10-Q 1 sep10q01.txt 2ND QUARTER 10Q SEPTEMBER 2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from.......... to.......... Blue Ridge 0-28-44 Commission File No.: Big Boulder 0-28-43 BLUE RIDGE REAL ESTATE COMPANY BIG BOULDER CORPORATION State or other jurisdiction of incorporation or organization: Pennsylvania 24-0854342 (Blue Ridge) I.R.S. Employer Identification Number: 24-0822326 (Big Boulder) Address of principal executive office: Blakeslee,Pennsylvania Zip Code: 18610 Registrant's telephone number, including area code:(570)-443-8433 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES___X____ NO__________ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period of this report: Class Outstanding at September 30, 2001 Common Stock, without par value, 1,917,180 stated value $.30 per combined share* *Under a Security Combination Agreement between Blue Ridge Real Estate Company ("Blue Ridge") and Big Boulder Corporation ("Big Boulder") (referred to as the "Corporations") and under the by-laws of the Corporations, shares of the Corporations are combined in unit certificates, each certificate representing the same number of shares of each of the Corporations. Shares of each Corporation may be transferred only together with an equal number of shares of the other Corporation. For this reason, a combined Blue Ridge/Big Boulder Form 10-Q is being filed. Except as otherwise indicated, all information applies to both Corporations. INDEX Page No. PART I - FINANCIAL INFORMATION Item 1-Financial Statements Combined Condensed Balance Sheets September 30, 2001 and March 31, 2001 1 & 2 Combined Condensed Statements of Operations - Three Months and Six Months ended September 30, 2001 and 2000 3 Combined Condensed Statements of Cash Flows - Six Months Ended September 30, 2001 and 2000 4 Notes to Financial Statements 5 Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations 6 & 7 PART II - OTHER INFORMATION 8 Signatures 9 BLUE RIDGE REAL ESTATE COMPANY and SUBSIDIARIES BIG BOULDER CORPORATION AND SUBSIDIARIES COMBINED CONDENSED BALANCE SHEETS ASSETS September 30, March 31, 2001 2001 (UNAUDITED) (AUDITED) Current Assets: Cash and cash equivalents (all funds are interest bearing) $324,233 $2,628,839 Accounts receivable 471,720 429,653 Inventories 124,471 141,611 Deferred tax asset 579,224 665,095 Prepaid expenses, principally insurance and real estate taxes 539,963 403,313 Deferred operating costs-net of deferred revenue-ski facilities 2,724,515 0 Total current assets 4,764,126 4,268,511 Properties: Land, principally unimproved (19,741 acres per land ledger) 1,868,505 1,868,505 Land improvements, buildings and equipment 53,929,308 53,754,045 55,797,813 55,622,550 Less accumulated depreciation and amortization 36,557,029 35,597,696 19,240,784 20,024,854 $24,004,910 $24,293,365 See accompanying notes to unaudited financial statements. LIABILITIES AND SHAREHOLDERS' EQUITY September 30, March 31, 2001 2001 (UNAUDITED) (AUDITED) Current Liabilities: Notes Payable-Line of Credit $ 100,000 $ 0 Current installments of long-term debt 719,965 757,228 Accounts and other payables 898,165 549,847 Accrued claims 209,770 80,433 Accrued income taxes 0 67,387 Accrued pension expense 711,042 627,042 Accrued liabilities 802,484 1,087,851 Deferred revenue 230,151 316,753 Total current liabilities 3,671,577 3,486,541 Long-term debt, less current installments 6,996,728 7,277,413 Deferred income taxes 2,446,472 2,442,178 Other non-current liabilities 84,077 204,321 Deferred income non-current 515,631 515,631 Commitments and Contingencies Combined shareholders' equity: Capital Stock, without par value, stated value $.30 per combined share, Blue Ridge and Big Boulder each have authorized 3,000,000 shares and each have issued 2,198,148 shares as of Sept.30, 2001 and as of March 31, 2001 659,444 659,444 Capital in excess of stated value 1,461,748 1,461,748 Earnings retained in the business 10,243,615 10,283,875 12,364,807 12,405,067 LESS: Cost of 280,968 and 277,221 shares of capital stock in treasury as of September 30, 2001 & March 31,2001 respectively. 2,074,382 2,037,786 10,290,425 10,367,281 $24,004,910 $24,293,365 See accompanying notes to unaudited financial statements. -2- BLUE RIDGE REAL ESTATE COMPANY AND SUBSIDIARIES BIG BOULDER CORPORATION and SUBSIDIARIES COMBINED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Six Months Ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2001 2000 2001 2000 Revenues: Ski operations $ 0 $ 0 $ 0 $ 0 Real estate management 766,192 775,464 1,386,286 1,408,382 Summer recreation operations 1,429,423 1,616,038 1,954,384 2,175,779 Rental income 613,325 484,131 1,056,670 938,514 2,808,940 2,875,633 4,397,340 4,522,675 Costs and expenses: Ski operations 0 0 0 0 Real estate management 620,411 676,130 1,199,573 1,273,024 Summer recreation operations 1,274,218 1,165,240 1,799,771 