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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORTS* PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended MARCH 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transtion period from to
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: 717 - 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*
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 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 June 16, 1998, was
$22,159,799. The market value per share is based upon the per share cost
of shares as indicated by NASDAQ on March 31, 1998. 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 June 16, 1998
Common Stock, without par value 1,991,892 Shares
stated value $.30 per
combined share
DOCUMENTS INCORPORATED BY REFERENCE
Specified portions of the Companies' 1998 Annual Report to
Shareholders are incorporated by reference into Part II hereof.
Specified portions of the Companies' definitive Proxy Statement for
the 1998 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 fiscal year covered by this report and is incorporated
herein by reference.
____________________
*Under a Security Combination Agreement between 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.
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 18,845 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 215-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, and 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.
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 33 full-time employees. Jack Frost Mountain
Company, which operates the Jack Frost Mountain Ski Area, has 37 full-time
employees and during the skiing season there are approximately 500
additional employees. Northeast Land Company has 21 full-time employees.
ITEM 1. BUSINESS - (continued)
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
Blue Heron Grille. 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, to provide certain services to other facilities, such as
the Blue Heron, Midlake and Laurelwoods resort communities, and operate the
recreational facilities as they are located within the Big Boulder Lake
tract.
The Blue Heron Grille is currently being leased to a restaurant
operator.
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 22 full-time employees. During the skiing season,
there are approximately 525 additional employees.
INDUSTRY SEGMENT INFORMATION
Information with respect to industry segments is presented in Note 12
to the Registrants' financial statements included in Item 8.
The quarterly results of operations for 1998, 1997 and 1996 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 18,948
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.
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, four 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
10,800 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
$19,379,516, 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 March 31, 1998 the out-
standing debt on the Jack Frost Mountain Ski Area was $1,078,493.
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 March 31, 1998. 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, 2014. At March 31, 1998, a mortgage
totaling $1,416,265 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 March 31, 1998, the center was 96%
occupied under leases expiring on various dates from April 30, 1998 to
October 31, 2011. The total capital investment in the shopping center is
$5,414,170. At March 31, 1998, a mortgage totaling $5,331,999 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 acres and consists of 215 campsites, 75 with water and electric, 15
with rustic cabins and the remaining 125 are wilderness sites. Its
operating period is from April 1 through September 30. At March 31, 1998,
the Company's investment in this facility was $475,350.
ITEM 2. PROPERTIES - (Continued)
Blue Ridge owns 18,845 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 March 31, 1998 was $1,224,623 with
outstanding debt of $172,127.
Blue Ridge also owns The Sports Complex at Jack Frost Mountain which
consists of a swimming pool, fitness trail, tennis courts,In-line skate
Park, 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.
For the fiscal year ended March 31, 1998, revenues from operations of
Blue Ridge and its subsidiaries amounted to $10,914,914. Approximately 55%
of this revenue or $6,043,977 was derived from the Jack Frost Mountain Ski
Area which operated 96 days during the fiscal year.
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 Blue Heron Grille.
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 slope, snowtubing hill, five double chair-
lifts, 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 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 $12,992,006. At
March 31, 1998, the outstanding debt on the Big Boulder Ski Area was
$839,816.
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
March 31, 1998, was $1,700,719 with an outstanding debt of $452,209 at that
date.
Big Boulder Corporation constructed the Blue Heron Grille 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 with a nightclub. The
capital investment in the facility at March 31, 1998 was $1,563,626.
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 fiscal year ended March 31, 1998, revenues from operations of
Big Boulder amounted to $7,741,081. Approximately 81% of this revenue of
$6,254,916 was derived from the Big Boulder Ski Area which operated 112
days during that fiscal year.
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
Michael J. Flynn 63 1991
Chairman of the Board
Gary A. Smith 55 1992
President
Melanie Murphy 38 1996
Vice President-Operations
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.
Michael J. Flynn was elected Chairman of the Board of the Registrants
on July 11, 1991. He is Vice Chairman of the Board of Kimco Realty
Corporation since January 1996. Mr. Flynn serves as a Director of Kimco
Realty Corporation. Mr. Flynn was formerly Chairman of the Board and
President of Slattery Associates, Inc. and Director of Slattery Group,
Inc. From 1987 to December 1995.
Gary A. Smith was appointed President in July, 1992. He has been
employed by the Registrants on a full-time basis since September 1982; he
was appointed Vice President and Treasurer in July 1983 and Senior Vice
President in September 1987.
Melanie Murphy was appointed Vice President-Operations in June, 1996.
She has been employed by the Registrants on a full-time basis since July,
1984.
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 Fiscal 1998 Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
Information required with respect to the specified financial data is
incorporated herein by reference to Page 14 of the Fiscal 1998 Annual
Report 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 14 through 15 of the Fiscal 1998 Annual Report
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 Fiscal 1998 Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
_ON ACCOUNTING AND FINANCIAL DISCLOSURES_____
Not applicable.
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 1998 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 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___
Carl V. Kerstetter, Director of Marketing 47 1991
Eldon D. Dietterick, Secretary of Corporation 52 1996
Carl V. Kerstetter and Eldon D. Dietterick 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 "Remuneration of Executive
Officers and Directors" in the registrant's definitive Proxy Statement for
the 1998 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 fiscal year 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 1998 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 fiscal year covered by this report and
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
________AND REPORTS ON FORM 8-K________
A. (1) Financial statements included in Registrants' Fiscal 1997 Annual
Report to Shareholders on Pages 2 through 12 are incorporated by reference.
The Report of Independent Accountants for the combined financial statements
appears on Page 14 of this Form 10-K.
A. (2) Financial Statement Schedules
The following is a list of financial statement schedules filed as
part of this Annual Report on Form 10-K. The report of Independent
Accountants for the financial statement schedule appears on Page 28 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
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, CoreStates Bank, NA,
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
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
(3) Filed August 27, 1975 as an Exhibit to Form
10-K and incorporated herein by reference
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
_______AND REPORTS ON FORM 8-K__________ - (Continued)
(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 Eldon D. Dietterick, Secretary, Blakeslee,
PA 18610. A charge of $.25 per page to cover the
Registrants' expenses will be made.
