fitness trail, tennis courts, motocross/B.M.X. and
A.T.V. (All Terrain Vehicle) park and accompanying buildings. The Stretch is an
exclusive fishing club. The Corporate Office Building is located on Route 940
and Mosey Wood Road.
Northeast Land Company owns 103 acres of land which are located in the
Pocono Mountains and a 196 foot communication tower.
For the seven months ended October 31, 2001, revenues from operations of
Blue Ridge and its subsidiaries amounted to $3,782,404. Jack Frost Mountain Ski
Area had no ski revenue during this period.
B. BIG BOULDER CORPORATION
The physical properties owned by Big Boulder consist of approximately 929
acres, the Big Boulder Ski Area, a sewage treatment facility, a 200 foot
communications tower, and the Mountain's Edge.
SKI FACILITIES
The Big Boulder Ski Area's physical properties have been leased to Lake
Mountain Company since June 1, 1983, and are located in Kidder Township, Carbon
County, Pennsylvania. Big Boulder Ski Area commenced operations in 1947. The Big
Boulder Ski Area contains fourteen slopes and trails including a snowboard
terrain park, snowtubing hill, five double chairlifts, two triple chairlifts,
and various buildings including a base lodge, providing food service, a cocktail
lounge, a ski shop and a ski rental service. The total lift capacity per hour is
9,600 skiers. These lifts are in good condition and are operated as needed
Page - 6
during the ski season. These facilities are situated on approximately 90 acres
owned by Big Boulder. The total capital investment in the ski area is
$13,475,696. At October 31, 2001, the outstanding debt on the Big Boulder Ski
Area was $434,061.
REAL ESTATE MANAGEMENT OPERATIONS
A sewage treatment facility was constructed by Big Boulder Corporation to
serve the resort housing within the Big Boulder tract. The facility has the
capacity of treating 225,000 gallons per day and is leased to Lake Mountain
Company for operation. The capital investment in the facility at October 31,
2001, was $1,511,847 with an outstanding debt of $233,726 at that date.
Big Boulder Corporation constructed the Mountain's Edge Restaurant which
consists of 8,800 square feet and is located on the east shore of Big Boulder
Lake, Kidder Township, Carbon County, Pennsylvania. The facility, leased to a
private operator, commenced operations in May 1986. The restaurant has dining
capacity for 100 patrons. The capital investment in the facility at October 31,
2001 was $1,594,192.
Big Boulder owns 929 acres of land which are located in the Pocono
Mountains. The Big Boulder Lake Club includes a 175-acre lake, swimming pool,
tennis courts, boat docks and accompanying buildings.
For the seven months ended October 31, 2001, revenues from operations of
Big Boulder amounted to $979,663. Big Boulder Ski Area had no ski revenue during
this period.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANTS
Age Office Held Since
Patrick M. Flynn 25 2001
President
Eldon D. Dietterick 56 1995
Executive Vice-President/Treasurer
All officers of the Registrants serve for a one-year period or until their
election at the first meeting of the Board of Directors after the Annual Meeting
of Shareholders.
Page - 7
Patrick M. Flynn was appointed President in October 2001. He is the
Director of Real Estate at Kimco Realty Corporation.
Eldon D. Dietterick was appointed Executive Vice-President/Treasurer in
October, 2001. He has been employed by the Registrants on a full-time basis
since January 1985; he was appointed Secretary/Treasurer in October 1998.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Information required with respect to Registrants' common stock and related
shareholder matters is incorporated herein by reference to the caption entitled
"Price Range of Common Shares and Dividend Information" on Page 13 of the
Transition Report for the Seven Months Ended October 31, 2001 to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
Information required with respect to the specified financial data is
incorporated herein by reference to Page 13 of the Transition Report for the
Seven Months Ended October 31, 2001 to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information required with respect to Registrants' financial condition,
changes in financial condition and results of operations is incorporated herein
by reference to Pages 13 and 14 of the Transition Report for the Seven Months
Ended October 31, 2001 to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The required financial statements are incorporated herein by reference to
Pages 2 through 12 of the Transition Report for the Seven Months Ended October
31, 2001 to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
Not applicable.
Page - 8
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
The information concerning Directors required by Item 10 of Form 10-K is
set forth under the caption "Election of Directors" in the Registrants'
definitive Proxy Statement for the Transition Period for the Seven Months Ended
October 31, 2001 Meetings of Shareholders to be filed pursuant to Regulation 14A
with the Securities and Exchange Commission not later than 120 days after the
end of the fiscal year covered by this report and is incorporated herein by
reference.
The information concerning Executive Officers required by Item 10 of Form
10-K is set forth in Item 4A of this report.
CERTAIN SIGNIFICANT EMPLOYEES OF THE REGISTRANTS
Employed in
Present
Age Position Since
Richard T. Frey, Vice-President 51 2001
Carl V. Kerstetter, Director of Marketing 51 1991
Cynthia A. Barron, Controller 38 1996
Richard T. Frey, Carl V. Kerstetter and Cynthia A. Barron have been
employed by the Registrants on a full-time basis for more than five years.
ITEM 11. EXECUTIVE COMPENSATION
The information concerning Executive Compensation required by Item 11 of
Form 10-K is set forth under the caption "Renumeration of Executive Officers and
Directors" in the registrant's definitive Proxy Statement for the Transition
Period of the Seven Months Ended October 31, 2001 Meetings of Shareholders to be
filed pursuant to Regulation 14A with the Securities and Exchange Commission not
later than 120 days after the end of the fiscal transition period covered by
this report and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 of Form 10-K is set forth under the
caption "Holdings of Common Stock" in the Registrants' definitive Proxy
Statement for the Transition Period of the Seven Months Ended October 31, 2001
Annual Meetings of Shareholders to be filed pursuant to Regulation 14A with the
Securities and Exchange Commission not later than 120 days after the end of the
transition period covered by this report and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
Page - 9
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A.(1) Financial statements included in Registrants' Transition Report for
the Seven Months Ended October 31, 2001 Report to Shareholders on Pages 2
through 12 are incorporated by reference. The Report of Independent Auditors for
the combined financial statements appears on Page 15 of this Form 10-K.
(2) Financial Statement Schedules The following is a list of financial
statement schedules filed as part of this Transition Period Report on Form 10-K.
The report of Independent Auditors for the financial statement schedule appears
on Page 14 of this Form 10-K. All other schedules omitted herein are so omitted
because either (1) they are not applicable, (2) the required information is
shown in the financial statements, or (3) conditions are present which permit
their omission, as set forth in the instructions pertaining to the content of
financial statements:
Schedules: III. Real Estate and Accumulated Depreciation
A.(3) Exhibits, Including Those Incorporated by Reference
The following is a list of Exhibits filed as part of this Annual Report on
Form 10-K. Where so indicated by footnote, Exhibits that were previously filed
are incorporated by reference. For Exhibits incorporated by reference, the
location of the Exhibit in the previous filing is indicated in parentheses.
Legend for
Documents
Incorporated Page
Articles of Incorporation and By-Laws By Reference Number
3( 1).1 Articles of Incorporation (1)
3( 1).4 Articles of Amendment (2)
3(ii).1 By-Laws of Blue Ridge Real Estate Company
as amended through July 25, 1990 (8)
3(ii).2 By-Laws of Big Boulder Corporation
as amended through July 25, 1990 (8)
Instruments Defining the Rights of Security
Holders including Indentures
4.1 Specimen Certificate for Shares of (1)
Common Stock
Page - 10
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K (Continued)
Legend for
Documents
Incorporated
By Reference
4.2 Security Combination Agreement (1)
4.3 Revised Specimen Unit Certificates
for shares of common stock (7)
Material Contracts
Financial Agreements
10.1.1 Mortgage Relating to the Construction
of the Jack Frost Mountain Ski Area (2)
10.1.2 Construction Loan - Jack Frost
Mountain Ski Area (3)
10.1.3 Loan from PNC Bank, Wilkes-Barre (4)
10.1.4 First Mortgage, Principal Mutual,
Building leased to Wal-Mart (8)
10.1.16 First Mortgage, First Union National Bank,
Dreshertown Plaza Shopping Center,
Montgomery County
Acquisition of Properties
10.2.1 Acquisition of Dreshertown Plaza
Shopping Center (6)
10.2.2 Acquisition of Building leased to
Wal-Mart (8)
Lease
10.3.1 Building leased to Wal-Mart (10)
Agreement with Executive Officers and Director
10.4.1 Stock Option - Michael J. Flynn (9)
Stock Option Agreement - Michael J. Flynn
13.1 The Registrants' Transition Report for the Seven Months
Period Ended October 31, 2001 to Shareholders, to the
extent referred to in the responses to the Items of this
Transition Period Report.
