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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2003
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from.......... to..........
Blue Ridge 0-28-44
Commission File No.: Big Boulder 0-28-43
BLUE RIDGE REAL ESTATE COMPANY
BIG BOULDER CORPORATION
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
Registrant's telephone number, including area code: (570)-443-8433
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 and Exchange
Act
of 1934 during the preceding 12 months (or for such 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__________
Indicate the number of shares outstanding of each of the issuer's
classes
of common stock, as of the close of the period of this report:
Class Outstanding at April 30, 2003
Common Stock, without par value, 1,916,130
stated value $.30 per combined share*
*Under a Security Combination Agreement between Blue Ridge Real Estate Company
("Blue Ridge") and Big Boulder Corporation ("Big Boulder") (referred to as 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-Q is being filed. Except as otherwise indicated, all information applies to
both Corporations.
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1-Financial Statements
Combined Condensed Balance Sheets
April 30, 2003 and October 31, 2002 1 & 2
Combined Condensed Statements of
Operations - Three Months and Six Months
ended April 30, 2003 and April 30, 2002 3
Combined Condensed Statements of
Cash Flows - Six Months Ended
April 30, 2003 and April 30, 2002 4
Notes to Financial Statements 5,6,7 & 8
Item 2-Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8,9,10,11 & 12
Item 3-Quantitative and Qualitative Disclosures
About Market Risk - Not applicable
Item 4-Controls and Procedures 12
PART II - OTHER INFORMATION
Item 6-Exhibits and Reports on Form 8-K 13
Signatures 14
Chief Executive Officer Certification 15
Chief Financial Officer Certification 16
President Certification 17
Executive Vice President and Treasurer Certification 18
BLUE RIDGE REAL ESTATE COMPANY and SUBSIDIARIES
BIG BOULDER CORPORATION AND SUBSIDIARIES
COMBINED CONDENSED BALANCE SHEETS
(UNAUDITED)
April 30, October 31,
ASSETS 2003 2002
Current Assets
Cash and cash equivalents $ 247,452 $ 261,311
(all funds are interest bearing)
Accounts receivable 587,559 388,292
Inventories 143,986 247,460
Prepaid expenses, principally insurance 949,444 918,210
and real estate taxes
Deferred operating costs 381,093 2,275,784
------- ---------
Total current assets 2,309,534 4,091,057
--------- ---------
Cash held in escrow 327,864 107,909
------- -------
Notes receivable noncurrent 177,652 0
------- -------
Properties:
Land, principally unimproved (19,580 and 1,964,902 1,867,352
19,714 acres respectively, per
land ledger)
Land improvements, buildings and equipment 58,420,527 56,190,649
---------- ----------
60,385,429 58,058,001
Less accumulated depreciation and amortization 38,171,082 37,611,139
---------- ----------
22,214,347 20,446,862
---------- ----------
$25,029,397 $24,645,828
=========== ===========
See accompanying notes to unaudited financial statements.
1
LIABILITIES AND SHAREHOLDERS' EQUITY
April 30, October 31,
2003 2002
Current Liabilities:
Notes payable - lines of credit $150,000 $600,000
Current installments of:
long-term debt and capital 5,204,132 5,266,548
lease obligations
Accounts and other payables 542,092 913,825
Accrued claims 234,618 208,642
Deferred income taxes 1,269,060 796,000
Accrued pension expense 894,493 890,493
Accrued liabilities 647,782 631,913
Deferred revenue 422,346 698,242
------- -------
Total current liabilities 9,364,523 10,005,663
--------- ----------
Long-term debt and capital lease 2,895,535 2,783,257
--------- ---------
obligations, less current installments
Deferred income taxes 1,110,000 1,110,000
--------- ---------
Other non-current liabilities 21,175 28,756
------ ------
Deferred income non-current 515,631 515,631
------- -------
Commitments and Contingencies
Combined shareholders' equity: 659,444 659,444
Capital Stock, without par value,
stated value $.30 per combined share,
Blue Ridge and Big Boulder each have
authorized 3,000,000 shares and each
have issued 2,198,148 shares as of April
30, 2003 and as of October 31, 2002
Capital in excess of stated value 1,461,748 1,461,748
Compensation recognized under employee 200,900 0
stock plans
Earnings retained in the business 10,885,848 10,166,211
---------- ----------
13,207,940 12,287,403
LESS: Cost of 282,018 and 281,968 shares
of capital stock in treasury as of
April 30, 2003 & October 31, 2002,
respectively. 2,085,407 2,084,882
---------- ----------
11,122,533 10,202,521
---------- ----------
$25,029,397 $24,645,828
=========== ===========
See accompanying notes to unaudited financial statements.