B Reports on Form 8-K
None
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 ESTATE COMPANY
BIG BOULDER CORPORATION BIG BOULDER CORPORATION
By:___________________________ By:___________________________
Gary A. Smith Cynthia A. Barron
President Chief Accounting Officer
Dated:________________________ Dated:________________________
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 Gary A.
Smith, 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___
_______________________ ___________
Michael J. Flynn Chairman of the Board
Principal Executive Officer
_______________________ ___________
Gary A. Smith President
Chief Operating Officer
Principal Financial Officer
______________________ ___________
Kieran E. Burke Director
______________________ ___________
Milton Cooper Director
______________________ ___________
Allen J. Model Director
______________________
Wolfgang Traber Director ___________
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Blue Ridge Real Estate Company
and Big Boulder Corporation
Our report on the combined financial statements of Blue Ridge Real Estate
Company and subsidiaries and Big Boulder Corporation and subsidiaries has
been incorporated by reference in this Form 10-K from page 13 of the 1998
Annual Report to Shareholders of Blue Ridge Real Estate Company and
subsidiaries and Big Boulder Corporation and subsidiaries. In connection
with our audits of such financial statements, we have also audited the
related financial statement schedule included on pages 15 to 16 inclusive
of this Form 10-K.
In our opinion, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents
fairly, in all material respects, the information required to be included
therein.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
June 5, 1998
COMBINED SCHEDULE III.
REAL ESTATE AND ACCUMULATED DEPRECIATION March 31, 1998
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 3,655,166
Corporate
Building 282,918 158,154
Buildings Leased
to Others
Eastern PA
Exchanged Asset-
Shopping Center 5,700,000 780,700 4,554,235 79,235
Other 0 0 0 2,308,869
Laurens,SC 1,600,000 276,000 1,914,470 0
TOTAL 7,300,000 2,924,466 6,801,538 6,201,423
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
1,867,738 3,705,080 5,572,818 2,139,587
Corporate Building 441,072 441,072 220,277
Buildings Leased to
Others Eastern PA
Exchanged Asset-
Shopping Center 780,700 4,633,470 5,414,170 2,424,437
Other 0 2,308,869 2,308,869 1,114,162
Laurens, SC 276,000 1,914,470 2,190,470 467,980
TOTAL 2,924,438 13,002,961 15,927,399 6,366,443
Column G Column H Column I
Life on which
Depreciation
Date of Date in latest income
Contstruction 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
TOTAL
(1) Activity for the fiscal years ended March 31, 1998, March 31, 1997
& May 31, 1996 is as follows:
1998 1997 1996
Balance at beginning of year 17,477,744 16,878,154 16,875,710
Additions during year:
Improvements 181,369 599,590 181,260
(reclassify) (1,731,686) 0 (178,816)
15,927,427 17,477,744 16,878,154
Deductions during year:
Cost of real estate sold 28 0 0
Balance at end of year 15,927,399 17,477,744 16,878,154
(2) The aggregate cost for Federal Income Tax purposes at March 31, 1998
is $14,490,158
(3) Activity for the fiscal years ended March 31, 1998, March 31, 1997
& May 31, 1996 is as follows:
1998 1997 1996
Balance at beginning of year 7,029,213 6,602,457 5,996,856
Additions during year:
(Reclassification) (920,651) 0 0
Current year depreciation 257,881 426,756 605,601
Less retirements 0 0 0
Balance at end of year 6,366,443 7,029,213 6,602,457
BLUE RIDGE REAL ESTATE COMPANY
BIG BOULDER CORPORATION
To The Shareholders,
The Companies experienced another good year. This can be attributed to
having snow conditions superior to our competition, a growth in summer
activities and increased marketing efforts.
In 1997, to better reflect business cycles between our ski and non-ski
season, the Companies changed the fiscal year-end to March 31st, resulting
in a 10-month fiscal year. Fiscal 1998 represents the first twelve-month
period since this adjustment. Net income for the Companies in 1998 was
$394,593 or $.20 per combined share compared to $486,806 or $.24 per
combined share for 10 months ending March 31, 1997. Although our pretax
income of $737,590 is on par with last year, we have improved on our
performance because the two additional months in Fiscal 1998 are
historically non-revenue producing months.
Cold temperatures early in November provided us with the opportunity
to open Big Boulder for skiing on November 22, 1997, the earliest in the
ski area's 51-year history. Jack Frost opened Saturday, December 13th. By
Christmas, Big Boulder was 100% open and Jack Frost had 18 of 21 slopes
available. Snow Tubing was opened the same days as skiing at both resorts.
The investment made in additional air capacity two years ago allowed
us to make snow during December's marginal temperatures. This and the
decision to make snow in early November put us a giant step ahead of our
competition.
We introduced Snow Tubing to the Pocono region in 1994. Today,
basically all Pocono Ski Areas have tubing. During mid-January other ski
areas had to restore snow on their ski slopes and treated the tubing areas
as secondary. Unlike our competition, we consider tubing a primary
activity for our customers and worked diligently to maintain optimum
conditions. Capital improvements expanded our tubing complex to 9 lifts and
24 chutes making this the largest in the world. The response to the family
tube was so great at Big Boulder last year; we added a family tubing area
at Jack Frost Mountain.
The ski areas experienced a profitable winter season with 385,000
visitors. Skiers' and Snowboarders' combined visits totaled 293,000, while
Snow Tubers' added another 92,000.
The popularity of Snowboarding continues. Surveys show that 41% of
our downhillers are snowboarders. As part of our dedication to grow the
sport, we purchased a special groomer called a Pipe Dragon to improve our
half-pipe terrain. Weekly snowboard competitions were hosted at Big
Boulder and continue to attract competitors from outside the local area.
We have expanded our marketing to include expenditures in the New York
area. These include television, billboards and group leader contacts. We
have also taken advantage of matching funds from a state marketing
initiative.
