BLUE RIDGE REAL ESTATE COMPANY
BIG BOULDER CORPORATION
ANNUAL REPORT 1997
To Our Shareholders:
To better reflect business cycles between our ski and non-ski seasons,
the companies changed the Fiscal year end to March 31.
Net income for the ten months ended March 31, 1997 was $486,806 or $.24
per combined share compared to net income of $43,263 or $.02 per combined
share for the twelve months ended May 31, 1996.
We took advantage of cold temperatures in early November to open tubing
at Jack Frost Mountain on November 16, 1996 and Big Boulder for skiing on
November 29, 1996. These dates represent our earliest opening for the ski
season. This was made possible because of our investment in an additional
10,000 CFM of air at Jack Frost Mountain.
The ski areas experienced a profitable winter season with 374,000 visitors.
Skier's and Snowboarders' combined visits totaled 277,000, while Snow Tubers
added another 97,000. Tubing, introduced to East Coast ski area by Jack Frost
Mountain in December 1994, has become very popular as a winter recreation
activity. We have expanded our tubing facilities each of the last three years
and in view of the success achieved to date, our capital plans this year
include additional expansion.
Snowboarding continues to grow in popularity representing almost 24% of our
skier visits. To accommodate and indeed encourage these customers, our ski
areas have built halfpipes, snowparks, obstacle courses and hosts snowboard
competition on a weekly basis. We will both continue and expand our efforts
to grow this market.
Big Boulder celebrated its 50th year of operation this past season with
torchlight parades, fireworks displays and entertainment every Saturday night
representing five decades of music styles. This celebration coupled with the
introduction of the family tube resulted in a successful season for Boulder.
The Ski Areas have diversified into winter recreation resorts with tubing,
snowboarding, snowmobiling and townhouse rentals.
The introduction of summertime activities over the last five years has
proven successful:
We currently host seven Festivals from Memorial Day through Columbus Day
weekend with attendance ranging from 4,000 to 10,000 per festival.
Splatter, our paintball game, continues to grow and is now operated on a
year-round basis.
New activities available to our summer visitors include and In-Line Skate
Park and an A.T.V. (All Terrain Vehicle) Park.
Fern Ridge Campground, in its third year of operation under company manage-
ment, has expanded to 205 sites, including wilderness cabins.
Our Summer Festivals and Splatter have complemented the occupancy of
this facility.
Realizing our Companies' major potential lies in the future development
opportunities of its large land holdings, 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. The Companies have municipal approval
for some 800 homesites adjacent to our Ski Areas and permits in place to
construct a golf course at Jack Frost Mountain.
Your Companies have an excellent record in the ski industry and have made
marked progress toward our goal of generating revenues and profits during the
non-ski season. I would like to thank our employees for their innovativeness
and hard work, which have contributed to the positive image and profitability
of the Companies.
Gary A. Smith
President
Blakeslee, Pennsylvania
June 16, 1997
PAGE 1
COMBINED BALANCE SHEETS
March 31, 1997 and May 31, 1996
ASSETS 1997 1996
Current Assets:
Cash and cash equivalents (including interest-
bearing deposits of $2,084,101 in 1997 and
$1,770,546 in 1996) $2,084,101 $1,958,963
Marketable securities 303,096 293,588
Current installments of mortgage notes receivable 0 10,670
Accounts receivable 430,628 334,397
Refundable income taxes 23,146 0
Inventories 249,590 123,257
Prepaid expenses and other current assets 623,561 766,921
Total current assets 3,714,122 3,487,796
Mortgage notes receivable less current
installments 0 2,479
Other non-current assets 36,797 71,297
Properties:
Land, principally unimproved (19,884 acres
per land ledger) 1,867,766 1,867,766
Land improvements, buildings and equipment 47,146,625 45,779,980
49,014,391 47,647,746
Less accumulated depreciation & amortization 28,962,573 27,999,628
20,051,818 19,648,118
$23,802,737 $23,209,690
LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996
Current liabilities:
Current installments of long-term debt $ 532,513 $ 504,681
Accounts and other payables 430,814 503,063
Accrued claims 158,905 204,147
Accrued income taxes 138,566 59,098
Accrued liabilities 801,849 684,835
Deferred revenue 192,556 293,095
Total current liabilities 2,255,203 2,248,919
Long-term debt, less current installments 9,245,918 9,189,486
Deferred income taxes 2,201,348 2,157,823
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 9,235,309 8,748,503
11,356,501 10,869,695
Less cost of 194,134 shares of
capital stock in treasury 1,256,233 1,256,233
10,100,268 9,613,462
$23,802,737 $23,209,690
The accompanying notes are an integral part of the combined financial
statements.
