-----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, FY6razj+zDGQtSiQHjtFqozKtPlFOP11u7fwHNt1IrfjYxsxiDQepCwX+Dm3aIex aG8MSNLrBeUMStB5Fm1cLg== 0000012779-01-500005.txt : 20010702 0000012779-01-500005.hdr.sgml : 20010702 ACCESSION NUMBER: 0000012779-01-500005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010629 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: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-02844 FILM NUMBER: 1672179 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 1 ek01.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (X) ANNUAL REPORTS* PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES ACT OF 1934 (FEE REQUIRED) For the fiscal year ended MARCH 31, 2001 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to 0-2844 (Blue Ridge) Commission File No. 0-2843 (Big Boulder) BLUE RIDGE REAL ESTATE COMPANY BIG BOULDER CORPORATION (exact name of Registrants as specified in their charters) State or other jurisdiction of incorporation or organization: Pennsylvania 24-0854342 (Blue Ridge) I.R.S. Employer Identification Number: 24-0822326 (Big Boulder) Address of principal executive office: Blakeslee, Pennsylvania Zip Code: 18610 Registrants' telephone number, including area code:570-443-8433 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, without par value, stated value $.30 per combined share* Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days: Yes _X No___ 1 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K/A 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 15, 2001, was $18,222,710. The market value per share is based upon the per share cost of shares as indicated over the counter on March 31, 2001. 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 15, 2001 Common Stock, without par value 1,918,180 Shares stated value $.30 per combined share DOCUMENTS INCORPORATED BY REFERENCE Specified portions of the Companies' 2001 Annual Report to Shareholders are incorporated by reference into Part II hereof. Specified portions of the Companies' definitive Proxy Statement for the 2001 Annual Meetings of Shareholders to be filed pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this report and is incorporated herein by reference. -------------------- *Under a Security Combination Agreement between Blue Ridge Real Estate Company ("Blue Ridge") and Big Boulder Corporation ("Big Boulder") (the "Corporations") and under the By-Laws of the Corporations, shares of the Corporations are combined in unit certificates, each certificate representing the same number of shares of each of the Corporations. Shares of each Corporation may be transferred only together with an equal number of shares of the other Corporation. For this reason, a combined Blue Ridge /Big Boulder Form 10-K is being filed. Except as otherwise indicated, all information applies to both Corporations. FORM 10-K PART I ITEM 1. BUSINESS BLUE RIDGE REAL ESTATE COMPANY Blue Ridge Real Estate Company ("Blue Ridge"), which was incorporated in Pennsylvania in 1911, is believed to be one of the largest owners of investment property in Northeastern Pennsylvania. It owns 18,709 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 225-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 rec eives revenue from a land lease to a Burger King franchise, and leased space on a 196 foot communication tower. 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 26 full-time employees. Jack Frost Mountain Company, which operates the Jack Frost Mountain Ski Area, has 54 full-time employees and during the skiing season there are approximately 500 additional employees. Northeast Land Company has 24 full-time employees. 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 Mountains's Edge. 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, and operate the recreational facilities as they are located within the Big Boulder Lake tract. 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 20 full-time employees. During the skiing season, there are approximately 525 additional employees. INDUSTRY SEGMENT INFORMATION Information with respect to business segments is presented in Note 11 to the Registrants' financial statements included in Item 8. The quarterly results of operations for 2001, 2000 and 1999 reflect the cyclical nature of the Companies' business since (a) the Companies' two ski facilities operate principally during the months of December through March and (b) land dispositions occur sporadically and do not follow any pattern during the fiscal year. Costs and expenses, net of revenues received in advance attributable to the ski facilities for the months of April through November, are deferred and recognized as revenue and operati ng expenses, ratably, over the operating period. ITEM 2. PROPERTIES A. BLUE RIDGE REAL ESTATE COMPANY The physical properties of Blue Ridge consist of approximately 18,812 acres owned by Blue Ridge and Northeast Land Company, the Jack Frost 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, five 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 12,000 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 $21,218,879, 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, 2001 the out-standing debt on the Jack Frost Mountain Ski Area was $930,012. 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 31,2001. 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, 2039. At March 31, 2001 a mortgage totaling $1,291,719 was outstanding on this property. The Dreshertown Plaza Shopping Center, Dresher, Montgomery County, Pennsylvania, was acquired in July, 1986 for consideration of $4,592,579. The center consists of approximately 101,233 square feet located on approximately 15 acres of land. On March 31, 2001, the center was 97% occupied under leases expiring on various dates from April 30, 2001 to October 31, 2020. The total capital investment in the shopping center is $5,459,641. At March 31, 2001, a mortgage totaling $4,941,000 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 225 campsites, 75 with water and electric, 25 with rustic cabins and the remaining 125 are wilderness sites. Its operating period is from April 1 through September 30. At March 31, 2001, the Companies' investment in this facility was $930,920. Blue Ridge owns 18,709 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, 2001 was $1,227,655 with outstanding debt of $102,503. 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, motocross/B.M.X. and 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 and a 196 foot communication tower. For the fiscal year ended March 31, 2001, revenues from operations of Blue Ridge and its subsidiaries amounted to $12,367,702. Approximately 48% of this revenue or $5,992,023 was derived from the Jack Frost Mountain Ski Area which operated 122 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 Mountain's Edge. SKI FACILITIES The Big Boulder Ski Area's physical properties have been leased to Lake Mountain Company since June 1, 1983, and are located in Kidder Township, Carbon County, Pennsylvania. Big Boulder Ski Area commenced operations in 1947. The Big Boulder Ski Area contains fourteen slopes and trails including a snowboard slope, snowtubing hill, five double 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 approximatel y 90 acres owned by Big Boulder. The total capital investment in the ski area is $13,470,981. At March 31, 2001, the outstanding debt on the Big Boulder Ski Area was $500,114. 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, 2001, was $1,511,847 with an outstanding debt of $269,293 at that date. Big Boulder Corporation constructed the Mountain's Edge 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. The capital investment in the facility at March 31, 2001 was $1,594,192. Big Boulder owns 929 acres of land which are located in the Pocono Mountains. The Big Boulder Lake Club includes a 175 acre lake, swimming pool, tennis courts, boat docks and accompanying buildings. For the fiscal year ended March 31, 2001, revenues from operations of Big Boulder amounted to $6,528,749. Approximately 81% of this revenue of $5,275,348 was derived from the Big Boulder Ski Area which operated 78 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 66 1991 Chairman of the Board Eldon D. Dietterick 55 1995 Secretary/Treasurer All officers of the Registrants serve for a one-year period or until their election at the first meeting of the Board of Directors after the Annual Meeting of Shareholders. Michael J. Flynn was elected Chairman of the Board of the Registrants on July 11, 1991. He is Vice Chairman of the Board of Kimco Realty Corporation since January 1996. Mr. Flynn serves as a Director of Kimco Realty Corporation. Mr. Flynn was formerly Chairman of the Board and President of Slattery Associates, Inc. and Director of Slattery Group, Inc. From 1987 to December 1995. Eldon D. Dietterick was appointed Secretary/Treasurer in October, 1998. He has been employed by the Registrants on a full-time basis since January 1985; he was appointed Secretary in October 1996. 