2
BLUE RIDGE REAL ESTATE COMPANY and SUBSIDIARIES
BIG BOULDER CORPORATION and SUBSIDIARIES
COMBINED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
April 30 April 30 April 30 April 30
2003 2002 2003 2002
Revenues:
Ski operations $4,701,471 $5,074,055 $10,269,983 $10,015,075
Real estate management 863,376 850,089 1,639,215 1,689,797
Summer recreation operations 147,765 186,278 233,753 364,635
Land resource management 491,703 523,356 1,601,603 671,715
Rental income 541,537 516,084 998,223 945,940
------- ------- ------- -------
6,745,852 7,149,862 14,742,777 13,687,162
--------- --------- ---------- ----------
Costs and expenses:
Ski operations 4,010,795 4,007,210 9,641,796 8,928,726
Real estate management 703,707 661,618 1,362,843 1,336,265
Summer recreation operations 183,779 263,763 381,763 431,936
Land resource management 297,610 97,136 595,643 102,496
Rental operations 479,778 210,042 770,919 455,867
General & administrative
exoebses 407,755 191,925 593,451 496,262
------- ------- ------- -------
6,083,424 5,431,694 13,346,415 11,751,552
--------- --------- ---------- ----------
Income from operations 662,428 1,718,168 1,396,362 1,935,610
------- --------- --------- ---------
Other income (expense):
Interest & other income 11,631 10,536 12,958 16,333
Interest expense (102,208) (88,396) (216,683) (195,098)
-------- ------- -------- --------
(90,577) (77,860) (203,725) (178,765)
------- ------- -------- --------
Income before income taxes 571,851 1,640,308 1,192,637 1,756,845
------- --------- --------- ---------
Provision for income taxes 223,000 436,123 473,000 482,723
------- ------- ------- -------
Net income $ 348,851 $1,204,185 $ 719,637 $1,274,122
========== ========== ========== ==========
Basic and diluted earnings
per weighted average
combined share $0.19 $0.63 $0.38 $0.66
===== ===== ===== =====
See accompanying notes to unaudited financial statements.
3
BLUE RIDGE REAL ESTATE COMPANY
BIG BOULDER CORPORATION and SUBSIDIARIES
COMBINED CONDENSED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED APRIL 30, 2003 & 2002
(UNAUDITED)
2003 2002
Cash Flows From(Used In) Operating Activities:
Net Income $ 719,637 $1,274,122
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,733,990 1,587,934
Deferred income taxes 473,060 482,723
Gain on sale of assets (7,613) (1,632)
Compensation cost under employee stock plans 200,900 0
Changes in assets and liabilities:
Accounts receivable (190,137) (509,343)
Prepaid expenses and other current assets 72,240 52,897
Deferred operating costs 1,237,959 1,088,476
Notes Receivable (186,782)
Accounts Payable & accrued liabilities (333,469) (282,853)
Deferred revenue (275,896) (272,455)
-------- --------
Net cash provided by operating activities 3,443,889 3,419,869
--------- ---------
Cash Flows From (Used In) Investing Activities:
Proceeds from disposition of assets 9,000 17,191
Additions to properties (1,834,352) (1,024,141)
Cash held in escrow (219,955) 0
-------- ---------
Net cash used in investing activities (2,045,307) (1,006,950)
---------- ----------
Cash flows From (Used In) Financing Activities:
Payment of short-term financing (2,250,000) (1,448,195)
Proceeds from short-term financing 1,800,000 800,000
Payment of long-term debt and capital lease (961,916) (439,510)
obligations
Purchase of Treasury stock (525) (10,500)
---- -------
Net cash used in financing activities (1,412,441) (1,006,950)
---------- ----------
Net increase in cash and cash equivalents (13,859) 1,314,714
Cash and cash equivalents, beginning of period 261,311 263,178
------- -------
Cash and cash equivalents, end of period $ 247,452 $1,577,892
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during period:
Interest $ 217,769 $ 196,249
Income taxes $ 6,913 $ 14,012
Supplemental disclosure of non cash investing $ 1,011,778 $ 0
and financing activities, additions to property
acquired through capital lease obligations
See accompanying notes to unaudited financial statements.