PAGE 2
COMBINED STATEMENTS OF OPERATIONS AND
EARNINGS RETAINED IN THE BUSINESS
For the 10 months ended March 31, 1997
& the years ended May 31,1996 & 1995
1997 1996 1995
Revenues:
Ski operations $11,251,882 10,618,961 7,837,872
Real estate management 3,367,627 2,928,213 2,757,217
Rental income 1,418,491 1,761,812 1,587,139
Disposition of properties 0 0 62,262
16,038,000 15,308,986 12,244,490
Costs and expenses:
Ski operations 9,778,443 9,741,679 7,720,572
Real estate management 3,164,328 3,062,437 2,656,771
Rental income 768,565 827,229 798,759
Disposition of properties 0 0 3,687
General and administrative 893,485 941,001 972,146
14,604,821 14,572,346 12,151,935
Income from operations 1,433,179 736,640 92,555
Other income (expense):
Interest and other income 57,067 88,060 82,956
Interest expense (748,531) (866,262) (884,068)
(691,464) (778,202) (801,112)
Income (loss)before income taxes 741,715 (41,562) (708,557)
Provision(credit)for income taxes:
Current 234,528 58,731 3,810
Deferred 20,381 (143,556) (276,599)
254,909 (84,825) (272,789)
Net income (loss) 486,806 43,263 (435,768)
Earnings retained in business:
Beginning of year 8,748,503 8,705,240 9,141,008
End of year $9,235,309 $8,748,503 $8,705,240
Per weighted average combined share:
Net income (loss) $0.24 $0.02 $(0.21)
The accompanying notes are an integral part of the combined financial
statements.
PAGE 3
COMBINED STATEMENTS OF CASH FLOWS
for the 10 months ended March 31, 1997
and the years ended May 31,1996 and 1995
1997 1996 1995
Cash Flows From Operating Activities
Net income (loss) $ 486,806 $43,263 $(435,768)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 1,928,651 2,132,581 2,255,928
Deferred income taxes 20,381 (143,556) (276,599)
Write-off of project development costs 0 178,818 0
Deferred revenue (100,539) (119,129) 174,363
Gain on sale of land 0 0 (58,575)
Changes in operating assets and
liabilities:
Accounts receivable (85,561) (132,331) (29,976)
Refundable income taxes (23,146) 10,000 30,000
Prepaid expenses & other current assets 17,027 (318,527) (89,123)
Accounts payable & accrued liabilities (477) 251,340 89,985
Accrued income taxes 79,468 59,098 0
Net cash provided by operating
activities 2,322,610 1,961,557 1,660,235
Cash Flows From (used in) Investing
Activities:
Marketable securities (9,508) (293,588) 0
Collection of mortgage receivable 2,479 11,189 9,919
Other non-current assets 34,500 (34,500) 0
Proceeds from disposition of assets 4,200 0 62,262
Additions to properties (2,313,407) (1,225,983) (1,414,650)
Cash(used in)investing activities (2,281,736) (1,542,882) (1,342,469)
Cash Flows From (used in) Financing
Activities:
Additions to long-term debt 649,985 0 0
Borrowings under short-term financing 1,500,000 900,000 1,075,000
Payment of short-term financing 1,500,000 (900,000 (1,075,000)
Payment of long-term debt (565,721) (544,999) (511,227)
Purchase of treasury stock 0 0 (609,863)
Net cash provided by (used in)
financing activities 84,264 (544,999) (1,121,090)
Net increase (decrease) in cash
& cash equivalents 125,138 (126,324) (803,324)
Cash & cash equivalents, beginning
of year 1,958,963 2,085,287 2,888,611
Cash & cash equivalents, end of year $2,084,101 $1,958,963 $2,085,287
Supplemental disclosures of cash flow
information:
Cash paid (received) during year for:
Interest $726,430 $863,438 $888,550
Income taxes $207,300 $25,091 $(17,602)
The accompanying notes are an integral part of the combined financial
statements.