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 12 of the Fiscal 2001 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 2001 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 13 and 14 of the Fiscal 2001 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 2001 Annual Report to Shareholders. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS _ON ACCOUNTING AND FINANCIAL DISCLOSURES_____ Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS The information concerning Directors required by Item 10 of Form 10-K is set forth under the caption "Election of Directors" in the Registrants' definitive Proxy Statement for the 2001 Annual Meetings of Shareholders to be filed pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this report and is incorporated herein by reference. The information concerning Executive Officers required by Item 10 of Form 10-K is set forth in Item 4A of this report. CERTAIN SIGNIFICANT EMPLOYEES OF THE REGISTRANTS Employed in Present Age __Position Since___ Carl V. Kerstetter, Director of Marketing 50 1991 Cynthia A. Barron, Controller 37 1996 Carl V. Kerstetter and Cynthia A. Barron 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 "Renumeration of Executive Officers and Directors" in the registrant's definitive Proxy Statement for the 2001 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 2001 Annual Meetings of Shareholders to be filed pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this report and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES ________AND REPORTS ON FORM 8-K________ A. (1) Financial statements included in Registrants' Fiscal 2001 Annual Report to Shareholders on Pages 2 through 12 are incorporated by reference. The Report of Independent Auditors for the combined financial statements appears on Page 15 of this Form 10-K. A. (2) Financial Statement Schedules The following is a list of financial statement schedules filed as part of this Annual Report on Form 10-K. The report of Independent Auditors for the financial statement schedule appears on Page 14 of this Form 10-K. All other schedules omitted herein are so omitted because either (1) they are not applicable, (2) the required information is shown in the financial statements, or (3) conditions are present which permit their omission, as set forth in the instructions pertaining to the content of financial statements: Schedules: III. Real Estate and Accumulated Depreciation A. (3) Exhibits, Including Those Incorporated by Reference The following is a list of Exhibits filed as part of this Annual Report on Form 10-K. Where so indicated by footnote, Exhibits that were previously filed are incorporated by reference. For Exhibits incorporated by reference, the location of the Exhibit in the previous filing is indicated in parentheses. Legend for Documents Incorporated Page Articles of Incorporation and By-Laws By Reference Number 3( 1).1 Articles of Incorporation (1) 3( 1).4 Articles of Amendment (2) 3(ii).1 By-Laws of Blue Ridge Real Estate Company as amended through July 25, 1990 (8) 3(ii).2 By-Laws of Big Boulder Corporation as amended through July 25, 1990 (8) Instruments Defining the Rights of Security ________Holders including Indentures_____ 4.1 Specimen Certificate for Shares of (1) Common Stock ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES ________AND REPORTS ON FORM 8-K________ -(Continued) Legend for Documents Incorporated By Reference 4.2 Security Combination Agreement (1) 4.3 Revised Specimen Unit Certificates for shares of common stock (7) Material Contracts Financial Agreements 10.1.1 Mortgage Relating to the Construction of the Jack Frost Mountain Ski Area (2) 10.1.2 Construction Loan - Jack Frost Mountain Ski Area (3) 10.1.3 Loan from PNC Bank, Wilkes-Barre (4) 10.1.4 First Mortgage, Principal Mutual, Building leased to Wal-Mart (8) 10.1.16 First Mortgage, First Union National Bank, Dreshertown Plaza Shopping Center, Montgomery County Acquisition of Properties 10.2.1 Acquisition of Dreshertown Plaza Shopping Center (6) 10.2.2 Acquisition of Building leased to Wal-Mart (8) Lease 10.3.1 Building leased to Wal-Mart (10) Agreement with Executive Officers and Director 10.4.1 Stock Option - Michael J. Flynn (9) Stock Option Agreement - Michael J. Flynn 13.1 The Registrants' Fiscal 2001 Annual Report to Shareholders, to the extent referred to in the responses to the Items of this Annual Report. 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 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, _______AND REPORTS ON FORM 8-K__________ - (Continued) (3) Filed August 27, 1975 as an Exhibit to Form 10-K and incorporated herein by reference (4) Filed February 7, 1975 as an Exhibit to Form 8-K and incorporated herein by reference (5) Northeast Land Company - Incorporated in Commonwealth of Pennsylvania Jack Frost Mountain Company - Incorporated in Commonwealth of Pennsylvania Lake Mountain Company - Incorporated in Commonwealth of Pennsylvania Big Boulder Lodge, Inc. - Incorporated in Commonwealth of Pennsylvania BRRE Holdings, Inc. - Incorporated in State of Delaware BBC Holdings, Inc. - Incorporated in State of Delaware (6) Filed August 28, 1987 as an Exhibit to Form 10-K and incorporated herein by reference (7) Filed August 28, 1990 as an Exhibit to Form 10-K and incorporated herein by reference (8) Filed August 26, 1991 as an Exhibit to Form 10-K and incorporated herein by reference (9) Filed August 26, 1994 as an Exhibit to Form 10-K and incorporated herein by reference (10) Filed August 29, 1995 as an Exhibit to Form 10-K and incorporated herein by reference. Copies of Exhibits are available to Shareholders by contacting Eldon D. Dietterick, Secretary, Blakeslee,PA 18610. A charge of $.25 per page to cover the Registrants' expenses will be made. B. Reports on Form 8-K None SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized. BLUE RIDGE REAL ESTATE COMPANY BLUE RIDGE REAL ESTATE COMPANY BIG BOULDER CORPORATION BIG BOULDER CORPORATION By:__/S/_____________________ By: /S/______________________ Eldon D. Dietterick Cynthia A. Barron Secretary/Treasurer Chief Accounting Officer Dated:___6-29-01____ Dated:___6-29-01 ____ 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 Michael J. Flynn, 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___ ___/S/_________________ __6-29-01__ Michael J. Flynn Chairman of the Board & President Principal Executive Officer ___/S/__________________ __6-29-01__ Eldon D. Dietterick Secretary/Treasurer ___/S/_________________ __6-29-01__ Milton Cooper Director ___/S/_________________ __6-29-01__ Allen J. Model Director ___/S/_________________ __6-29-01__ Wolfgang Traber Director INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES To the Board of Directors of Blue Ridge Real Estate Company and Big Boulder Corporation: We have audited the combined financial statements of Blue Ridge Real Estate Company and subsidiaries and Big Boulder Corporation and subsidiaries (the "Companies") as of March 31, 2001, and for the year then ended, and have issued our report thereon dated June 15, 2001; such financial statements and report are included in your 2001 Annual Report to Shareholders and are incorporated herein by reference. Our audit also included the combined financial statement schedules of the Companies listed in Item 14. These financial statement schedules are the responsibility of the Companies' management. Our responsibility is to express an opinion based on our audit. In our opinion, such combined financial statement schedules, when considered in relation to the basic combined financial statements taken as a whole, present fairly in all material respects the information set therein. /S/ Parente Randolph, P.C. June 15, 2001 Wilkes-Barre, Pennsylvania INDEPENDENT AUDITORS' REPORT To the Shareholders of Blue Ridge Real Estate Company and Big Boulder Corporation: We have audited the combined balance sheets of Blue Ridge Real Estate Company and subsidiaries and Big Boulder Corporation and subsidiaries (the "Companies") as of March 31, 2001 and 2000, and the related combined statements of operations and earnings retained in the business and cash flows for the years then ended. 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. The combined fi nancial statements of the Companies as of March 31, 1999 were audited by other auditors whose report dated June 4, 1999, expressed an unqualified opinion on those statements. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 managemen t, 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 2001 and 2000 combined financial statements referred to above present fairly, in all material respects, the financial position of Blue Ridge Real Estate Company and subsidiaries and Big Boulder Corporation and subsidiaries as of March 31, 2001 and 2000, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. /S/ Parente Randolph, P.C. Wilkes-Barre, Pennsylvania June 15, 2001 REPORT OF INDEPENDENT ACCOUNTANTS To Shareholders of Blue Ridge Real Estate Company and Big Boulder Corporation In our opinion, the accompanying combined balance sheet and the related combined statements of operations and earnings retained in the business and cash flows present fairly, in all material respects, the financial position of Blue Ridge Real Estate Company and subsidiaries and Big Boulder Corporation and subsidiaries (the "Companies") at March 31, 1999, and the results of their operations and their cash flows for the years ended March 31, 1999 and 1998 in conformity with accounting principles generally ac cepted in the United States. 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 of these statements in accordance with auditing standards generally accepted in the United States, which 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 examinin g, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /S/ PricewaterhouseCoopers LLP June 4, 1999 Philadelphia, Pennsylvania REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To the Board of Directors of Blue Ridge Real Estate Company and Big Boulder Corporation Our audits of the combined financial statements referred to in our report dated June 4, 1999 appearing in the 1999 Annual Report to Shareholders of Blue Ridge Real Estate Company and Big Boulder Corporation (which report and combined financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the combined financial statements schedules listed in Item 14 (a)(2) of the Form 10-K. In our opinion, these combined financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related combined financial statements. /S/ PricewaterhouseCoopers LLP June 4, 1999 Philadephia, Pennsylvania
COMBINED SCHEDULE III. REAL ESTATE AND ACCUMULATED DEPRECIATION March 31, 2001 Column A Column B Column C Column D Initial Cost Cost Capitalized to Company Subsequent To Acquisition Buildings & Description Encumbrances Land Improvements Improvements Land located in N E PA including various improvements 1,867,766 49,915 5,485,623 Corporate Building 282,918 187,989 Buildings Leased to Others Eastern PA Exchanged Asset- Shopping Center 5,700,000 780,700 4,554,235 124,706 Other 0 0 0 2,436,810 Laurens,SC 1,600,000 276,000 1,914,470 0 TOTAL 7,300,000 2,924,466 6,801,538 8,235,128
Column E Column F Gross Amount at which Carried at Close of Period (1)(2) Land located in N E PA including Building Accumulated Various improvements Land Improvements Total Depreciation 1,868,506 5,534,798 7,403,304 2,929,206 Corporate Building 470,907 470,907 267,686 Buildings Leased to Others Eastern PA Exchanged Asset- Shopping Center 780,700 4,678,941 5,459,641 2,785,328 Other 0 2,436,810 2,436,810 1,316,951 Laurens, SC 276,000 1,914,470 2,190,470 659,427 TOTAL 2,925,206 15,035,925 7,961,131 7,958,599
Column G Column H Column I Life on which Depreciation in Date of Date latest income Contstruction Acquired Statement is computed Land located in NE PA Including various improvements Various Various 5 to 30 Yrs Corporate Building 1982 10 to 30 Yrs Buildings leased to others Eastern PA Exchanged Asset Shopping Center N/A Various 5 to 30 Yrs Other N/A Various 5 to 30 Yrs Laurens, SC N/A Various 5 to 30 Yrs TOTAL (1) Activity for the fiscal years ended March 31, 2001, March 31, 2000 & March 31, 1999 is as follows: 2001 2000 1999 Balance at beginning of year 17,012,095 16,159,756 15,927,399 Additions during year: Improvements 426,502 418,407 232,439 (reclassify) 523,738 434,015 0 17,962,335 17,012,178 16,159,838 Deductions during year: Cost of real estate sold 1,204 83 82 Balance at end of year 17,961,131 17,012,095 16,159,756 (2) The aggregate cost for Federal Income Tax purposes at March 31, 2001 is $16,498,499. (3) Activity for the fiscal years ended March 31, 2001, March 31, 2000 & March 31, 1999 is as follows: 2001 2000 1999 Balance at beginning of year 7,472,074 6,754,807 6,366,443 Additions during year: (Reclassification) 36,316 304,923 0 Current year depreciation 450,209 412,344 388,364 Less retirements 0 0 0 Balance at end of year 7,958,599 7,472,074 6,754,807 BLUE RIDGE REAL ESTATE COMPANY BIG BOULDER CORPORATION To Our Shareholders, Year 2001 presented a number of challenges and opportunities for our company. The Companies report net income of $252,532 or $.13 per combined share for fiscal 2001 compared to $480,640 and $.24 for the previous year. Financial results fell short of expectations resulting in the re-evaluation of key management positions and structuring the company to meet future growth. Strategic Priorities for 2002 The management team has established the following priorities for the year that will enable our company to be more profitable. Strengthen Customer Service. Implement customer-training programs for employees and management to improve the quality of services. Maximize current facilities. Additional seating in both lodges, expansion of the Jack Frost Mountain ski rental shop, food service outlets, and construction of a Terrain Park at Big Boulder Ski Area are some of the major improvements planned for next ski season. Keep Building the Team. Keep motivating our dedicated team of employees and managers. Many have valuable experiences in the ski resort and real estate industry. We have enhanced our human resources department to maximize the performance of our current employees and attract a qualified staff. Improve Profit Margin. Accounting policies and controls have been implemented by management to allow for close monitoring of operating costs. Capture Internet Marketing Advantages. Maintain technological leadership by using the Internet for: * Providing information about the activities and events, accommodations, snow condition reports and real estate opportunities. * Introducing an on-line reservation system for ski / snowboard rental equipment and lift tickets prior to arrival at the resort. Profit Center Revenue Enhancement. Winter sports remain our primary business, however, we will continue to investigate new potential profit centers. All existing profit centers will be evaluated as to their contribution to the company. Develop New Business Opportunities. Future development opportunities and real estate ventures for the companies' large landholdings are being investigated. Management will continue to monitor the local real estate market and outline a strategy for moving forward. The growth and success of our companies is a result of teamwork. I would like to thank our dedicated employees for helping to make the company profitable. I am looking forward to the coming year to grow the Company further, improve its economic success and build shareholder value. Michael J. Flynn Chairman of the Board and President Blakeslee, Pennsylvania June 15, 2001
BLUE RIDGE REAL ESTATE COMPANY AND SUBSIDIARIES AND BIG BOULDER CORPORATION AND SUBSIDIARIES COMBINED BALANCE SHEETS March 31, 2001 and 2000 ASSETS 2001 2000 Current Assets: Cash and cash equivalents (all funds are interest bearing) $2,628,839 2,553,510 Accounts receivable 429,653 448,838 Inventories 141,611 213,215 Deferred tax asset 665,095 410,186 Prepaid expenses and other current assets 403,313 620,284 Total current assets 4,268,511 4,246,033 Properties: Land, principally unimproved (19,741 and 19,873, respectively, acres per land ledger) 1,868,505 1,869,709 Land improvements, buildings and equipment 53,754,045 52,025,096 55,622,550 53,894,805 Less accumulated depreciation & amortization 35,597,696 33,774,181 20,024,854 20,120,624 $24,293,365 $24,366,657 LIABILITIES AND SHAREHOLDERS' EQUITY 2001 2000 Current liabilities: Current installments of long-term debt $757,228 $842,152 Accounts and other payables 549,847 410,430 Accrued claims 80,433 46,601 Accrued income taxes 67,387 293,113 Accrued pension expense 627,042 494,837 Accrued liabilities 1,087,851 659,800 Deferred revenue 316,753 145,169 Total current liabilities 3,486,541 2,892,102 Long-term debt, less current installments 7,277,413 7,976,642 Deferred income taxes 2,442,178 2,560,131 Other non-current liabilities 204,321 71,730 Deferred income non-current 515,631 502,433 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 10,283,875 10,031,343 12,405,067 12,152,535 Less cost of 277,221 and 250,790 shares of capital stock in treasury as of March 31, 2001 and 2000, respectively 2,037,786 1,788,916 10,367,281 10,363,619 $24,293,365 $24,366,657
The accompanying notes are an integral part of the combined financial statements.