4
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. The combined financial statements include the accounts of Blue
Ridge Real Estate Company and its wholly-owned subsidiaries (Northeast Land
Company, Jack Frost Mountain Company and BRRE Holdings, Inc.) and Big Boulder
Corporation and its wholly-owned subsidiaries (Lake Mountain Company and
BBC Holdings, Inc.). In the opinion of Management, the accompanying
unaudited combined condensed financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly
the financial position as of April 30, 2003, and the results of operations and
the statements of cash flows for the three and six month periods ended April
30, 2003 and April 30, 2002.
Certain information and footnote disclosures have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. These combined financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Companies' Annual Report on Form 10-K for the year ended October 31, 2002.
2. The preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. For example, unexpected changes in market
conditions or a downturn in the economy could adversely affect actual results.
Estimates are used in accounting for, among other things, inventory
obsolescence, accounts and notes receivables, deferred operating costs, legal
liability, insurance liability, depreciation, employee benefits, taxes, and
contingencies. Estimates and assumptions are reviewed periodically and the
effects of revisions are reflected in the Combined Condensed Financial
Statements in the period they are determined to be necessary.
Management believes that its accounting policies regarding accounts and
notes receivable, deferred operating costs, long lived assets, revenue
recognition and other reserves, among others, affect its more significant
judgments and estimates used in the preparation of its Combined Condensed
Financial Statements. For a description of these critical accounting policies
and estimates, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations". Management believes there have been no significant
changes in the Companies' critical accounting policies or estimates since the
Companies' fiscal year ended October 31, 2002.
3. The Companies account for notes receivable on a cost basis. Interest
income is recorded on a monthly basis. Late payment fees are charged on
overdue payment of principal and interest. Notes receivable are evaluated at
origination and monitored on an ongoing basis for credit worthiness. Notes
receivable are considered fully collectible by management and accordingly no
allowance for loan losses is considered necessary. Any note 90 days past due
is reviewed by management for write off.
5
Accounts receivable, trade are reported at net realizable value. Accounts
are written off when they are determined to be uncollectible based upon
management's assessment of individual accounts. The allowance for doubtful
accounts which is insignificant is estimated based on the Companies' historical
losses and the financial stability of its customers.
4. The Companies and the subsidiaries, under SFAS No. 131, operate in four
business segments - Ski Operations, Real Estate Management/Rental Operations,
Summer Recreation Operations and Land Resource Management.
The results of operations for the three months are not necessarily
indicative of the results to be expected for the full year since the Companies'
two ski facilities operate principally during the months of December through
March. Costs and expenses net of revenues received in advance, directly
related to the Ski Operations that are incurred during the months of April
through November are capitalized as deferred operating costs and recognized as
revenue and operating expenses, ratably, over the ski operating season.
Revenues and operating expenses of the Real Estate Management/Rental
Operations, Summer Recreation Operations and Land Resource Management are as
disclosed on the statement of operations.
Depreciation of ski facility fixed assets is calculated over the 12-month
period. The expense is deferred until the operating period, at which time it
will be recognized ratably.
5. The provision for income taxes for the three and six months ended April
30, 2003 represents the estimated annual effective tax rate for the year ending
October 31, 2003. The effective income tax rate for the first six months of
Fiscal 2003 was 40%.
6. Reclassifications have been made to the April 30, 2002 Combined
Condensed Statement of Operations to reflect changes in presentation for the
three and six months ended April 30, 2003. Namely, Land Resource Management is
reported as a separate segment of the Companies.
