10-Q 1 brbb10q4.txt BLUE RIDGE BIG BOULDER CORP 10Q FILING FOR PERIOD ENDED 4/30/03 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 April 30, 2003 ( ) 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 April 30, 2003 Common Stock, without par value, 1,916,130 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 April 30, 2003 and October 31, 2002 1 & 2 Combined Condensed Statements of Operations - Three Months and Six Months ended April 30, 2003 and April 30, 2002 3 Combined Condensed Statements of Cash Flows - Six Months Ended April 30, 2003 and April 30, 2002 4 Notes to Financial Statements 5,6,7 & 8 Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations 8,9,10,11 & 12 Item 3-Quantitative and Qualitative Disclosures About Market Risk - Not applicable Item 4-Controls and Procedures 12 PART II - OTHER INFORMATION Item 6-Exhibits and Reports on Form 8-K 13 Signatures 14 Chief Executive Officer Certification 15 Chief Financial Officer Certification 16 President Certification 17 Executive Vice President and Treasurer Certification 18 BLUE RIDGE REAL ESTATE COMPANY and SUBSIDIARIES BIG BOULDER CORPORATION AND SUBSIDIARIES COMBINED CONDENSED BALANCE SHEETS
(UNAUDITED) April 30, October 31, ASSETS 2003 2002 Current Assets Cash and cash equivalents $ 247,452 $ 261,311 (all funds are interest bearing) Accounts receivable 587,559 388,292 Inventories 143,986 247,460 Prepaid expenses, principally insurance 949,444 918,210 and real estate taxes Deferred operating costs 381,093 2,275,784 ------- --------- Total current assets 2,309,534 4,091,057 --------- --------- Cash held in escrow 327,864 107,909 ------- ------- Notes receivable noncurrent 177,652 0 ------- ------- Properties: Land, principally unimproved (19,580 and 1,964,902 1,867,352 19,714 acres respectively, per land ledger) Land improvements, buildings and equipment 58,420,527 56,190,649 ---------- ---------- 60,385,429 58,058,001 Less accumulated depreciation and amortization 38,171,082 37,611,139 ---------- ---------- 22,214,347 20,446,862 ---------- ---------- $25,029,397 $24,645,828 =========== ===========
See accompanying notes to unaudited financial statements. 1 LIABILITIES AND SHAREHOLDERS' EQUITY
April 30, October 31, 2003 2002 Current Liabilities: Notes payable - lines of credit $150,000 $600,000 Current installments of: long-term debt and capital 5,204,132 5,266,548 lease obligations Accounts and other payables 542,092 913,825 Accrued claims 234,618 208,642 Deferred income taxes 1,269,060 796,000 Accrued pension expense 894,493 890,493 Accrued liabilities 647,782 631,913 Deferred revenue 422,346 698,242 ------- ------- Total current liabilities 9,364,523 10,005,663 --------- ---------- Long-term debt and capital lease 2,895,535 2,783,257 --------- --------- obligations, less current installments Deferred income taxes 1,110,000 1,110,000 --------- --------- Other non-current liabilities 21,175 28,756 ------ ------ Deferred income non-current 515,631 515,631 ------- ------- Commitments and Contingencies Combined shareholders' equity: 659,444 659,444 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 April 30, 2003 and as of October 31, 2002 Capital in excess of stated value 1,461,748 1,461,748 Compensation recognized under employee 200,900 0 stock plans Earnings retained in the business 10,885,848 10,166,211 ---------- ---------- 13,207,940 12,287,403 LESS: Cost of 282,018 and 281,968 shares of capital stock in treasury as of April 30, 2003 & October 31, 2002, respectively. 2,085,407 2,084,882 ---------- ---------- 11,122,533 10,202,521 ---------- ---------- $25,029,397 $24,645,828 =========== ===========
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 April 30 April 30 April 30 April 30 2003 2002 2003 2002 Revenues: Ski operations $4,701,471 $5,074,055 $10,269,983 $10,015,075 Real estate management 863,376 850,089 1,639,215 1,689,797 Summer recreation operations 147,765 186,278 233,753 364,635 Land resource management 491,703 523,356 1,601,603 671,715 Rental income 541,537 516,084 998,223 945,940 ------- ------- ------- ------- 6,745,852 7,149,862 14,742,777 13,687,162 --------- --------- ---------- ---------- Costs and expenses: Ski operations 4,010,795 4,007,210 9,641,796 8,928,726 Real estate management 703,707 661,618 1,362,843 1,336,265 Summer recreation operations 183,779 263,763 381,763 431,936 Land resource management 297,610 97,136 595,643 102,496 Rental operations 479,778 210,042 770,919 455,867 General & administrative exoebses 407,755 191,925 593,451 496,262 ------- ------- ------- ------- 6,083,424 5,431,694 13,346,415 11,751,552 --------- --------- ---------- ---------- Income from operations 662,428 1,718,168 1,396,362 1,935,610 ------- --------- --------- --------- Other income (expense): Interest & other income 11,631 10,536 12,958 16,333 Interest expense (102,208) (88,396) (216,683) (195,098) -------- ------- -------- -------- (90,577) (77,860) (203,725) (178,765) ------- ------- -------- -------- Income before income taxes 571,851 1,640,308 1,192,637 1,756,845 ------- --------- --------- --------- Provision for income taxes 223,000 436,123 473,000 482,723 ------- ------- ------- ------- Net income $ 348,851 $1,204,185 $ 719,637 $1,274,122 ========== ========== ========== ========== Basic and diluted earnings per weighted average combined share $0.19 $0.63 $0.38 $0.66 ===== ===== ===== =====