A special winter event popular with skiing and non-skiing customers
was our "Saturday Night Lightning" series at Big Boulder. National tribute
bands, fireworks and torchlight parades were held every Saturday night for
ten weeks from December through February.
Our efforts to generate revenue during non-ski season months over the
past six years have proven very successful. Our nationally acclaimed Blues
Festival, now going into its 7th year, attracted over 12,000 people. The
Gathering on the Mountain festival is also ensuring our reputation to
provide excellence in the entertainment industry. Splatter paintball
games, played year-round, Wheels, an in-line skate park, and Ride, an all
terrain vehicle park, continue to generate revenue at Jack Frost Mountain.
A new center for mountain bikes called The Hub is being introduced this
year. Fern Ridge Campground is in its fourth year of operation under
company management and is continually expanding. Currently the campground
encompasses 215 sites including 15 wilderness cabins. Our summer events,
together with other local events, continue to support the occupancy of this
facility.
Major potential for the Companies lies in the future development
opportunities of its large land holdings. Recent progress in local
municipal sewer facilities is making future development possible. We
continue to explore possible real estate ventures and periodically test the
market in order to be prepared to move forward should an upturn occur.
Municipal approval for some 800 home sites adjacent to our Ski Areas and
permits to construct a golf course at Jack Frost Mountain are in place.
Your Companies are regarded as leaders in the ski industry and are
effectively generating revenues and profits during the non-ski season
months. I would like to thank the employees for their hard work and
dedication to customer satisfaction, which enhances the image and
profitability of the Companies.
Gary A. Smith
President
Blakeslee, Pennsylvania
June 16, 1998
COMBINED BALANCE SHEETS
March 31, 1998 and 1997
ASSETS 1998 1997
Current Assets:
Cash and cash equivalents (all funds are
Interest bearing) $2,799,777 $2,084,101
Marketable securities 0 303,096
Accounts receivable 230,482 430,628
Refundable income taxes 8,614 23,146
Inventories 221,210 249,590
Prepaid expenses and other current assets 485,513 623,561
Total current assets 3,745,596 3,714,122
Other non-current assets 36,797 36,797
Properties:
Land, principally unimproved (19,877
and 19,884, respectively, acres per
land ledger) 1,867,738 1,867,766
Land improvements, buildings and equipment 48,907,191 47,146,625
50,774,929 49,014,391
Less accumulated depreciation & amortization 30,977,716 28,962,573
19,797,213 20,051,818
$23,579,606 $23,802,737
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997
Current liabilities:
Current installments of long-term debt $457,503 $ 532,513
Accounts and other payables 436,941 430,814
Accrued claims 78,423 158,905
Accrued income taxes 267,885 138,566
Accrued liabilities 559,575 801,849
Deferred revenue 236,598 192,556
Total current liabilities 2,036,925 2,255,203
Long-term debt, less current installments 8,833,406 9,245,918
Deferred income taxes 2,295,417 2,201,348
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 9,629,902 9,235,309
11,751,094 11,356,501
Less cost of 206,134 and 194,134 shares of
capital stock in treasury as of March 31,
1998 and 1997, respectively 1,337,236 1,256,233
10,413,858 10,100,268
$23,579,606 $23,802,737
The accompanying notes are an integral part of the combined financial
statements.
COMBINED STATEMENTS OF OPERATIONS AND
EARNINGS RETAINED IN THE BUSINESS
for the year ended March 31, 1998,
the 10 months ended March 31, 1997,
& the year ended May 31,1996
1998 1997 1996
Revenues:
Ski operations $12,298,893 $11,251,882 $10,618,961
Real estate management 4,610,779 3,367,627 2,928,213
Rental income 1,746,323 1,418,491 1,761,812
18,655,995 16,038,000 15,308,986
Costs and expenses:
Ski operations 11,395,132 9,778,443 9,741,679
Real estate management 3,941,009 3,164,328 3,062,437
Rental income 826,504 768,565 827,229
General and administration 1,068,163 893,485 941,001
17,230,808 14,604,821 14,572,346
Income from operations 1,425,187 1,433,179 736,640
Other income (expense):
Interest and other income 131,397 57,067 88,060
Interest expense (818,994) (748,531) (866,262)
(687,597) (691,464) (778,202)
Income (loss)before income taxes 737,590 741,715 (41,562)
Provision(credit)for income taxes:
Current 248,927 234,528 58,731
Deferred 94,070 20,381 (143,556)
342,997 254,909 (84,825)
Net income 394,593 486,806 43,263
Earnings retained in business:
Beginning of year 9,235,309 8,748,503 8,705,240
End of year $9,629,902 $9,235,309 $8,748,503
Net income per weighted
average combined share:
Basic $0.20 $0.24 $0.02
Diluted $0.20 $0.24 $0.02
The accompanying notes are an integral part of the combined financial
statements.