BLUE RIDGE REAL ESTATE COMAPNY AND SUBSIDIARIES AND BIG BOULDER CORPORATION AND SUBSIDIARIES COMBINED STATEMENTS OF OPERATIONS AND EARNINGS RETAINED IN THE BUSINESS for the years ended March 31, 2001,2000 & 1999 2001 2000 1999 Revenues: Ski operations $11,267,371 $11,565,643 $11,124,018 Real estate management 5,761,390 5,417,962 4,926,533 Rental income 1,867,690 1,903,314 1,736,929 18,896,451 18,886,919 17,787,480 Costs and expenses: Ski operations 11,246,003 11,135,115 11,293,011 Real estate management 4,968,664 4,798,647 4,230,279 Rental income 950,258 936,870 868,536 General and administration 1,768,375 1,084,649 1,064,167 18,933,300 17,955,281 7,455,993 Income (loss) from operations (36,849) 931,638 331,487 Other income (expense): Interest and other income 866,127 620,203 246,745 Interest expense (736,865) (732,201) (698,913) 129,262 (111,998) (452,168) Income (loss)before income taxes 92,413 819,640 (120,681) Provision(credit)for income taxes: Current 259,417 382,000 144,357 Deferred (419,536) (43,000) (185,839) (160,119) 339,000 (41,482) Net income (loss) 252,532 480,640 (79,199) Earnings retained in business: Beginning of year 10,031,343 9,550,703 9,629,902 End of year $10,283,875 $10,031,343 $9,550,703 Basic and diluted earnings (loss)per weighted average combined share $0.13 $0.24 ($0.04)
The accompanying notes are an integral part of the combined financial statements.
BLUE RIDGE REAL ESTATE COMPANY AND SUBSIDIARIES AND BIG BOULDER CORPORATION AND SUBSIDIARIES COMBINED STATEMENTS OF CASH FLOWS For the years ended March 31, 2001, 2000 & 1999 2001 2000 1999 Cash Flows From Operating Activities: Net income (loss) $252,532 $480,640 ($79,199) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,969,154 1,921,237 2,003,891 Deferred income taxes (372,862) (43,000) (102,471) Gain on sale of assets (528,242) (19,006) (4,930) Changes in operating assets and liabilities: Accounts receivable 19,185 110,840 35,178 Refundable income taxes 0 0 8,614 Prepaid expenses & other current assets 288,575 161,692 (251,671) Accounts payable & accrued liabilities 866,096 (324,934) 497,289 Accrued income taxes (225,726) 124,596 (99,368) Deferred revenue 171,584 (111,308) 91,609 Net cash provided by operating activities 2,440,296 2,300,757 2,098,942 Cash Flows From (used in) Investing Activities: Deferred income 13,198 254,246 248,187 Proceeds from disposition of assets 529,446 19,089 16,150 Additions to properties (1,874,588) 2,496,246) (1,763,597) Net cash used in investing activities (1,331,944) (2,222,911)(1,499,260) Cash Flows From (used in) Financing Activities: Borrowings under short-term financing 2,050,000 2,550,000 1,950,000 Payment of short- inancing (2,050,000) (2,550,000)(1,950,000) Additions to long-term debt 0 800,000 0 Payment of long-term debt (784,153) (781,111) (491,004) Purchase of treasury stock (248,870) (250,413) (201,267) Net cash used in financing activities (1,033,023) (231,524) (692,271) Net increase (decrease) in cash & cash equivalents 75,329 (153,678) (92,589) Cash & cash equivalents, beginning of year 2,553,510 2,707,188 2,799,777 Cash & cash equivalents, end of year $2,628,839 $2,553,510 $2,707,188 Supplemental disclosures of cash flow information: Cash paid during year for: Interest $736,054 $732,458 $714,107 Income taxes $427,516 $335,395 $214,100
The accompanying notes are an integral part of the combined financial statements. NOTES TO COMBINED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BASIS OF COMBINATION: The combined financial statements include the accounts of Blue Ridge Real Estate Company (Blue Ridge) and its wholly-owned subsidiaries, Northeast Land Company, Jack Frost Mountain Company, and BRRE Holdings, Inc.; and Big Boulder Corporation (Big Boulder) and its wholly-owned subsidiaries, Lake Mountain Company and BBC Holdings, Inc. Under a Security Combination Agreement between Blue Ridge and Big Boulder and under the bylaws of both Companies, shares of the Companies are combined in unit certificates, each certificate representing concurrent ownership of the same number of shares of each company; shares of each company may be transferred only together with an equal number of shares of the other company. All significant intercompany accounts and transactions are eliminated. DISPOSITION OF LAND AND RESORT HOMES: The Companies recognize income on the disposition of real estate in accordance with the provisions of Statement of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate" (SFAS 66). Down payments of less than 20% are accounted for as deposits as required by SFAS No 66. The costs of developing land for resale as resort homes and the costs of constructing certain related amenities are allocated to the specific parcels to which the costs relate. Such costs, as well as the costs of construction of the resort homes, are charged to operations as sales occur. Land held for resale and resort homes under construction are stated at lower of cost or market. PROPERTIES AND DEPRECIATION: Properties are stated at cost. Depreciation and amortization is provided principally using the straight-line method over the following years: Land improvements 10-30 Buildings 3-30 Equipment and furnishings 3-20 Ski facilities: Land improvements 10-30 Buildings 5-30 Machinery and equipment 5-20 Upon sale or retirement of depreciable property, the cost and related accumulated depreciation are removed from the related accounts, and resulting gains or losses are reflected in income. Interest, real estate taxes, and insurance costs, including those costs associated with holding unimproved land, are normally charged to expense as incurred. Interest cost incurred during construction of facilities is capitalized as part of the cost of such facilities. Maintenance and repairs are charged to expense, and major renewals and betterments are added to property accounts. Impairment losses are recognized in operating income as they are determined. The Companies review their long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. In that event, the Companies calculate the expected future net cash flows to be generated by the asset. If those net future cash flows are less than the carrying value of the asset, an impairment loss is recognized in operating income. The impairment loss is the differenc e between the carrying value and the fair value of the asset. No such losses were recognized in the three years ended March 31, 2001. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): 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. DEFERRED REVENUE: Deferred revenues include revenues billed in advance for services and dues which are not yet earned. INCOME TAXES: The Companies' account for income taxes utilizing the asset and liability method of recognizing the tax consequence of transactions that have been recognized for financial reporting or income tax purposes. Among other things, this method requires current recognition of the effect of changes in statutory tax rates on previously provided deferred taxes. Valuation allowances are established, when necessary, to reduce tax assets to the amount expected to be realized. Blue Ridge, including its subsidiaries, and Big Boulder, including its subsidiaries, report as separate entities for federal income tax purposes. State income taxes are reported on a separate company basis. DEFERRED INCOME: Amounts received under a contract with the Pennsylvania Department of Transportation for reimbursement of the cost of a constructed asset are deferred. The amounts will be recognized as income over the period in which depreciation on those assets is charged. This asset has not yet been placed in service. ADVERTISING COSTS: Advertising costs are expensed when incurred. Advertising expense for the years ended March 31, 2001, 2000 and 1999 was $1,538,647, $1,488,268 and $1,580,385, respectively. 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. STATEMENT OF CASH FLOWS: For purposes of reporting cash flows, the Companies consider cash equivalents to be all highly liquid investments with maturities of three months or less when acquired. CONCENTRATION OF CREDIT RISK: Financial instruments which potentially subject the Companies to concentration of credit risk consist principally of temporary cash investments. The Companies' temporary cash investments are held by financial institutions. The Companies have not experienced any losses related to these investments. EARNINGS (LOSS) PER SHARE: Basic earnings (loss) per share is calculated based on the weighted-average number of shares outstanding. Diluted earnings (loss) per share includes the dilutive effect of stock options. RECLASSIFICATION: Certain reclassifications have been made to conform to current year presentation. RECENT ACCOUNTING PRONOUNCEMENT: The Financial Accounting Standards Board issued Statement of Financial Standard ("SFAS") No. 133, "Accounting for Derivative Financial Instruments and Hedging Activities." The statement establishes accounting and reporting standards for derivative instruments including certain derivative instruments imbedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those inst ruments at fair value. SFAS No. 133 is effective for the Companies' fiscal year beginning April 1, 2001, and will not be applied retroactively to the Companies' financial statements of prior periods. The adoption of SFAS No. 133 will have no material effect on the Companies' financial statements. 2. CONDENSED FINANCIAL INFORMATION: Condensed financial information of the constituent Companies, Blue Ridge and its subsidiaries and Big Boulder and its subsidiaries, at March 31, 2001, 2000 and 1999 and for each of the periods then ended is as follows:
Blue Ridge and Subsidiaries 2001 2000 1999 FINANCIAL POSITION: Current assets $1,666,123 $1,583,756 $1,839,683 Total assets 16,687,506 16,527,534 16,096,555 Current liabilities 3,125,297 2,451,318 2,403,281 Shareholders'equity 4,404,959 4,445,461 4,384,868 OPERATIONS: Revenues 12,367,702 11,798,218 11,468,148 Income(loss)before taxes (75,807) 464,004 (185,036) Provision(credit)for income taxes (284,176) 153,000 (71,540) Net income (loss) 208,369 311,004 (113,496) Big Boulder and Subsidiaries 2001 2000 1999 FINANCIAL POSITION: Current assets $2,602,388 $2,662,277 $2,385,577 Total assets 7,605,859 7,839,123 7,711,200 Current liabilities 361,244 440,784 491,654 Shareholders'equity 5,962,322 5,918,158 5,748,524 OPERATIONS: Revenues 6,528,749 7,088,701 6,319,332 Income(loss)before taxes 168,220 355,636 64,355 Provision(credit)for income taxes 124,057 186,000 30,058 Net income (loss) 44,163 169,636 34,297
3. SHORT-TERM FINANCING: At March 31, 2001, Blue Ridge had an unused line of credit agreement with a bank aggregating $2,000,000 available for short-term financing, expiring August 31, 2001, which management expects to be renewed. The line of credit bears interest at .25% less than the prime rate (7.75% at March 31,2001). The agreement requires, amoung other things, that the Companies comply with minimum current and total liabilities to tangible net worth ratios and meet a minumum debt service coverage ratio. The companies have met or obtained waivers for each of these covenants. 4. LONG-TERM DEBT: Long-term debt as of March 31, 2001 and 2000 consists of the following: 2001 2000 Mortgage note payable to bank, interest is LIBOR plus 160 basis points (6.655% at March 31, 2001) payable monthly with Principal reduction of $18,000 through August 2003 4,941,000 5,138,999 Mortgage note payable to bank, interest at 80% of the bank's prime rate (6.4% at March 31, 2001) payable in monthly installments of $24,187 plus interest through Fiscal 2005 1,281,922 1,572,168 Mortgage note payable to insurance company, interest fixed at 10.5% payable in monthly installments of $15,351 including interest through Fiscal 2014 1,291,719 1,337,642 Mortgage note payable to bank, interest at 7% payable monthly with principle reduction at $32,500 per month December to March through 2001 0 129,985 Mortgage note payable to bank, interest at 6.84% payable monthly with principal reduction at $40,000 per month December to March through 2004 520,000 640,000 8,034,641 8,818,794 Less current installments 757,228 842,152 $7,277,413 $7,976,642 Properties at cost, which have been pledged as collateral for long-term debt, include the following at March 31, 2001: Investment properties leased to others $7,650,111 Ski facilities $17,418,087 The aggregate amount of long-term debt maturing in each of the five years ending subsequent to March 31, 2001, is as follows: 2002-$757,228; 2003-$5,231,846; 2004-$513,085; 2005-$360,010; 2006-$198,395; Thereafter $974,077.
