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 July 31, 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 July 31, 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
July 31, 2002 and October 31, 2001 1 & 2
Combined Condensed Statements of
Operations - Three Months and Nine Months
ended July 31, 2002 and June 30, 2001 3
Combined Condensed Statements of
Cash Flows - Nine Months Ended
July 31, 2002 and June 30, 2001 4
Notes to Financial Statements 5
Item 2-Management's Discussion and Analysis
of Financial Condition and Results
of Operations 6, 7, 8, & 9
Item 3-Quantitative and Qualitative Disclosures
About Market Risk - Not applicable
Item 4-Controls and Procedures 9
PART II - OTHER INFORMATION 9
Item 6-Exhibits and Reports on Form 8-K 9
Signatures 10
Chief Executive Officer Certification 11
Chief Financial Officer Certification 12
BLUE RIDGE REAL ESTATE COMPANY and SUBSIDIARIES
BIG BOULDER CORPORATION AND SUBSIDIARIES
COMBINED CONDENSED BALANCE SHEETS
ASSETS July 31, October 31,
2002 2001
(UNAUDITED) (AUDITED)
Current Assets
Cash and cash equivalents
(all funds are interest bearing) $ 956,262 $263,178
Accounts receivable 727,533 376,838
Inventories 198,618 231,771
Prepaid expenses, principally
insurance and real estate taxes 946,623 730,382
Deferred operating costs 1,229,977 2,106,478
Total current assets 4,059,013 3,708,647
Properties:
Land, principally unimproved (19,741 1,868,505 1,868,505
acres per land ledger)
Land Improvements, buildings
and equipment 54,797,267 53,985,296
56,665,772 55,853,801
Less accumulated depreciation
and amortization 37,156,076 36,636,005
19,509,696 19,217,796
$23,568,709 $22,926,443
See accompanying notes to unaudited financial statements.
1
LIABILITIES AND SHAREHOLDERS' EQUITY
July 31, October 31,
2002 2001
Current Liabilities:
Notes payable - line of credit $0 $648,195
Current installments of
long-term debt 724,854 720,435
Accounts and other payables 712,341 544,734
Accrued claims 189,963 134,770
Deferred income taxes 996,398 625,292
Accrued pension expense 858,580 732,580
Accrued liabilities 751,757 999,527
Deferred revenue 577,641 638,875
Total current liabilities 4,811,534 5,044,408
Long-term debt, less
current installments 6,365,595 6,949,805
Deferred income taxes 1,044,269 842,117
Other non-current liabilities 32,419 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 July
31, 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 10,762,951 9,479,453
12,884,143 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
10,799,261 9,526,263
$23,568,709 $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 Nine Months Ended
July 31, June 30, July 31, June 30,
2002 2001 2002 2001
Revenues:
Ski operations $ 0 $ 0 $10,015,075 $11,267,371
Real estate management 1,212,214 620,094 3,573,726 2,321,511
Summer recreation
operations 812,444 524,961 1,177,079 1,000,773
Rental income 466,069 443,345 1,412,009 1,372,521
2,490,727 1,588,400 16,177,889 15,962,176
Costs and expenses:
Ski operations 559,815 0 9,488,541 11,246,003
Real estate management 805,953 579,162 2,244,714 1,982,328
Summer recreation
Operations 655,172 525,553 1,087,108 1,123,339
Rental operations 220,073 240,895 675,940 741,204
General & administrative
Expenses 67,593 251,326 563,855 1,476,773
2,308,606 1,596,936 14,060,158 16,569,647
Income (loss)from
operations 182,121 (8,536) 2,117,731 (607,471)
Other income (expense:)
Interest & other income 5,684 15,560 22,017 296,698
Interest expense (87,894) (135,805) (282,992) (508,316)
(82,210) (120,245) (260,975) (211,618)
Income (loss) before
income taxes 99,911 (128,781) 1,856,756 (819,089)
Provision (benefit)
for income taxes 90,535 (46,044) 573,258 (519,163)
Net income (loss) $9,376 ($82,737) $1,283,498 ($299,926)
Basic and diluted income
(loss) per weighted
average combined share $0.01 ($0.04) $0.67 ($0.16)
See accompanying notes to unaudited financial statements.