COMBINED STATEMENTS OF CASH FLOWS
For the year ended March 31, 1998,
the 10 months ended March 31, 1997
and the year ended May 31,1996
1998 1997 1996
Cash Flows From Operating Activities
Net income $394,593 $486,806 43,263
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and Amortization 2,059,274 1,928,651 2,132,581
Deferred income taxes 94,070 20,381 (143,556)
Write-off of project development costs 0 0 178,818
Deferred revenue 44,042 (100,539) (119,129)
Gain on sale of assets (33,746) 0 0
Changes in operating assets and
liabilities:
Accounts receivable 200,146 (85,561) (132,331)
Refundable income taxes 14,532 (23,146) 10,000
Prepaid expenses & other current assets 166,428 17,027 (318,527)
Accounts payable & accrued
liabilities (316,628) (477) 251,340
Accrued income taxes 129,319 79,468 59,098
Net cash provided by operating
activities 2,752,028 2,322,610 1,961,557
Cash Flows From (used in) Investing
Activities:
Marketable securities 303,096 (9,508) (293,588)
Collection of mortgage receivable 2,479 11,189
Other non-current assets 34,500 (34,500)
Proceeds from disposition of assets 33,773 4,200 0
Additions to properties (1,804,696) (2,313,407) (1,225,983)
Cash(used in)investing activities (1,467,827) (2,281,736) (1,542,882)
Cash Flows From (used in) Financing
Activities:
Additions to long-term debt 5,331,999 649,985 0
Borrowings under short-term financing 2,000,000 1,500,000 900,000
Payment of short-term financing (2,000,000) (1,500,000) (900,000)
Payment of long-term debt (5,819,521) (565,721) (544,999)
Purchase of treasury stock (81,003) 0 0
Net cash provided by (used in)
financing activities (568,525) 84,264 (544,999)
Net increase (decrease) in cash
& cash equivalents 715,676 125,138 (126,324)
Cash & cash equivalents, beginning
of year 2,084,101 1,958,963 2,085,287
Cash & cash equivalents, end of year $2,799,777 $2,084,101 $1,958,963
Supplemental disclosures of cash flow
information:
Cash paid during year for:
Interest $826,330 $726,430 $863,438
Income taxes $141,898 $207,300 $25,091
The accompanying notes are an integral part of the combined financial
statements.
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.
DISPOSITION OF LAND 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 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 periodically review their property and equipment
to determine if its carrying cost will be recovered from future operating
cash flows.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
In cases when the Companies do not expect to recover their carrying cost,
the Companies recognize an impairment loss. No such losses were recognized
in the three periods ended March 31, 1998.
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.
PENSIONS:
The Companies are parties to a non-contributory defined benefit
pension plan covering all permanent employees who meet certain requirements
as to age and length of employment. Pension benefits vest after five years
of vesting service and are based on the participant's earnings in the 60
consecutive months during the last ten years of employment in which
earnings are highest. Plan assets consist primarily of U.S. Government
Notes, common stocks and short-term investments.
Pension expense is computed under the projected unit credit method
which spreads past service costs over the average future service lives of
covered employees. The Companies' policy is to fund pension contributions
in accordance with statutory requirements.
INVESTMENTS:
The Companies have an investment in Commercial Paper which is liquid
on a daily basis, and is classified as a cash equivalent.
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
subsidiaries, 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.
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.
FAIR VALUE:
The Companies have estimated the fair value of their financial
instruments at March 31, 1998 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 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.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
EARNINGS PER SHARE:
In 1997, the Companies adopted the Financial Accounting Standard
No.128 "Earnings Per Share". This Statement establishes standards for
computing and presenting earnings per share ("EPS") and applies to entities
with publicly held common stock or potential common stock. This statement
requires restatement of all prior-period EPS data presented.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS:
In June 1997 and February 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards ('SFAS') No.130
"Reporting Comprehensive Income", No.131 "Disclosures about Segments of an
Enterprise and Related Information" and No.132 "Employers' Disclosures
about Pensions and Other Postretirement Benefits". These statements are
effective for financial statements issued for periods ending after December
15, 1997. Adoption of SFAS Nos. 130, 131 and 132 should not have a
material impact on the Companies' financial statements.
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.
2. CHANGE IN FISCAL REPORTING PERIOD
At the July 24, 1996 Board of Directors meetings, a change in the
fiscal year-end was approved from May 31 to March 31. This change is
effective for each of the Companies' 1997 Fiscal years. The purpose is to
have the fiscal reporting period coincide with the operating periods of the
Companies. The results of operations from the comparable 10 month periods
are as follows:
(UNAUDITED) (UNAUDITED)
3/31/98 3/31/97 3/31/96
Revenues 17,686,316 16,038,000 14,341,324
Operating Income 1,437,240 1,433,179 1,034,527
Income Taxes 396,947 254,909 127,662
Net Income 475,518 486,806 247,814
3. SALE OF LAND:
The Companies sold land in Fiscal 1998 for cash consideration of
$23,778.
4. CONDENSED FINANCIAL INFORMATION:
Condensed financial information of the constituent Companies, Blue
Ridge and its subsidiaries and Big Boulder and its subsidiaries, at March
31, 1998, and 1997 and May 31, 1996 and for each of the periods then ended
is as follows:
Blue Ridge and Subsidiaries Big Boulder and Subsidiaries
12 Mos 10 Mos 12 Mos
Ended Ended Ended
3/31/98 3/31/97 5/31/96
FINANCIAL POSITION:
Current assets $1,538,567 $1,894,928 $2,882,803
Total assets 15,532,118 16,066,800 15,654,413
Current liabilities 1,499,881 1,723,363 1,427,707
Shareholders'equity 4,699,630 4,796,387 4,764,634
OPERATIONS:
Revenues 10,914,914 8,880,248 9,407,238
Income(loss)before
income taxes 94,741 66,225 20,797
Provision(credit)for
income taxes 110,495 34,472 (87,373)
Net income (loss) (15,754) 31,753 108,170
Blue Ridge and Subsidiaries Big Boulder and Subsidiaries
12 mos 10 mos 12 mos
Ended Ended Ended
3/31/98 3/31/97 5/31/96
FINANCIAL POSITION:
Current assets $2,207,029 $1,819,194 $604,993
Total assets 8,047,488 7,735,937 7,555,277
Current liabilities 537,044 531,840 821,212
Shareholders'equity 5,714,228 5,303,881 4,848,828
OPERATIONS:
Revenues 7,741,081 7,157,752 5,901,748
Income(loss)before
income taxes 642,849 675,490) (62,359)
Provision(credit)for
income taxes 232,502 220,437 2,548
Net income (loss) 410,347 455,053 (64,907)
5.SHORT-TERM FINANCING:
At March 31, 1998, Blue Ridge had an unused line of credit aggregating
$2,000,000 available for short-term financing, expiring August 31, 1998,
which management expects to be renewed. The line of credit bears interest
at .25% less than the prime rate.