Subsidiaries of the Registrants
21.1 List of the Subsidiaries of the Registrants (6)
(1) Filed September 23, 1966 as an Exhibit to Form 10 and
incorporated herein by reference
(2) Filed August 22, 1973 as an Exhibit to Form
10-K and incorporated herein by reference
Page - 11
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K - (Continued)
(3) Filed August 27, 1975 as an Exhibit to Form
10-K and incorporated herein by reference
(4) Filed February 7, 1975 as an Exhibit to Form 8-K
and incorporated herein by reference
(5) Northeast Land Company - Incorporated in
Commonwealth of Pennsylvania
Jack Frost Mountain Company - Incorporated
in Commonwealth of Pennsylvania
Lake Mountain Company - Incorporated in
Commonwealth of Pennsylvania
Big Boulder Lodge, Inc. - Incorporated in
Commonwealth of Pennsylvania
BRRE Holdings, Inc. - Incorporated in
State of Delaware
BBC Holdings, Inc. - Incorporated in
State of Delaware
(6) Filed August 28, 1987 as an Exhibit to Form 10-K
and incorporated herein by reference
(7) Filed August 28, 1990 as an Exhibit to Form 10-K
and incorporated herein by reference
(8) Filed August 26, 1991 as an Exhibit to Form
10-K and incorporated herein by reference
(9) Filed August 26, 1994 as an Exhibit to Form 10-K
and incorporated herein by reference
(10) Filed August 29, 1995 as an Exhibit to Form 10-K
and incorporated herein by reference.
Copies of Exhibits are available to Shareholders by
Contacting Christine A. Liebold, Secretary, Blakeslee,PA
18610. A charge of $.25 per page to cover the
Registrants' expenses will be made.
Reports on Form 8-K
None
Page - 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrants have duly
caused this report to be signed on their behalf by the
undersigned, thereunto duly authorized.
BLUE RIDGE REAL ESTATE COMPANY BLUE RIDGE REAL ESTATECOMPANY
BIG BOULDER CORPORATION BIG BOULDER CORPORATION
By:__/S/_____________________ By: /S/______________________
Eldon D. Dietterick Cynthia A. Barron
Executive Vice-President Chief Accounting Officer
And Treasurer
Dated: 1-29-02 Dated: 1-29-02
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrants and
in the capacities and on the dates indicated.
Each person in so signing also makes, constitutes and appoints Patrick M.
Flynn, President, his true and lawful attorney-in-fact, in his name, place and
stead to execute and cause to be filed with the Securities and Exchange
Commission any or all amendments to this report.
Signature Title Date
___/s/____________________ 1-29-02
Michael J. Flynn Chairman of the Board
___/s/____________________ 1-29-02
Patrick M. Flynn President
___/s/____________________ 1-29-02
Eldon D. Dietterick Executive Vice-President &
Treasurer
___/s/____________________ 1-29-02
Milton Cooper Director
___/s/____________________ 1-29-02
Wolfgang Traber Director
Page - 13
INDEPENDENT AUDITORS' REPORT ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of
Blue Ridge Real Estate Company
and Big Boulder Corporation:
We have audited the combined financial statements of Blue Ridge Real Estate
Company and subsidiaries and Big Boulder Corporation and subsidiaries (the
"Companies") as of October 31, 2001 and March 31, 2001, and for the seven months
ended October 31, 2001 and the years ended March 31, 2001 and 2000, and have
issued our report thereon dated January 11, 2002; such financial statements and
report are included in your October 31, 2001 Annual Report to Shareholders and
are incorporated herein by reference . Our audits also included the combined
financial statement schedules of the Companies listed in Item 14. These
financial statement schedules are the responsibility of the Companies'
management. Our responsibility is to express an opinion based on our audit. In
our opinion, such combined financial statement schedules, when considered in
relation to the basic combined financial statements taken as a whole, present
fairly in all material respects the information set forth therein.
/S/
Parente Randolph, P.C.
January 11, 2002
Wilkes-Barre, Pennsylvania
Page - 14
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Blue Ridge Real Estate Company and
Big Boulder Corporation:
We have audited the combined balance sheets of Blue Ridge Real Estate
Company and subsidiaries and Big Boulder Corporation and subsidiaries (the
"Companies") as of October 31, 2001 and March 31, 2001, and the related combined
statements of operations and earnings retained in the business and cash flows
for the seven months ended October 31, 2001 and the years ended March 31, 2001
and 2000. These financial statements are the responsibility of the Companies'
management. Our responsibility is to expre ss an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 mana gement, 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of Blue Ridge Real
Estate Company and subsidiaries and Big Boulder Corporation and subsidiaries as
of October 31, 2001 and March 31, 2001, and the results of their operations and
their cash flows for the seven months ended October 31, 2001 and the years ended
March 31, 2001 and 2000 in conformity with accounting principles generally
accepted in the United States of America.
/S/
Parente Randolph, P.C.
Wilkes-Barre, Pennsylvania
January 11, 2002
Page - 15
COMBINED SCHEDULE III.
REAL ESTATE AND ACCUMULATED DEPRECIATION October 31, 2001
Column A Column B Column C Column D
Initial Cost Cost Capitalized
to Company Subsequent To
Acquisition
Buildings &
Description Encumbrances Land Improvements Improvements
Land located
in N E PA including
various improvements 1,867,766 49,915 5,575,561
Corporate
Building 282,918 187,989
Buildings Leased
to Others
Eastern PA
Exchanged Asset-
Shopping Center 5,700,000 780,700 4,554,235 124,706
Other 0 0 0 2,437,509
Laurens,SC 1,600,000 276,000 1,914,470 0
TOTAL 7,300,000 2,924,466 6,801,538 8,325,765
Column E Column F
Gross Amount at which Carried
at Close of Period (1)(2)
Land located in
N E PA including Building Accumulated
Various improvements Land Improvements Total Depreciation
1,868,506 5,624,736 7,493,242 3,040,202
Corporate Building 470,907 470,907 277,032
Buildings Leased to
Others Eastern PA
Exchanged Asset-
Shopping Center 780,700 4,678,941 5,459,641 2,856,212
Other 0 2,437,508 2,437,508 1,357,946
Laurens, SC 276,000 1,914,470 2,190,470 696,653
TOTAL 2,925,206 15,126,562 18,051,768 8,228,045
Page - 16
Column G Column H Column I
Life on which
Depreciation in
Date of Date latest income
Construction Acquired Statement
is computed
Land located in NE PA
Including various
improvements Various Various 5 to 30 Yrs
Corporate Building 1982 10 to 30 Yrs
Buildings leased to others
Eastern PA Exchanged Asset
Shopping Center N/A Various 5 to 30 Yrs
Other N/A Various 5 to 30 Yrs
Laurens, SC N/A Various 5 to 30 Yrs
(1) Activity for the seven months ended October 31, 2001, and the fiscal
years ended March 31, 2001 and March 31, 2000 is as follows:
10/31/01 3/31/01 3/31/00
Balance at beginning of year 17,961,131 17,012,095 16,159,756
Additions during year:
Improvements 90,637 426,502 418,407
(reclassify) 0 523,738 434,015
18,051,768 17,962,335 17,012,178
Deductions during year:
Cost of real estate sold 0 1204 83
Balance at end of year 18,051,768 17,961,131 17,012,095
(2) The aggregate cost for Federal Income Tax purposes at October 31, 2001
is $16,589,136.
(3) Activity for the fiscal years ended October 31, 2001, March 31, 2001 &
March 31, 2000 is as follows:
10/31/01 3/31/01 3/31/00
Balance at beginning of year 7,958,599 7,472,074 6,754,807
Additions during year:
(Reclassification) 0 36,316 304,923
Current year depreciation 269,446 450,209 412,344
Less retirements 0 0 0
Balance at end of year 8,228,045 7,958,599 7,472,074
Page - 17
BLUE RIDGE REAL ESTATE COMPANY
BIG BOULDER CORPORATION
To Our Shareholders,
We have decided to change the fiscal year from March 31st to October 31st.
This allows for better consistency in reporting earnings for the ski and non-ski
season activities. For the 7-month fiscal year ending October 31, 2001, the
Companies report a net loss of ($804,422) or ($0.42) per combined share compared
to a profit of $252,532 and $.13 for the previous 12-month period ending March
31, 2001. The loss represents accrued ski area expense recognized in the short
reporting year.