See accompanying notes to unaudited financial statements. 3 BLUE RIDGE REAL ESTATE COMPANY BIG BOULDER CORPORATION and SUBSIDIARIES COMBINED CONDENSED STATEMENT OF CASH FLOWS SIX MONTHS ENDED APRIL 30, 2003 & 2002 (UNAUDITED)
2003 2002 Cash Flows From(Used In) Operating Activities: Net Income $ 719,637 $1,274,122 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,733,990 1,587,934 Deferred income taxes 473,060 482,723 Gain on sale of assets (7,613) (1,632) Compensation cost under employee stock plans 200,900 0 Changes in assets and liabilities: Accounts receivable (190,137) (509,343) Prepaid expenses and other current assets 72,240 52,897 Deferred operating costs 1,237,959 1,088,476 Notes Receivable (186,782) Accounts Payable & accrued liabilities (333,469) (282,853) Deferred revenue (275,896) (272,455) -------- -------- Net cash provided by operating activities 3,443,889 3,419,869 --------- --------- Cash Flows From (Used In) Investing Activities: Proceeds from disposition of assets 9,000 17,191 Additions to properties (1,834,352) (1,024,141) Cash held in escrow (219,955) 0 -------- --------- Net cash used in investing activities (2,045,307) (1,006,950) ---------- ---------- Cash flows From (Used In) Financing Activities: Payment of short-term financing (2,250,000) (1,448,195) Proceeds from short-term financing 1,800,000 800,000 Payment of long-term debt and capital lease (961,916) (439,510) obligations Purchase of Treasury stock (525) (10,500) ---- ------- Net cash used in financing activities (1,412,441) (1,006,950) ---------- ---------- Net increase in cash and cash equivalents (13,859) 1,314,714 Cash and cash equivalents, beginning of period 261,311 263,178 ------- ------- Cash and cash equivalents, end of period $ 247,452 $1,577,892 ========== ========== Supplemental disclosures of cash flow information: Cash paid during period: Interest $ 217,769 $ 196,249 Income taxes $ 6,913 $ 14,012 Supplemental disclosure of non cash investing $ 1,011,778 $ 0 and financing activities, additions to property acquired through capital lease obligations
See accompanying notes to unaudited financial statements. 4 NOTES TO UNAUDITED FINANCIAL STATEMENTS 1. The combined financial statements include the accounts of Blue Ridge Real Estate Company and its wholly-owned subsidiaries (Northeast Land Company, Jack Frost Mountain Company and BRRE Holdings, Inc.) and Big Boulder Corporation and its wholly-owned subsidiaries (Lake Mountain Company and BBC Holdings, Inc.). In the opinion of Management, the accompanying unaudited combined condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of April 30, 2003, and the results of operations and the statements of cash flows for the three and six month periods ended April 30, 2003 and April 30, 2002. 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 October 31, 2002. 2. The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. For example, unexpected changes in market conditions or a downturn in the economy could adversely affect actual results. Estimates are used in accounting for, among other things, inventory obsolescence, accounts and notes receivables, deferred operating costs, legal liability, insurance liability, depreciation, employee benefits, taxes, and contingencies. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the Combined Condensed Financial Statements in the period they are determined to be necessary. Management believes that its accounting policies regarding accounts and notes receivable, deferred operating costs, long lived assets, revenue recognition and other reserves, among others, affect its more significant judgments and estimates used in the preparation of its Combined Condensed Financial Statements. For a description of these critical accounting policies and estimates, see "Management's Discussion and Analysis of Financial Condition and Results of Operations". Management believes there have been no significant changes in the Companies' critical accounting policies or estimates since the Companies' fiscal year ended October 31, 2002. 3. The Companies account for notes receivable on a cost basis. Interest income is recorded on a monthly basis. Late payment fees are charged on overdue payment of principal and interest. Notes receivable are evaluated at origination and monitored on an ongoing basis for credit worthiness. Notes receivable are considered fully collectible by management and accordingly no allowance for loan losses is considered necessary. Any note 90 days past due is reviewed by management for write off. 5 Accounts receivable, trade are reported at net realizable value. Accounts are written off when they are determined to be uncollectible based upon management's assessment of individual accounts. The allowance for doubtful accounts which is insignificant is estimated based on the Companies' historical losses and the financial stability of its customers. 