7. 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 exercise price on the 35,000 options is $6.75 and
the original term was extended in February 2003 to July 1, 2008. In accordance
with FASB Interpretation No. 44, Accounting for Certain Transaction involving
Stock Compensation ("FIN 44"), the extension of the life of the award requires
a new measurement of compensation as if the award was newly granted. Because
the exercise price was less than the current fair market value at the date of
grant, compensation cost of $122,900, net of tax has been recognized in the
combined condensed statement of operations. During Fiscal 2002, additional
corporate officers were granted stock options in varying amounts for a total of
11,000 shares, all expiring December 10, 2006. Additionally, on December 2,
2002, six key employees were granted stock options totaling 18,000 shares, due
to expire on December 2, 2007.
6
Option activity during the three and six-month periods ended April 30, 2003 and
2002 is as follows:
THREE MONTHS ENDED
04/30/03 4/30/02
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
OUTSTANDING AT
BEGINNING OF
PERIOD 64,000 $8.56 46,000 $7.65
GRANTED - - - -
EXERCISED - - - -
CANCELED - - - -
------ ----- ------ -----
OUTSTANDING AT
END OF PERIOD 64,000 $8.56 46,000 $7.65
====== ===== ====== =====
OPTIONS EXERCISABLE
AT PERIOD-END 64,000 $8.56 46,000 $7.65
====== ===== ====== =====
OPTION PRICE RANGE $6.75-$10.90 $6.75-$10.90
============ ============
WEIGHTED AVERAGE
FAIR VALUE
OF OPTIONS
GRANTED DURING
PERIOD $4.92 $ -
===== =====
SIX MONTHS ENDED
04/30/03 4/30/02
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
OUTSTANDING AT
BEGINNING OF
PERIOD 46,000 $7.65 35,000 $6.75
GRANTED 18,000 $10.90 11,000 $10.50
EXERCISED - - - -
CANCELED - - - -
------ ----- ------ -----
OUTSTANDING AT
END OF PERIOD 64,000 $8.56 46,000 $7.65
====== ===== ====== =====
OPTIONS EXERCISABLE
AT PERIOD-END 64,000 $8.56 46,000 $7.65
====== ===== ====== =====
OPTION PRICE RANGE $6.75-$10.50 $6.75-$10.50
============ ============
WEIGHTED AVERAGE
FAIR VALUE
OF OPTIONS
GRANTED DURING
PERIOD $4.92 $2.71
===== =====
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", and SFAS No. 148,
"Accounting for Stock-Based Compensation-Transition and Disclosure." 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. SFAS No. 123 requires the
disclosure of pro forma net income and earnings per share as if the Companies
had adopted the fair value method for stock-based compensation. Under SFAS No.
123, the fair value of stock-based awards to employees is calculated through
the use of option pricing models. These models also require subjective
assumptions, including future stock price volatility and expected time to
exercise, which greatly affect the calculated values. The Companies'
calculations were made using the Black-Scholes option pricing model with the
following weighted average assumptions in the three and six month periods ended
April 30, 2003 and 2002:
THREE MONTHS ENDED SIX MONTHS ENDED
04/30/03 04/30/02 04/30/03 04/30/02
Remaining expected life of
Options 6.5 yrs - 6.5 yrs 5.9 yrs
Stock volatility 1.4% - 1.4% 4.1%
Risk-free interest rate 2.7% - 2.7% 2.5%
Dividends during the
expected term $ - $ - $ - $ -
=========== ========== ========== ========
The following table illustrates the effect on net income and earnings per share
as if the fair value based method had been applied to all outstanding awards in
each period.