Accomplishments of 2001
The Team. A lot of emphasis is placed on retaining, motivating and hiring
the best people to work at our ski slopes and other areas of activity. Training
is given to our employees and those providing greater customer service can earn
incentives. Our team has reviewed and improved most aspects of our operations.
The management team is great.
The Resorts. Ski Areas and other Facilities - This past year we invested
$750,000 in capital improvements upgrading the lodges, installing a new food
service facility at the Big Boulder Tubing Hill, a new Terrain Run at Big
Boulder Ski Area, new snow grooming equipment, and upgrading the sound system
and other facilities.
Marketing Strategies. Several new promotions were introduced to help
increase our market share. We formed a partnership with Pepsi. Pepsi advertised
Jack Frost/Big Boulder on one million soda cans that offered discounted lift
tickets through our website. Pepsi also gave permission for the co branding of
the Big Boulder Terrain Run with the Mountain Dew logo and placed advertising
for the Terrain Run on the back of Pepsi trucks. The local vendors throughout
the ski season sponsor competitions. Arrangements were made wi th Chi Chi's
Restaurants, and the Philadelphia radio stations, WYSP and WMMR to publicize our
resorts.
Online web sales - Our Internet sales have been very successful. Purchases
of advance tickets, season passes, and the all-new Express Ticket/Express
Equipment Rental increased significantly.
Looking Ahead
At this time, winter sports remain our primary business, and we are greatly
affected by the annual snowfall in our area. During the non-ski season other
profit centers, including Splatter Paintball Games, Traxx Motorsports Park, and
Fern Ridge Campground, make a contribution to the companies' overall
performance. We continue to evaluate untapped resources within its large land
holdings and look for opportunities to unlock increased value for shareholders.
The Real Estate market is improving in this area and at the right time we expect
to take advantage of land sales, ventures involving new home construction, golf
course development and forestry management.
I want to thank our dedicated team of employees and managers for their
great help during this year. I am looking forward to working with them in the
coming year to help grow the Company and build shareholder value.
Patrick M. Flynn
President
Blakeslee, Pennsylvania
January 11, 2002
Page - 1
BLUE RIDGE REAL ESTATE COMPANY AND SUBSIDIARIES
AND
BIG BOULDER CORPORATION AND SUBSIDIARIES
COMBINED BALANCE SHEETS
October 31, 2001 and March 31, 2001
ASSETS 10/31/01 03/31/01
Current Assets:
Cash and cash equivalents (all funds are
interest bearing) $263,178 2,628,839
Accounts receivable 376,838 429,653
Inventories 231,771 141,611
Prepaid expenses and other current assets 730,382 403,313
Deferred operating costs 2,106,478 0
Deferred tax asset 0 345,810
Total current assets 3,708,647 3,949,226
Properties:
Land, principally unimproved
(19,741 respectively,
acres per land ledger) 1,868,505 1,868,505
Land improvements,
buildings and equipment 53,985,296 53,754,045
55,853,801 55,622,550
Less accumulated depreciation &
amortization 36,636,005 35,597,696
19,217,796 20,024,854
$22,926,443 $23,974,080
LIABILITIES AND SHAREHOLDERS' EQUITY 10/31/01 03/31/01
Current liabilities:
Notes payable - line of credit $648,195 $ 0
Current installments of long-term debt 720,435 757,228
Accounts and other payables 544,734 549,847
Accrued claims 134,770 80,433
Accrued income taxes 0 67,387
Deferred income taxes 625,292 0
Accrued pension expense 732,580 627,042
Accrued liabilities 999,527 1,087,851
Deferred revenue 638,875 316,753
Total current liabilities 5,044,408 3,486,541
Long-term debt, less current
installments 6,949,805 7,277,413
Deferred income taxes 842,117 2,122,893
Other non-current liabilities 48,219 204,321
Deferred income non-current 515,631 515,631
Commitments and contingencies
Combined shareholders' equity:
Capital stock, without par value, stated value
$.30 per combined share, Blue Ridge and
Big Boulder each authorized 3,000,000 shares,
each issued 2,198,148 shares 659,444 659,444
Capital in excess of stated value 1,461,748 1,461,748
Earnings retained in the business 9,479,453 10,283,875
11,600,645 12,405,067
Less cost of 280,968 and 277,221 shares
of capital stock in treasury as of
October 31, 2001 and
March 31, 2001, respectively 2,074,382 2,037,786
9,526,263 10,367,281
$22,926,443 $23,974,080
The accompanying notes are an integral part of the combined
financial statements.
Page - 2
BLUE RIDGE REAL ESTATE COMPANY AND SUBSIDIARIES
AND BIG BOULDER CORPORATION AND SUBSIDIARIES
COMBINED STATEMENTS OF OPERATIONS
AND EARNINGS RETAINED IN THE BUSINESS
for the seven months ended October 31, 2001 and the
years ended March 31, 2001 and 2000.
10/31/01 3/31/01 3/31/00
Revenues:
Ski operations $ 0 $11,267,371 $11,565,643
Real estate management 1,562,649 3,109,799 2,901,700
Summer recreation operations 2,099,387 2,651,591 2,516,262
Rental income 1,100,031 1,867,690 1,903,314
4,762,067 18,896,451 18,886,919
Costs and expenses:
Ski operations 1,100,477 11,246,003 11,135,115
Real estate management 1,419,318 2,676,191 2,727,460
Summer recreation operations 1,935,710 2,292,473 2,071,187
Rental income 576,287 950,258 936,870
General and administration 650,425 1,768,375 1,084,649
5,682,217 18,933,300 17,955,281
Income (loss)
from operations (920,150) (36,849) 931,638
Other income (expense):
Interest and other income 55,642 866,127 620,203
Interest expense (296,041) (736,865) (732,201)
(240,399) 129,262 (111,998)
Income (loss) before
income taxes (1,160,549) 92,413 819,640
Provision(credit)for income taxes:
Current (46,453) 259,417 382,000
Deferred (309,674) (419,536) (43,000)
(356,127) (160,119) 339,000
Net income (loss) (804,422) 252,532 480,640
Earnings retained in business:
Beginning of year 10,283,875 10,031,343 9,550,703
End of year $9,479,453 $10,283,875 $10,031,343
Basic and diluted earnings (loss) per
weighted average combined share ($0.42) $0.13 $0.24
The accompanying notes are an integral part of the combined
financial statements.
Page - 3
BLUE RIDGE REAL ESTATE COMPANY AND SUBSIDIARIES
AND
BIG BOULDER CORPORATION AND SUBSIDIARIES
COMBINED STATEMENTS OF CASH FLOWS
for the seven months ended October 31, 2001
And the years ended March 31, 2001 and 2000
10/31/01 3/31/01 3/31/00
Cash Flows From (Used In) Operating
Activities:
Net income (loss) ($804,422) $252,532 $480,640
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 352,468 1,969,154 1,921,237
Deferred income taxes (309,674) (372,862) (43,000)
Gain (loss) on sale of assets 2,438 (528,242) (19,006)
Changes in operating assets and liabilities:
Accounts receivable 52,815 19,185 110,840
Prepaid expenses & other current
assets (417,229) 288,575 161,692
Deferred operating costs (1,310,033) 0 0
Accounts payable & accrued
liabilities (89,664) 866,096 (324,934)
Accrued income taxes (67,387) (225,726) 124,596
Deferred revenue 322,122 171,584 (111,308)
Net cash provided by (used in) operating
activities (2,268,566) 2,440,296 2,300,757
Cash Flows From (used in) Investing Activities:
Deferred income 0 13,198 254,246
Proceeds from disposition of
assets 20,757 529,446 19,089
Additions to properties (365,050) (1,874,588) (2,496,246)
Net cash used in investing
activities (344,293) (1,331,944) (2,222,911)
Cash Flows From (used in) Financing
Activities:
Borrowings under short-term
financing 648,195 2,050,000 2,550,000
Payment of short-
financing 0 (2,050,000) (2,550,000)
Additions to long-term debt 0 0 800,000
Payment of long-term debt (364,401) (784,153) (781,111)
Purchase of treasury stock (36,596) (248,870) (250,413)
Net cash used in financing
activities 247,198 (1,033,023) (231,524)
Net increase (decrease) in cash
& cash equivalents (2,365,661) 75,329 (153,678)
Cash & cash equivalents,
beginning of year 2,628,839 2,553,510 2,707,188
Cash & cash equivalents,
end of year $263,178 $2,628,839 $2,553,510
Supplemental disclosures of cash flow information: Cash paid during year for:
Interest $302,209 $736,054 $732,458
Income taxes $136,311 $427,516 $335,395
The accompanying notes are an integral part of the combined
Financial statements.