1,694,688 Rental operations 346,285 229,985 587,180 449,949 General & administra- tive expenses 289,047 266,797 540,373 542,928 2,529,961 2,338,152 4,126,897 3,960,589 Income from operations 278,979 537,481 270,443 562,086 Other income (expense:) Interest & other income 22,969 536,114 38,529 584,989 Interest expense (123,262) (184,763) (259,067) (364,354) (100,293) 351,351 (220,538) 220,635 Income before income taxes 178,686 888,832 49,905 782,721 Provision for income taxes 136,209 313,000 90,165 313,000 Net income $42,477 $575,832 ($40,260) $469,721 Basic and diluted income per weighted average combined share $0.02 $0.29 ($0.02) $0.24 See accompanying notes to unaudited financial statements. BLUE RIDGE REAL ESTATE COMPANY BIG BOULDER CORPORATION and SUBSIDIARIES COMBINED CONDENSED STATEMENT OF CASH FLOWS SIX MONTHS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000 (UNAUDITED) 2001 2000 Cash Flows from Operating Activities: Net Income(Loss) ($40,260) $469,721 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 298,917 296,122 Deferred income taxes 92,748 303,393 Gain on sale of assets (1,108) (522,363) Changes in assets and liabilities: Accounts & other receivables (42,067) 152,992 Prepaid expenses and other current assets (2,152,396) (2,948,174) Accounts payable & accrued liabilities 156,044 186,313 Accrued income taxes (69,970) (172,540) Deferred revenue (86,602) 66,525 Net cash used in operating activities (1,844,694) (2,168,011) Cash Flows (used in) from Investing Activities: Proceeds from disposition of assets 19,457 523,567 Additions to properties (224,825) (944,480) Net cash used in investing activities (205,368) (420,913) Cash flows (used in) from Financing Activities: Borrowings under short-term financing 100,000 700,000 Additions to long-term debt 62,360 Payment of long-term debt (317,948) (262,681) Purchase of treasury stock (36,596) (202,902) Net cash from(used in)financing activities (254,544) 296,777 Net decrease in cash & cash equivalents (2,304,606) (2,292,147) Cash & cash equivalents beginning of period 2,628,839 2,553,510 Cash and cash equivalents end of period $324,233 $261,363 Supplemental disclosures of cash flow information: Cash paid during period: Interest $265,024 $364,804 Income taxes $136,311 $179,714 NOTES TO UNAUDITED FINANCIAL STATEMENTS 1. The combined financial statements include the accounts of Blue Ridge Real Estate Company and its wholly-owned subsidiaries (Northeast Land Company, Jack Frost Mountain Company and BRRE Holdings, Inc.) and Big Boulder Corporation and its wholly-owned subsidiaries (Lake Mountain Company and BBC Holdings, Inc.). In the opinion of management, the accompanying unaudited combined condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of September 30, 2001, and the results of operations and the statements of cash flows for the three and six month periods ended September 30, 2001 and September 30, 2000. Certain information and footnote disclosures have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These combined financial statements should be read in conjunction with the financial statements and notes thereto included in the Companies' Annual report on Form 10-K for the year ended March 31, 2001. 2. The Companies and the subsidiaries, under SFAS No. 131 operate in three business segments - Ski Operations, Real Estate Management/Rental Operations and Summer Recreation Operations. The results of operations for the three and six months are not necessarily indicative of the results to be expected for the full year since the Companies' two ski facilities operate principally during the months of December through March. Costs and expenses net of revenues received in advance attributable to the Ski Operations for the months of April through November are deferred and recognized as revenue and operating expenses, ratably, over the operating period. Therefore revenues and operating expenses of the Real Estate Management/Rental Operations and Summer Recreation Operations are as disclosed on the statement of operations. Depreciation of ski facility fixed assets is calculated over the 12-month period. The expense is deferred until the operating period, at which time it will be recognized ratably. 3. The provision for income taxes for the three and six months ended September 30, 2001 represents the estimated annual effective tax rate for the year ending October 31, 2001. The effective income tax rate for the first six months of Transition Period 2001 was 34%. 4. Reclassifications have been made to the September 30, 2000 Combined Condensed Financial Statements to reflect changes in presentation for the three and six months ended September 30, 2001. Namely, Summer Recreation Operations are reported as a separate segment of the Companies. 