4. The Companies and the subsidiaries, under SFAS No. 131, operate in four business segments - Ski Operations, Real Estate Management/Rental Operations, Summer Recreation Operations and Land Resource Management. The results of operations for the three 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, directly related to the Ski Operations that are incurred during the months of April through November are capitalized as deferred operating costs and recognized as revenue and operating expenses, ratably, over the ski operating season. Revenues and operating expenses of the Real Estate Management/Rental Operations, Summer Recreation Operations and Land Resource Management 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. 5. The provision for income taxes for the three and six months ended April 30, 2003 represents the estimated annual effective tax rate for the year ending October 31, 2003. The effective income tax rate for the first six months of Fiscal 2003 was 40%. 6. Reclassifications have been made to the April 30, 2002 Combined Condensed Statement of Operations to reflect changes in presentation for the three and six months ended April 30, 2003. Namely, Land Resource Management is reported as a separate segment of the Companies. 7. 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 exercise price on the 35,000 options is $6.75 and the original term was extended in February 2003 to July 1, 2008. In accordance with FASB Interpretation No. 44, Accounting for Certain Transaction involving Stock Compensation ("FIN 44"), the extension of the life of the award requires a new measurement of compensation as if the award was newly granted. Because the exercise price was less than the current fair market value at the date of grant, compensation cost of $122,900, net of tax has been recognized in the combined condensed statement of operations. During Fiscal 2002, additional corporate officers were granted stock options in varying amounts for a total of 11,000 shares, all expiring December 10, 2006. Additionally, on December 2, 2002, six key employees were granted stock options totaling 18,000 shares, due to expire on December 2, 2007. 6 Option activity during the three and six-month periods ended April 30, 2003 and 2002 is as follows:
THREE MONTHS ENDED 04/30/03 4/30/02 WEIGHTED WEIGHTED AVERAGE AVERAGE EXERCISE EXERCISE SHARES PRICE SHARES PRICE OUTSTANDING AT BEGINNING OF PERIOD 64,000 $8.56 46,000 $7.65 GRANTED - - - - EXERCISED - - - - CANCELED - - - - ------ ----- ------ ----- OUTSTANDING AT END OF PERIOD 64,000 $8.56 46,000 $7.65 ====== ===== ====== ===== OPTIONS EXERCISABLE AT PERIOD-END 64,000 $8.56 46,000 $7.65 ====== ===== ====== ===== OPTION PRICE RANGE $6.75-$10.90 $6.75-$10.90 ============ ============ WEIGHTED AVERAGE FAIR VALUE OF OPTIONS GRANTED DURING PERIOD $4.92 $ - ===== =====
SIX MONTHS ENDED 04/30/03 4/30/02 WEIGHTED WEIGHTED AVERAGE AVERAGE EXERCISE EXERCISE SHARES PRICE SHARES PRICE OUTSTANDING AT BEGINNING OF PERIOD 46,000 $7.65 35,000 $6.75 GRANTED 18,000 $10.90 11,000 $10.50 EXERCISED - - - - CANCELED - - - - ------ ----- ------ ----- OUTSTANDING AT END OF PERIOD 64,000 $8.56 46,000 $7.65 ====== ===== ====== ===== OPTIONS EXERCISABLE AT PERIOD-END 64,000 $8.56 46,000 $7.65 ====== ===== ====== ===== OPTION PRICE RANGE $6.75-$10.50 $6.75-$10.50 ============ ============ WEIGHTED AVERAGE FAIR VALUE OF OPTIONS GRANTED DURING PERIOD $4.92 $2.71 ===== =====
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", and SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure." 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. SFAS No. 123 requires the disclosure of pro forma net income and earnings per share as if the Companies had adopted the fair value method for stock-based compensation. Under SFAS No. 123, the fair value of stock-based awards to employees is calculated through the use of option pricing models. These models also require subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. The Companies' calculations were made using the Black-Scholes option pricing model with the following weighted average assumptions in the three and six month periods ended April 30, 2003 and 2002:
THREE MONTHS ENDED SIX MONTHS ENDED 04/30/03 04/30/02 04/30/03 04/30/02 Remaining expected life of Options 6.5 yrs - 6.5 yrs 5.9 yrs Stock volatility 1.4% - 1.4% 4.1% Risk-free interest rate 2.7% - 2.7% 2.5% Dividends during the expected term $ - $ - $ - $ - =========== ========== ========== ========
The following table illustrates the effect on net income and earnings per share as if the fair value based method had been applied to all outstanding awards in each period. 7