Page - 4
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF COMBINATION: The combined financial statements include the
accounts of Blue Ridge Real Estate Company (Blue Ridge) and its wholly-owned
subsidiaries, Northeast Land Company, Jack Frost Mountain Company, and BRRE
Holdings, Inc.; and Big Boulder Corporation (Big Boulder) and its wholly-owned
subsidiaries, Lake Mountain Company and BBC Holdings, Inc. Under a Security
Combination Agreement between Blue Ridge and Big Boulder and under the bylaws of
both Companies, shares of the Companies are combined in unit certificates, each
certificate representing concurrent ownership of the same number of shares of
each company; shares of each company may be transferred only together with an
equal number of shares of the other company. All significant intercompany
accounts and transactions are eliminated.
REVENUE RECOGNITION: Revenues are derived from a wide variety of sources,
including sales of lift tickets, ski school tuition, dining, retail stores,
equipment rental, property management services and other recreational
activities, and are recognized as services are performed.
SEASONALITY: Operations are highly seasonal at both ski mountains with the
majority of revenues realized during the ski season from late November through
the end of March. The length of the ski season and the profitability of
operations are significantly impacted by weather conditions. Although the
mountains have snowmaking capacity to mitigate some of the effects of adverse
weather conditions, abnormally warm weather or lack of adequate snowfall can
materially affect revenues.
DISPOSITION OF LANDS AND RESORT HOMES: The Companies recognize income on
the disposition of real estate in accordance with the provisions of Statement of
Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate"
(SFAS 66). Down payments of less than 20% are accounted for as deposits as
required by SFAS No 66.
The costs of developing land for resale as resort homes and the costs of
constructing certain related amenities are allocated to the specific parcels to
which the costs relate. Such costs, as well as the costs of construction of the
resort homes, are charged to operations as sales occur. Land held for resale and
resort homes under construction are stated at lower of cost or market.
PROPERTIES AND DEPRECIATION: Properties are stated at cost. Depreciation
and amortization is provided principally using the straight-line method over the
following years:
Land improvements 10-30
Buildings 3-30
Equipment and furnishings 3-20
Ski facilities:
Land improvements 10-30
Buildings 5-30
Machinery and equipment 5-20
Upon sale or retirement of depreciable property, the cost and related
accumulated depreciation are removed from the related accounts, and resulting
gains or losses are reflected in income.
Interest, real estate taxes, and insurance costs, including those costs
associated with holding unimproved land, are normally charged to expense as
incurred. Interest cost incurred during construction of facilities is
capitalized as part of the cost of such facilities.
Maintenance and repairs are charged to expense, and major renewals and
betterments are added to property accounts.
Impairment losses are recognized in operating income as they are
determined. The Companies review their long-lived assets whenever events or
changes in circumstances indicate that the carrying value of an asset may not be
recoverable. In that event, the Companies calculate the expected future net cash
flows to be generated by the asset. If those net future cash flows are less than
the carrying value of the asset, an impairment loss is recognized in operating
income. The impairment loss is the diff erence between the carrying value and
the fair value of the asset. No such losses were recognized in the three years
ended October 31, 2001.
DEFERRED OPERATING COSTS: Deferred operating costs are capitalized from
April through November for costs directly related to the winter ski season.
These costs are deferred in order to match operating expenses of the ski season
with revenues generated from ski activities. Deferred operating costs are then
recognized ratably over the months of December through March, the ski season
period. Significant expenditures capitalized as deferred operating costs at
October 31, 2002 include depreciation, advertising, insurance, real e state
taxes and other costs.
INVENTORIES: Inventories consist of food, beverage and retail merchandise
and are stated at cost which approximates market, with cost determined using the
first-in, first-out method.
DEFERRED REVENUE: Deferred revenues include revenues billed in advance for
services and dues which are not yet earned.
INCOME TAXES: The Companies' account for income taxes utilizing the asset
and liability method of recognizing the tax consequence of transactions that
have been recognized for financial reporting or income tax purposes. Among other
things, this method requires current recognition of the effect of changes in
statutory tax rates on previously provided deferred taxes. Valuation allowances
are established, when necessary, to reduce tax assets to the amount expected to
be realized. Blue Ridge, including its subsidiar ies, and Big Boulder, including
its subsidiaries, report as separate entities for federal income tax purposes.
State income taxes are reported on a separate company basis.
Page - 5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
DEFFERED INCOME: Amounts received under a contract with the Pennsylvania
Department of Transportation for reimbursement of the cost of a constructed
asset are deferred. The amounts will be recognized as income over the period in
which depreciation on those assets is charged. This asset has not yet been
placed in service.
ADVERTISING COSTS: Advertising costs directly related to ski operations are
capitalized as deferred operating costs for the seven months ended October 31,
2001. All other advertising costs are expensed when incurred. Advertising
expense for the seven months ended October 31, 2001 and the years ended March
31, 2001 and 2000 was $216,559, $1,538,647 and $1,488,268, respectively.
USE OF ESTIMATES AND ASSUMPTIONS: 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 dates of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
STATEMENT OF CASH FLOWS: For purposes of reporting cash flows, the
Companies consider cash equivalents to be all highly liquid investments with
maturities of three months or less when acquired.
CONCENTRATION OF CREDIT RISK: Financial instruments which potentially
subject the Companies to concentration of credit risk consist principally of
temporary cash investments. The Companies' temporary cash investments are held
by financial institutions. The Companies have not experienced any losses related
to these investments.
EARNINGS (LOSS) PER SHARE: Basic earnings (loss) per share is calculated
based on the weighted-average number of shares outstanding. Diluted earnings
(loss) per share includes the dilutive effect of stock options.
BUSINESS SEGMENTS: The Companies and the subsidiaries, under SFAS No. 131
operate in three business segments - Ski Operations, Real Estate
Management/Rental Operations and Summer Recreation Operations. The Companies'
two ski facilities operate principally during the months of December through
March. Revenues generated from advance ticket sales have been recorded as
deferred revenue, and likewise various operating costs directly related to the
two ski facilities have been recorded as deferred operating costs.
RECLASSIFICATION: Certain reclassifications have been made to conform to
current year presentation.
RECENT ACCOUNTING PRONOUNCEMENTS: In June 2000, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities - an Amendment of FASB Statement No. 133". SFAS No. 138
addresses a limited number of issues causing difficulties in the implementation
of SFAS No. 133 and was required to be adopted concurrently with SFAS No. 133.
The Companies do not engage in hedging activities and therefore the adoption of
SFAS No. 133 and 138 did not have a material impact on the Companies' financial
position or results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", but retains the requirements of SFAS No. 121 to (a)
recognize an impairment loss only if the carrying amount of a long-lived asset
is not recoverable from its undiscounted cash flows and (b) measure an
impairment loss as the difference between the carrying amount and fair value of
the asset. SFAS No. 144 removes goodwill from its scope as the impairment of
goodwill is addressed prospectively pursuant to SFAS No. 142. SFAS No. 144 is
effective for financial statements issued for fiscal years beginning after
December 15, 2001, and interim periods within those years. The Companies do not
expect the adoption of SFAS No. 144 to have a material impact on its financial
position or results of operations.
