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, 2002
( ) 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, 2002
Common Stock, without par value, 1,916,180
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, 2002 and October 31, 2001 1 & 2
Combined Condensed Statements of
Operations - Three Months and Six Months
ended April 30, 2002 and March 31, 2001 3
Combined Condensed Statements of
Cash Flows - Six Months Ended
April 30, 2002 and March 31, 2001 4
Notes to Financial Statements 5
Item 2-Management's Discussion and Analysis
of Financial Condition and Results
of Operations 6, 7 & 8
PART II - OTHER INFORMATION 8
Signatures 9
BLUE RIDGE REAL ESTATE COMPANY and SUBSIDIARIES
BIG BOULDER CORPORATION AND SUBSIDIARIES
COMBINED CONDENSED BALANCE SHEETS
ASSETS April 30, October 31,
2002 2001
(UNAUDITED) (AUDITED)
Current Assets
Cash and cash equivalents
(all funds are interest bearing) $1,577,892 $263,178
Accounts receivable 886,181 376,838
Inventories 200,570 231,771
Prepaid expenses, principally
insurance and real estate taxes 708,686 730,382
Deferred operating costs 336,684 2,106,478
Total current assets 3,710,013 3,708,647
Properties:
Land, principally unimproved (19,741 1,868,505 1,868,505
acres per land ledger)
Land Improvements, buildings
and equipment 54,111,007 53,985,296
55,979,512 55,853,801
Less accumulated depreciation
and amortization 36,659,750 36,636,005
19,319,762 19,217,796
$23,029,775 $22,926,443
See accompanying notes to unaudited financial statements.
1
LIABILITIES AND SHAREHOLDERS' EQUITY
April 30, October 31,
2002 2001
Current Liabilities:
Notes payable - line of credit $0 $648,195
Current installments of
long-term debt 723,342 720,435
Accounts and other payables 494,137 544,734
Accrued claims 165,682 134,770
Deferred income taxes 905,863 625,292
Accrued pension expense 816,580 732,580
Accrued liabilities 663,871 999,527
Deferred revenue 366,420 638,875
Total current liabilities 4,135,895 5,044,408
Long-term debt, less
current installments 6,507,388 6,949,805
Deferred income taxes 1,044,269 842,117
Other non-current liabilities 36,707 48,219
Deferred income non-current 515,631 515,631
Commitments and Contingencies
Combined shareholders' equity:
Capital Stock, without par value,
stated value $.30 per combined share,
Blue Ridge and Big Boulder each have
authorized 3,000,000 shares and each
have issued 2,198,148 shares as of April
30, 2002 and as of October 31, 2001 659,444 659,444
Capital in excess of stated
value 1,461,748 1,461,748
Earnings retained in the business 10,753,575 9,479,453
12,874,767 11,600,645
LESS: Cost of 281,968 and 280,968 shares
of capital stock in treasury as April
30, 2002 & October 31, 2001,
respectively. 2,084,882 2,074,382
10,789,885 9,526,263
$23,029,775 $22,926,443
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 March 31 April 30 March 31,
2002 2001 2002 2001
Revenues:
Ski operations $5,074,055 $8,609,998 $10,015,075 $11,267,371
Real estate management 1,373,445 1,014,394 2,361,512 1,701,417
Summer recreation
operations 186,278 165,764 364,635 475,812
Rental income 516,084 500,737 945,940 929,176
7,149,862 10,290,893 13,687,162 14,373,776
Costs and expenses:
Ski operations 4,007,210 8,560,957 8,928,726 11,246,003
Real estate management 758,754 761,955 1,438,761 1,403,166
Summer recreation
Operations 263,763 272,193 431,936 597,786
Rental operations 210,042 280,090 455,867 500,309
General & administrative
Expenses 191,925 957,793 496,262 1,225,447
5,431,694 10,832,988 11,751,552 14,972,711
Income (loss)from
operations 1,718,168 (542,095) 1,935,610 (598,935)
Other income (expense:)
Interest & other income 10,536 146,735 16,333 281,138
Interest expense (88,396) (163,922) (195,098) (372,511)
(77,860) (17,187) (178,765) (91,373)
Income (loss) before
income taxes 1,640,308 (559,282) 1,756,845 (690,308)
Provision (benefit)
for income taxes 436,123 (419,119) 482,723 (473,119)
Net income (loss) $1,204,185 ($140,163) $1,274,122 ($217,189)
Basic and diluted income
(loss) per weighted
average combined share $0.63 ($0.07) $0.66 ($0.11)
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, 2002 & MARCH 31, 2001
(UNAUDITED)
2002 2001
Cash Flows From(Used In) Operating Activities:
Net Income(Loss) $1,274,122 ($217,189)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 1,587,934 1,673,032
Deferred income taxes 482,723 (676,255)
Gain on sale of assets (1,632) (5,879)
Changes in assets and liabilities:
Accounts receivable (509,343) (133,807)
Prepaid expenses and other current assets 52,897 (447,628)
Deferred operating costs 1,088,476 3,684,377
Accounts Payable & accrued liabilities (282,853) 679,783
Accrued income taxes 0 (53,186)
Deferred revenue (272,455) 105,059
Net cash provided by operating activities 3,419,869 4,608,307