5. INCOME TAXES: The provision (credit) for income taxes is as follows: 2001 2000 1999 Currently payable Federal $259,417 $382,000 $141,749 State 0 0 2,608 259,417 382,000 144,357 Deferred: Federal (315,926) (43,000) (185,839) State (103 610) 0 0 (419,536) (43,000) 185,839) ($160,119) $339,000 ($41,482) A reconciliation between the amount computed using the statutory federal income tax rate and the provision (credit) for income taxes is as follows: 2001 2000 1999 Computed at statutory rate $31,420 $279,000 ($41,032) State net operating losses subject to valuation allowance 0 46,000 0 State income taxes, net of federal income tax 0 0 1,721 Prior year overaccrual (107,367) 0 0 Other 3,919 6,000 5,228 AMT (utilization) tax (88,091) 8,000 (7,399) Provision(credit)for income Taxes ($160,119) $339,000 ($41,482) The components of the deferred tax assets and liabilities as of March 31, 2001 and 2000 are as follows: 2001 2000 Current deferred tax asset: Accrued expenses $266,379 52,472 Deferred revenues 79,431 0 State net operating losses and AMT credit carryforward 631,723 653,977 Contribution carryforward 0 1,073 Valuation allowance (312,438) (297,336) Current deferred tax asset 665,095 410,186 Noncurrent deferred tax liability Depreciation (2,673,786) (2,761,406) Deferred income, sewer line and tower 231,608 201,275 Noncurrent deferred tax liability (2,442,178) (2,560,131) Deferred income tax liability, net ($1,777,083) ($2,149,945)
At March 31, 2001, the Companies have $296,957 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 $3,351,014 which will expire by 2011. The valuation allowance increased by $15,102 during Fiscal 2001 due to additional state net operating losses which are not expected to be utilized. 6. PENSION BENEFITS:
Assumptions 2001 2000 1999 Discount Rates used to determine projected benefit obligations as of March 31, 7.25% 7.50% 6.75% Expected long-term rates of return on assets 8.50% 8.50% 8.50% Rates of increase in compensation levels 5.00% 5.00% 5.00%
Change in Benefit Obligation 2001 2000 Benefit obligation at beginning of year $3,065,215 $3,102,102 Service cost(net of expenses) 213,365 219,936 Interest cost 220,819 208,672 Plan amendments 0 0 Actuarial (gain) loss 75,268 (322,519) Benefit payments (151,811) (139,976) Benefit obligation at end of year $3,422,856 $3,065,215 6. PENSION BENEFITS (continued): Change in Plan Assets 2001 2000 Fair value of plan assets at beginning of year $3,473,821 $3,145,730 Actual return on plan assets (311,801) 491,996 Employer contributions 0 0 Benefits paid (151,811) (139,976) Actual expenses paid during the year (26,706) (23,929) Fair value of plan assets at end of year $2,983,503 $3,473,821 Reconciliation of Funded Status of the Plan 2001 2000 Funded status at end of year ($439,353) $408,606 Unrecognized transition obligation 103,172 111,652 Unrecognized net prior service cost 9,270 9,881 Unrecognized net actuarial gain (300,131) (1,025,015) Net amount recognized at end of year ($627,042) ($494,876)
Components of Net Periodic Benefit Cost 2001 2000 1999 Service Cost $238,365 $240,936 $240,717 Interest Cost 220,819 208,672 186,169 Expected return of plan 287,388 282,286 250,562 Net amortization and deferral: Amortization of transition obligation 8,480 8,480 8,480 Amortization of prior service cost 611 611 611 Amortization of accumulated (48,721) (8,374) (19,911) Net amortization and deferral $(39,630) $717 ($10,820) Total net periodic pension cost $132,166 $168,039 $165,504
7. PROPERTIES: Properties consist of the following at March 31, 2001 and 2000: 2001 2000 Land, principally unimproved $1,868,505 $1,869,709 Land improvements 5,534,798 4,626,270 Corporate buildings 470,907 470,907 Buildings leased to others 10,147,329 10,076,083 Ski facilities: Land 4,552 4,552 Land improvements 7,902,133 8,769,371 Buildings 6,528,611 6,515,956 Machinery & equipment 19,676,762 19,163,807 Equipment & furnishings 3,488,953 2,398,150 55,622,550 53,894,805 Less accumulated depreciation and Amortization 35,597,696 33,774,181 $20,024,854 $20,120,624 Buildings leased to others include land of $1,056,700 at March 31, 2001, 2000 and 1999. 8. ACCRUED LIABILITIES: Accrued liabilities consist of the following at March 31, 2001 and 2000. 2001 2000 Accrued Payroll $693,347 $294,714 Accrued Security & Other Deposits 133,898 120,415 Accrued Professional Fees 140,223 29,505 Accrued - Miscellaneous 120,383 215,166 $1,087,851 $659,800
9. 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 3.03 years with options for renewal. A store has been net leased until January 2039. Information concerning rental properties and minimum future rentals under current leases as of March 31, 2001, is as follows: Properties Subject To Lease Accumulated Cost Depreciation Investment properties leased to others $7,962,043 $3,524,078 Land and land improvements 3,997,935 1,237,480 Minimum future rentals: Fiscal years ending March 31: 2002 1,682,814 2003 1,188,267 2004 1,042,048 2005 856,060 2006 851,491 Thereafter 15,410,234* $21,030,914 *Includes $1,401,750 under a land lease expiring in 2072 and $6,600,835 under a net lease for a store expiring in 2039. There were no contingent rentals included in income for Fiscal 2001, 2000 or 1999. Under an agreement with a management company relating to the shopping center, in the event of the termination of the management contract or the sale of the property, the management company is entitled to approximately 25% of the fair market value after satisfaction of certain obligations. 10. FAIR VALUE: The Companies have estimated the fair value of their financial instruments at March 31, 2001 and 2000 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 long-term 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 remain ing maturities. 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 2001 1st $1,647,042 $24,605 ($106,111) ($0.05) 2nd 2,875,633 537,481 575,832 0.29 3rd 4,082,883 56,840 (77,026) (0.04) 4th 10,290,893 (655,775) (140,163) (0.07) $18,896,451 $(36,849) $252,532 $0.13 2000 1st $1,531,989 ($83,551) ($87,119) ($0.05) 2nd 2,860,457 610,202 424,036 0.22 3rd 3,715,629 (77,467) (50,925) (0.03) 4th 10,778,84 482,454 194,648 0.10 $18,886,919 $931,638 $480,640 $0.24
The quarterly results of operations for 2001 and 2000 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 April through November, are deferred and recognized as revenue and operating expenses , ratably, over the operating period. The fourth quarter of Fiscal 2001 was impacted by a $467,000 severance accrual due to a change in management. 12. BUSINESS SEGMENT INFORMATION: The following information is presented in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." In accordance with SFAS No. 131, the Companies' business segments were determined from the Companies' internal organization and management reporting, which are based primarily on differences in services. The Companies and the subsidiaries, under SFAS No.131, operate in two business segments consisting of the following: SKI OPERATIONS: Two ski areas located in the Pocono Mountains of Northeastern Pennsylvania. REAL ESTATE MANAGEMENT/RENTAL OPERATIONS: Investment properties leased to others located in Eastern Pennsylvania and South Carolina, fees from managing investor-owned properties, principally resort homes, recreational club activities and services to the trusts that operate resort communities, sales of land held for resale and investment purposes, and rental of land and land improvements. Income or loss for each segment represents total revenue less operating expenses. General and administrative expenses are allocated to each business segment based on percentage of revenue. 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.