6. LONG-TERM DEBT:
Long-term debt as of March 31, 1998 and 1997 consists of the following:
1998 1997
Mortgage note payable to insurance company,
interest fixed at 9% payable in monthly
installments of $47,834 including interest
through November 1997. This loan was
refinanced September 1997 0 $5,363,074
Mortgage note payable to bank, interest is
LIBOR plus 145 basis points, payable August 31,
1999. Interest is payable in monthly install-
ments through August 1999. $5,331,999 0
Mortgage note payable to bank, interest at
80% of the bank's prime rate (6.6% at March 31,
1998) payable in monthly installments of
$24,187 through Fiscal 2005 2,152,660 2,442,906
Mortgage note payable to insurance company,
interest fixed at 10.5% payable in monthly
installments of $15,351 including interest
through Fiscal 2014 1,416,265 1,452,466
Mortgage note payable to bank, interest at
7% payable monthly with principle
reduction at $32,500 per month December to
March through 2001 389,985 519,985
9,290,909 9,778,431
Less current installments 457,503 532,513
$8,833,406 $9,245,918
Properties at net book value, which have been pledged as collateral for
long-term debt, include the following at March 31, 1998:
Investment properties leased to others 7,604,936
Ski facilities 24,012,479
The aggregate amount of long-term debt maturing in each of the years ending
subsequent to March 31, 1998, is as follows:
1999-$457,503; 2000-$5,793,608; 2001-$466,152; 2002-$341,228;
2003-$346,847
7. INCOME TAXES:
The provision (credit) for income taxes is as follows:
1998 1997 1996
Currently payable:
Federal $246,896 $234,528 $58,731
State 2,031 0 0
248,927 234,528 58,731
Deferred:
Federal 94,070 20,381 (142,441)
State 0 0 (1,115)
94,070 20,381 (143,556)
$342,997 $254,909 $(84,825)
A reconciliation between the amount computed using the statutory federal
income tax rate and the provision (credit) for income taxes is as follows:
1998 1997 1996
Computed at statutory rate $248,272 $253,060 $(14,131)
State net operating losses
subject to valuation allowance 27,311 0 0
State income taxes, net of federal
income tax 1,341 0 (7,153)
Change in state tax rate 0 0 6,417
Other 0 1,849 (7,124)
Change in valuation allowance 0 0 (62,834)
AMT utilization 66,073 0 0
Provision(credit)for income taxes $342,997 $254,909 $(84,825)
The components of the deferred tax assets and liabilities as of March 31,
1998 and 1997 are as follows:
1998 1997
Gross deferred tax asset:
Accrued expenses $73,124 $75,979
Net operating loss and AMT credit carryforward 464,467 627,181
Contribution carryforward 0 1,316
537,591 704,476
Less valuation allowance (78,620) (105,961)
458,971 598,515
Gross deferred tax liability:
Depreciation (2,754,388) 2,799,863
(2,754,388) 2,799,863
Net deferred tax liability $(2,295,417) 2,201,348
At March 31, 1998, the Companies have $385,847 of Alternative Minimum Tax
(AMT) credit carryforward available to reduce future federal income taxes.
The AMT credit has no expiration date. For state income tax purposes, the
Companies have available state net operating loss carryforwards of
$1,192,400 which expire in Fiscal 1999. The valuation allowance decreased
by $27,341 during Fiscal 1998 due to the expiration of state net operating
losses.
8. PENSION PLAN:
Pension expense for 1998, 1997, and 1996 includes the following components:
1998 1997 1996
Service costs, benefits earned during
the period $177,661 $124,044 $148,042
Interest cost on projected benefit
obligation 170,907 137,314 161,992
Actual return on plan assets (581,064) (222,439) (377,221)
Net amortization and deferral 383,153 67,433 231,468
Pension expense $150,657 $106,352 $164,281
Net amortization and deferral consists of the deferral of differences
between actual and estimated return on assets and amortization of the net
unrecognized transition obligation on a straight-line basis over 26 years.
The funded status of the pension plan and the amounts recognized in the
Companies' combined balance sheets at March 31, 1998 and 1997
were as follows: 1998 1997
Actuarial present value of benefit obligations:
Accumulated benefit obligation (including vested
benefits of $1,880,645 and $1,571,300,
respectively) $(1,960,477) $(1,638,000)
Effect of future increase in compensation (747,925) (624,900)
Projected benefit obligation (2,708,402) (2,262,900)
Plan assets at fair value 3,070,947 2,633,321
Plan assets in excess of benefit obligation 362,545 370,421
Unrecognized net gain (663,593) (529,903)
Unrecognized net transition obligation 128,612 137,092
Unrecognized prior service costs 11,103 11,714
Accrued pension expense $(161,333) $(10,676)
Significant assumptions used in determining the actuarial present value of
the projected benefit obligations at fiscal year end and pension expense
for the following fiscal years are as follows:
1998 1997 1996
Discount rate 7.00% 7.50% 7.50%
Rate of compensation increase 5.00% 5.00% 5.00%
Expected long-term rate of return 7.50% 7.50% 7.50%
9. PROPERTIES:
Properties consist of the following at
March 31, 1998 and 1997:
1998 1997
Land, principally unimproved $1,867,738 $1,867,766
Land improvements 3,705,080 7,246,611
Corporate buildings 441,072 434,512
Buildings leased to others 9,913,509 7,928,855
Ski facilities:
Land 4,552 4,552
Land improvements 6,879,932 5,136,418
Buildings 7,054,009 7,093,100
Machinery & equipment 18,820,426 18,272,223
Equipment & furnishings 2,088,611 1,030,354
50,774,929 49,014,391
Less accumulated depreciation 30,977,716 28,962,573
$19,797,213 $20,051,818
Buildings leased to others include land of $1,056,700 at March 31, 1998 and
1997 and May 31, 1996.
