-----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, Agz68hFX3jeTBO2/gUTYkiSeR4gdsNDysDe0MqdaQu5hqz6P+1rSiTLgxcW8mwhp cjEIf/cAC2rxTJM2l+5QoQ== 0000012779-96-000011.txt : 19960828 0000012779-96-000011.hdr.sgml : 19960828 ACCESSION NUMBER: 0000012779-96-000011 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960827 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLUE RIDGE REAL ESTATE CO CENTRAL INDEX KEY: 0000012779 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 240854342 STATE OF INCORPORATION: PA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-02844 FILM NUMBER: 96621323 BUSINESS ADDRESS: STREET 1: PO BOX 707 CITY: BLAKESLEE STATE: PA ZIP: 18610 BUSINESS PHONE: 7174438433 MAIL ADDRESS: STREET 1: PO BOX 707 CITY: BLAKESLEE STATE: PA ZIP: 18610 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIG BOULDER CORP/PA CENTRAL INDEX KEY: 0000277666 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 240822326 STATE OF INCORPORATION: PA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-02843 FILM NUMBER: 96621324 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 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 MAY 31, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transtion 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: 717 - 443 - 8433 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, without par value, stated value $.30 per combined share* Page 1 Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days: Yes X No____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be con- tained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X) The aggregate market value of common stock, without par value, stated value $.30 per combined share, held by non-affiliates at August 16, 1996, was $13,527,095. The market value per share is based upon the per share cost of shares as indicated by NASDAQ on May 31, 1996. 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 August 16, 1996 Common Stock, without par value 2,004,014 Shares stated value $.30 per combined share DOCUMENTS INCORPORATED BY REFERENCE Specified portions of the Companies' 1996 Annual Report to Shareholders are incorporated by reference into Part II hereof. Specified portions of the Companies' definitive Proxy Statement for the October 7, 1996 Annual Meetings of Shareholders to be filed pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this report and is incorporated herein by reference. ____________________ *Under a Security Combination Agreement between Blue Ridge Real Estate Company ("Blue Ridge") and Big Boulder Corporation ("Big Boulder") (the "Corporations") and under the By-Laws of the Corporations, shares of the Corporations are combined in unit certificates, each certificate repre- senting the same number of shares of each of the Corporations. Shares of each Corporation may be transferred only together with an equal number of shares of the other Corporation. For this reason, a combined Blue Ridge/ Big boulder Form 10-K is being filed. Except as otherwise indicated, all information applies to both Corporations. Page 2 FORM 10-K PART I ITEM 1. BUSINESS BLUE RIDGE REAL ESTATE COMPANY Blue Ridge Real Estate Company ("Blue Ridge"), which was incorporated in Pennsylvania in 1911, is believed to be one of the largest owners of investment property in Northeastern Pennsylvania. It owns 18,852 acres of land which are predominately located in the Pocono Mountains. These lands are held entirely as investment property. Income is derived from these lands through leases, selective timbering by others, condemnation, sales, and other dispositions. Blue Ridge also owns the Jack Frost Mountain Ski area which is leased to Jack Frost Mountain Company, a 150-site campground a retail stosre 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 during the current year 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. Northeast Land Company also receives revenue from a land lease to a Burger King franchise. Northeast Land Company was the developer of the resort community known as Midlake located on Big Boulder Lake. This project, located adjacent to the Big Boulder Lake shore directly west of Blue Heron, was completed in the Summer of 1989 and consists of 132 resort homes. 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 28 full-time employees. Jack Frost Mountain Company, which operates the Jack Frost Mountain Ski Area, has 24 full-time employees and during the skiing season there are approximately 376 additional employees. Northeast Land Company has 9 full-time employees. Page 3 ITEM 1. BUSINESS - (continued) BIG BOULDER CORPORATION Big Boulder Corporation ("Big Boulder") was incorporated in Pennsylvania in 1949. The major assets of the company are 929 acres of land, which includes a 175 acre lake, the Big Boulder Ski Area, and the Blue Heron Grille. The principal source of revenue for Big Boulder is derived from the Big Boulder Ski Area which is leased to Lake Mountain Company. Lake Mountain Company, a wholly-owned subsidiary of Big Boulder Corporation was incorporated in Pennsylvania in 1983 and commenced operations on June 1, 1983. It was created to lease and operate the Big Boulder Ski Area, to provide certain services to other facilities, such as the Blue Heron, Midlake and Laurelwoods resort communities, and operate the recreational facilities as they are located within the Big Boulder Lake tract. The Blue Heron Grille is currently being leased to a restaurant operator. BBC Holdings, Inc., a wholly-owned subsidiary of Big Boulder, was incorporated in Delaware in 1986. It was established for investment purposes. Big Boulder has no employees. Lake Mountain Company, which operates the Big Boulder Ski Area, has 28 full-time employees. During the skiing season, there are approximately 525 additional employees. INDUSTRY SEGMENT INFORMATION Information with respect to industry segments is presented in Note 13 to the Registrants' financial statements included in Item 8. The quarterly results of operations for 1996, 1995 and 1994 reflect the cyclical nature of the Companies' business since (a) the Companies' two ski facilities operate principally during the months of December through March and (b) land dispositions occur sporadically and do not follow any pattern during the fiscal year. Costs and expenses, net of revenues received in advance attributable to the ski facilities for the months of June through November, are deferred and recognized as revenue and operating expenses, ratably, over the operating period. ITEM 2. PROPERTIES A. BLUE RIDGE REAL ESTATE COMPANY The physical properties of Blue Ridge consist of approximately 18,955 acres owned by Blue Ridge and Northeast Land Company, the Jack Frost 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. Page 4 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, snow- mobile course, snowtubing hill, four double chairlifts, two triple chair- lifts, one quad chairlift, and various buildings including a Summit Lodge with food service, a cocktail lounge, a ski shop, and a ski rental shop. The total lift capacity per hour is 10,800 skiers. These lifts are in good condition and are operated as needed during the ski season. These facilities are situated on approximately 473 acres owned by Blue Ridge and leased to Jack Frost Mountain Company. The total capital investment in the ski area is $17,267,494, 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 May 31, 1996, the outstanding debt on the Jack Frost Mountain Ski Area was $903,144. 