3/31/01 03/31/00 03/31/99 Revenues: Ski operations $11,267,371 $11,565,643 $11,124,018 Real estate management/ Rental operations 7,629,080 7,321,276 6,663,462 $18,896,451 $18,886,919 $17,787,480 Income:(loss) Ski operations $21,368 430,528 ($168,993) Real estate management/ Rental operations 1,710,158 1,585,759 1,564,647 $1,731,526 $2,016,287 $1,395,654 General & administrative expenses: Ski Operations ($1,061,025) ($661,636) ($670,425) Real estate management/ Rental operations (707,350) (423,013) (393,742) ($1,768,375) ($1,084,649) ($1,064,167) Interest and other income: Ski Operations $17,710 $13,995 $2,736 Real estate management/ Rental operations 848,417 606,208 244,009 $866,127 $620,203 $246,745 Interest expense: Ski operations ($161,016) ($170,898) ($141,467) Real estate management/ rental operations (575,849) (561,303) (557,446) ($736,865) ($732,201) ($698,913) Income (loss) before income taxes, $92,413 $819,640 ($120,681)
In Fiscal 2001, 2000 and 1999, no one customer represented 10% or more of total revenues. Identifiable assets, net of accumulated depreciation at March 31, 2001, 2000 and 1999 and depreciation expense and capital expenditures for the years then ended by business segment are as follows:
Identifiable Depreciation Capital 2001 Assets Expense Expenditure Ski Operations $10,478,612 $1,373,109 $1,295,402 Real Estate Management/Rental Operations 11,916,318 451,993 451,297 Other Corporate 1,898,435 144,052 158,072 Total $24,293,365 $1,969,154 $1,904,771 2000 Ski Operations $11,660,694 $1,397,361 $2,080,192 Real Estate Management/Rental Operations 11,253,397 426,243 330,347 Other Corporate 1,452,566 97,633 85,707 Total $24,366,657 $1,921,237 $2,496,246 1999 Ski Operations $11,622,619 $1,485,975 $1,249,973 Real Estate Management/Rental Operations $9,858,387 419,891 321,087 Other Corporate 2,326,749 98,025 192,537 Total $23,807,755 $2,003,891 $1,763,597
13. CONTINGENT LIABILITIES AND COMMITMENTS: The Companies are party to various legal proceedings incidental to their business. Certain claims, suits, and complaints arising in the ordinary course of business have been filed or are possible of assertion against the Companies. In the opinion of management, all such matters are without merit or are of such kind, or involve such amounts, that are not expected to have a material effect on the combined financial position or results of operations of the Companies. Blue Ridge has pledged approximately 20 acres of its leased land (cost $144,786) to serve as collateral, together with the lessee's land improvements, for the lessee's mortgage loan which amounts to approximately $1,264,000 at March 31, 2001. 14. STOCK OPTIONS AND CAPITAL STOCK: During Fiscal 1998, the Companies adopted an employee stock option plan, under which an officer was granted options to purchase shares of the Companies' common stock. The options expire July 1, 2003. Option activity during the periods ended March 31, 2001, 2000 and 1999 is as follows: 2001 2000 1999
Exercise Exercise Exercise Shares Price Shares Price Shares Price Outstanding at beginning of year:35,000 $6.75 35,000 $6.75 10,000 $6.75 Granted - - - - - - Exercised - - - - - - Canceled - - - - - - Outstanding at end of year 35,000 $6.75 35,000 $6.75 35,000 $6.75 Options exercisable At year-end 35,000 $6.75 35,000 $6.75 35,000 $6.75 Option price range $6.75 $6.75 $6.75 Weighted average fair value of options granted during year $- $- $-
The Companies elected to follow APB Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for its employee stock options as permitted by SFAS No. 123, "Accounting for Stock Based Compensation." Under APB No. 25, because the exercise price of the employee stock options equals the estimated fair market value of the Companies' underlying stock on the date of the grant, no compensation expense is recognized. 15. PER SHARE DATA: Earnings per share for the years ended March 31, 2001, 2000 and 1999 are computed as follows: 2001 2000 1999 Net Earnings $252,532 $480,640 ($79,199) Weighted average combined shares of common stock out- standing used to compute basic earnings per combined common share 1,926,402 1,962,491 1,980,706 Additional combined common shares to be issued assuming exercise of stock options, net of combined shares assumed re- acquired 10,195 10,295 12,346 Combined shares used to compute dilutive effect of stock option 1,936,597 1,972,786 1,993,052 Basic and diluted earnings per combined common share $0.13 $0.24 ($0.04) INDEPENDENT AUDITOR'S REPORT To Shareholders of Blue Ridge Real Estate Company and Big Boulder Corporation: We have audited the combined balance sheet of Blue Ridge Real Estate Company and subsidiaries and Big Boulder Corporation and subsidiaries (the "Companies") as of March 31, 2001 and 2000, and the related combined statements of operations and earnings retained in the business and cash flows for the year then ended. 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. The combined fina ncial statements of the Companies as of March 31, 1999 were audited by other auditors whose report dated June 4, 1999, expressed an unqualified opinion on those statements. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 2001 and 2000 combined financial statements referred to above present fairly, in all material respects, the financial position of Blue Ridge Real Estate Company and subsidiaries and Big Boulder Corporation and subsidiaries as of March 31, 2001 and 2000, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Parente Randolph, P.C. Wilkes-Barre, Pennsylvania June 15, 2001 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 publ ic trading market. The following sets forth the high asked and low bid price quotations as reported on the monthly statistical reports of the National Association of Securities Dealers, Inc. for Fiscal Years 2001 and 2000. No dividends were paid on common stock in either Fiscal Year. FISCAL YEAR 2001 HIGH LOW ASKED BID First Quarter 10.500 9.125 Second Quarter 10.500 9.250 Third Quarter 9.750 9.250 Fourth Quarter 10.875 9.250 FISCAL YEAR 2000 HIGH LOW ASKED BID First Quarter 10.500 9.500 Second Quarter 10.500 9.250 Third Quarter 9.875 9.250 Fourth Quarter 9.750 9.125 The reported quotations represent prices between dealers, do not reflect retail mark-ups, mark-downs or commissions and do not necessarily represent actual transactions. The approximate number of holders of record of common stock on March 31, 2001 and 2000 were 608 and 636, respectively. BLUE RIDGE REAL ESTATE COMPANY AND SUBSIDIARIES AND BIG BOULDER CORPORATION AND SUBSIDIARIES COMBINED SUMMARY OF SELECTED FINANCIAL DATA
2001 2000 1999 Revenues $18,896,451 $18,886,919 $17,787,480 Net income(loss) 252,532 480,640 (79,199) Net income(loss)per combined share $0.13 $0.24 $(0.04) Cash dividends per combined share 0 0 0 Weighted average number of combined shares outstanding 1,926,402 1,962,491 1,980,706 Total assets 24,293,365 24,366,657 23,807,755 Long-term debt 8,034,641 8,818,794 8,799,905 Shareholders' equity 10,367,281 10,363,619 10,133,392 1998 1997 Revenues $18,655,995 $16,038,000 Net income(loss) 394,593 486,806 Net income(loss)per combined share .20 $0.24 Cash dividends per combined share 0 0 Weighted average number of combined shares outstanding 1,993,014 2,004,014 Total assets 23,943,980 23,802,737 Long-term debt 9,290,909 9,778,431 Shareholders' equity 10,413,858 10,100,268