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 4.11 years with options for renewal. A store has been net
leased until January 2014. Information concerning rental properties and
minimum future rentals under current leases (excluding renewal options) as
of March 31, 1998, is as follows:
Properties Subject To Lease
Accumulated
Cost Depreciation
Investment properties leased to
others $7,829,640 $2,943,390
Land and land improvements 3,956,161 1,063,189
Minimum future rentals:
Fiscal years ending March 31: 1998 1,217,385
1999 958,477
2000 845,498
2001 951,368
2002 837,841
Thereafter 8,691,718*
$13,502,287
*Includes $1,554,000 under a land lease expiring in 2072 and $2,597,130
under a net lease for a store expiring in 2014. There were no contingent
rentals included in income for Fiscal 1998, 1997 or 1996.
11. QUARTERLY FINANCIAL INFORMATION (Unaudited)
The results of operations for each of the quarters in the last two
years are presented below. The fiscal quarters for 1998 and 1997 differ in
that first quarter 1998 represents April through June; first quarter 1997,
June to August. Subsequent quarters in each fiscal year are likewise
different.
Earnings (Loss)
Income(loss) Per Weighted
Operating from Net Avg. Combined
Quarter Revenues Operations Income(Loss) Share
1998
1st $1,502,232 $ (2,143) $(131,615) (0.07)
2nd 2,171,126 401,752 144,160 0.07
3rd 3,895,877 (342,831) (297,388) (0.15)
4th 11,086,760 1,368,409 679,436 0.35
$18,655,995 $1,425,187 $394,593 $0.20
1997
1st $2,184,620 $304,384 $71,993 0.04
2nd 1,115,056 (62,398) (169,013) (0.08)
3rd 11,295,423 1,694,076 922,988 0.46
1mo 1,442,901 (502,883) (339,162) (0.18)
$16,038,000 $1,433,179 $486,806 $0.24
The quarterly results of operations for 1998 and 1997 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. Costs and expenses, net of revenues received in
advance attributable to the ski facilities for the months of June through
November, are deferred and recognized as revenue and operating expenses,
ratably, over the operating period.
12. INDUSTRY SEGMENT INFORMATION:
The Companies and the subsidiaries operate in two industry 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.
Income or loss for each segment represents total revenue less
operating expenses. General and administrative expenses, other income,
and interest expense are not specifically attributable to any one industry
segment. 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.
12 Months 10 Months 12 Months
Ended Ended Ended
3/31/98 03/31/97 05/31/96
Revenues:
Ski operations $12,298,893 $11,251,882 $10,618,961
Real estate management/
Rental operations 6,357,102 4,786,118 4,690,025
$18,655,995 $16,038,000 $15,308,986
Income:
Ski operations $ 903,761 $1,473,439 $877,282
Real estate management/
Rental operations 1,589,589 853,225 800,359
$2,493,350 $2,326,664 $1,677,641
General & administrative expenses (1,068,163) $(893,485) $941,001
Interest and other income 131,397 57,067 88,060
Interest expense (818,994) (748,531) (866,262)
Income(loss) before income taxes $737,590 $741,715 $(41,562)
In Fiscal 1998, 1997 and 1996, no one customer represented 10% or more
of total revenues.
Identifiable assets, net of accumulated depreciation at March 31, 1998
and 1997 and May 31,1996 and depreciation expense and capital expenditures
for the years then ended by industry segment are as follows:
Identifiable Depreciation Capital
Assets Expense Expenditure
1998
Ski Operations $11,973,455 $1,417,719 $1,382,580
Real Estate Management/Rental
Operations 9,628,467 449,728 181,369
Other Corporate 1,977,684 191,825 240,747
Total $23,579,606 $2,059,272 $1,804,696
1997
Ski Operations $10,364,590 $1,304,906 $2,091,557
Real Estate Management/Rental
Operations $10,937,749 357,691 187,431
Other Corporate 2,500,398 266,054 34,419
Total $23,802,737 $1,928,651 $2,313,407
1996
Ski Operations $ 9,186,757 $1,451,159 $1,066,507
Real Estate Management/Rental
Operations 10,540,000 415,449 121,757
Other Corporate 3,482,933 265,973 37,719
Total $23,209,690 $2,132,581 $1,225,983
13 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.
At March 31, 1998, the letter of credit of $75,000 is no longer
required to guarantee the ski facilities' aggregate liability insurance
deductible.
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
$1,300,000 at March 31, 1998.
14. STOCK OPTIONS AND CAPITAL STOCK:
The Board of Directors has authorized the repurchase of the
Companies' common stock in the open market from time to time. As of March
31, 1998, 206,134 shares have been repurchased. Twelve thousand shares were
repurchased in Fiscal 1998. No shares were repurchased in Fiscal 1997 or
1996.
The Chairman of the Board of the Companies was granted options for
35,000 shares of the Companies' common stock at $6.75 per share. Ten
thousand options were granted in 1993 and 25,000 in July 1997. The options
expire July 1, 2003. The option price of $6.75 was equal to the market
value on the dates of the grant.
The Companies apply Accounting Principles Board Opinion 25 and the
related interpretations in accounting for the options. Accordingly, no
compensation cost has been recognized in the financial statements relative
to these options. Had compensation cost for the Companies' options been
determined consistent with Financial Accounting Standards Board Statement
No. 123, the Companies' net income and earnings per share would have been
reduced to the proforma amounts indicated below, based on the following
assumptions:
The fair value of the 1998 option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions for 1998: dividend yield of 0%; expected
volatility of 37.8%, risk free interest rate of 6.4%, and expected life of
6 years.
1998
Net Income:
As reported $394,593
Pro Forma $340,879
Basic earnings per share:
As reported $0.20
Pro Forma $0.17
Diluted earnings per share:
As reported $0.20
Pro Forma $0.17
Option activity during the periods ended March 31, 1998 and 1997 is as
follows:
1998 1997
Exercise Exercise
Shares Price Shares Price
Outstanding at beginning
of year: 10,000 $6.75 10,000 $6.75
Granted 25,000 $6.75 - -
Exercised - - - -
Canceled - - - -
Outstanding at end of year 35,000 $6.75 10,000 $6.75
Options exercisable at
year-end 35,000 $6.75 10,000 $6.75
Option price range $6.75 $6.75
Weighted average fair value
of options granted during year $3.26 $ -
All 35,000 options outstanding are exercisable at $6.75 per share and have
a remaining contractual life of 5.25 years.