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 May 31, 1996. The building consists of 70,000 square feet, located on 10.217 acres of land and is leased to Wal-Mart on a triple net basis through January 31, 2014. At May 31, 1996, a mortgage totaling $1,477,654 was outstanding on this property. The Dreshertown Plaza Shopping Center, Dresher, Montgomery County, Pennsylvania, was acquired in July, 1986 for consideration of $4,592,579. The center consists of approximately 99,233 square feet located on approxi- mately 15 acres of land. On May 31, 1996, the center was 96% occupied under leases expiring on various dates from August 31, 1996 to August 31, 2006. The total capital investment in the shopping center is $5,304,971. At May 31, 1996, a mortgage totaling $5,436,135 was outstanding 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 150 campsites, 75 with water and electric. Its operating period is from April 1 through September 30. At May 31, 1996, the Company's investment in this facility was $296,269. Page 5 ITEM 2. PROPERTIES - (Continued) Blue Ridge owns 18,852 acres of land which are predominately located in the Pocono Mountains. The majority of this property is leased to various hunting clubs. Blue Ridge also owns several cottages in the area that are leased to private individuals. Blue Ridge owns and leases to Jack Frost Mountain Company a sewage treatment facility to serve the resort housing at Jack Frost Mountain. The total investment in this facility at May 31, 1996 was $1,195,170 with outstanding debt of $214,675. Blue Ridge also owns The Sports Complex at Jack Frost Mountain which consists of a swimming pool, fitness trail, tennis courts, and accompanying buildings. The Stretch is an exclusive fishing club. The Corporate Office Building is located on Route 940 and Mosey Wood Road. Northeast Land Company owns 103 acres of land which are located in the Pocono Mountains. For the fiscal year ended May 31, 1996, revenues from operations of Blue Ridge and its subsidiaries amounted to $9,407,238 Approximately 59% of this revenue or $5,555,210 was derived from the Jack Frost Mountain Ski Area which operated 108 days during the fiscal year. B. BIG BOULDER CORPORATION The physical properties owned by Big Boulder consist of approximately 929 acres, the Big Boulder Ski Area, a sewage treatment facility, a 200 foot communications tower, and the Blue Heron Grille. SKI FACILITIES The Big Boulder Ski Area's physical properties have been leased to Lake Mountain Company since June 1, 1983, and are located in Kidder Township, Carbon County, Pennsylvania. Big Boulder Ski Area commenced operations in 1947. The Big Boulder Ski Area contains fourteen slopes and trails including a snowboard slope, five double chairlifts, two triple chairlifts, and various buildings including a base lodge, providing food service, a cocktail lounge, a ski shop and a ski rental service. The total lift capacity per hour is 9,600 skiers. These lifts are in good condition and are operated as needed during the ski season. These facilities are situated on approxi- mately 90 acres owned by Big Boulder. The total capital investment in the ski area is $12,899,656. At May 31, 1996, the outstanding debt on the Big Boulder Ski Area was $1,330,047. Page 6 REAL ESTATE MANAGEMENT OPERATIONS A sewage treatment facility was constructed by Big Boulder Corporation to serve the resort housing within the Big Boulder tract. The facility has the capacity of treating 225,000 gallons per day and is leased to Lake Mountain Company for operation. The capital investment in the facility at May 31, 1996, was $1,698,917 with an outstanding debt of $332,512 at that date. Big Boulder Corporation constructed the Blue Heron Grille which consists of 8,800 square feet and is located on the east shore of Big Boulder Lake, Kidder Township, Carbon County, Pennsylvania. The facility, leased to a private operator, commenced operations in May 1986. The restaurant has dining capacity for 100 patrons with a nightclub. The capital investment in the facility at May 31, 1996 was $1,563,626. Big Boulder owns 929 acres of land which are located in the Pocono Mountains. The Big Boulder Lake Club includes a 175 acre lake, swimming pool, tennis courts, boat docks and accompanying buildings. For the fiscal year ended May 31, 1996, revenues from operations of Big Boulder amounted to $5,901,748. Approximately 83% of this revenue of $4,899,344 was derived from the Big Boulder Ski Area which operated 104 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 61 1991 Chairman of the Board Gary A. Smith 53 1992 President Melanie Murphy 36 1996 Vice President-Operations All officers of the Registrants serve for a one-year period or until their election at the first meeting of the Board of Directors after the Annual Meeting of Shareholders. Page 7 Michael J. Flynn was elected Chairman of the Board of the Registrants on July 11, 1991. He is Vice Chairman of the Board of Kimco Realty Corporation since January 1996. Mr. Flynn serves as a Director of Kimco Realty Corporation. Mr. Flynn was formerly Chairman of the Board and President of Slattery Associates, Inc. and Director of Slattery Group, Inc. from 1987 until December, 1995. Gary A. Smith was appointed President in July, 1992. He has been employed by the Registrants on a full-time basis since September 1982; he was appointed Vice President and Treasurer in July 1983 and Senior Vice President in September 1987. Melanie Murphy was appointed Vice President-Operations in June, 1996. She has been employed by the Registrants on a full-time basis since July, 1985. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND _______RELATED STOCKHOLDER MATTERS__________ Information required with respect to Registrants' common stock and related shareholder matters is incorporated herein by reference to the caption entitled "Price Range of Common Shares and Dividend Information" on Page 13 of the Fiscal 1996 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 1996 Annual Report to Shareholders. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ________CONDITION AND RESULTS OF OPERATIONS______ Information required with respect to Registrants' financial condition, changes in financial condition and results of operations is incorporated herein by reference to Pages 14 through 15 of the Fiscal 1996 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 1996 Annual Report to Shareholders. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS _ON ACCOUNTING AND FINANCIAL DISCLOSURES_____ Not applicable. Page 8 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS The information concerning Directors required by Item 10 of Form 10-K is set forth under the caption "Election of Directors" in the Registrants' defini- tive Proxy Statement for the 1996 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 45 1991 President - Northeast Land Company Vice President Jack Frost Mountain Company Lake Mountain Company Carl V. Kerstetter has been employed by the Registrants on a full-time basis for more than five years. ITEM 11. EXECUTIVE COMPENSATION The information concerning Executive Compensation required by Item 11 of Form 10-K is set forth under the caption "Remuneration of Executive Officers and Directors" in the registrant's definitive Proxy Statement for the 1996 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 1996 Annual Meetings of Shareholders to be filed pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this report and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. Page 9 PART IV ITEM 14(a). EXHIBITS, FINANCIAL STATEMENT SCHEDULES ________AND REPORTS ON FORM 8-K________ Financial statements included in Registrants' Fiscal 1996 Annual Report to Shareholders on Pages 2 through 12 are incorporated by reference. The Report of Independent Accountants for the combined financial statements appears on Page 14 of this Form 10-K. (b) Financial Statement Schedules The following is a list of financial statement schedules filed as part of this Annual Report on Form 10-K. The report of Independent Accountants for the financial statement schedule appears on Page 29 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 state- ments, 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 IV. Mortgage Loans on Real Estate (c) Reports on Form 8-K A Form 8-K was filed August 7, 1996, to report a change in the fiscal year end from May 31 to March 31, taking effect March 31, 1997. This change was approved by the Board of Directors on July 24, 1996. (d) Exhibits, Including Those Incorporated by Reference The following is a list of Exhibits filed as part of this Annual Report on Form 10-K. Where so indicated by footnote, Exhibits that were previously filed are incorporated by reference. For Exhibits incorporated by reference, the location of the Exhibit in the previous filing is indicated in parentheses. Legend for Documents Incorporated Page Articles of Incorporation and By-Laws By Reference Number 3( 1).1 Articles of Incorporation (1) 3( 1).4 Articles of Amendment (2) 3(ii).1 By-Laws of Blue Ridge Real Estate Company as amended through July 25, 1990 (9) 3(ii).2 By-Laws of Big Boulder Corporation as amended through July 25, 1990 (9) Page 10 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES ________AND REPORTS ON FORM 8-K________ Legend for Documents Incorporated By Reference Instruments Defining the Rights of Security ________Holders including Indentures______ 4.1 Specimen Certificate for Shares of (1) Common Stock 4.2 Security Combination Agreement (1) 4.3 Revised Specimen Unit Certificates for shares of common stock (7) Material Contracts Financial Agreements 10.1.1 Mortgage Relating to the Construction of the Jack Frost Mountain Ski Area (2) 10.1.2 Construction Loan - Jack Frost Mountain Ski Area (3) 10.1.3 Loan from PNC Bank, Wilkes-Barre (4) 10.1.4 First Mortgage, Principal Mutual, Building leased to Wal-Mart (8) 10.1.15 First Mortgage, American International Life Assurance Company - Dreshertown Plaza Shopping Center (9) Acquisition of Properties 10.2.1 Acquisition of Dreshertown Plaza Shopping Center (6) 10.2.2 Acquisition of Building leased to Wal-Mart (8) Lease 10.3.1 Building leased to Wal-Mart Agreement with Executive Officers and Director 10.4.1 Stock Option - Michael J. Flynn (10) Subsidiaries of the Registrants 21.1 List of the Subsidiaries of the Registrants (6) (1) Filed September 23, 1966 as an Exhibit to Form 10 and incorporated herein by reference (2) Filed August 22, 1973 as an Exhibit to Form 10-K and incorporated herein by reference (3) Filed August 27, 1975 as an Exhibit to Form 10-K and incorporated herein by reference Page 11 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, _______AND REPORTS ON FORM 8-K__________ - (Continued) Subsidiaries of the Registrants - (Continued) 21.1 List of the Subsidiaries of the Registrants (6) (4) Filed February 7, 1975 as an Exhibit to Form 8-K and incorporated herein by reference (5) Northeast Land Company - Incorporated in Commonwealth of Pennsylvania Jack Frost Mountain Company - Incorporated in Commonwealth of Pennsylvania Lake Mountain Company - Incorporated in Commonwealth of Pennsylvania Big Boulder Lodge, Inc. - Incorporated in Commonwealth of Pennsylvania BRRE Holdings, Inc. - Incorporated in State of Delaware BBC Holdings, Inc. - Incorporated in State of Delaware (6) Filed August 28, 1987 as an Exhibit to Form 10-K and incorporated herein by reference (7) Filed August 28, 1990 as an Exhibit to Form 10-K and incorporated herein by reference (8) Filed August 26, 1991 as an Exhibit to Form 10-K and incorporated herein by reference (9) Filed August 27, 1993 as an Exhibit to Form 10-K and incorporated herein by reference (10) Filed August 26, 1994 as an Exhibit to Form 10-K and incorporated herein by reference (11) Filed August 29, 1995 as an Exhibit to Form 10-K and incorporated herein by reference. Copies of Exhibits are available to Shareholders by contacting Lois K. McCurdy, Secretary, Blakeslee, PA 18610. A charge of $.25 per page to cover the Registrants' expenses will be made. Page 12 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized. BLUE RIDGE REAL ESTATE COMPANY BLUE RIDGE REAL ESTATE COMPANY BIG BOULDER CORPORATION BIG BOULDER CORPORATION By:___________________________ By:___________________________ Gary A. Smith Russell S. Mollath President Chief Accounting Officer Dated:________________________ Dated:________________________ Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrants and in the capacities and on the dates indicated. Each person in so signing also makes, constitutes and appoints Gary A. Smith, President, his true and lawful attorney-in-fact, in his name, place and stead to execute and cause to be filed with the Securities and Exchange Commission any or all amendments to this report. _______Signature_______ __________Title___________ ____Date___ Michael J. Flynn Chairman of the Board Gary A. Smith President Chief Operating Officer Principal Financial Officer Kieran E. Burke Director Milton Cooper Director Allen J. Model Director Wolfgang Traber Director Page 13 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders of Blue Ridge Real Estate Company and Big Boulder Corporation Our report on the combined financial statements of Blue Ridge Real Estate Company and subsidiaries and Big Boulder Corporation and subsidiaries has been incorporated by reference in this Form 10-K from page 12 of the 1996 Annual Report to Shareholders of Blue Ridge Real Estate Company and subsidiaries and Big Boulder Corporation and subsidiaries. In connection with our audits of such financial statements, we have also audited the related financial statement schedules on pages 15 to 17 inclusive of this Form 10-K. In our opinion, these financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. 