PAGE 4
NOTES TO COMBINED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
BASIS OF COMBINATION:
The combined financial statements include the accounts of Blue Ridge
Real Estate Company (Blue Ridge) and its wholly-owned subsidiaries, North-
east Land Company, Jack Frost Mountain Company, and BRRE Holdings, Inc.;
and Big Boulder Corporation (Big Boulder) and its wholly-owned subsidiar-
ies, Lake Mountain Company and BBC Holdings, Inc. Under a Security
Combination Agreement between Blue Ridge and Big Boulder and under the By-
laws of both Companies, shares of the Companies are combined in unit certifi-
cates, each certificate representing concurrent ownership of the
same number of shares of each company; shares of each company may be trans-
ferred 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 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.
In 1996, the Companies adopted Financial Accounting Standards No.
121, (Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of.( Impairment losses are recog-
nized 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.
In cases when the Companies do not expect to recover their carrying
cost, the Companies recognize an impairment loss. No such losses
have been recognized to date.
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.
PAGE 5
PENSIONS:
The Companies are parties to a non-contributory defined benefit
pension plan covering all permanent employees who meet certain require-
ments as to age and length of employment. Pension benefits vest after
five years of credited service and are based on the total 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 aggregate cost method which
spreads past service costs over the average future service lives of
covered employees. The Companies' policy is to fund pension contribu-
tions in accordance with statutory requirements.
INVESTMENTS:
The Companies have classified their marketable securities as held
to maturity and have stated these securities at amortized cost. The
investment represents Discount Commercial Paper.
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, the standard requires current
recognition of the effect of changes in statutory tax rates on
previously provided deferred taxes. Valuation allowances are estab-
lished, 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, 1997 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.
EARNINGS PER SHARE:
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ('SFAS') No. 128 "Earnings
Per Share". This Statement establishes standards for computing and present-
ing earnings per share ("EPS") and applies to entities with publicly held
common stock or potential common stock. This Statement is effective for
financial statements issued for periods ending after December 15, 1997,
earlier application is not permitted. This statement requires restatement
of all prior-period EPS data presented. Adoption of SFAS No. 128 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.
PAGE 6
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 year. 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 period
of the prior year are as follows:
(UNAUDITED)
3/31/97 3/31/96
Revenues 16,038,000 14,341,324
Operating Income 1,433,179 1,034,527
Income Taxes 254,909 127,662
Net Income 486,806 247,814
3. SALE OF LAND
The Companies had no land sales for Fiscal 1997 or 1996.
The Companies sold land in Fiscal 1995 for cash consideration of
$62,262.