THREE MONTHS ENDED SIX MONTHS ENDED 04/30/03 04/30/02 04/30/03 04/30/02 Net income, as Reported $ 348,851 $1,204,185 $ 719,637 $1,274,122 Add: Stock-based employee compensation expense included in reported net income, net of related tax Effects 122,900 - 122,900 - Deduct: Total stock- based employee compensation expense determined under fair value based method for all awards, net of tax effects (113,652) (172,102) (19,675) -------- -------- -------- ------- Pro forma net income $358,099 $1,204,185 $670,435 $1,254,447 ======== ========== ======== ========== Basic earnings per share: As reported $ 0.19 $ 0.63 $ 0.38 $ 0.66 ======== ======== ======== ======== Pro forma $ 0.19 $ 0.63 $ 0.33 $ 0.65 ======== ======== ======== ======== Diluted earnings per share: As reported $ 0.19 $ 0.63 $ 0.38 $ 0.66 ======== ======== ======== ======== Pro forma $ 0.19 $ 0.63 $ 0.33 $ 0.65 ======== ======== ======== ========
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Critical Accounting Policies The most sensitive estimates affecting the combined condensed financial statements include management's estimate of deferred operating costs and net deferred tax assets and liabilities, the valuation of long-lived assets and recognition of deferred revenues. Revenues are derived from a wide variety of sources, including sales of lift tickets, ski school tuition, dining, retail stores, equipment rental, property management services, timbering and other recreational activities. Revenues are recognized as services are performed. 8 Timbering revenues from stumpage contracts are recognized in accordance with Staff Accounting Bulleting No. 101 - Revenue Recognition, ("SAB 101"). At the time a stumpage contract is signed, the risk of ownership has been passed to the buyer at a fixed, determinable cost. Reasonable assurance of collectibility has been determined by the date of signing, and the few obligations of the Companies' have already been met. Therefore, full accrual recognition at the time of contract execution is appropriate under SAB 101 guidance. Management's estimate of deferred operating costs is primarily based on deferring costs directly related to ski operations in order to match those costs to the period in which ski operating revenues are recognized. Ski operating revenues are recognized principally over the months of December through March. Therefore, deferred operating costs are ratably expensed over the same period in order to maintain the consistent application of the matching principle over each operating cycle. The capitalized costs consist principally of depreciation, insurance, real estate taxes, advertising, repairs, maintenance and supplies. Management's estimate of deferred tax assets and liabilities is primarily based on the difference between the tax basis and financial reporting basis of depreciable assets, like-kind exchanges of assets, accruals, deferred operating costs and deferred revenues. The Companies' valuation of long-lived assets, namely, properties is based on historical cost. Depreciation and amortization is provided principally using the straight-line method over the estimated useful life of the class of property. 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. Costs of land development, such as surveyor and consultant fees are capitalized as land costs. 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 difference between the carrying value and the fair value of the asset. No such losses were recognized as of April 30, 2003. Deferred revenue consists of revenue billed in advance for services and dues that are not yet earned. Revenue billed in advance for services consists of season lift tickets and advance ticket sales and gift certificates for the ski resorts. The Companies' recognize revenue billed in advance ratably over the principal months of the ski season, December through March. Dues that are not yet earned consist of rents related to our commercial properties that have been paid in advance, and dues related to memberships in our hunting and fishing clubs paid in advance. The Companies' recognize revenue related to the hunting and fishing clubs over the one-year period that the dues cover. 9 Results of Operations Operations for the three and six months ended April 30, 2003 resulted in a net income of $ .19 and $ .38 per combined share compared to a net income of $.63 and $.66 per combined share for the three and six months ended April 30, 2002. Combined revenue of $6,745,852 and $14,742,777 represents a decrease of $404,010 and an increase of $1,055,615 as compared to the three and six months ended April 30, 2002. Ski operations decreased $372,584 and increased $254,908 for the three and six months ended April 30, 2003 as compared to the three and six months ended April 30, 2002. Real Estate Management increased $13,287 and decreased $50,582 for the three and six months ended April 30, 2003 as compared to the three and six months ended April 30, 2002. Summer recreation operations decreased $38,513 and $130,882 for the three and six months ended April 30, 2003 as compared to the three and six months ended April 30, 2002. Land resource management decreased $31,653 and increased $929,888 for the three and six months ended April 30, 2003 as compared to the three and six months ended April 30, 2002. Rental income increased $25,453 and $52,283 for the three and six months ended April 30, 2003 as compared to the three and six months ended April 30, 2002. Ski operations increase of $254,908 in revenue for the six months ended April 30, 2003 as compared to the six months ended April 30, 2002 was due to an increase in lift and season pass revenue (10%), rental shop revenue (40%), food revenue (14%) and retail revenue (36%). Real Estate Management revenue decreased $50,582 for the six months ended April 30, 2002. This decrease in revenue is attributable to property management of homes in our resort communities (10%), property sales within our resort communities (90%). Summer recreation operations decreased $130,882 for six months ended April 30, 2003 as compared to the six months ended April 30, 2002. This decrease was the result of a decrease in Splatter revenue (22%) and Traxx revenue (76%). The decrease in Traxx revenue is a result of the discontinuation of Snocross snow mobile rentals. Land resource management increased $929,888 for the six months ended April 30, 2003 as compared to the six months ended April 30, 2002. This is a new business segment that wasn't operational until the second quarter of fiscal 2002. This segment relates to the sale and purchasing of land and harvesting timber. Rental operations increased $52,283 for the six months ended April 30, 2003 as compared to the six months ended April 30, 2002. This increase is attributable to the management of homes in our resort communities. Operating costs increased $1,497,674 during the first six months of Fiscal 2003 as compared to the six months ended April 30, 2002. Ski operation expenses increased $713,070. This increase was mainly attributable to an increase in salaries and wages (29%), utilities (14%), insurance expense (12%) and depreciation (22%). Real Estate Management operating expenses increased $26,578 for the first six months of Fiscal 2003 as compared to the six months ended April 30, 2002. 10 Summer recreational operations expenses decreased $50,173 for the first six months of Fiscal 2003 as compared to the six months ended April 30, 2002. This decrease was the result of a decrease in Campground labor and supplies and services (40%), Lake Club depreciation (14%) and Traxx equipment rental costs (46%). Land Resource Management operation expenses increased $493,147 for the first six months of Fiscal 2003 as compared to the six months ended April 30, 2002. This is a new business segment that wasn't operational until the second quarter of Fiscal 2002. General and Administrative expenses increased $97,189 for the first six months of Fiscal 2003 as compared to the six months ended April 30, 2002. This increase was due primarily to the recognition of compensation cost under the employee stock plans. Interest expense increased $21,585 for the first six months of Fiscal 2003 as compared to the six months ended April 30, 2002. This increase is attributable to an additional line of credit for Land resource management purposes (3%), interest on the new D lift at Jack Frost Mountain loan ( 55% ) and the interest on the capital leases ( 42% ) for the groomers and compressors at both ski areas. These increases were also offset by a paydown on existing debt and the reduction in the prime interest rate. Financial Condition, Liquidity and Capital Resources The deficit in working capital as of April 30, 2003 increased by $1,140,383 as compared to October 31, 2002. The increase is primarily due to the cyclical nature of the Companies' business. The change in the balance of deferred operating costs from October 31, 2002 to April 30, 2003 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. During the quarter ended April 30, 2003, the Companies paid in full a loan with PNC Bank prior to the maturity date of March 31, 2004. Management chose to pay down the balance of $247,270 due to available cash flow and interest savings. Management has secured an amendment to the loan documents from PNC Bank which deletes the financial covenant relating to the current ratio. Moving Forward During Fiscal 2003 the Companies will actively pursue land sales and purchases. The Companies will offer financing to attract new land sale customers. The Companies will continue to generate timbering revenues from selective harvesting of timber. Management is organizing a subsidiary company - Boulder Creek Resort Company. This new company will be used as a marketing tool to consolidate and brand the Companies' holdings as one resort destination and to facilitate the land sales division. The Companies are planning further real estate development of multi - family dwellings at our ski resorts. 