7
THREE MONTHS ENDED SIX MONTHS ENDED
04/30/03 04/30/02 04/30/03 04/30/02
Net income, as
Reported $ 348,851 $1,204,185 $ 719,637 $1,274,122
Add: Stock-based
employee compensation
expense included in
reported net income,
net of related tax
Effects 122,900 - 122,900 -
Deduct: Total stock-
based employee
compensation expense
determined under fair
value based method
for all awards, net
of tax effects (113,652) (172,102) (19,675)
-------- -------- -------- -------
Pro forma net income $358,099 $1,204,185 $670,435 $1,254,447
======== ========== ======== ==========
Basic earnings per
share:
As reported $ 0.19 $ 0.63 $ 0.38 $ 0.66
======== ======== ======== ========
Pro forma $ 0.19 $ 0.63 $ 0.33 $ 0.65
======== ======== ======== ========
Diluted earnings per
share:
As reported $ 0.19 $ 0.63 $ 0.38 $ 0.66
======== ======== ======== ========
Pro forma $ 0.19 $ 0.63 $ 0.33 $ 0.65
======== ======== ======== ========
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Critical Accounting Policies
The most sensitive estimates affecting the combined condensed financial
statements include management's estimate of deferred operating costs and net
deferred tax assets and liabilities, the valuation of long-lived assets and
recognition of deferred revenues.
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, timbering and other recreational activities. Revenues are
recognized as services are performed.
8
Timbering revenues from stumpage contracts are recognized in accordance with
Staff Accounting Bulleting No. 101 - Revenue Recognition, ("SAB 101"). At the
time a stumpage contract is signed, the risk of ownership has been passed to
the buyer at
a fixed, determinable cost. Reasonable assurance of collectibility has been
determined by the date of signing, and the few obligations of the Companies'
have already been met. Therefore, full accrual recognition at the time of
contract execution is appropriate under SAB 101 guidance.
Management's estimate of deferred operating costs is primarily based on
deferring costs directly related to ski operations in order to match those
costs to the period in which ski operating revenues are recognized. Ski
operating revenues are recognized principally over the months of December
through March. Therefore, deferred operating costs are ratably expensed over
the same period in order to maintain the consistent application of the matching
principle over each operating cycle. The capitalized costs consist principally
of depreciation, insurance, real estate taxes, advertising, repairs,
maintenance and supplies.
Management's estimate of deferred tax assets and liabilities is primarily based
on the difference between the tax basis and financial reporting basis of
depreciable assets, like-kind exchanges of assets, accruals, deferred operating
costs and deferred revenues.
The Companies' valuation of long-lived assets, namely, properties is based on
historical cost. Depreciation and amortization is provided principally using
the straight-line method over the estimated useful life of the class of
property. 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. Costs of land development, such as surveyor and consultant fees are
capitalized as land costs. 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 difference between the carrying
value and the fair value of the asset. No such losses were recognized as of
April 30, 2003.
Deferred revenue consists of revenue billed in advance for services and dues
that are not yet earned. Revenue billed in advance for services consists of
season lift tickets and advance ticket sales and gift certificates for the ski
resorts. The Companies' recognize revenue billed in advance ratably over the
principal months of the ski season, December through March. Dues that are not
yet earned consist of rents related to our commercial properties that have been
paid in advance, and dues related to memberships in our hunting and fishing
clubs paid in advance. The Companies' recognize revenue related to the hunting
and fishing clubs over the one-year period that the dues cover.
9
Results of Operations
Operations for the three and six months ended April 30, 2003 resulted in a net
income of $ .19 and $ .38 per combined share compared to a net income of $.63
and $.66 per combined share for the three and six months ended April 30, 2002.
Combined revenue of $6,745,852 and $14,742,777 represents a decrease of
$404,010 and an increase of $1,055,615 as compared to the three and six months
ended April 30, 2002. Ski operations decreased $372,584 and increased $254,908
for the three and six months ended April 30, 2003 as compared to the three and
six months ended April 30, 2002. Real Estate Management increased $13,287 and
decreased $50,582 for the three and six months ended April 30, 2003 as compared
to the three and six months ended April 30, 2002. Summer recreation operations
decreased $38,513 and $130,882 for the three and six months ended April 30,
2003 as compared to the three and six months ended April 30, 2002. Land
resource management decreased $31,653 and increased $929,888 for the three and
six months ended April 30, 2003 as compared to the three and six months ended
April 30, 2002. Rental income increased $25,453 and $52,283 for the three and
six months ended April 30, 2003 as compared to the three and six months ended
April 30, 2002.
Ski operations increase of $254,908 in revenue for the six months ended April
30, 2003 as compared to the six months ended April 30, 2002 was due to an
increase in lift and season pass revenue (10%), rental shop revenue (40%), food
revenue (14%) and retail revenue (36%).