3
BLUE RIDGE REAL ESTATE COMPANY
BIG BOULDER CORPORATION and SUBSIDIARIES
COMBINED CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JULY 31, 2002 & JUNE 30, 2001
(UNAUDITED)
2002 2001
Cash Flows From(Used In) Operating Activities:
Net Income(Loss) $1,283,498 ($299,926)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 1,758,883 2,176,313
Deferred income taxes 573,258 (722,299)
Gain on sale of assets (1,632) (6,237)
Changes in assets and liabilities:
Accounts receivable (350,695) (64,687)
Prepaid expenses and other current assets (183,088) (550,757)
Deferred operating costs 520,560 2,383,010
Accounts Payable & accrued liabilities 85,230 658,298
Accrued income taxes 0 (123,156)
Deferred revenue (61,234) 227,473
Net cash provided by operating activities 3,624,780 3,678,032
Cash Flows From (Used In) Investing Activities:
Deferred Income 0 13,198
Proceeds from disposition of assets 17,191 24,586
Additions to properties (1,710,401) (952,842)
Net cash used in investing activities (1,693,210) (915,058)
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 (579,791) (762,644)
Purchase of Treasury stock (10,500) (72,064)
Net cash used in financing activities (1,238,486) (1,534,708)
Net increase in cash and cash equivalents 693,084 1,228,266
Cash and cash equivalents, beginning
of period 263,178 261,363
Cash and cash equivalents, end of period $956,262 $1,489,629
Supplemental disclosures of cash flow information:
Cash paid during period:
Interest $284,277 $511,900
Income taxes $ 14,012 $318,113
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 July 31, 2002, and the results of operations and the statements of cash flows
for the three and nine month periods ended July 31, 2002 and June 30, 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 nine 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 nine months ended July
31, 2002 represents the estimated annual effective tax rate for the year ending
October 31, 2002. The effective income tax rate for the first nine months of
Fiscal 2002 was 34%.
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 nine months ended June
30, 2001. It was not financially practicable to restate the prior fiscal
information to match the newly stated quarters.
Operations for the three and nine months ended July 31, 2002 resulted in a
net income of $.01 and $.67 per combined share compared to a net loss of $(.04)
and ($0.16) per combined share for the three and nine months ended June 30,
2001.
Combined revenue of $2,490,727 and $16,177,889 for the three and nine
months ended July 31, 2002 represents an increase of $902,327 and $215,713 as
compared to the three and nine months ended June 30, 2001. Ski Operations
remained unchanged at $0 for the three months ended July 31, 2002 and decreased
$1,252,296 for the nine months ended June 30, 2001. Real Estate Management
increased $592,120 and $1,252,215 for the three and nine months ended July 31,
2002 as compared to the three and nine months ended Ju ne 30, 2001. Summer
Recreation Operations increased $287,483 and $176,306 for the three and nine
months ended July 31, 2002 as compared to the three and nine months ended June
30, 2001. Rental income increased $22,724 and $39,488 for the three and nine
months ended July 31, 2002 as compared to the three and nine months ended June
30, 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. To date approximately 5% of the
companies 19,741 acres have been marked for timbering. 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 nine months ended July 31, 2002 seven timber
sales agreements have been entered into generating approximately $1,173,000 of
revenue.
Summer Recreation Activities increase was due to increased Splatter
Paintball revenue (39%) and Lake Club revenue (61%). The comparative information
specifically for summer operations includes 3 months of operation in 2001 versus
4 months in 2002.
6
Interest and Other Income decreased by $9,876 and $274,681 for the three
and nine months ended July 31, 2002 as compared to the three and nine months
ended June 30, 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 nine months ended June 30, 2001
that wasn't applicable to the three and nine months ended July 31, 2002.
Operating costs increased by $895,403 and decreased by $1,596,571 for the
three and nine months ended July 31, 2002 as compared to the three and nine
months ended June 30, 2001. The increase in operating expenses for the three
months ended July 31, 2002 as compared to the three months ended June 30, 2001
is the result of ski operation wages, benefits and payroll taxes being
recognized for personnel performing services related to other revenue operations
which were previously deferred during the three mont hs ended June 30, 2001 and
the costs associated with the addition of timbering and land sales departments
in Fiscal 2002. The decrease in operating expenses for the nine months ended
July 31, 2002 as compared to the nine months ended June 30, 2001 is the result
of the change in fiscal year end.