2. CHANGE IN FISCAL REPORTING PERIOD At an executive session held on August
28, 2001 the Board of Directors resolved that the companies fiscal year end be
changed from March 31st to October 31st. This change is effective for each of
the Companies October 31, 2001, resulting in a 7 month transition period which
does not include any ski area revenue. The purpose is to allow for a more
natural business year and to conform the Companies' reporting period to that of
the majority stockholder's financial statements. The results of operations from
the comparable 7 month period of the prior year are as follows:
UNAUDITED
10/31/01 10/31/00
Revenues $4,762,067 $5,057,853
Operating Income (loss) (920,150) 586,615
Provision (benefit) for
income taxes (356,127) 297,000
Net income (loss) (804,422) 443,867
Earnings (loss) per share (0.42) 0.23
Page - 6
3. CONDENSED FINANCIAL INFORMATION:
Condensed financial information of the constituent Companies, Blue Ridge
and its subsidiaries and Big Boulder and its subsidiaries, at October 31, 2001,
March 31, 2001, and 2000 and for each of the periods then ended is as follows:
Blue Ridge and Subsidiaries
7 Mos. Ended
10/31/01 03/31/01 03/31/00
FINANCIAL POSITION:
Current assets $1,520,615 $1,346,838 $1,583,756
Total assets 16,028,020 16,368,221 16,527,534
Current liabilities 4,332,664 3,125,297 2,451,318
Shareholders'equity 3,894,672 4,404,959 4,445,461
OPERATIONS:
Revenues 3,782,404 12,367,702 11,798,218
Income(loss)before taxes (536,374) (75,807) 464,004
Provision(credit)for
income taxes (62,685) (284,176) 153,000
Net income (loss) (473,689) 208,369 311,004
Big Boulder and Subsidiaries
7 Mos. Ended
10/31/01 03/31/01 03/31/00
FINANCIAL POSITION:
Current assets $2,188,032 $2,602,388 $2,662,277
Total assets 6,898,423 7,605,859 7,839,123
Current liabilities 711,744 361,244 440,784
Shareholders'equity 5,631,591 5,962,322 5,918,158
OPERATIONS:
Revenues 979,663 6,528,749 7,088,701
Income(loss)before taxes (624,175) 168,220 355,636
Provision(credit)for
income taxes (293,442) 124,057 186,000
Net income (loss) (330,733) 44,163 169,636
4. SHORT-TERM FINANCING: At October 31, 2001, Blue Ridge had utilized
approximately $648,000 of a line of credit agreement with a bank, aggregating
$2,000,000 available for short term financing, expiring November 30, 2002, which
management expects to be renewed. The line of credit bears interest at .25% less
than the prime rate (5.25% at October 31,2001). The weighted average interest
rate at October 31, 2001 was 5.25%. The agreement requires, among other things,
that the Companies comply with minimum current and total liabilities to
tangible net worth ratios and meet a minimum debt service coverage ratio.
5. LONG-TERM DEBT:
Long-term debt as of October 31, 2001 and March 31, 2001
consists of the following:
10/31/01 03/31/01
Mortgage note payable to bank, interest is
LIBOR plus 160 basis points
(3.9537% at October 31, 2001) payable monthly
with principal reduction of $18,000
through maturity, August 2003 4,815,000 4,941,000
Mortgage note payable to bank, interest at 80%
of the bank's prime rate (4.4% at October 31, 2001)
payable in monthly installments of $24,187
plus interest through Fiscal 2005 1,112,612 1,281,922
Mortgage note payable to insurance company,
interest fixed at 10.5% payable in monthly
installments of $15,351 including interest
through Fiscal 2014 1,262,628 1,291,719
Mortgage note payable to bank,
interest at 6.84% payable monthly
with principle reduction at $40,000
per month December to March through 2004 480,000 520,000
7,670,240 8,034,641
Less current installments 720,435 757,228
$6,949,805 $7,277,413
Properties at cost, which have been pledged as collateral for long-term
debt, include the following at October 31, 2001:
Investment properties leased to others $7,650,111
Ski facilities $19,515,837
The aggregate amount of long-term debt maturing in each of the five years
Ending subsequent to October 31, 2001, is as follows: 2002-$720,435;
2003-$5,109,406; 2004-$517,036; 2005-$316,029; 2006-$82,323; thereafter
$925,011.
6. INCOME TAXES:
The provision (credit) for income taxes is as follows:
10/31/01 03/31/01 03/31/00
Currently payable
Federal ($46,453) $259,417 $382,000
State 0 0 0
(46,453) 259,417 382,000
Deferred:
Federal (537,361) (315,926) (43,000)
State 227,687 (103 610) 0
(309,674) (419,536) (43,000)
($356,127) ($160,119) $339,000
Page - 7
6. INCOME TAXES(continued):
A reconciliation between the amount computed using the statutory federal
income tax rate and the provision (credit) for income taxes is as follows:
10/31/01 03/31/01 03/31/00
Computed at statutory rate ($394,587) $31,420 $279,000
State net operating losses
subject to valuation allowance 0 0 46,000
State income taxes, net of federal
income tax 218,656 0 0
Prior year overaccrual (130,594) (107,367) 0
Other (3,149) 3,919 6,000
AMT (utilization) tax (46,453) (88,091) 8,000
Provision(credit)for income
Taxes ($356,127) ($160,119) $339,000
The components of the deferred tax assets and (liabilities) as of October
31, 2001 and March 31, 2001 are as follows:
10/31/01 03/31/01
Current deferred tax asset:
Accrued expenses $0 $266,379
Deferred revenues 0 79,431
Current deferred tax asset 0 345,810
Current deferred tax liability:
Deferred operating costs (855,092) 0
Accrued expenses 203,672 0
Deferred revenues 26,128 0
Current deferred tax liability (625,292) 0
Noncurrent deferred tax liability:
Depreciation (2,533,090) (2,673,786)
Deferred income, sewer line and tower 227,557 231,608
Net operating losses and AMT credit
carryforward 2,289,811 631,723
Valuation allowance (826,395) (312,438)
Noncurrent deferred tax liability (842,117) (2,122,893)
Deferred income tax liability, net ($1,467,409) ($1,777,083)
At October 31, 2001, the Companies have $250,504 of Alternative Minimum Tax
(AMT) credit carryforward available to reduce future federal income taxes. The
AMT credit has no expiration date. The Companies have filed with the IRS, an
application to change their tax year-end. In connection with this request, the
Companies have agreed to certain regulatory provisions in order to obtain the
IRS's approval. This relates primarily to the federal net operating loss created
in the short tax period ended October 31, 2001, approximating $3,570,000. The
Companies may not carry back the net operating loss. Instead, the Companies must
carry the loss forward to apply to taxable income over the next six years. That
is, the loss carryforward is limited in those years to one-sixth of the total
amount. Any losses unused after the six years will expire in 2021.
The Companies also have state net operating loss carryforwards of
approximately $8,270,000 that will begin to expire in 2005. The Companies have
recorded a valuation allowance against state net operating losses, which are not
expected to be utilized.
7. PENSION BENEFITS:
Assumptions 10/31/01 03/31/01 03/31/00
Discount Rates used to determine
projected benefit obligations
as of October 31, 2001 and March 31,
2001 and 2000 7.25% 7.25% 7.50%
Expected long-term rates of return
on assets 8.50% 8.50% 8.50%
Rates of increase in compensation
levels 4.00% 5.00% 5.00%
Change in Benefit Obligation 10/31/01 03/31/01
Benefit obligation at beginning of year $3,422,856 $3,065,215
Service cost(net of expenses) 119,090 213,365
Interest cost 129,820 220,819
Plan amendments 0 0
Actuarial (gain) loss (267,227) 75,268
Benefit payments (82,795) (151,811)
Benefit obligation at end of year $3,321,744 $3,422,856
Page - 8
7. PENSION BENEFITS (continued):
Change in Plan Assets 10/31/01 03/31/01
Fair value of plan assets at
beginning of year $2,983,503 $3,473,821
Actual return on plan assets (134,104) (311,801)
Employer contributions 0 0
Benefits paid (82,795) (151,811)
Actual expenses paid during the year (10,710) (26,706)
Fair value of plan assets at end of year $2,755,894 $2,983,503
Reconciliation of Funded Status of the Plan 10/31/01 03/31/01
Funded status at end of year ($565,850) ($439,353)
Unrecognized transition obligation 98,225 103,172
Unrecognized net prior service cost 8,914 9,270
Unrecognized net actuarial gain (273,869) (300,131)
Net amount recognized at end of year ($732,580) ($627,042)
Components of Net Periodic Benefit Cost 10/31/01 03/31/01 03/31/00
Service Cost $130,757 $238,365 $240,936
Interest Cost 129,820 220,819 208,672
Expected return on plan assets 143,485 287,388 282,286
Net amortization and deferral:
Amortization of transition
obligation 4,947 8,480 8,480
Amortization of prior service
cost 356 611 611
Amortization of accumulated gain (16,857) (48,721) (8,374)
Net amortization and deferral ($11,554) ($39,630) $717
Total net periodic pension cost $105,538 $132,166 $168,039
8. PROPERTIES:
Properties consist of the following at October 31, 2001 and March 31, 2001.
10/31/01 03/31/01
Land, principally unimproved $1,868,505 $1,868,505
Land improvements 5,624,734 5,534,798
Corporate buildings 470,907 470,907
Buildings leased to others 10,120,371 10,147,329
Ski facilities:
Land 4,552 4,552
Land improvements 7,908,064 7,902,133
Buildings 6,529,121 6,528,611
Machinery & equipment 20,109,752 19,676,762
Equipment & furnishings 3,217,795 3,488,953
55,853,801 55,622,550
Less accumulated depreciation and
Amortization 36,636,005 35,597,696
$19,217,796 $20,024,854
Buildings leased to others include land of $1,056,700 at October 31, 2001,
and March 31, 2001 and 2000
9. ACCRUED LIABILITIES:
Accrued liabilities consist of the following at October 31, 2001 and March
31, 2001.