Cash Flows From (Used In) Investing Activities:
Deferred Income 0 13,198
Proceeds from disposition of assets 17,191 5,879
Additions to properties (1,024,141) (930,108)
Net cash used in investing activities (1,006,950) (911,031)
Cash flows From (Used In) Financing Activities:
Payment of short-term financing (1,448,195) (2,050,000)
Proceeds from short-term financing 800,000 1,350,000
Payment of long-term debt (439,510) (583,832)
Purchase of Treasury stock (10,500) (45,968)
Net cash used in financing activities (1,098,205) (1,329,800)
Net increase in cash and cash equivalents 1,314,714 2,367,476
Cash and cash equivalents, beginning
of period 263,178 261,363
Cash and cash equivalents, end of period $1,577,892 $2,628,839
Supplemental disclosures of cash flow information:
Cash paid during period:
Interest $196,249 $371,250
Income taxes $ 14,012 $247,802
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, 2002, and the results of operations and the statements of cash
flows for the three and six month periods ended April 30, 2002 and March 31,
2001.
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' Transition
Report on Form 10-K for the seven months ended October 31, 2001.
2. The Companies and the subsidiaries, under SFAS No. 131, operate in three
business segments - Ski Operations, Real Estate Management/Rental Operations and
Summer Recreation Operations.
The results of operations for the three and six 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 attributable to
the Ski Operations for the months of April through November are deferred and
recognized as revenue and operating expenses, ratably, over the operating
period. Therefore revenues and operating expenses of the Real Estate
Management/Rental Operations and Summer Recreation Operations 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.
3. The provision for income taxes for the three and six months ended April
30, 2002 represents the estimated annual effective tax rate for the year ending
October 31, 2002. The effective income tax rate for the first six months of
Fiscal 2002 was 34%.
4. Reclassifications have been made to the March 31, 2001 Combined
Condensed Financial Statement of Operations to reflect changes in presentation
for the three and six months ended April 30, 2002. Namely, Summer Recreation
Operations are reported as a separate segment of the Companies.
5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Due to the change in the Companies' fiscal year end, the most recent being
October 31, 2001, the comparative quarterly information presented is from the
most current comparable quarters which are the three and six months ended March
31, 2001. It was not financially practicable to restate the prior fiscal
information to match the newly stated quarters.
Operations for the three and six months ended April 30, 2002 resulted in a
net income of $.63 and $.66 per combined share compared to a net loss of $(.07)
and ($0.11) per combined share for the three and six months ended March 31,
2001.
Combined revenue of $7,149,862 and $13,687,162 for the three and six months
ended April 30, 2002 represents a decrease of $3,141,031 and $686,614 as
compared to the three and six months ended March 31, 2001. Ski Operations
decreased $3,535,943 and $1,252,296 for the three and six months ended April 30,
2002 as compared to the three and six months ended March 31, 2001. Real Estate
Management increased $359,051 and $660,095 for the three and six months ended
April 30, 2002 as compared to the three and six months ended March 31, 2001.
Summer Recreation Operations increased $20,514 and decreased $111,177 for the
three and six months ended April 30, 2002 as compared to the three and six
months ended March 31, 2001. Rental income increased $15,347 and $16,764 for the
three and six months ended April 30, 2002 as compared to the three and six
months ended March 31, 2001.
Ski Operations decrease was due to the extremely warm months of November
and December 2001 which resulted in a much later opening date.
Real Estate Management increase was due to the implementation of a
timbering program. Management has instituted a program to begin selective
timbering on the Companies land holdings. A forester has been hired to generate
a long-term plan of managed timbering which pays specific attention to
protecting the environment and retaining the value of the land. Bids are
publicly sought for parcels which have had the timber selectively marked and
calculated to board feet. For the six months ended April 30, 2002 five timber
sales agreements have been entered into generating approximately $672,000 of
revenue. Management anticipates two additional contracts to be entered into
during the remaining months of the fiscal year.