15. PER SHARE DATA:
Earnings per share amounts have been restated in accordance with Financial
Accounting Standards No. 128 "Earning Per Share". The restatement did not
result in any changes between diluted per share amounts and previously
reported primary per common share amounts. Earnings per share and computed
as follows:
Year 10 Months Year
Ended Ended Ended
3/31/98 3/31/97 5/31/96
Net Earnings $394,593 $486,806 $43,263
Weighted average combined
shares of common stock out-
standing used to compute basic
earnings per combined
common share 1,993,014 2,004,014 2,004,014
Additional combined common
shares to be issued assuming
exercise of stock options, net
of combined shares assumed re-
acquired 8,029 -- --
Combined shares used to compute
dilutive effect of stock
option 2,001,043 2,004,014 2,004,014
Basic earnings per combined
common share $0.20 $0.24 $0.02
Diluted earnings per combined
common share $0.02 $0.24 $0.02
REPORT OF INDEPENDENT ACCOUNTANTS
To Shareholders of
Blue Ridge Real Estate Company
and Big Boulder Corporation
We have audited the accompanying combined balance sheets of Blue Ridge Real
Estate Company and subsidiaries and Big Boulder Corporation and
subsidiaries as of March 31, 1998 and 1997, and related combined statements
of operations and earnings retained in the business and cash flows for the
year ended March 31, 1998, the ten months ended March 31, 1997 and the year
ended May 31, 1996. 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 generally accepted auditing
standards. 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 March 31, 1998 and 1997, and the combined results of
their operations and their cash flows for the year ended March 31, 1998,
the ten months ended March 31, 1997 and the year ended May 31, 1996 in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
June 5, 1998
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 price quotations as
reported on the monthly statistical reports of the National Association of
Securities Dealers, Inc. for Fiscal Years 1998 and 1997. No dividends were
paid on common stock in either Fiscal Year.
FISCAL YEAR HIGH LOW
1998 ASKED BID
First Quarter 7.000 6.625
Second Quarter 18.000 11.000
Third Quarter 13.500 11.250
Fourth Quarter 11.750 11.250
FISCAL YEAR HIGH LOW
1997 ASKED BID
First Quarter 7.000 6.250
Second Quarter 6.750 6.250
Third Quarter 7.000 6.500
Fourth Quarter (March '97) 7.000 6.625
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 March 31, 1998 was 687.
BLUE RIDGE REAL ESTATE COMPANY AND SUBSIDIARIES
AND BIG BOULDER CORPORATION AND SUBSIDIARIES
COMBINED SUMMARY OF SELECTED FINANCIAL DATA
1998 1997 1996
Revenues $18,655,995 $16,038,000 $15,308,986
Net income(loss) 394,593 486,806 43,263
Net income(loss)per combined share $0.20 $0.24 $0.02
Cash dividends per combined share 0 0 0
Weighted average number of
combined shares outstanding 1,993,014 2,004,014 2,004,014
Total assets 23,579,606 23,802,737 23,209,690
Long-term debt 9,290,909 9,778,431 9,694,167
Shareholders' equity 10,413,858 10,100,268 9,613,462
1995 1994
Revenues $12,244,490 $13,423,910
Net income(loss) (435,738) (163,884)
Net income(loss)per combined share $(.21) $(.08)
Cash dividends per combined share 0 0
Weighted average number of
combined shares outstanding 2,029,630 2,109,246
Total assets 23,663,671 25,232,780
Long-term debt 10,239,166 10,750,393
Shareholders' equity 9,570,199 10,615,830
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
Results of Operations
FISCAL 1998 VERSUS FISCAL 1997 (Fiscal 1998 is twelve months and Fiscal
1997 is ten months)
For Fiscal Year ended March 31, 1998, the Companies reported net
income of $394,593 or $.20 per combined share as compared with a net income
of $486,806 or $.24 per combined share for Fiscal 1997.
Combined revenue of $18,655,995 represents an increase of $2,617,995
or 14% when compared to Fiscal 1997. Ski Operations increased $1,047,011
or 9%, and Real Estate Management Operations increased $1,570,984 or 25%
when compared to Fiscal 1997. Both Fiscal 1998 and 1997 include a full ski
season.
The Ski Operations had approximately 293,000 skiers visit our slopes
compared to 277,000 skier visits last season. The increase of 16,000 skier
visits represents a 5% increase. Revenue per skier was $28 compared to $27
last season for an increase of $1.00 or 2%. Tubing operations had
approximately 92,000 tuber visits compared to 97,000 tuber visits last
season. The decrease of 5,000 tuber visits represents a 5% decrease.
Revenue per tuber was $13.27 compared to $11.32 last season for an increase
of $1.95 or 17%. The ski areas operated for a combined total of 208 days
compared to 213 days last season. The food and beverage operation at the
ski area contributed revenue of $7.13 per skier visit. The retail shop
operation at the ski area contributed revenue of $1.83 per skier visit
compared to $2.02 the previous season.
The Real Estate Management Operations increase is attributed to fewer
vacancies in investment properties, festival revenues, leasing commissions
in resort communities, fees for services provided to the Trust of the
resort communities, and fishing and hunting leases. The increases were
offset by a decrease in commissions for resale of homes in our resort
communities. Disposition of properties occur sporadically and do not
follow any pattern during the fiscal year. No major land sales occurred in
Fiscal 1998 or Fiscal 1997.
Operating costs associated with Ski Operations increased by $1,616,689
when compared to Fiscal 1997. This increase is attributed to increased
advertising costs, and associated personnel costs.
Operating costs associated with Real Estate Management Operations
increased by $834,620 when compared to Fiscal 1997. This increase is
attributed to increased advertising costs, associated personnel costs, and
an additional two months of operations. General and Administration
expenses increased by $174,678 when compared to Fiscal 1997. The increase
is attributable to an increase in supplies and services and an additional
two months of operations.