Real Estate Management revenue decreased $50,582 for the six months ended April
30, 2002. This decrease in revenue is attributable to property management of
homes in our resort communities (10%), property sales within our resort
communities (90%).
Summer recreation operations decreased $130,882 for six months ended April 30,
2003 as compared to the six months ended April 30, 2002. This decrease was the
result of a decrease in Splatter revenue (22%) and Traxx revenue (76%). The
decrease in Traxx revenue is a result of the discontinuation of Snocross snow
mobile rentals.
Land resource management increased $929,888 for the six months ended April 30,
2003 as compared to the six months ended April 30, 2002. This is a new business
segment that wasn't operational until the second quarter of fiscal 2002. This
segment relates to the sale and purchasing of land and harvesting timber.
Rental operations increased $52,283 for the six months ended April 30, 2003 as
compared to the six months ended April 30, 2002. This increase is attributable
to the management of homes in our resort communities.
Operating costs increased $1,497,674 during the first six months of Fiscal 2003
as compared to the six months ended April 30, 2002. Ski operation expenses
increased $713,070. This increase was mainly attributable to an increase in
salaries and wages (29%), utilities (14%), insurance expense (12%) and
depreciation (22%).
Real Estate Management operating expenses increased $26,578 for the first six
months of Fiscal 2003 as compared to the six months ended April 30, 2002.
10
Summer recreational operations expenses decreased $50,173 for the first six
months of Fiscal 2003 as compared to the six months ended April 30, 2002. This
decrease was the result of a decrease in Campground labor and supplies and
services (40%), Lake Club depreciation (14%) and Traxx equipment rental costs
(46%).
Land Resource Management operation expenses increased $493,147 for the first
six months of Fiscal 2003 as compared to the six months ended April 30, 2002.
This is a new business segment that wasn't operational until the second quarter
of Fiscal 2002.
General and Administrative expenses increased $97,189 for the first six months
of Fiscal 2003 as compared to the six months ended April 30, 2002. This
increase was due primarily to the recognition of compensation cost under the
employee stock plans.
Interest expense increased $21,585 for the first six months of Fiscal 2003 as
compared to the six months ended April 30, 2002. This increase is attributable
to an additional line of credit for Land resource management purposes (3%),
interest on the new D lift at Jack Frost Mountain loan ( 55% ) and the interest
on the capital leases ( 42% ) for the groomers and compressors at both ski
areas. These increases were also offset by a paydown on existing debt and the
reduction in the prime interest rate.
Financial Condition, Liquidity and Capital Resources
The deficit in working capital as of April 30, 2003 increased by
$1,140,383 as compared to October 31, 2002. The increase is primarily due to
the cyclical nature of the Companies' business. The change in the balance of
deferred operating costs from October 31, 2002 to April 30, 2003 was due
primarily to revenue and expenses that are applicable to the ski facilities,
which are deferred and recognized ratably during the months of December through
March.
During the quarter ended April 30, 2003, the Companies paid in full a loan
with PNC Bank prior to the maturity date of March 31, 2004. Management chose
to pay down the balance of $247,270 due to available cash flow and interest
savings.
Management has secured an amendment to the loan documents from PNC Bank
which deletes the financial covenant relating to the current ratio.
Moving Forward
During Fiscal 2003 the Companies will actively pursue land sales and
purchases. The Companies will offer financing to attract new land sale
customers. The Companies will continue to generate timbering revenues from
selective harvesting of timber.
Management is organizing a subsidiary company - Boulder Creek Resort
Company. This new company will be used as a marketing tool to consolidate and
brand the Companies' holdings as one resort destination and to facilitate the
land sales division.
The Companies are planning further real estate development of multi -
family dwellings at our ski resorts.
11
Management has declined the offer to purchase Dreshertown Plaza Shopping
Center. The mortgage note payable on the Dreshertown Plaza approximating
$4,492,000 is classified as a current obligation with a maturity date of August
31, 2003. Management is currently reviewing proposals for long-term
refinancing of the debt and has every intention that refinancing will occur
prior to August 31, 2003.