5. During an executive session held on August 28 , 2001 the Board of Directors approved a change in the fiscal year end from March 31 to October 31. This change will result in a seven month 2001 Transition Period ended October 31, 2001. The purpose is to allow a more natural business year and to conform the companies reporting period to that of the majority stockholder's financial statements. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Operations for the three and six months ended September 30, 2001 (Transition Period 2001) resulted in net income of $.02 and ($.02) per combined share compared to a net income of $.29 and $.24 per combined share for the three and six months ended September 30, 2000. Combined revenue of $2,808,940 and $4,397,340 for the three and six months ended September 30, 2001 represents a decrease of $66,693 and $125,335 as compared to the three and six months ended September 30, 2000. Ski operations remained unchanged at $-0-. Real Estate Management decreased $9,272 and $22,096 for the three and six months ended September 30, 2001 as compared to the three and six months ended September 30, 2000. Summer Recreation Operations decreased by $186,615 and $221,395 for the three and six months ended September 30, 2001 as compared to the three and six months ended September 30, 2000. Rental Income increased $129,194 and $118,156 for the three and six months ended September 30, 2001 as compared to the three and six months ended September 30, 2000. Real Estate Management decrease in revenue is attributed to rental management operations and property management of homes in our resort communities. Rental income increase in revenue is from investment properties, mainly an increase in the revenues earned in the Dreshertown Plaza. Summer Recreational Operations decrease is due to decreased festival revenue. Interest and Other Income decreased $513,145 and $546,460 for the three and six months ended September 30, 2001 as compared to the three and six months ended September 30, 2000. This decrease was due to the sale of land in the prior fiscal year. -6- Operating costs increased by $169,559 and $168,863 for the three and six months ended September 30, 2001 as compared to the three and six months ended September 30, 2000. This increase was due to increased advertising costs associated with Splatter paintball (20%), increased festival expenses (20%) and increased real estate taxes (60%) resulting from a change in real estate tax expense recognition on the Dreshertown Plaza. General and Administrative expenses for the three and six months ended September 30, 2001 as compared to the three and six months ended September 30, 2000, increased by $22,250 and decreased by $2,555, this resulted from fluctuations in supplies and services (50%) and repairs and maintenance (50%). Interest expense for the three and six months ended September 30, 2001 as compared to the three and six months ended September 30, 2000 decreased by $61,501 and $105,287. This decrease is attributable to a reduction in the prime interest rate (24%), paydowns of notes payable (64%), and lower draws on the line of credit (12%). Per Share Data Earnings per share are computed as follows: 6 Mos. Ended 6 Mos.Ended September 30, September 30, 2001 2000 Net Income (Loss) ($40,260) $469,721 Weighted average combined shares of common stock outstanding used to compute basic earnings per combined common share 1,917,971 1,929,625 Additional combined common shares to be issued assuming exercise of stock options, net of combined shares assumed reacquired 12,295 10,488 Combined shares used to complete dilutive effect of stock option 1,930,266 1,940,113 Basic and diluted earnings per combined common share ($0.02) $0.24 Financial Condition, Liquidity and Capital Resources Working capital as of September 30, 2001 increased by $310,579 as compared to March 31, 2001. The increase is primarily due to the cyclical nature of the Companies' business. The change in the balance of deferred operating costs from March 31, 2001 to September 30, 2001 was due primarily to revenue and expenses that are applicable to the ski facilities, which are deferred and recognized ratably during the months of December through March. Moving Forward Capital expenditures for the six months ended September 30, 2001 were for various equipment purchases. The Companies, in Fiscal 2002, will purchase a new groomer for Jack Frost Mountain, complete construction of the rental shop addition at Jack Frost Mountain, and the snowboard terrain park at Big Boulder Ski Area. PART II - OTHER INFORMATION The Companies have no matters to report with respect to Items 1, 2, 3, 4, 5, and 6(A) and (B). FORM 10-Q SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized: BLUE RIDGE REAL ESTATE COMPANY BIG BOULDER CORPORATION (Registrant) (Signature) Eldon D. Dietterick Executive Vice-President/Treasurer (Signature) Cynthia A. Barron Chief Accounting Officer Date: November 7, 2001