11 Management has declined the offer to purchase Dreshertown Plaza Shopping Center. The mortgage note payable on the Dreshertown Plaza approximating $4,492,000 is classified as a current obligation with a maturity date of August 31, 2003. Management is currently reviewing proposals for long-term refinancing of the debt and has every intention that refinancing will occur prior to August 31, 2003. Management has established a $150,000 accrual specific to the remediation of an environmental issue discovered at Dreshertown Shopping Plaza. The accrual is based on an estimate provided by environmental clean-up consultants and is recorded as a current accrued liability in the April 30, 2003 combined condensed balance sheet. Subsequent to the six months ended April 30, 2003, management has obtained short term financing of approximately $1.9 million for the purpose of buying out Vesterra Corporation, the management company of Dreshertown Shopping Plaza in accordance with the terms of the Management Agreement. The $1.9 million will be recognized as an expense charged to operations in the third quarter ending July 31, 2003. Kimco Realty Corporation, the Companies' majority shareholder, will take over management services of the shopping center at a reduced cost from the previous management service. The terms of the agreement have yet to be finalized. Subsequent to the six months ended April 30, 2003, management has secured mortgage financing for numerous revenue generating investment properties aggregating approximately $850,000 for the purpose of real estate development. Subsequent to the six months ended April 30, 2003, management terminated its two lines of credit with PNC Bank, N.A., totaling $3.1 million, and has obtained new lines of credit for the same amount with Manufacturers & Traders Trust Company, on substantially the same terms. PART II - OTHER INFORMATION Item 4. Controls and Procedures Within the 90 days prior to the date of this report, the Companies carried out an evaluation, under the supervision and with the participation of its management, including its President and Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934. Based upon that evaluation, the President and Chief Executive Officer, and Chief Financial Officer have concluded that the Companies disclosure controls and procedures are effective in timely alerting them to material information relating to the Companies that is required to be included in the Companies periodic SEC filings. There have been no significant changes in the Companies internal controls or in any factors that could significantly affect the controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. 12 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. 99.1 Certification of chief executive officer 99.2 Certification of chief financial officer (b) Reports on Form 8-K None. The Companies have no matters to report with respect to Items 1, 2, 3 and 5. 13 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) __________________________________ Eldon D. Dietterick Executive Vice President/Treasurer __________________________________ Cynthia A. Barron Chief Accounting Officer Date: June 4, 2003 14 CERTIFICATION* I, Patrick M. Flynn, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Blue Ridge Real Estate Company and Big Boulder Corporation (together, the "registrants"); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this quarterly report; Date: June 4, 2003 __________________________________ Patrick M. Flynn Chief Executive Officer and President _____________ * Pursuant to the transition provisions of Release No. 34-46427 (Aug. 28, 2002), the portions of this certification required by paragraphs (b)(4), (5) and (6) of Exchange Act Rule 13a-14 are inapplicable to this quarterly report. Accordingly, the portions have been omitted from this certification. 15 CERTIFICATION* I, Eldon D. Dietterick, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Blue Ridge Real Estate Company and Big Boulder Corporation (together, the "registrants"); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this quarterly report; Date: June 4, 2003 ________________________________ Eldon D. Dietterick Executive Vice President and Treasurer (chief financial officer) _____________ * Pursuant to the transition provisions of Release No. 34-46427 (Aug. 28, 2002), the portions of this certification required by paragraphs (b)(4), (5) and (6) of Exchange Act Rule 13a-14 are inapplicable to this quarterly report. Accordingly, the portions have been omitted from this certification. 16 CERTIFICATION I, PATRICK M. FLYNN, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Blue Ridge Real Estate Company/Big Boulder Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respect the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 45 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers, and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. June 4, 2003 __________________________________ Patrick M. Flynn President 17 CERTIFICATION I, ELDON D. DIETTERICK, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Blue Ridge Real Estate Company/Big Boulder Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respect the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 45 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers, and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. June 4, 2003 _______________________________________ Eldon D. Dietterick Executive Vice President and Treasurer 18