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations FISCAL 2001 VERSUS FISCAL 2000 For Fiscal Year ended March 31, 2001, the Companies reported net income of $252,532 or $.13 per combined share as compared with a net income of $480,640 or $.24 per combined share for Fiscal 2000. Combined revenue of $18,896,451 represents an increase of $9,532 or less than 1% when compared to Fiscal 2000.Ski Operations decreased $298,272 or 3%, and Real Estate Management Operations increased $307,804 or 4% when compared to Fiscal 2000. The Ski Operations had approximately 247,000 skiers visit our slopes compared to 256,000 skier visits last season. The decrease of 9,000 skier visits represents a decrease of 4%. Revenue per skier was $31 compared to $30 last season for an increase of $1.00 or 3%. Tubing operations had approximately 83,000 tuber visits compared to 90,000 tuber visits last season. The decrease of 7,000 tuber visits represents an 8% decrease. Revenue per tuber was $15.18 compared to $13.84 last season for an increase of $1.34 or 9%. The ski areas operated for a combined total of 200 days compared to 181 days last season. The food and beverage operations at the ski areas contributed revenue of $6.79 per skier visit. The retail shop operations at the ski areas contributed revenue of $2.12 per skier visit compared to $1.97 the previous season. The Real Estate Management Operations increase is attributed to commissions for resale of homes in our resort communitites (37%), fees for contract services provided to the homeowners of the resort communities (53%), and fishinig and hunting leases (10%). The increases were offset by a decrease in festival revenues and fees for services provided to the trusts of the resort communities. Disposition of properties occur sporadically and do not follow any pattern during the fiscal year. In Fiscal 2001, 132 acres of land was sold for $521,607 with a basis of $1,204. No major land sales occurred in Fiscal 2000. Operating costs associated with Ski Operations increased by $110,888 when compared to Fiscal 2000. This increase is attributed to seasonal labor costs. Operating costs associated with Real Estate Management Operations increased by $183,405 when compared to Fiscal 2000. This increase is attributed to increased expenses related to summer activities and the investment properties. General and Administration expenses increased by $683,726 when compared to Fiscal 2000. The increase is primarily due to severance expenses of $466,922 relating to management changes. The remaining increase is due to professional fees. Interest and Other Income increased by $245,924 when compared to Fiscal 2000. This increase is attributable to reimbursement of estimated income taxes (25%) and overhead expenses related to the construction of the sewer line (15%) and an increase in disposed assets and resulting gains (60%). Interest expense increased by $4,664 when compared to Fiscal 2000. This increase is primarily attributable to an increase in LIBOR. The effective Tax Rate for Fiscal 2001 and 2000 was 34% and 41% respectively. FISCAL 2000 VERSUS FISCAL 1999 For Fiscal Year ended March 31, 2000, the Companies reported net income of $480,640 or $.24 per combined share as compared with a net loss of $(79,199) or $.04 per combined share for Fiscal 1999. Combined revenue of $18,886,919 represents an increase of $1,099,439 or 6% when compared to Fiscal 1999. Ski Operations increased $441,625 or 4%, and Real Estate Management Operations increased $657,814 or 9% when compared to Fiscal 1999. The Ski Operations had approximately 256,000 skiers visit our slopes compared to 257,000 skier visits last season. The decrease of 1,000 skier visits represents a decrease of less than 1%. Revenue per skier was $30 compared to $27 last season for an increase of $3.00 or 10%. Tubing operations had approximately 90,000 tuber visits compared to 86,000 tuber visits last season. The increase of 4,000 tuber visits represents a 5% increase. Revenue per tuber was $13.84 compared to $13.95 last season for an decrease of $.11 or 1%. The ski areas operated for a combined total of 181 days compared to 179 days last season. The food and beverage operation at the ski areas contributed revenue of $8.13 per skier visit. The retail shop operations at the ski areas contributed revenue of $1.97 per skier visit compared to $2.16 the previous season. The Real Estate Management Operations increase is attributed to fewer vacancies in investment properties (25%), leasing commissions in resort communities (62%), and fishing and hunting leases (13%). 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 2000 or Fiscal 1999. Operating costs associated with Ski Operations decreased by $157,896 when compared to Fiscal 1999. This decrease is attributed to reduced advertising (50%) and depreciation costs (50%). Operating costs associated with Real Estate Management Operations increased by $636,702 when compared to Fiscal 1999. This increase is attributed to increased expenses related to summer activities and the investment properties. General and Administration expenses increased by $20,482 when compared to Fiscal 1999. The increase is attributable to an increase in supplies and services. Interest and Other Income increased by $373,458 when compared to Fiscal 1999. This increase is attributable to reimbursement of estimated income taxes and overhead expenses related to the construction of the sewer line (97%) and an increase in disposed assets and resulting gains (3%). Interest expense increased by $33,288 when compared to Fiscal 1999. This increase is attributable to an additional mortgage note payable for the East Mountain Lift at Jack Frost Mountain and an increase in the prime interest rate. The effective Tax Rate for Fiscal 2000 and 1999 was 41% and 34% respectively. BOARD OF DIRECTORS Milton Cooper Chairman, Kimco Realty Corporation; Director, Getty Petroleum Corp.; Director, Kimco Realty Corporation Michael J. Flynn Chairman of the Board and President of the Companies; Vice Chairman and Director, Kimco Realty Corporation Allen J. Model Private Investor, Model Entities Wolfgang Traber Chairman of the Board, Hanseatic Corporation & Co. N.Y. The above Directors serve both Companies. OFFICERS Michael J. Flynn President Eldon D. Dietterick Secretary/Treasurer Christine A. Liebold Assistant Secretary Cynthia A. Barron Controller The above Officers serve both Companies. TRANSFER AGENT HSBC Bank USA New York, New York INDEPENDENT AUDITORS Parente Randolph, PC Wilkes Barre, Pennsylvania NOTICE OF ANNUAL MEETINGS The Annual Meetings of Shareholders of Blue Ridge Real Estate Company and Big Boulder Corporation will be announced with mailing of Proxy Material in July. FORM 10-K AVAILABLE The Companies will furnish to any shareholder, without charge, a copy of their Fiscal Year 2001 Annual Report as filed with the Securities and Exchange Commission on Form 10-K. Written request 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 The Mountains Edge, Lake Harmony, Pennsylvania Land Holdings Blue Ridge 18,709 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) TRAXX, Motocross, ATV and BMX Park Wheels, In-Line Skate and Board Park Hub, Mountain Bike Facility -----END PRIVACY-ENHANCED MESSAGE-----