2400 Eleven Penn Center Philadelphia, Pennsylvania July 26, 1996 Page 14 COMBINED SCHEDULE III. REAL ESTATE AND ACCUMULATED DEPRECIATION MAY 31, 1996
Column A Column B Column C Column D Initial Cost Cost Capitalized to Company Subsequent To Encum- Buildings & Description brances Land Improvements Improvements Land located in N.E.Penna. including various improvements 1,867,766 49,915 6,725,314 Corporate Building 282,918 151,594 Buildings Leased to Others Eastern Penna. Exchanged Asset- Shopping Center 5,700,000 780,700 4,554,235 0 Other 0 0 0 325,157 Laurens,S.C. 1,452,522 276,000 1,914,470 0 TOTAL 7,152,522 2,924,466 6,801,538 7,202,065 Column E Column F Gross Amount at which Carried Land located at Close of Period (1)(2) in N.E.Penna. Build- Accumu- including ing & lated various Improve- Deprecia- improvements Land ments Total tion 1,867,766 6,725,314 8,593,080 3,885,367 Corporate Building 434,512 434,512 192,551 Buildings Leased to Others Eastern Penna. Exchanged Asset- Shopping Center 780,700 4,554,235 5,334,935 2,058,324 Other 0 325,157 325,157 64,692 Laurens, S.C. 276,000 1,914,470 2,190,470 401,523 TOTAL 2,924,466 13,953,688 16,878,154 6,602,457
Page 15
Column G Column H Column I Life on Date of which Depre- Construc- Date ciation in tion Acquired Latest income Statement is Computed Land located in N.E. PA including various improvements Various Various 5 to 30 Years Corporate Building 1982 10 to 30 Years Buildings leased to Others Others Eastern Penna. Exchanged Asset- Shopping N/A Various 5 to 30 Years Other N/A Various 5 to 30 Years Laurens, S.C. N/A Various 5 to 30 Years TOTAL (1) Activity for the three years ended May 31, 1996 is as follows: 1996 1995 1994 Balance at beginning of year 16,875,710 16,934,242 16,934,242 Additions during year: Acquisition 0 0 225,000 Improvements 181,260 0 0 (reclassify) (178,816) (54,845) 2,444 (54,845) 0 16,878,154 16,879,397 16,934,242 Deductions during year: Cost of real estate sold 0 3,687 0 Balance at end of year 16,878,154 16,875,710 16,934,242
(2) The aggregate cost for Federal Income Tax purposes at May 31, 1996 is $13,640,298 (3) Activity for the three years ended May 31, 1996 is as follows:
1996 1995 1994 Balance at beginning of year 5,996,856 5,334,921 4,677,142 Additions during year: Current year depreciation 605,601 661,935 657,779 Less retirements 0 0 0 Balance at end of year 6,602,457 5,996,856 5,334,921 Page 16
COMBINED SCHEDULE IV. MORTGAGE LOANS ON REAL ESTATE - MAY 31, 1996
Column A Column B Column C Column D Column E Final Periodic Interest Maturity Payment Prior Description Rate Date Terms Liens First Mortgages: Land located in N.E. Penna. 11% May 1997 $2,480 Qtrly. plus interest None Land located in N.E. Penna. Aug. 1996 $250 monthly None Column F Column G Column H Principal Amount of Carrying Loans Subject Face Amounts to delinquent Amounts of Mortgages Principal or Mortgages (1)(2) Interest First Mortgages: Land located in N.E. Penna. 99,191 12,399 None Land located in N.E. Penna. 7,500 750 None 106,691 13,149 0 (1) Activity for the three years ended May 31, 1996 is as follows: 1996 1995 1994 Balance at beginning of year 26,824 55,407 100,926 Additions during year: New mortgage loans arising from real estate sales 0 0 7,500 26,824 55,407 108,426 Deductions during year: Collections of principal 13,675 28,583 53,019 13,675 28,583 53,019 Balance at end of year 13,149 26,824 55,407 (2) The aggregate cost for Federal Income Tax purposes at 5/31/96 is $13,149 Page 17
EX-13 2 BLUE RIDGE REAL ESTATE COMPANY BIG BOULDER CORPORATION ANNUAL REPORT 1996 To Our Shareholders: For Fiscal 1996, the Companies report net income of $43,263 or $.02 per combined share, compared to a net loss of $435,768 or $.21 for the previous year. Included with this year's expenses is a one-time write- off of $179,000 of project costs related to real estate development. The ski areas experienced 267,000 skier visits and 64,000 tubing visits to give us a profitable winter season, despite some extreme weather patterns that occurred on several weekends. Two years ago we introduced snowtubing to the Pocono ski industry at Jack Frost Mountain and last year we added a tubing complex at Big Boulder. With the growing interest in this winter activity, we plan to expand our tubing areas for the 1996-97 season. Additional capital expenditures include the installation of 10,000 CFM of air at Jack Frost Mountain, giving us the opportunity to open East Mountain for Christmas week. The Retail Shops, formerly operated on a concession basis, were taken in-house this year and operated successfully. Big Boulder Ski Area, which opened in December 1947, will be celebrating its 50th year during the 1996-97 season. Special activities are being planned. The ski areas operating revenues are dependent upon favorable weather patterns during the season. Over the last four years, we have made efforts to supplement this revenue with summertime activities which are proving successful. Festivals contribute the biggest portion of revenue during the summer months and this year we added two new festivals to our calendar--the American Roots Music Festival in June and the Pocono Gathering in August. Our Blues Festival held the last weekend in July, features top National and International Blues Recording Artists and has grown to be one of the top Blues Festivals in the Country. Splatter, our paintball game, operates primarily from April through November, and continues to grow in popularity. Due to demand, this activity now remains open on a reduced basis during the winter months. An In-Line Skate and Board Park, named "Wheels", is being introduced at Jack Frost this summer. Popular with Generation "X", this sport offers the growth we are looking for during our summer months. Fern Ridge Campground completed its first year of operation under Company management and has expanded the number of sites to 150 from its long-time capacity of 110. Future expansion is under consideration. We realize the key to our potential lies in the future sales and development opportunities of our Companies' large land holdings. As reported for several years, the real estate market for second homes in the Pocono Mountains remains weak. Should an upturn occur, the Companies are well prepared to respond with municipal approval for some 800 homesites adjacent to our ski areas. Additionally, Blue Ridge has necessary permits to construct a golf course at Jack Frost Mountain. These projects are continually evaluated as to market timing. I would like to thank our dedicated employees for their efforts throughout the year. After all, their commitment to service is our key to success. Our Companies are prepared and indded look forward to this upcoming year with enthusiasm. Gary A. Smith President Blakeslee, Pennsylvania August 16, 1996 Page 1