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, 1997, May 31, 1996, 1995, and for each of the periods then
ended, is as follows:
Blue Ridge and Subsidiaries
10 Mos. Ended 12 Mos.Ended 12 Mos. Ended
3/31/97 5/31/96 5/31/95
Financial position:
Current assets $ 1,894,928 $2,882,803 $2,499,262
Total assets 16,066,800 15,654,413 17,217,104
Current liabilities 1,723,363 1,427,707 2,679,640
Shareholders' equity 4,796,387 4,764,634 4,656,463
Operations:
Revenues 8,880,248 9,407,238 8,082,007
Income(loss)before income taxes 66,225 20,797 (430,741)
Provision(credit)for income taxes 34,472 (87,373) (176,487)
Net income (loss) 31,753 108,170 (254,254)
Big Boulder and Subsidiaries
10 Mos. Ended 12 Mos. Ended 12 Mos. Ended
3/31/97 5/31/96 5/31/95
Financial position:
Current assets $1,819,194 $604,993 $1,541,450
Total assets 7,735,937 7,555,277 7,570,807
Current liabilities 531,840 821,212 537,532
Shareholders' equity 5,303,881 4,848,828 4,913,736
Operations:
Revenues 7,157,752 5,901,748 4,162,483
Income(loss)before income taxes 675,490 (62,359) (277,816)
Provision(credit)for income taxes 220,437 2,548 (96,302)
Net income (loss) 455,053 (64,907) (181,514)
5.SHORT-TERM FINANCING:
At March 31, 1997, Blue Ridge had an unused line of credit aggrega-
ting $2,000,000 available for short-term financing, expiring November
1997, which management expects to be renewed. The line of credit bears
interest at the bank's prime rate.
PAGE 7
6. LONG-TERM DEBT:
Long-term debt as of March 31, 1997 and May 31, 1996 consists of the following:
1997 1996
Mortgage note payable to insurance company,
interest fixed at 9% payable in monthly
installments of $47,834 including interest
through November 1997 5,363,074 5,436,135
Mortgage note payable to bank, interest at
80% of the bank's prime rate (6.6% at March 31,
1997) payable in monthly installments of
$24,187 through Fiscal 2005 2,442,906 2,684,778
Mortgage note payable to bank, interest at
80% of the bank's prime rate (6.6% at March 31,
1997) payable in monthly installments of
$11,951 through December 1996 0 .95,600
Mortgage note payable to insurance company,
interest fixed at 10.5% payable in monthly
installments of $15,351 including interest
through Fiscal 2014 1,452,466 1,477,654
Mortgage note payable to bank, interest at
7% fixed payable monthly with principle
reduction at $32,500 per month December to
March through 2001 519,985 0
9,778,431 9,694,167
Less current installments 532,513 504,681
9,245,918 9,189,486
Properties at net book value, which have been pledged as collateral
for long-term debt, include the following at March 31, 1997:
Investment properties leased to others 7,596,278
Ski facilities 23,862,208
The aggregate amount of long-term debt maturing in each of the years
ending subsequent to March 31, 1997, is as follows:
1998-$532,513; 1999-$536,179; 2000-$540,249; 2001-$544,753; 2002-$419,785
7. INCOME TAXES
The provision (credit) for income taxes is as follows:
1997 1996 1995
Currently payable
Federal $234,528 $58,731 $3,810
State 0 0 0
234,528 58,731 3,810
Deferred
Federal 20,381 (142,441) (229,616)
State 0 (1,115) (46,983)
20,381 (143,556) (276,599)
$254,909 $(84,825) $(272,789)
A reconciliation between the amount computed using the statutory federal
income tax rate and the provision (credit) for income taxes is as
follows:
1997 1996 1995
Computed at statutory rate $253,060 $(14,131) $(240,911)
State income taxes, net of federal
income tax 0 (7,153) (21,156)
Change in state tax rate 0 6,417 (19,162)
Other 1,849 (7,124) 8,440
Change in valuation allowance 0 (62,834) 0
Provision(credit)for income taxes $254,909 $(84,825) $(272,789)
PAGE 8
The components of the deferred tax assets and liabilities under the new
accounting method as of March 31, 1997 and May 31, 1996 are as follows:
1997 1996
Gross deferred tax asset:
Accrued expenses $75,979 $134,710
Net operating loss and AMT credit carryforward 627,181 902,613
Contribution carryforward 1,316 168,647
704,476 1,205,970
Less valuation allowance (105,961) (405,348)
598,515 800,622
Gross deferred tax liability:
Depreciation 2,799,863 2,957,496
Deferred gains 0 949
2,799,863 2,958,445
Net deferred tax liability $2,201,348 2,157,823
At March 31, 1997, the Companies have $522,536 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
$1,587,111 which expire in Fiscal 1998 and 1999. The valuation allowance
decreased by $299,387 during Fiscal 1997, due to the expiration of charitable
contribution carryforwards and the utilization/expiration of state net
operating losses.
