-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RRQ2gPAQidExabmMihARnl98XjwDU/dpIw2Ywvngnt2Z2bzRMminokZ5eP/IYvpX gAOR3RxWc8F/JrdUzYXoFA== 0000012779-97-000013.txt : 19970708 0000012779-97-000013.hdr.sgml : 19970708 ACCESSION NUMBER: 0000012779-97-000013 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970707 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLUE RIDGE REAL ESTATE CO CENTRAL INDEX KEY: 0000012779 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 240854342 STATE OF INCORPORATION: PA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-02844 FILM NUMBER: 97636827 BUSINESS ADDRESS: STREET 1: PO BOX 707 CITY: BLAKESLEE STATE: PA ZIP: 18610 BUSINESS PHONE: 7174438433 MAIL ADDRESS: STREET 1: PO BOX 707 CITY: BLAKESLEE STATE: PA ZIP: 18610 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIG BOULDER CORP/PA CENTRAL INDEX KEY: 0000277666 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 240822326 STATE OF INCORPORATION: PA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-02843 FILM NUMBER: 97636828 BUSINESS ADDRESS: STREET 1: PO BOX 707 CITY: BLAKESLEE STATE: PA ZIP: 18610 BUSINESS PHONE: 7174438433 MAIL ADDRESS: STREET 1: PO BOX 707 CITY: BLAKESLEE STATE: PA ZIP: 18610 10-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ( ) ANNUAL REPORTS* PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES ACT OF 1934 (FEE REQUIRED) For the fiscal year ended MARCH 31, 1997 OR (x) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transtion period from 6/01/96 to 3/31/97 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* PAGE 1 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 con- tained, 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, 1997, was $13,446,094. The market value per share is based upon the per share cost of shares as indicated by NASDAQ on March 31, 1997. 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, 1997 Common Stock, without par value 1,992,014 Shares stated value $.30 per combined share DOCUMENTS INCORPORATED BY REFERENCE Specified portions of the Companies' 1997 Annual Report to Shareholders are incorporated by reference into Part II hereof. Specified portions of the Companies' definitive Proxy Statement for the 1997 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 repre- senting 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. PAGE 2 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 18,852 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 205-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 revenues 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 34 full-time employees. Jack Frost Mountain Company, which operates the Jack Frost Mountain Ski Area, has 25 full-time employees and during the skiing season there are approximately 500 additional employees. Northeast Land Company has 17 full-time employees. Page 3 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 17 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 1997, 1996 and 1995 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 June 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 18,955 acres owned by Blue Ridge and Northeast Land Company, the Jack Frost PAGE 4 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 $18,263,254, 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, 1997, the out-standing debt on Jack Frost Mountain Ski Area was $1,301,325. 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, 1997. 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, 1997, a mortgage totaling $1,452,466 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 99,233 square feet located on approximately 15 acres of land. On March 31, 1997, the center was 96% occupied under leases expiring on various dates from August 31, 1997 to October 31, 2011. The total capital investment in the shopping center is $5,405,513. At March 31, 1997, a mortgage totaling $5,363,074 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 205 campsites, 75 with water and electric, 5 with rustic cabins and the remaining 125 are wilderness sites. Its operating period is from April 1 through September 30. At March 31, 1997, the Company's investment in this facility was $369,417. PAGE 5 ITEM 2. PROPERTIES - (Continued) Blue Ridge owns 18,852 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, 1997 was $1,197,050 with outstanding debt of $195,335. 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 10 months ended March 31, 1997, revenues from operations of Blue Ridge and its subsidiaries amounted to $8,880,248. Approximately 60% of this revenue or $5,343,562 was derived from the Jack Frost Mountain Ski Area which operated 108 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, five double chairlifts, 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, 696,009. At March 31, 1997, the outstanding debt on the Big Boulder Ski Area was $953,050. PAGE 6 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, 1997, was $1,700,719 with an outstanding debt of $513,181 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, 1997 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 10 months ended March 31, 1997, revenues from operations of Big Boulder amounted to $7,157,752. Approximately 82% of this revenue of $5,875,458 was derived from the Big Boulder Ski Area which operated 105 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 62 1991 Chairman of the Board Gary A. Smith 54 1992 President Melanie Murphy 37 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. PAGE 7 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 1997 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 13 of the Fiscal 1997 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 1997 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 1997 Annual Report to Shareholders. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS _ON ACCOUNTING AND FINANCIAL DISCLOSURES_____ Not applicable. PAGE 8 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 1997 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 46 1991 Director of Marketing Eldon D. Dietterick 51 1996 Secretary of Corporations 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 1997 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 1997 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. PAGE 9 PART IV ITEM 14(a). EXHIBITS, FINANCIAL STATEMENT SCHEDULES ________AND REPORTS ON FORM 8-K________ 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. (b) 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 (c) Reports on Form 8-K A Form 8-K was filed August 7, 1996, to report a change in the fiscal year end from May 31 to March 31, taking effect March 31, 1997. This change was approved by the Board of Directors on July 24, 1996. (d) 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 (9) 3(ii).2 By-Laws of Big Boulder Corporation as amended through July 25, 1990 (9) PAGE 10 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8K Legend for Documents Incorporated By Reference Instruments Defining the Rights of Security Holders including Indentures 4.1 Specimen Certificate for Shares of (1) Common Stock 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) 10.1.15 First Mortgage, American International Life Assurance Company - Dreshertown Plaza Shopping Center (9) 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 Agreement with Executive Officers and Director 10.4.1 Stock Option - Michael J. Flynn (10) 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 PAGE 11 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - (Continued) Subsidiaries of the Registrants - (Continued) 21.1 List of the Subsidiaries of the Registrants (6) (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 27, 1993 as an Exhibit to Form 10-K and incorporated herein by reference (10) Filed August 26, 1994 as an Exhibit to Form 10-K and incorporated herein by reference (11) 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. PAGE 12 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 ______________________ J. Anthony V. Townsend Director ___________ PAGE 13 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 12 of the 1997 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 12, 1997 PAGE 14 COMBINED SCHEDULE III. REAL ESTATE AND ACCUMULATED DEPRECIATION March 31, 1997
Column A Column B Column C Column D Initial Cost Cost Capitalized to Company Subsequent to Acquisition Encum- Buildings & Description brances Land Improvements Improvements Land located in N.E.Penna. including various improvements 1,867,766 49,915 7,196,696 Corporate Building 282,918 151,594 Buildings Leased to Others Eastern Penna. Exchanged Asset- Shopping Center 5,700,000 780,700 4,554,235 0 Other 0 0 0 403,450 Laurens,S.C. 1,600,000 276,000 1,914,470 0 TOTAL 7,300,000 2,924,466 6,801,538 7,751,740 Column E Column F Gross Amount at which Carried Land located at Close of Period (1)(2) in N.E.Penna. Build- Accumu- including ing & lated various Improve- Deprecia- improvements Land ments Total tion 1,867,766 7,246,611 9,114,377 4,096,597 Corporate Building 434,512 434,512 192,551 Buildings Leased to Others Eastern Penna. Exchanged Asset- Shopping Center 780,700 4,554,235 5,334,935 2,254,112 Other 0 403,450 403,450 69,715 Laurens, S.C. 276,000 1,914,470 2,190,470 404,165 TOTAL 2,924,466 14,553,278 17,477,744 7,029,213
PAGE 15
Column G Column H Column I Life on Date of which Depre- Construc- Date ciation in tion Acquired Latest income Statement is Computed Land located in N.E. PA including various improvements Various Various 5 to 30 Years Corporate Building 1982 10 to 30 Years Buildings leased to Others Others Eastern Penna. Exchanged Asset- Shopping N/A Various 5 to 30 Years Other N/A Various 5 to 30 Years Laurens, S.C. N/A Various 5 to 30 Years TOTAL (1) Activity for the fiscal years ended March 31, 1997, May 31, 1996 & May 31, 1995 is as follows: 1997 1996 1995 Balance at beginning of year 16,878,154 16,875,710 16,934,242 Additions during year: Improvements 599,590 181,260 0 (reclassify) (178,816) (54,845) 599,590 2,444 (54,845) 17,477,744 16,878,154 16,879,397 Deductions during year: Cost of real estate sold 0 0 3,687 Balance at end of year 17,477,744 16,878,154 16,875,710
(2) The aggregate cost for Federal Income Tax purposes at March 31, 1997 is $14,308,789 (3) Activity for the fiscal years ended March 31, 1997, May 31, 1996 & May 31, 1995 is as follows:
1997 1996 1995 Balance at beginning of year 6,602,457 5,996,856 5,334,921 Additions during year: Current year depreciation 426,756 605,601 661,935 Less retirements 0 0 0 Balance at end of year 7,029,213 6,602,457 5,996,856
PAGE 16 EX-13 2 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 areas 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 hosted 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, firework 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 an 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 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:
1997 1996 1995 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 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 for each of the two years in the period 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 EX-27 3 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 10-MOS MAR-31-1997 MAR-31-1997 2,084,101 303,096 430,628 0 249,590 3,714,122 49,014,391 28,962,573 23,802,737 2,255,203 0 0 0 2,004,014 0 23,802,737 16,038,000 16,038,000 0 14,604,821 0 0 748,531 741,715 254,909 0 0 0 0 486,806 .24 0
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