COMBINED BALANCE SHEETS May 31, 1996 and 1995 ASSETS 1996 1995 Current Assets: Cash and cash equivalents (including interest- bearing deposits of $1,770,546 in 1996 and $2,058,412 in 1995) 1,958,963 2,085,287 Marketable securities 293,588 0 Current installments of mortgage notes receivable 10,670 13,156 Accounts receivable 334,397 199,580 Refundable income taxes 0 10,000 Inventories 123,257 0 Prepaid expenses and other current assets 766,921 571,651 Total current assets 3,487,796 2,879,674 Mortgage notes receivable less current installments 2,479 13,668 Other non-current assets 71,297 36,797 Properties: Land, principally unimproved (19,884 acres per land ledger) 1,867,766 2,046,582 Land improvements, buildings and equipment 45,779,980 44,565,426 47,647,746 46,612,008 Less accumulated depreciation & amortization 27,999,628 25,878,476 19,648,118 20,733,532 23,209,690 23,663,671 LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995 Current liabilities: Current installments of long-term debt 504,681 661,141 Accounts and other payables 503,063 319,721 Accrued claims 204,147 154,605 Accrued income taxes 59,098 0 Accrued liabilities 684,835 542,627 Deferred revenue 293,095 412,224 Total current liabilities 2,248,919 2,090,318 Long-term debt, less current installments 9,189,486 9,578,025 Deferred income taxes 2,157,823 2,425,129 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 8,748,503 8,705,240 10,869,695 10,826,432 Less cost of 194,134 shares of capital stock in treasury 1,256,233 1,256,233 9,613,462 9,570,199 23,209,690 23,663,671
The accompanying notes are an integral part of the combined financial statements. Page 2
COMBINED STATEMENTS OF OPERATIONS AND EARNINGS RETAINED IN THE BUSINESS For years ended May 31,1996,1995&1994 1996 1995 1994 Revenues: Ski operations 10,618,961 7,837,872 9,539,184 Real estate management 2,928,213 2,757,217 2,359,231 Rental income 1,761,812 1,587,139 1,524,750 Disposition of properties 0 62,262 745 15,308,986 12,244,490 13,423,910 Costs and expenses: Ski operations 9,741,679 7,720,572 8,345,886 Real estate management 3,062,437 2,656,771 2,813,067 Rental income 827,229 798,759 793,608 Disposition of properties 0 3,687 0 General and administrative 941,001 972,146 996,582 14,572,346 12,151,935 12,949,143 Income from operations 736,640 92,555 474,767 Other income (expense): Interest and other income 88,060 82,956 105,917 Interest expense (866,262) (884,068) (864,102) Income(loss)before income taxes and cumulative effect of change in accounting method (41,562) (708,557) (283,418) Provision(credit)for income taxes: Current 58,731 3,810 161,116 Deferred (143,556) (276,599) (272,295) (84,825) (272,789) (111,179) Income(loss)before cumulative effect of change in accounting method 43,263 (435,768) (172,239) Cumulative effect on prior years (to May 31, 1994) of change in method of accounting for income taxes 0 0 8,355 Net income (loss) 43,263 (435,768) (163,884) Earnings retained in business: Beginning of year 8,705,240 9,141,008 9,304,892 End of year 8,748,503 8,705,240 9,141,008 Per weighted average combined share: Income(loss)before cumulative effect of change in accounting method 0.02 (.21) (.08) Net income (loss) 0.02 (.21) (.08)
The accompanying notes are an integral part of the combined financial statements. Page 3
COMBINED STATEMENTS OF CASH FLOW for the years ended May 31, 1996,1995 & 1994 1996 1995 1994 Cash Flows From Operating Activities Net income (loss) 43,263 (435,768) (163,884) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 2,132,581 2,255,928 2,303,977 Deferred income taxes (143,556) (276,599) (272,295) Cumulative effect of accounting change 0 0 (8,355) Write-off of project development costs 178,818 0 344,600 Deferred revenue (119,129) 174,363 63,917 Gain on sale of land 0 (58,575) 0 Changes in operating assets and liabilities: Accounts receivable (132,331) (29,976) (14,781) Refundable income taxes 10,000 30,000 85,558 Prepaid expenses & other current assets (318,527) (89,123) (195,217) Accounts payable & accrued liabilities 251,340 89,985 (41,175) Accrued income taxes 59,098 0 (25,835) Net cash provided by operating activities 1,961,557 1,660,235 2,076,510 Cash Flows From (used in) Investing Activities: Marketable securities (293,558) 0 0 Collection of mortgage receivable 11,189 9,919 53,019 Other non-current assets (34,500) 0 (7,500) Proceeds from sale of land 0 62,262 0 Additions to properties (1,225,983) (1,414,650) (1,611,406) Cash(used in)investing activities (1,542,882) (1,342,469) (1,565,887) Cash Flows From (used in) Financing Activities: Borrowings under short-term financing 900,000 1,075,000 665,000 Payment of short-term financing (900,000) (1,075,000) (665,000) Payment of long-term debt (544,999) (511,227) (511,735) Purchase of treasury stock 0 (609,863) (125,426) Net cash provided by (used in) financing activities (544,999) (1,121,090) (637,161) Net increase (decrease) in cash & cash equivalents (126,324) (803,324) (126,538) Cash & cash equivalents, beginning of year 2,085,287 2,888,611 3,015,149 Cash & cash equivalents, end of year 1,958,963 2,085,287 2,888,611 Supplemental disclosures of cash flow information: Cash paid (received) during year for: Interest 863,438 888,550 848,298 Income taxes 25,091 (17,602) 145,029