8. PENSION PLAN
Pension expense for 1997, 1996 and 1995 includes the following components:
Service costs, benefits earned during
the period $124,044 $148,042 $117,509
Interest cost on projected benefit
obligation 137,314 161,992 141,608
Actual return on plan assets (222,439) (377,221) (188,902)
Net amortization and deferral 67,433 231,468 50,079
Pension expense $106,352 164,281 120,294
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, 1997
were as follow:
1997 1996
Actuarial present value of benefit obligations:
Accumulated benefit obligation (including vested
benefits of $1,571,300 and $1,545,200,
respectively) (1,638,000) $(1,606,000)
Effect of future increase in compensation (624,900) (615,300)
Projected benefit obligation (2,262,900) (2,221,300)
Plan assets at fair value 2,633,321 2,491,554
Plan assets in excess of benefit obligation 370,421 270,254
Unrecognized net gain (529,903) (391,414)
Unrecognized net transition obligation 137,092 144,159
Unrecognized prior service costs 11,714 12,223
Prepaid pension expense ($10,676) 35,222
Significant assumptions used in determining the actuarial present value
of the projected benefit obligations and pension expense are as follows:
1997 1996 1995
Discount rate 7.50% 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%
PAGE 9
9. PROPERTIES
Properties consist of the following at March 31, 1997 and May 31, 1996:
1997 1996
Land, principally unimproved $1,867,766 $1,867,766
Land improvements 7,246,611 6,725,314
Corporate buildings 434,512 434,512
Buildings leased to others 7,928,855 7,850,266
Ski facilities:
Land 4,552 4,552
Land improvements 5,136,418 4,244,068
Buildings 7,093,100 7,041,699
Machinery & equipment 18,272,223 18,452,243
Equipment & furnishings 1,030,354 1,027,326
49,014,391 47,647,746
Less accumulated depreciation 28,962,573 27,999,628
$20,051,818 19,648,118
Buildings leased to others include land of $1,056,700 at March 31, 1997 and
May 31, 1996 and 1995. Development costs relating to real estate projects
of $178,816 were written off during Fiscal 1996, which was included in the
land balance at May 31, 1995.
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 4.01 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, 1997, is as follows:
Properties Subject To Lease
Accumulated
Cost Depreciation
Investment properties leased to
others 7,928,854 2,767,298
Land and land improvements 3,570,528 996,624
Minimum future rentals:
Fiscal years ending March 31: 1998 1,188,837
1999 828,690
2000 668,445
2001 612,266
2002 713,712
Thereafter 8,409,397*
12,421,347
*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 1997, 1996 or
1995.
11. QUARTERLY FINANCIAL INFORMATION (Unaudited)
The results of operations for each of the quarters in the last two
years are presented below:
Earnings (Loss)
Income(loss) Per Weighted
Operating from Net Avg.Combined
Quarter Revenues Operations Income(Loss) Share
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
1 mo 1,442,901 (502,883) (339,162) (0.18)
$16,038,000 $1,433,179 $486,806 $0.24
PAGE 10
1996
1st 1,490,288 168,625 (17,594) (0.01)
2nd 975,344 (129,757) (200,669) (0.10)
3rd 10,091,533 955,306 463,208 0.23
4th 2,751,821 (257,534) (201,682) (0.10)
15,308,986 736,640 43,263 (0.02)
The quarterly results of operations for 1997 and 1996 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 opera-
ting expenses, ratably, over the operating period.
The Fiscal 1996 fourth quarter includes the write-off of $178,816
of real estate development costs ($60,797 after tax) relating to the pre-
liminary phase of real estate projects. The fourth quarter of 1996 includes
approximately $63,000 from the partial utilization of state net operating
losses which had been subject to a valuation allowance in the prior year.
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 Pennsyl-
vania 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.