Summer Recreation Activities decreased due to the closing of the Splatter
Paintball fields and the Traxx Motocross facility in early December 2001 which
were operational year round in the previous year.
Interest and Other Income decreased by $136,199 and $264,805 for the three
and six months ended April 30, 2002 as compared to the three and six months
ended March 31, 2001. This decrease is attributable to the revenue from Penn Dot
Sewer Project (52%) and the reclassification of fuel tax credits (48%) being
included in other income during the three and six months ended March 31, 2001
that wasn't applicable to the three and six months ended April 30, 2002.
6
Operating costs decreased by $4,635,426 and $2,491,974 for the three and six
months ended April 30, 2002 as compared to the three and six months ended March
31, 2001. This decrease was due to the late opening of the ski areas relating to
the extremely warm weather in November and December 2001, in addition to
vigorous cost management because of the unseasonably warm winter.
General and Administrative expenses for the three and six months ended
April 30, 2002 decreased $765,868 and $729,185 as compared to the three and six
months ended March 31, 2001. This is the result of a reallocation of wages and
benefits (14%), the accrual of a severance package (65%) at March 31, 2001 and
year end accrual adjustments (21%) at March 31, 2001.
Interest expense for the three and six months ended April 30, 2002
decreased $75,526 and $177,413 as compared to the three and six months ended
March 31, 2001. This decrease is attributable to a reduction in the prime
interest rate (50%), pay down on notes payable (20%), and lower draws on the
line of credit (10%).
Options Granted Effective December 10, 2001 four corporate officers were
granted stock options in varying amounts with a total of 11,000 shares. The
option price of $10.50 was equal to the market value on the date of the grant.
Because the exercise price of the stock options equaled the fair market
value of the Companies' underlying stock on the date of the grant, no
compensation expense has been recognized in the combined condensed statement of
operations.
Per Share Data
Loss per share are computed as follows;
6 Mos ended 6 Mos ended
April 30, March 31,
2002 2001
Net Income (Loss) $1,274,122 ($217,189)
Weighted average combined shares of common
stock outstanding used to compute basic
earnings per combined common share 1,916,680 1,923,179
Additional combined common shares to be
issued assuming exercise of stock options,
net of combined shares assumed reacquired 13,722 9,902
Combined shares used to complete dilutive
effect of stock option 1,930,402 1,933,081
Basic and diluted income (loss) per combined
common share $0.66 $(.11)
Financial Condition, Liquidity and Capital Resources
The deficit in working capital as of April 30, 2002, decreased by $909,879
as compared to October 31, 2001. The change is primarily due to the cyclical
nature of the Companies' business. The change in the balance of deferred
operating costs from October 31, 2001 to April 30, 2002 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.
7
Moving Forward
Capital expenditures for the six months ended April 30, 2002 were for the
renovation and expansion of the Jack Frost Mountain Rental Shop, the expansion
of the terrain park at Big Boulder and various equipment purchases at both ski
areas all of which were financed through working capital. The Companies, in
Fiscal 2002 will construct a new dual double chair lift at Jack Frost Mountain,
purchase new snowmaking compressors and new snow grooming equipment for Big
Boulder Ski Area. Management expects to obtai n debt and or lease financing on
the three previously mentioned capital additions.
During Fiscal 2002 the Companies instituted a new division for the purpose
of actively pursuing real estate sales and purchases. The land department has
started to identify a subdivision masterplan and will begin to seek potential
buyers. Management intends to generate a constistent stream of additional
revenue through selective sales and purchases of land. The initiation of two
business activities during Fiscal 2002 - land sales and the timbering program,
has prompted Management to consider the possib ility of creating a new business
segment.
Management is also considering the organization of another subsidiary
corporation - Boulder Creek Resort Company. The new company would be used as a
marketing tool to consolidate and "brand" the Companies' holdings as one resort
destination and also enable the advancement of the land sales division.
An offer to purchase the Dreshertown Plaza Shopping Center has been
presented to the Companies. Management is presently reviewing the proposal. No
firm price has been determined
PART II - OTHER INFORMATION
The Companies have no matters to report with respect to Items 1, 2, 3, 4,
5, and 6(A) and (B).
8
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)
(Signature)
Eldon D. Dietterick
Executive Vice President/Treasurer
(Signature)
Cynthia A. Barron
Chief Accounting Officer
Date: June 4, 2002
9