The accompanying notes are an integral part of the combined financial statements. Page 4 NOTES TO COMBINED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies: BASIS OF COMBINATION: The combined financial statements include the accounts of Blue Ridge Real Estate Company (Blue Ridge) and its wholly-owned subsidiaries, North- east Land Company, Jack Frost Mountain Company, and BRRE Holdings, Inc.; and Big Boulder Corporation (Big Boulder) and its wholly-owned subsidiar- ies, Lake Mountain Company and BBC Holdings, Inc. Under a Security Combination Agreement between Blue Ridge and Big Boulder and under the By- laws of both Companies, shares of the Companies are combined in unit certificates, each certificate representing concurrent ownership of the same number of shares of each company; shares of each company may be trans- ferred only together with an equal number of shares of the other company. All significant intercompany accounts and transactions are eliminated. DISPOSITION OF LAND AND RESORT HOMES: The Companies recognize income on the disposition of real estate in accordance with the provisions of Statement of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate" (SFAS 66). Down payments of less than 20% are accounted for as deposits as required by SFAS 66. The costs of developing land for resale as resort homes and the costs of constructing certain related amenities are allocated to the specific parcels to which the costs relate. Such costs, as well as the costs of construction of the resort homes, are charged to operations as sales occur. Land held for resale and resort homes under construction are stated at lower of cost or market. PROPERTIES AND DEPRECIATION: Properties are stated at cost. Depreciation is provided principally using the straight-line method over the following years: Land improvements 10-30 Buildings 3-30 Equipment and furnishings 3-20 Ski facilities: Land improvements 10-30 Buildings 5-30 Machinery and equipment 5-20 Upon sale or retirement of depreciable property, the cost and related accumulated depreciation are removed from the related accounts, and resulting gains or losses are reflected in income. Interest, real estate taxes, and insurance costs, including those costs associated with holding unimproved land, are normally charged to expense as incurred. Interest cost incurred during construction of facilities is capitalized as part of the cost of such facilities. Maintenance and repairs are charged to expense, and major renewals and betterments are added to property accounts. In 1996, the Companies adopted Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Impairment losses are recog- nized in operating income as they are determined. The Companies periodically review their property and equipment to determine if its carrying cost will be recovered from future operating cash flows. In Page 5 cases when the Companies do not expect to recover their carrying cost, the Companies recognize an impairment loss. No such losses have been recognized to date. INVENTORIES: Inventories consist of food, beverage, and retail merchandise and are stated at cost which approximates market, with cost determined using the first-in, first-out method. PENSIONS: The Companies are parties to a non-contributory defined benefit pension plan covering all permanent employees who meet certain require- ments as to age and length of employment. Pension benefits vest after five years of credited service and are based on the total earnings in the 60 consecutive months during the last ten years of employment in which earnings are highest. Plan assets consist primarily of U.S. Government Notes, common stocks and short-term investments. Pension expense is computed under the aggregate cost method which spreads past service costs over the average future service lives of covered employees. The Companies' policy is to fund pension contribu- tions in accordance with statutory requirements. INVESTMENTS: The Companies have classified their marketable securities as held to maturity and have stated these securities at amortized cost. The investment represents Discount Commercial Paper. DEFERRED REVENUE: Deferred revenues include revenues billed in advance for services and dues which are not yet earned. INCOME TAXES: Effective June 1, 1993, the Companies adopted Statement of Finan- cial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109) . The cumulative effect of the change in method of account- ing as of the beginning of the 1994 fiscal year has been reported in the combined statements of operations. SFAS 109 is based upon the asset and liability method of recognizing the tax consequence of transactions that have been recognized for financial reporting or income tax purposes. Among other things, the standard requires current recognition of the effect of changes in statutory tax rates on previously provided deferred taxes. Valuation allowances are estab- lished, when necessary, to reduce tax assets to the amount expected to be realized. Blue Ridge, including its subsidiaries, and Big Boulder, including its subsidiaries, report as separate entities for federal income tax purposes. State income taxes are reported on a separate company basis. USE OF ESTIMATES AND ASSUMPTIONS: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Page 6 FAIR VALUE: The Companies have estimated the fair value of their financial instruments at May 31, 1996, as required by Statement of Financial Accounting Standards No. 107. The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are reasonable estimates of their fair values. The carrying values of variable and fixed rate debt are reasonable estimates of their fair values based on their discounted cash flows at discount rates currently available to the Companies for debt with similar terms and remaining maturities. EARNINGS PER SHARE: Earnings per combined share are computed on the basis of the weighted average number of unit certificates outstanding during the year. Outstanding stock options had no dilutive effect on earnings per share. 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. 2. SALE OF LAND The Companies had no land sales for Fiscal 1996 or Fiscal 1994. The Companies sold land in Fiscal 1995 for cash consideration of $62,262. 3. CONDENSED FINANCIAL INFORMATION Condensed financial information of the constituent companies, Blue Ridge and its subsidiaries and Big Boulder and its subsidiaries, at May 31, 1996, 1995, and 1994 and for each of the years then ended, is as follows:
Blue Ridge and Subsidiaries 1996 1995 1994 Financial position: Current assets 2,882,803 2,499,262 3,295,047 Total assets 15,654,413 17,217,104 18,607,050 Current liabilities 1,427,707 2,679,640 2,919,877 Shareholders' equity 4,764,634 4,656,463 5,364,795 Operations: Revenues 9,407,238 8,082,007 8,353,991 Income(loss)before income taxes 20,797 (430,741) (432,839) Provision(credit)for income taxes (87,373) (176,487) (154,802) Net income (loss) 108,170 (254,254) (269,682) Page 7
Big Boulder and Subsidiaries 1996 1995 1994 Financial position: Current assets 604,993 1,541,450 1,751,690 Total assets 7,555,277 7,570,807 8,044,772 Current liabilities 821,212 537,532 647,028 Shareholders' equity 4,848,828 4,913,736 5,251,035 Operations: Revenues 5,901,748 4,162,483 5,069,919 Income(loss)before income taxes (62,359) (277,816) 149,421 Provision(credit)for income taxes 2,548 (96,302) 43,623 Net income (loss) (64,907) (181,514) 105,798