Year Ended
3/31/97 05/31/96 05/31/95
Revenues:
Ski operations $11,251,882 $10,618,961 $7,837,872
Real estate management/Rental
operations 4,786,118 4,690,025 4,406,618
$16,038,000 $15,308,986 $12,244,490
Income:
Ski operations $1,473,439 $877,282 $117,300
Real estate management/Rental
operations 853,225 800,359 947,401
$2,326,664 $1,677,641 $1,064,701
General & administrative expenses (893,485) (941,001) (972,146)
Interest and other income 57,067 88,060 82,956
Interest expense (748,531) (866,262) (884,068)
Income(loss) before income taxes $741,715 $(41,562) $(708,557)
In Fiscal 1997, 1996 and 1995, no one customer represented 10% or
more of total revenues.
PAGE 11
Identifiable assets, net of accumulated depreciation at March 31, 1997
and May 31,1996 and 1995, and depreciation expense and capital expenditures
for the years then ended by industry segment are as follows:
Identifiable Depreciation Capital
Assets Expense Expenditure
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 2,500,398 242,910 34,419
Total $23,802,737 $1,905,507 $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 3,482,933 283,181 104,626
Total $23,209,690 $2,149,789 $1,292,890
1995
Ski Operations $10,353,174 $1,507,073 $1,293,301
Real Estate Management/Rental
Operations 10,315,950 333,597 8,789
Other Corporate 2,994,547 415,258 112,560
Total $23,663,671 $2,255,928 $1,414,650
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 result of operations of the Companies.
At March 31, 1997, the Companies had an outstanding letter of credit
of $75,000 which guarantees 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 approxi-
mately $2,683,862 at March 31, 1997.
14. STOCK OPTIONS AND CAPITAL STOCK:
The Chairman of the Board of the Companies was granted an Option
for 10,000 shares of the Companies' common stock in July 1993 at $6.75
per share, which expires in ten years. The Option has not been exercised
at March 31, 1997. The Option price was not less than the market value
at the date of the grant.
The Board of Directors has authorized the repurchase of up to
200,000 shares of the Companies' common stock in the open market from
time to time. As of March 31, 1997, 194,134 shares had been purchased.
No shares were purchased in Fiscal 1997 or 1996, and 96,600 shares
were purchased in Fiscal 1995.
PAGE 12
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, 1997 and May 31, 1996, and related combined
statements of operations and earnings retained in the business and cash
flows for each of the ten months ended March 31, 1997 and each of the
two years in the period 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 posi-
tion of Blue Ridge Real Estate Company and subsidiaries and Big Boulder
Corporation and subsidiaries as of March 31, 1997 and May 31, 1996, and the
combined results of their operations and their cash flows for the ten months
ended March 31, 1997 and each of the two years ended May 31, 1996
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
June 12, 1997
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 1997 and 1996.
No dividends were paid on common stock in either Fiscal Year.
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
FISCAL YEAR HIGH LOW
1996 ASKED BID
First Quarter 5.875 5.125
Second Quarter 6.250 5.500
Third Quarter 6.000 5.375
Fourth Quarter 6.750 5.375
PAGE 13
The reported quotations represent prices between dealers, do not
reflect retail mark-ups, mark-downs or commissions and do not neces-
sarily represent actual transactions. The approximate number of
holders of record of common stock on March 31, 1997 was 718.
BLUE RIDGE REAL ESTATE COMPANY AND SUBSIDIARIES
AND BIG BOULDER CORPORATION AND SUBSIDIARIES
COMBINED SUMMARY OF SELECTED FINANCIAL DATA
1997 1996 1995
Revenues $16,038,000 $15,308,986 $12,244,490
Net income(loss) 486,806 43,263 (435,738)
Net income(loss)per combined share $0.24 $ .02 $(.21)
Cash dividends per combined share 0 0 0
Weighted average number of
combined shares outstanding 2,004,014 2,004,014 2,029,630
Total assets 23,802,737 23,209,690 23,663,671
Long-term debt 9,778,431 9,694,167 10,239,166
Shareholders' equity 10,100,268 9,613,462 9,570,199
1994 1993
Revenues $13,423,910 $13,370,007
Net income(loss) (163,884) 130,214
Net income(loss)per combined share $(.08) $.06
Cash dividends per combined share 0 0
Weighted average number of
combined shares outstanding 2,109,246 2,144,442
Total assets 25,232,780 26,190,005
Long-term debt 10,750,393 11,262,128
Shareholders' equity 10,615,830 10,905,140
PAGE 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Results of Operations
FISCAL 1997 VERSUS FISCAL 1996
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 $41 compared to $40 last season for an increase of $1.00 or 2%.