Management has established a $150,000 accrual specific to the remediation
of an environmental issue discovered at Dreshertown Shopping Plaza. The
accrual is based on an estimate provided by environmental clean-up consultants
and is recorded as a current accrued liability in the April 30, 2003 combined
condensed balance sheet.
Subsequent to the six months ended April 30, 2003, management has obtained
short term financing of approximately $1.9 million for the purpose of buying
out Vesterra Corporation, the management company of Dreshertown Shopping Plaza
in accordance with the terms of the Management Agreement. The $1.9 million
will be recognized as an expense charged to operations in the third quarter
ending July 31, 2003.
Kimco Realty Corporation, the Companies' majority shareholder, will take
over management services of the shopping center at a reduced cost from the
previous management service. The terms of the agreement have yet to be
finalized.
Subsequent to the six months ended April 30, 2003, management has secured
mortgage financing for numerous revenue generating investment properties
aggregating approximately $850,000 for the purpose of real estate development.
Subsequent to the six months ended April 30, 2003, management terminated
its two lines of credit with PNC Bank, N.A., totaling $3.1 million, and has
obtained new lines of credit for the same amount with Manufacturers & Traders
Trust Company, on substantially the same terms.
PART II - OTHER INFORMATION
Item 4. Controls and Procedures
Within the 90 days prior to the date of this report, the Companies carried
out an evaluation, under the supervision and with the participation of its
management, including its President and Chief Executive Officer and its Chief
Financial Officer, of the effectiveness of the design and operation of its
disclosure controls and procedures pursuant to Rule 13a-15 under the Securities
Exchange Act of 1934. Based upon that evaluation, the President and Chief
Executive Officer, and Chief Financial Officer have concluded that the
Companies disclosure controls and procedures are effective in timely alerting
them to material information relating to the Companies that is required to be
included in the Companies periodic SEC filings.
There have been no significant changes in the Companies internal
controls or in any factors that could significantly affect the controls
subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
12
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
99.1 Certification of chief executive officer
99.2 Certification of chief financial officer
(b) Reports on Form 8-K
None.
The Companies have no matters to report with respect to Items 1, 2, 3 and 5.
13
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
BLUE RIDGE REAL ESTATE COMPANY
BIG BOULDER CORPORATION
(Registrant)
__________________________________
Eldon D. Dietterick
Executive Vice President/Treasurer
__________________________________
Cynthia A. Barron
Chief Accounting Officer
Date: June 4, 2003
14
CERTIFICATION*
I, Patrick M. Flynn, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Blue Ridge Real
Estate Company and Big Boulder Corporation (together, the "registrants");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrants as of, and for, the periods presented in this quarterly report;
Date: June 4, 2003
__________________________________
Patrick M. Flynn
Chief Executive Officer and President
_____________
* Pursuant to the transition provisions of Release No. 34-46427 (Aug. 28,
2002), the portions of this certification required by paragraphs (b)(4), (5)
and (6) of Exchange Act Rule 13a-14 are inapplicable to this quarterly report.
Accordingly, the portions have been omitted from this certification.
15
CERTIFICATION*
I, Eldon D. Dietterick, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Blue Ridge Real
Estate Company and Big Boulder Corporation (together, the "registrants");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrants as of, and for, the periods presented in this quarterly report;
Date: June 4, 2003
________________________________
Eldon D. Dietterick
Executive Vice President and Treasurer (chief financial officer)
_____________
* Pursuant to the transition provisions of Release No. 34-46427 (Aug. 28,
2002), the portions of this certification required by paragraphs (b)(4), (5)
and (6) of Exchange Act Rule 13a-14 are inapplicable to this quarterly report.
Accordingly, the portions have been omitted from this certification.
16
CERTIFICATION
I, PATRICK M. FLYNN, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Blue Ridge Real
Estate Company/Big Boulder Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respect the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 45 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers, and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
June 4, 2003 __________________________________
Patrick M. Flynn
President
17
CERTIFICATION
I, ELDON D. DIETTERICK, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Blue Ridge Real
Estate Company/Big Boulder Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respect the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 45 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers, and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
June 4, 2003 _______________________________________
Eldon D. Dietterick
Executive Vice President and Treasurer
18