10/31/01 3/31/01
Accrued Payroll $537,300 $693,347
Accrued Security & Other Deposits 162,266 133,898
Accrued Professional Fees 173,524 140,223
Accrued - Miscellaneous 126,437 120,383
$999,527 $1,087,851
Page - 9
10. LEASES: The Companies are lessors under various operating lease
agreements for the rental of land, land improvements and investment properties
leased to others. Rents are reported as income over the terms of the leases as
they are earned. A shopping center is leased to various tenants for renewable
terms averaging 6.38 years with options for renewal. A store has been net leased
until January 2039. Information concerning rental properties and minimum future
rentals under current leases as of October 31, 20 01, is as follows:
Properties Subject To Lease
Accumulated
Cost Depreciation
Investment properties leased to
others $7,962,742 $3,638,522
Land and land improvements 3,997,935 1,271,242
Minimum future rentals:
Fiscal years ending October 31: 2002 1,698,232
2003 1,602,191
2004 1,475,062
2005 1,318,956
2006 1,238,885
Thereafter 18,359,456*
$25,692,782
*Includes $1,254,750 under a land lease expiring in 2072 and $6,489,640
under a net lease for a store expiring in 2039. There were no contingent rentals
included in income for the seven months ended October 31, 2001 or Fiscal 2001
or 2000.
Under an agreement with a management company relating to the shopping
center, in the event of the termination of the management contract or the sale
of the property, the management company is entitled to approximately 25% of the
fair market value after satisfaction of certain obligations.
11. FAIR VALUE:
The Companies have estimated the fair value of their financial instruments
at October 31, 2001, March 31, 2001 and 2000 as follows:
The carrying values of cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses are reasonable estimates of their fair
values. The carrying values of variable and fixed rate long-term debt are
reasonable estimates of their fair values based on their discounted cash flows
at discount rates currently available to the Companies for debt with similar
terms and remaining maturities.
12. QUARTERLY FINANCIAL INFORMATION (Unaudited)
The results of operations for each of the quarters in the last two years
are presented below.
Earnings (Loss)
Income(loss) Per Weighted
Operating from Net Avg. Combined
Quarter Revenues Operations Income (Loss) Share
7 mos. ended
10/31/01
1st $1,588,400 ($8,536) ($82,737) ($0.04)
2nd 2,808,940 278,979 42,477 0.02
$4,397,340 $270,443 ($40,260) ($0.02)
Year ended
3/31/01
1st $1,647,042 $24,605 ($106,111) ($0.05)
2nd 2,875,633 537,481 575,832 0.29
3rd 4,082,883 (56,840) (77,026) (0.04)
4th 10,290,893 (542,095) (140,163) (0.07)
$18,896,451 ($36,849) $252,532 $0.13
The quarterly results of operations for the seven months ended October 31,
2001 and Fiscal 2001 reflect the cyclical nature of the Companies' business
since (1) the Companies' two ski facilities operate principally during the
months of December through March and (2) land dispositions occur sporadically
and do not follow any pattern during the fiscal year. Revenues generated from
advance ticket sales have been recorded as deferred revenue, and likewise
various operating costs directly related to the tw o ski facilities have been
recorded as deferred operating costs. The fourth quarter of Fiscal 2001 was
impacted by a $467,000 severance accrual due to a change in management.
Page - 10
13. BUSINESS SEGMENT INFORMATION: The following information is presented in
accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." In accordance with SFAS No. 131, the Companies' business
segments were determined from the Companies' internal organization and
management reporting, which are based primarily on differences in services.
The Companies and the subsidiaries, under SFAS No.131, operate in three
business segments consisting of the following:
SKI OPERATIONS:
Two ski areas located in the Pocono Mountains of Northeastern Pennsylvania
REAL ESTATE MANAGEMENT/RENTAL OPERATIONS: Investment properties leased to
others located in Eastern Pennsylvania and South Carolina, fees from managing
investor-owned properties, principally resort homes, recreational club
activities and services to the trusts that operate resort communities, sales of
land held for resale and investment purposes, and rental of land and land
improvements.
SUMMER RECREATION OPERATIONS: Seasonal recreational operating centers
located in the Pocono Mountains of Northeastern Pennsylvania - Splatter
Paintball, Fern Ridge Campground, Lake Mountain Sports Club, numerous Summer
Music Festivals and TRAXX Motocross, ATV and BMX Park.
Income or loss for each segment represents total revenue less operating
expenses. General and administrative expenses are allocated to each business
segment based on percentage of revenue. Identifiable assets are those utilized
in the operation of the respective segments; corporate assets consist
principally of cash and non-revenue producing properties held for investment
purposes.
10/31/01 03/31/01 03/31/00
Revenues:
Ski operations $0 $11,267,371 $11,565,643
Real estate management/
Rental operations 2,662,680 4,977,489 4,805,014
Summer recreation
operations 2,099,387 2,651,591 2,516,262
$4,762,067 $18,896,451 $18,886,919
Income:(loss)
Ski operations ($1,100,477) $21,368 $430,528
Real estate management/
Rental operations 667,075 1,351,040 1,140,684
Summer recreation
operations 163,677 359,118 445,075
($269,725) $1,731,526 $2,016,287
General & administrative expenses:
Ski Operations ($390,255) ($1,061,025) ($661,636)
Real estate management/
Rental operations (169,110) (459,778) (271,162)
Summer recreation operations (91,060) (247,572) (151,851)
($650,425) ($1,768,375) ($1,084,649)
Interest and other income:
Ski Operations $1,436 $17,710 $13,995
Real estate management/
Rental operations 54,206 848,417 606,208
Summer recreation operations 0 0 0
$55,642 $866,127 $620,203
Interest expense:
Ski operations ($47,546) ($161,016) ($170,898)
Real estate management/
rental operations (248,495) (575,849) (561,303)
Summer recreation operations 0 0 0
($296,041) ($736,865) ($732,201)
Income (loss) before income
taxes, ($1,160,549) $92,413 $819,640
For the seven months ended October 31, 2001 and Fiscal 2001 and 2000 no on
customer represented 10% or more of total revenue.
Identifiable assets, net of accumulated depreciation at October 31, 2001
and March 31, 2001 and 2000 and depreciation expense and capital expenditures
for the years then ended by business segment are as follows:
Identifiable Depreciation Capital
October 31, 2001 Assets Expense Expenditures
Ski Operations $9,800,297 $0 $258,718
Real Estate Management/Rental
Operations 9,629,654 217,202 8,666
Summer recreation operations 2,034,785 84,706 93,680
Other Corporate 1,461,707 50,560 3,986
Total $22,926,443 $352,468 $365,050
March 31, 2001 Assets Expense Expenditures
Ski Operations $11,333,038 $1,327,065 $1,251,464
Real Estate Management/Rental
Operations 8,971,600 363,542 48,838
Summer recreation operations 1,918,743 146,052 535,782
Other Corporate 1,750,699 132,495 38,503
Total $23,974,080 $1,969,154 $1,874,587
March 31, 2000 Assets Expense Expenditures
Ski Operations $11,482,021 $1,346,750 $1,119,881
Real Estate Management/Rental
Operations 9,921,036 361,871 330,347
Summer recreation operations 1,592,675 125,770 1,044,076
Other Corporate 1,370,925 86,846 1,942
Total $24,366,657 $1,921,237 $2,496,246
Page - 11
14. CONTINGENT LIABILITIES AND COMMITMENTS: The Companies are party to
various legal proceedings incidental to their business. Certain claims, suits,
and complaints arising in the ordinary course of business have been filed or are
possible of assertion against the Companies. In the opinion of management, all
such matters are without merit or are of such kind, or involve such amounts,
that are not expected to have a material effect on the combined financial
position or results of operations of the Companies.
Blue Ridge has pledged approximately 20 acres of its leased land (cost
$144,786) to serve as collateral, together with the lessee's land improvements,
for the lessee's mortgage loan which amounts to approximately $1,264,000 at
October 31, 2001.
15. STOCK OPTIONS AND CAPITAL STOCK: During Fiscal 1998, the Companies
adopted an employee stock option plan, under which an officer was granted
options to purchase shares of the Companies' common stock. The options expire
July 1, 2003.