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 a 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 operation at the ski area contributed
revenue of $7.03 per skier visit. The retail shop operation at the
ski area 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 Administrative 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%.
FISCAL 1996 VERSUS FISCAL 1995
For Fiscal Year ended May 31, 1996, the Companies reported a net
profit of $43,263 or $.02 per combined share as compared with a net
loss of $435,768 or $(.21) per combined share for Fiscal 1995.
Combined revenue of $15,308,986 represents a increase of $3,064,496
or 25% when compared to Fiscal 1995. Real Estate Management Operations
increased $283,407 or 6% when compared to Fiscal 1955. Ski Operations
increased $2,781,089 or 35% when compared to Fiscal 1995.
PAGE 15
The Ski Operations had approximately 267,000 skiers visit our
slopes compared to 220,000 skier visits last season. The increase
of 47,000 skier visits represents a 21% increase. Revenue per skier was
$40 compared to $36 last season for an increase of $4.00 or 11%. The ski
areas operated for a combined total of 212 days compared to 167 days last
season. The food and beverage operation at the ski areas contributed
revenue of $6.75 per skier visit.
The Real Estate Management Operations revenue increase is attri-
buted to fees for services provided to the Trust of the resort communi-
ties, fewer vacancies in investment properties, more campsites rented,
increased festival revenue, commissions for resales of homes in our
resort communities, fishing and hunting leases, and leasing commissions
in resort communities. Disposition of properties occur sporadically
and do not follow any pattern during the fiscal year. No major land
sales occurred in Fiscal 1996 or Fiscal 1995.
Operating costs associated with Ski Operations increased by $2,021,107
when compared to Fiscal 1995. This increase is attributed to personnel,
advertising costs, and more operating days.
Operating costs associated with Real Estate Management Operations
increased by $430,449 when compared to Fiscal 1995. This increase is
attributed to cost related to real estate development projects. General
and Administrative expenses decreased by $31,145 because of reduction in
supplies and services. Cost of properties disposed of is directly related to
land sold.
Interest and Other Income increased by $5,104 compared to Fiscal
1995. This increase was attributed to Interest Earned from Interest-bearing
deposits.
Interest expense decreased by $17,806 compared to Fiscal 1995. This
decrease is attributed to reduction of debt obligation.
The effective Tax Rate for Fiscal 1996 is a credit of 34%.versus
a credit of 38% for Fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Combined Statement of Cash flows reflects net cash provided
by operating activities of $2,322,610, $1,961,557$1, and $1,660,235 in
Fiscal 1997, 1996 and 1995 respectively.
The major capital investment made in Fiscal 1997 was the expansion
of the Big Boulder Tubing Area.
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.
During Fiscal 1996, the Companies borrowed against their $2,000,000
line of credit for a period of one month in varying amounts with a
maximum of $900,000.
The Companies have a combined working capital of $1,458,919 at March
31, 1997 versus $1,238,877 at May 31, 1996.
MOVING FORWARD
The Companies continue to develop activities to generate profit
during the non-ski season with increased festivals and the introduc-
tion in Fiscal 1998 of an All Terrain Vehicle Park. Plans are underway
to expand our snowtubing area.
The Companies will address any necessary changes to our financial
software package to encompass all issues regarding the year 2000.
PAGE 16
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
J. Anthony V. Townsend
Managing Director, Finsbury Asset Management Ltd;
Director, Rea Brothers Group, Plc.
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
PAGE 17
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 1997 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
18,852 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
PAGE 18