Interest and Other Income increased by $74,330 compared to Fiscal
1997. This increase is attributable to an additional two months of
operations.
Interest expense increased by $70,463 compared to Fiscal 1997. This
increase is attributable to an additional two months of operations.
The effective Tax Rate for Fiscal 1998 and 1997 was 46.5% and 34.4%
respectively. This increase in effective rate was due primarily to
utilization of AMT credits and state income tax benefits which were subject
to a valuation allowance.
FISCAL 1997 VERSUS FISCAL 1996 (Fiscal 1997 is ten months and Fiscal 1996
is twelve months)
For Fiscal Year ended March 31, 1997, the Companies reported net
income of $486,806 or $.24 per combined share as compared with a net
income of $43,263 or $.02 per combined share for Fiscal 1996.
Combined revenue of $16,038,000 represents an increase of
$729,014 or 5% when compared to Fiscal 1996. Ski Operations
increased $632,921 or 6%, and Real Estate Management Operations
increased $96,093 or 2% when compared to Fiscal 1996.
The Ski Operations had approximately 277,000 skiers visit our
slopes compared to 267,000 skier visits last season. The increase
of 10,000 skier visits represents a 4% increase. Revenue per skier
was $27 compared to $26 last season for an increase of $1.00 or 4%.
Tubing operations had approximately 97,000 tuber visits compared to
64,000 tuber visits last season. The increase of 33,000 tuber visits
represents a 52% increase. Revenue per tuber was $11.32 compared to
$9.63 last season for an increase of $1.69 or 17%. The ski areas
operated for a combined total of 213 days compared to 212 days last
season. The food and beverage operations at the ski areas contributed
revenue of $7.03 per skier visit. The retail shop operations at the
ski areas contributed revenue of $2.02 per skier visit compared to
$2.16 the previous season.
The Real Estate Management Operations increase is attributed to
fewer vacancies in investment properties, festival revenues, leasing
commissions in resort communities, fees for services provided to the
Trust of the resort communities, and fishing and hunting leases. The
increases were offset by a decrease in commissions for resale of
homes in our resort communities. Disposition of properties occur
sporadically and do not follow any pattern during the fiscal year.
No major land sales occurred in Fiscal 1997 or Fiscal 1996.
Operating costs associated with Ski Operations increased by
$36,764 when compared to Fiscal 1996. This increase is
attributed to more operating days, advertising costs, and associated
personnel costs.
Operating costs associated with Real Estate Management Operations
increased by $43,227 when compared to Fiscal 1996. This increase is
attributed to increased advertising costs, and associated personnel costs.
General and Administration expenses decreased by $47,516 when compared to
Fiscal 1996. The decrease is attributable to a reduction in supplies and
services and two months less of operations.
Interest and Other Income decreased by $30,993 compared to Fiscal
1996. This decrease is attributable to a Mortgage Receivable Payoff and
two months less of operations.
Interest expense decreased by $117,731 compared to Fiscal 1996.
This decrease is attributable to reduction of debt obligation and two
months less of operations.
The effective Tax Rate for Fiscal 1997 and 1996 was 34.4%.
RISKS AND UNCERTAINITIES
The Companies have taken steps to make its products, systems and
infrastructure Year 2000 compliant, and have installed new hardware and
financial software effective April 1, 1998. The Companies have also
initiated the process of upgrading the ticketing system to a Year 2000
compliant product. Management has and will continue to obtain
representation from its vendors that any new or existing systems are Year
2000 compliant. Management does not believe the cost for the balance of
the year 2000 implementation will be material.
LIQUIDITY AND CAPITAL RESOURCES
The Combined Statement of Cash flows reflects net cash provided by
operating activities of $2,752,028, $2,322,610, and $1,961,557 in Fiscal
1998, 1997 and 1996 respectively.
The major capital investment made in Fiscal 1998 was the expansion of
the Big Boulder Tubing Area.
During Fiscal 1998, the Companies borrowed against their $2,000,000
line of credit for a period of five months in varying amounts with a
maximum of $2,000,000.
During Fiscal 1997, the Companies borrowed against their $2,000,000
line of credit for a period of three months in varying amounts with a
maximum of $1,500,000.
The Companies have a combined working capital of $1,708,671 at March
31, 1998 versus $1,458,919 at March 31, 1997.
MOVING FORWARD
The Companies continue to develop operation centers to generate profit
during the non-ski season with expansion at Fern Ridge Campground and the
introduction in Fiscal 1998 of an All Terrain Vehicle Park. Fiscal 1999
plans include a Mountain Bike Center and new and innovative competitive
events are proposed to promote a year-round range of activities.
BOARD OF DIRECTORS
Kieran E. Burke
Chairman, Chief Executive Officer and Director
Premier Parks, Inc.
Milton Cooper
Chairman, Kimco Realty Corporation;
Director, Getty Petroleum Corp.;
Director, Kimco Realty Corporation
Michael J. Flynn
Chairman of the Board of the Companies;
Vice Chairman and Director, Kimco Realty Corporation
Allen J. Model
Private Investor, Model Entities
Wolfgang Traber
Chairman of the Board, Hanseatic Corporation & Co.-N.Y.
The above Directors serve both Companies.
OFFICERS
Michael J. Flynn
Chairman of the Board
Gary A. Smith
President
Melanie A. Murphy
Vice President of Operations
Eldon D. Dietterick
Secretary
Christine Liebold
Assistant Secretary
Cynthia A. Barron
Controller
The above Officers serve both Companies.
TRANSFER AGENT
Summit Bank, Hackensack, New Jersey
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., Philadelphia, Pennsylvania
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 July.
FORM 10-K AVAILABLE
The Companies will furnish to any shareholder, without charge, a copy of
their Fiscal Year 1998 Annual Report as filed with the Securities and
Exchange Commission on Form 10-K. Written requests 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
Blue Heron Grille, Lake Harmony, Pennsylvania
Land Holdings
Blue Ridge
18,845 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)
Wheels, In-Line Skate and Board Park
Ride, ATV Park