Option activity during the periods ended October 31, 2001, March 31, 2001
and 2000 is as follows:
10/31/01 03/31/01 03/31/00
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
Outstanding at
beginning of year:35,000 $6.75 35,000 $6.75 35,000 $6.75
Granted - - - - - -
Exercised - - - - - -
Canceled - - - - - -
Outstanding at
end of year 35,000 $6.75 35,000 $6.75 35,000 $6.75
Options exercisable
At year-end 35,000 $6.75 35,000 $6.75 35,000 $6.75
Option price
range $6.75 $6.75 $6.75
Weighted average
fair value of
options granted
during year $- $- $-
The Companies elected to follow APB Opinion No. 25, "Accounting for Stock
Issued to Employees," in accounting for its employee stock options as permitted
by SFAS No. 123, "Accounting for Stock Based Compensation." Under APB No. 25,
because the exercise price of the employee stock options equals the estimated
fair market value of the Companies' underlying stock on the date of the grant,
no compensation expense is recognized.
16. PER SHARE DATA: Earnings per share for the 7 months ended October 31,
2001 and the years ended March 31, 2001 and 2000 are computed as follows:
10/31/01 03/31/01 03/31/00
Net Earnings ($804,422) $252,532 $480,640
Weighted average combined
shares of common stock out-
standing used to compute basic
earnings per combined
common share 1,917,858 1,926,402 1,962,491
Additional combined common
shares to be issued assuming
exercise of stock options, net
of combined shares
assumed re-acquired 12,470 10,195 10,295
Combined shares used to compute
dilutive effect of stock
option 1,930,328 1,936,597 1,972,786
Basic and diluted earnings per
combined common share ($0.42) $0.13 $0.24
INDEPENDENT AUDITOR'S REPORT
To Shareholders of
Blue Ridge Real Estate Company
and Big Boulder Corporation:
We have audited the combined balance sheets of Blue Ridge Real Estate
Company and subsidiaries and Big Boulder Corporation and subsidiaries (the
"Companies") as of October 31, 2001 and March 31, 2001 and the related combined
statements of operations and earnings retained in the business and cash flows
for the seven months ended October 31, 2001 and the years ended March 31, 2001
and 2000. These financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Blue Ridge
Real Estate Company and subsidiaries and Big Boulder Corporation and
subsidiaries as of October 31, 2001 and March 31, 2001, and the results of their
operations and their cash flows for the seven months ended October 31, 2001 and
the years ended March 31, 2001 and 2000 in conformity with accounting principles
generally accepted in the United States of America.
Parente Randolph, P.C.
Wilkes-Barre, Pennsylvania
January 11, 2002
Page - 12
PRICE RANGE OF COMMON SHARES AND DIVIDEND INFORMATION
Prior to May 4, 1993, Blue Ridge Real Estate Company and Big Boulder
Corporation common shares were listed and traded as unit certificates on the
Over-the-Counter market and were quoted on the NASDAQ National Market System
(Symbol: BLRGZ). Effective May 4, 1993, the Companies decided to discontinue
their listing with NASDAQ. Subsequent to May 4, 1993, the Companies are aware of
limited trades in their common stock; however, Management does not believe such
limited activity constitutes an established public trading market.
The following sets forth the high asked and low bid price quotations as
reported on the monthly statistical reports of the National Association of
Securities Dealers, Inc. for seven months ended October 31, 2001 and Fiscal Year
2001. No dividends were paid on common stock in either period.
7 Mos. Ended 10/31/01 HIGH LOW
ASKED BID
First Quarter 12.000 9.125
Second Quarter 16.000 10.000
1 month - 10/31/01 11.000 11.000
FISCAL YEAR 2001 HIGH LOW
ASKED BID
First Quarter 10.500 9.125
Second Quarter 10.500 9.250
Third Quarter 9.750 9.250
Fourth Quarter 10.875 9.250
The reported quotations represent prices between dealers, do not reflect
retail mark-ups, mark-downs or commissions and do not necessarily represent
actual transactions. The approximate number of holders of record of common stock
on October 31, 2001 and March 31, 2001 were 597 and 608, respectively.
BLUE RIDGE REAL ESTATE COMPANY AND SUBSIDIARIES
AND BIG BOULDER CORPORATION AND SUBSIDIARIES
COMBINED SUMMARY OF SELECTED FINANCIAL DATA
10/31/01 03/31/01 2000
Revenues $4,762,067 $18,896,451 $18,886,919
Net income(loss) (804,422) 252,532 480,640
Net income(loss)per
combined share ($0.42) $0.13 $0.24
Cash dividends per
combined share 0 0 0
Weighted average number
of combined shares
outstanding 1,917,858 1,926,402 1,962,491
Total assets 22,926,443 23,974,080 24,366,657
Long-term debt 7,670,240 8,034,641 8,818,794
Shareholders' equity 9,526,263 10,367,281 10,363,619
1999 1998
Revenues $17,787,480 $18,655,995
Net income(loss) (79,199) 394,593
Net income(loss)per combined share $(0.04) $0.20
Cash dividends per combined share 0 0
Weighted average number of
combined shares outstanding 1,980,706 1,993,014
Total assets 23,807,755 23,943,980
Long-term debt 8,799,905 9,290,909
Shareholders' equity 10,133,392 10,413,858
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
SEVEN MONTHS ENDED OCTOBER 31, 2001 VERSUS FISCAL 2001
At an executive session held on August 28, 2001, the Board of Directors
resolved that the Companies' fiscal year end be changed from March 31st to
October 31st. This change is effective for each of the Companies as of October
31, 2001. The purpose of the change is to allow for a more natural business year
and to conform the Companies reporting period to that of the majority
stockholder's financial statements. Because of the change in fiscal year end,
the Companies current report date of October 31, 2001 represents a seven-month
period as compared to prior fiscal year end March 31, 2001, a twelve-month
period. Therefore, the major reason for decreases in various operating revenues
and expenses is the short reporting period.
Another significant variance in comparing the seven months ended October
31, 2001 to year end March 31, 2001 is that the seven-month short period does
not include any revenues and much decreased expenditures related to the two ski
facilities, as the majority of ski operation revenue and expense is generated
during the months of December through March. Revenues generated from advance
ticket sales have been recorded as deferred revenue, and likewise various
operating costs directly related to the two ski facilities have been recorded as
deferred operating costs.
For the seven months ended October 31, 2001, the Companies report a net
loss of ($804,422) or ($0.42) per combined share as compared with a net income
of $252, 532 or $0.13 per combined share for fiscal year end March 31, 2001.
Combined revenue of $4,762,067 represents a decrease of $14,134,384 or a
75% decrease when compared to Fiscal 2001. Ski Operations decreased $11,267,371
or 100%, Summer Recreational Operations decreased $552,204 or 20% and Real
Estate Management Operations decreased $2,314,809 or 47% when compared to Fiscal
2001.
The Ski Operations had no skiers visit our slopes during the seven months
ended October 31, 2001, as explained above, compared to 247,000 skier visits
last season. Tubing also had no tuber visits at October 31, 2001 as compared to
83,000 tuber visits at March 31, 2001. Likewise, food and beverage operations
and retail ski shop operations recognized no revenues during the short period
ended October 31, 2001. For Fiscal year end 2002, expectations are that the
number of skiers and tubers visiting our slopes, as well as revenues generated
from skiing and tubing operations, food and beverage and retail ski shop sales
will compare to ski seasons reported in previous March 31st fiscal year ends.
The Summer Recreation Operations decrease is attributed to the summer music
festivals (39%) not drawing as many consumers as in the past mainly due to
inclement weather. The remaining decrease is the result of shorter operating
periods for Splatter and TRAXX due to the new fiscal period.
Page - 13
SEVEN MONTHS ENDED OCTOBER 31, 2001 VERSUS FISCAL 2001 (continued)
The Real Estate Management Operations decrease is attributed to commissions
for resale of homes in our resort communities (20%), fees for contract services
provided to the homeowners of the resort communities (10%) and reduced rental
revenue from the resort community homes (70%). The ski season generates a
substantial volume of the home rental income, which due to the seven month
period we did not recognize. The decreases were offset by an increase in Rents,
Royalties and Other due to timbering revenues.
No land sales occurred in the seven months ended October 31, 2001. In
Fiscal 2001, 132 acres of land were sold for $521,607 with a basis of $1,204.
Operating costs associated with Ski Operations decreased by $10,145,526
when compared to Fiscal 2001. This decrease is attributed to the absence of ski
operations recognized during the short period, as stated above.
Operating costs associated with Summer Recreation Operations decreased
$356,763 when compared to Fiscal 2001. This decrease is attributed to the short
period as noted above.
Operating costs associated with Real Estate Management Operations decreased
by $1,630,844 when compared to Fiscal 2001. This decrease is attributed to the
seven month versus twelve month period comparison described above.