General and Administrative expenses for the three and nine months ended
July 31, 2002 decreased $183,733 and $912,918 as compared to the three and nine
months ended June 30, 2001. This is the result of a reclassification of wages
and benefits to the appropriate operating centers (15%), the payment of a
severance package (53%) at March 31, 2001 and year end accrual adjustments (13%)
at March 31, 2001.
Interest expense for the three and nine months ended July 31, 2002
decreased $47,911 and $225,324 as compared to the three and nine months ended
June 30, 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.
7
Per Share Data
Loss per share are computed as follows;
9 Mos ended 9 Mos ended
July 31, June 30,
2002 2001
Net Income (Loss) $1,283,498 ($299,926)
Weighted average combined shares of common
stock outstanding used to compute basic
earnings per combined common share 1,916,513 1,921,596
Additional combined common shares to be
issued assuming exercise of stock options,
net of combined shares assumed reacquired 14,025 10,441
Combined shares used to complete dilutive
effect of stock option 1,930,538 1,932,036
Basic earnings per combined common share $0.67 $(0.16)
Diluted earnings per combined common share $0.67 $(0.16)
Financial Condition, Liquidity and Capital Resources
The deficit in working capital as of July 31, 2002, decreased by $583,240
as compared to October 31, 2001. The increase is primarily due to the cyclical
nature of the Companies' business. The change in the balance of deferred
operating costs from October 31, 2001 to July 31, 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.
Moving Forward
Capital expenditures for the nine months ended July 31, 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.
The Companies will also be emphasizing our timbering and land sales
opportunities. The timbering program is designed to ensure that the highest
standards are being met in regards to retaining the value of the land where
timber is being harvested and that all environmental issues and concerns are
addressed in a professional, environment friendly manner. The land sales
department is aggressively marketing land parcels for residential and commercial
development. The land department has started to identify a subdivision
masterplan and will begin to seek potential buyers. Management intends to
generate a consistent stream of additional revenue through selective sales and
purchases of land. The possibility exists for entering into 1031 tax deferred
exchanges with any of the land transactions, therefore exchanging land for
revenue generating properties. The initiation of two business activities during
Fiscal 2002 - land sales and the timbering program, has prompted Management to
consider the possibility of creating a new business segment.
8
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
Item 4. Controls and Procedures
There have been no significant changes in the Companies internal controls
or in any factors that could significantly affect the controls subsequent to the
date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
99.1 Certification of chief executive officer
99.2 Certification of chief financial officer
(b) Reports on Form 8-K
None.
The Companies have no matters to report with respect to Items 1, 2, 3, and 5.
9
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: August 30, 2002
10
CERTIFICATION*
I, Patrick M. Flynn, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Blue Ridge Real
Estate Company and Big Boulder Corporation (together, the "registrants");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrants as of, and for, the periods presented in this quarterly report;
Date: August 30, 2002
/s/ PATRICK M. FLYNN________
Patrick M. Flynn
Chief Executive Officer and President
_____________
* Pursuant to the transition provisions of Release No. 34-46427 (Aug. 28,
2002), the portions of this certification required by paragraphs (b)(4), (5) and
(6) of Exchange Act Rule 13a-14 are inapplicable to this quarterly report.
Accordingly, the portions have been omitted from this certification.
11
CERTIFICATION*
I, Eldon D. Dietterick, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Blue Ridge Real
Estate Company and Big Boulder Corporation (together, the "registrants");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrants as of, and for, the periods presented in this quarterly report;
Date: August 30, 2002
/s/ ELDON D. DIETTERICK________ Eldon D. Dietterick Executive Vice
President and Treasurer (chief financial officer) _____________ * Pursuant to
the transition provisions of Release No. 34-46427 (Aug. 28, 2002), the portions
of this certification required by paragraphs (b)(4), (5) and (6) of Exchange Act
Rule 13a-14 are inapplicable to this quarterly report. Accordingly, the portions
have been omitted from this certification.
12