General and Administration expenses decreased by $1,117,950 when compared
to Fiscal 2001. This decrease is attributed to the seven month versus twelve
month period comparison. Also, general and administration expenses in Fiscal
2001 had increased by $466,922 due to recognizing severance expense relating to
changes in management.
Interest and Other Income decreased by $829,076 when compared to Fiscal
2001. This decrease is mainly attributable to the sale of 132 acres of land
during fiscal year ended March 31, 2001. The remaining decrease is attributed to
the seven month period versus twelve month comparison described above.
Interest expense decreased by $440,824 when compared to Fiscal 2001. This
decrease is primarily attributed to a reduction in the principal on the
Dreshertown Plaza note, favorable decreases in the prime rate and LIBOR rate of
interest approximating 2.0% and 2.5%, respectively, during the seven months
ended October 31, 2001, and the comparison of a seven month period to a twelve
month period as described above.
The effective Tax Rate for seven months ended October 31, 2001 and Fiscal
2001 was 41% respectively.
FISCAL 2001 VERSUS FISCAL 2000
For Fiscal Year ended March 31, 2001, the Companies reported net income of
$252,532 or $.13 per combined share as compared with a net income of $480,640 or
$.24 per combined share for Fiscal 2000.
Combined revenue of $18,896,451 represents an increase of $9,532 or less
than 1% when compared to Fiscal 2000. Ski Operations decreased $298,272 or 3%,
and Real Estate Management Operations increased $307,804 or 4% when compared to
Fiscal 2000.
The Ski Operations had approximately 247,000 skiers visit our slopes
compared to 256,000 skier visits last season. The decrease of 9,000 skier visits
represents a decrease of 4%. Revenue per skier was $31 compared to $30 last
season for an increase of $1.00 or 3%. Tubing operations had approximately
83,000 tuber visits compared to 90,000 tuber visits last season. The decrease of
7,000 tuber visits represents a 8% decrease. Revenue per tuber was $15.18
compared to $13.84 last season for an decrease of $1.34 or 9%. The ski areas
operated for a combined total of 200 days compared to 181 days last season. The
food and beverage operation at the ski areas contributed revenue of $6.79 per
skier visit. The retail shop operations at the ski areas contributed revenue of
$2.12 per skier visit compared to $1.97 the previous season.
The Real Estate Management Operations increase is attributed to commission
for resale of homes in our resort communities (37%), fees for contract services
provided to the homeowners of the resort communities (53%), and fishing and
hunting leases (10%). The increases were offset by a decrease in festival
revenues and fees for services provided to the Trusts of the resort communities.
Disposition of properties occur sporadically and do not follow any pattern
during the fiscal year.
In Fiscal 2001, 132 acres of land was sold for $521,607 with a basis of
$1,204. No major land sales occurred in Fiscal 2000.
Operating costs associated with Ski Operations increased by $110,888 when
compared to Fiscal 2000. This increase is attributed to seasonal labor costs.
Operating costs associated with Real Estate Management Operations increased
by $183,405 when compared to Fiscal 2000. This increase is attributed to
increased expenses related to summer activities and the investment properties.
General and Administration expenses increased by $683,726 when compared to
Fiscal 2000. The increase is primarily due to severance expenses of $466,922
relating to management changes. The remaining increase is due to professional
fees.
Interest and Other income increased by $245,924 when compared to Fiscal
2000. This increase is attributable to reimbursement of estimated income taxes
(25%) and overhead expenses related to the construction of the sewer line (15%)
and an increase in disposed assets and resulting gains (60%).
Interest expense increased by $4,664 when compared to Fiscal 2000. This
increase is primarily attributed to an increase in LIBOR.
The effective Tax Rate for Fiscal 2001 and 2000 was 34% and 41%
respectively.
LIQUIDITY AND CAPITAL RESOURCES:
The Combined Statement of Cash Flows reflects net cash used in operating
activities of ($2,268,566) for the seven months ended October 31, 2001 due to
the short period and the absence of ski season revenues to offset certain costs
and expenses, versus net cash provided by operating activities of $2,440,296 and
$2,300,757 in Fiscal 2001 and 2000 respectively.
The major capital investments made in the seven months ended October 31,
2001 were the repaving of the Jack Frost Mountain access road, the construction
of a Snowboard Park at Big Boulder Ski Area and the purchase of two
snowgroomers. These capital investments were financed wholly from working cash.
During Fiscal 2001 a mortgage note payable with First Union National Bank
in the amount of $4,941,000 was refinanced and will mature August 31, 2003.
During the seven months ended October 31, 2001 the Companies borrowed against
their $2,000,000 line of credit for a period of one month in varying amounts
with a maximum of $648,195. During Fiscal 2001, the Companies borrowed against
their $2,000,000 line of credit for a period of five months in varying amounts
with a maximum of $1,950,000. The rate of interest is one quarter of one
percentage point (0.25%) less than the Prime Rate. Management fully expects to
renew the line of credit.
Page - 14
In June 2000, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities - an Amendment of
FASB Statement No. 133". SFAS No. 138 addresses a limited number of issues
causing difficulties in the implementation of SFAS No. 133 and was required to
be adopted concurrently with SFAS No. 133. The Companies do not engage in
hedging activities and therefore the adoption of SFAS No. 133 and 138 did not
have a material impact on the Companies' financial position or results of
operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", but retains the requirements of SFAS No. 121 to (a)
recognize an impairment loss only if the carrying amount of a long-lived asset
is not recoverable from its undiscounted cash flows and (b) measure an
impairment loss as the difference between the carrying amount and fair value of
the asset. SFAS No. 144 removes goodwill from its scope as the impairment of
goodwill is addressed prospectively pursuant to SFAS No. 142. SFAS No. 144 is
effective for financial statements issued for fiscal years beginning after
December 15, 2001, and interim periods within those years. The Companies do not
expect the adoption of SFAS No. 144 to have a material impact on its financial
position or results of operations.
MOVING FORWARD: The company expects to generate significant timbering and
land sale revenues in the next fiscal year. Renovations are planned for the
lodges at Jack Frost Mountain and Big Boulder Ski Areas. The areas will also
receive new snow grooming equipment. Additional paintball fields and another
track at our motocross park will be constructed at Jack Frost Mountain.
Page - 15
BOARD OF DIRECTORS
Milton Cooper
Chairman, Kimco Realty Corporation;
Director, Getty Petroleum Corp.;
Director, Kimco Realty Corporation
Michael J. Flynn
Chairman of the Board and President of the Companies;
Vice Chairman and Director, Kimco Realty Corporation
Patrick M. Flynn
President of the Companies
Director of Real Estate, Kimco Realty Corporation
Wolfgang Traber
Chairman of the Board, Hanseatic Corporation & Co. N.Y.
The above Directors serve both Companies.
OFFICERS
Patrick M. Flynn
President
Eldon D. Dietterick
Executive Vice-President and Treasurer
Richard R. Frey
Vice-President
Christine A. Liebold
Secretary
Cynthia A. Barron
Controller
The above Officers serve both Companies.
TRANSFER AGENT
HSBC Bank USA
New York, New York
INDEPENDENT AUDITORS
Parente Randolph, PC
Wilkes Barre, Pennsylvania
Page - 16
NOTICE OF ANNUAL MEETINGS
The Annual Meetings of Shareholders of Blue Ridge Real Estate Company and
Big Boulder Corporation will be announced with mailing of Proxy Material in
February.
FORM 10-K AVAILABLE
The Companies will furnish to any shareholder, without charge, a copy of
their Fiscal Year 2001 Annual Report as filed with the Securities and Exchange
Commission on Form 10-K. Written request should be directed to the attention of
the Secretary, Blue Ridge Real Estate Company, P.O. Box 707, Blakeslee, PA
18610-0707
CORPORATE PROPERTIES
Resorts in the Pocono Mountains
Big Boulder Ski Area
Jack Frost Mountain
Fern Ridge Campground
Investment Properties
Dreshertown Plaza Shopping Center
Dresher, Montgomery County, Pennsylvania
Wal-Mart Store, Laurens, South Carolina
The Mountains Edge, Lake Harmony, Pennsylvania
Land Holdings
Blue Ridge
18,709 acres of land, held for investment
Big Boulder
929 acres of land, held for investment
Northeast Land Company
103 acres of land
Recreational Areas
"The Stretch" on the Tunkhannock
Porter Run Hunting Preserve
Splatter (Paintball game)
TRAXX, Motocross, ATV and BMX Park
Page - 17