4. SHORT-TERM FINANCING: At May 31, 1996, Blue Ridge had an unused line of credit aggrega- ting $2,000,000 available for short-term financing, expiring November 2, 1996, which management expects to be renewed. The line of credit bears interest at the bank's prime rate. 5. LONG-TERM DEBT: Long-term debt as of May 31, 1996 and 1995 consists of the following:
1996 1995 Mortgage note payable to insurance company, interest fixed at 9% payable in monthly installments of $47,834 including interest to August 1998 with the remaining balance due September 1998 5,436,135 5,516,900 Mortgage note payable to bank, interest at 80% of the bank's prime rate (6.6% at May 31, 1996) payable in monthly installments of $14,517 through Fiscal 2005 2,684,778 2,944,276 Mortgage note payable to bank, interest at 80% of the bank's prime rate (6.6% at May 31, 1996) payable in monthly installments of $11,951 through December 1996 95,600 239,017 Mortgage note payable to insurance company, interest fixed at 10.5% payable in monthly installments of $19,132 including interest through Fiscal 2014 1,477,654 1,505,120 Mortgage note payable to bank, interest at 85% of the bank's prime rate (7.65% at May 31, 1996), payable in monthly installments of $6,771 through November 1995 0 33,853 9,694,167 10,239,166 Less current installments 504,681 661,141 9,189,486 9,578,025 Properties at net book value, which have been pledged as collateral for long-term debt, include the following at May 31, 1996: Investment properties leased to others 7,525,405 Ski facilities 23,370,299
The aggregate amount of long-term debt maturing in each of the years ending subsequent to May 31, 1996, is as follows: 1997-$504,681; 1998-$5,671,891; 1999-$327,829; 2000-$331,969; and 2001-$336,568 Page 8 6. INCOME TAXES The provision (credit) for income taxes is as follows:
1996 1995 1994 Currently payable: Federal 58,731 3,810 144,712 State 0 0 16,404 58,731 3,810 161,116 Deferred Federal (142,441) (229,616) (226,436) State (1,115) (46,983) (45,859) (143,556) (276,599) (272,295) (84,825) (272,789) (111,179)
A reconciliation between the amount computed using the statutory federal income tax rate and the provision (credit) for income taxes is as follows:
1996 1995 1994 Computed at statutory rate (14,131) (240,911) (96,362) State income taxes, net of federal income tax (7,153) (21,156) (19,440) Change in state tax rate 6,417 (19,162) 0 Other (7,124) 8,440 4,623 Change in valuation allowance (62,834) 0 0 Provision(credit)for income taxes (84,825) (272,789) (111,179)
As discussed in Note 1, the Companies changed the method of accounting for income taxes effective June 1, 1993. The components of the deferred tax assets and liabilities under the new accounting method as of May 31, 1996 and 1995 are as follows:
1996 1995 Gross deferred tax asset: Accrued expenses 134,710 123,753 Net operating loss and AMT credit carryforward 902,613 1,126,677 Contribution carryforward 168,647 457,918 1,205,970 1,708,348 Less valuation allowance (405,348) (931,463) 800,622 776,885 Gross deferred tax liability: Depreciation 2,957,496 2,787,963 Deferred gains 949 266,569 Other 0 23,729 2,958,445 3,078,261 Net deferred tax liability 2,157,823 2,301,376
At May 31, 1996, the Companies have contribution and Federal net operating loss carryforwards available to reduce future taxable income, if any, of $496,021 and $750,187, respectively. The Companies also have $410,482 of Alternative Minimum Tax (AMT) credit carryforward available to reduce future federal income tax liabilities. The contribution and Federal net operating loss carryforwards expire between Fiscal 1997 and 2001 and between Fiscal 2009 and 2010, respectively; the AMT credit has no expiration date. For state income tax purposes, the Companies have available state net operating loss carryforwards of $358,976 which expire in Fiscal 1997 and 1998. The valuation allowance decreased by $526, 115 during Page 9 Fiscal 1996, due to the expiration of charitable contribution carryforwards and the utilization/expiration of state net operating losses. 7. PENSION PLAN Pension expense for 1996, 1995 and 1994 includes the following components:
1996 1995 1994 Service costs, benefits earned during the period 148,042 117,509 166,100 Interest cost on projected benefit obligation 161,992 141,608 135,756 Actual return on plan assets (377,221) (188,902) (31,571) Net amortization and deferral 231,468 50,079 (103,365) Pension expense 164,281 120,294 166,920
Net amortization and deferral consists of the deferral of differences between actual and estimated return on assets and amortization of the net unrecognized transition obligation on a straight-line basis over 26 years. The funded status of the pension plan and the amounts recognized in the Companies' combined balance sheets at May 31, 1996 were as follows:
1996 1995 Actuarial present value of benefit obligations: Accumulated benefit obligation (including vested benefits of $1,545,200 and $1,369,800, respectively) (1,606,000 (1,428,000) Effect of future increase in compensation (615,300) (523,600) Projected benefit obligation (2,221,300) (1,951,600) Plan assets at fair value 2,491,554 2,125,835 Plan assets in excess of benefit obligation 270,254 174,235 Unrecognized net gain (loss) (391,414) (277,561) Unrecognized net transition obligation 144,159 152,639 Unrecognized prior service costs 12,223 12,834 Prepaid pension expense 35,222 62,147
Significant assumptions used in determining the actuarial present value of the projected benefit obligations and pension expense are as follows:
1996 1995 1994 Discount rate 7.50% 7.50% 6.25% Rate of compensation increase 5.00% 5.00% 5.00% Expected long-term rate of return 7.25% 7.50% 7.50% 8. PROPERTIES Properties consist of the following at May 31, 1996 and 1995:
1996 1995 Land, principally unimproved 1,867,766 2,046,582 Land improvements 6,725,314 6,574,018 Corporate buildings 434,512 434,512 Buildings leased to others 7,850,266 7,820,598 Page 10 Ski facilities: Land 4,552 4,552 Land improvements 4,244,068 3,948,118 Buildings 7,041,699 6,852,806 Machinery & equipment 18,452,243 17,928,747 Equipment & furnishings 1,027,326 1,002,075 47,647,746 46,612,008 Less accumulated depreciation 27,999,628 25,878,476 19,648,118 20,733,532
Buildings leased to others include land of $1,056,700 at May 31, 1996 and 1995. Development costs relating to real estate projects of $178,816 were written off during Fiscal 1996, which was included in the land balance at May 31, 1995. 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 4.01 years with options for renewal. A store has been net leased until January 2014. Information concerning rental properties and minimum future rentals under current leases (excluding renewal options) as of May 31, 1996, is as follows:
Properties Subject To Lease Accumulated Cost Depreciation Investment properties leased to others 7,850,266 2,524,553 Land and land improvements 5,394,621 372,594 Minimum future rentals: Fiscal years ending May 31: 1997 1,365,988 1998 1,256,975 1999 1,047,360 2000 862,729 2001 673,181 Thereafter 7,144,066* 12,350,299
*Includes $1,554,000 under a land lease expiring in 2072 and $2,597,130 under a net lease for a store expiring in 2014. There were no contingent rentals included in income for Fiscal 1996 and 1995. Fiscal 1994 had contingent rentals of $1,495. Page 11 10. QUARTERLY FINANCIAL INFORMATION (Unaudited) The results of operations for each of the quarters in the last two fiscal years are presented below:
Income(loss) Per Weighted from Net Avg.Combined Quarter Revenues Operations Income(Loss) Share 1996 1st 1,490,288 168,625 (17,594) (0.01) 2nd 975,344 (129,757) (200,669) (0.10) 3rd 10,091,533 955,306 463,208 0.23 4th 2,751,821 (257,534) (201,682) (0.10) 15,308,986 736,640 43,263 (0.02) 1995 1st 1,282,030 83,530 (69,590) (0.03) 2nd 963,985 (127,702) (206,318) (0.10) 3rd 7,868,844 393,032 112,876 0.06 4th 2,129,631 (256,305) (272,736) (0.14) 12,244,490 92,555 (435,768) (0.21)
The quarterly results of operations for 1996 and 1995, reflect the cyclical nature of the Companies' business since (1) the Companies two ski facilities operate principally during the months of December through March and (2) land dispositions occur sporadically and do not follow any pattern during the fiscal year. Costs and expenses, net of revenues received in advance attributable to the ski facilities for the months of June through November, are deferred and recognized as revenue and opera- ting expenses, ratably, over the operating period. The Fiscal 1996 fourth quarter includes the write-off of $178,816 of real estate development costs ($60,797 after tax) relating to the preliminary phase of real estate projects. The fourth quarter of 1996 includes approximately $63,000 from the partial utilization of state net operating losses which had been subject to a valuation allowance in the prior year. 11. INDUSTRY SEGMENT INFORMATION: The Companies and the subsidiaries operate in two industry segments consisting of the following: SKI OPERATIONS: Two ski areas located in the Pocono Mountains of Northeastern Pennsylvania. REAL ESTATE MANAGEMENT OPERATIONS: Investment properties leased to others located in Eastern Pennsyl- vania and South Carolina, fees from managing investor-owned properties, principally resort homes, recreational club activities and services to the trusts that operate resort communities, sales of land held for resale and investment purposes, and rental of land and land improvements. Income or loss for each segment represents total revenue less operating expenses. General and administrative expenses, other income, and interest expense are not specifically attributable to any one industry segment. Identifiable assets are those utilized in the Page 12 operation of the respective segments; corporate assets consist principally of cash and non-revenue producing properties held for investment purposes.
Year Ended May 31 1996 1995 1994 Revenues: Ski operations 10,618,961 7,837,872 9,539,184 Real estate management operations 4,690,025 4,406,618 3,884,726 15,308,986 12,244,490 13,423,910 Income: Ski operations 877,282 117,300 1,193,298 Real estate management operations 800,359 947,401 278,051 1,677,641 1,064,701 1,471,349 General & administrative expenses (941,001) (972,146) (996,582) Interest and other income 88,060 82,956 105,917 Interest expense (866,262) (884,068) (864,102) Income(loss) before income taxes and cumulative effect of change in accounting method (41,562) (708,557) (283,418)
In Fiscal 1996, 1995 and 1994, no one customer represented 10% or more of total revenues. Identifiable assets, net of accumulated depreciation at May 31, 1996, 1995 and 1994, and depreciation expense and capital expenditures for the years then ended by industry segment are as follows:
Identifiable Depreciation Capital Assets Expense Expenditure 1996 Ski Operations 9,186,757 1,451,159 1,066,507 Real Estate Management Operations 10,540,000 415,449 121,757 Other Corporate 3,482,933 283,181 104,626 Total 23,209,690 2,149,789 1,292,890 1995 Ski Operations 10,353,174 1,507,073 1,293,301 Real Estate Management Operations 10,315,950 333,597 8,789 Other Corporate 2,994,547 415,258 112,560 Total 23,663,671 2,255,928 1,414,650 1994 Ski Operations 9,719,420 1,537,592 1,197,144 Real Estate Management Operations 11,415,581 662,401 324,545 Other Corporate 4,097,779 103,984 89,717 Total 25,232,780 2,303,977 1,611,406
12. CONTINGENT LIABILITIES AND COMMITMENTS: The Companies are party to various legal proceedings incidental to their business. Certain claims, suits, and complaints arising in the ordinary course of business have been filed or are possible of assertion against the Companies. In the opinion of management, all such matters are without merit or are of such kind, or involve such amounts, that are not expected to have a material effect on the combined financial position or result of operations of the Companies. Page 13 At May 31, 1996, the Companies had an outstanding letter of credit of $75,000 which guarantees the ski facilities' aggregate liability insurance deductible. Blue Ridge has pledged approximately 20 acres of its leased land (cost $144,786) to serve as collateral, together with the lessee's land improvements, for the lessee's mortgage loan which amounts to approxi- mately $2,696,119 at May 31, 1996. 13. STOCK OPTIONS AND CAPITAL STOCK: The Chairman of the Board of the Companies was granted an Option for 10,000 shares of the Companies' common stock in July 1993 at $6.75 per share, which expires in 10 years. The Option has not been exercised at May 31, 1996. The Option price was not less than the market value at the date of the grant. The Board of Directors has authorized the repurchase of up to 200,000 shares of the Companies' common stock in the open market from time to time. As of May 31, 1996, 194,134 shares had been purchased. No shares were purchased in Fiscal 1996, and 96,600 and 20,113 shares were purchased in Fiscal 1995 and Fiscal 1994, respectively. REPORT OF INDEPENDENT ACCOUNTANTS To Shareholders of Blue Ridge Real Estate Company and Big Boulder Corporation We have audited the accompanying combined balance sheets of Blue Ridge Real Estate Company and subsidiaries and Big Boulder Corporation and subsidiaries as of May 31, 1996 and 1995, and related combined state- ments of operations and earnings retained in the business and cash flows for each of the three years in the period ended May 31, 1996. These financial statements are the responsibility of the Companies' manage- ment. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial posi- tion of Blue Ridge Real Estate Company and subsidiaries and Big Boulder Corporation and subsidiaries as of May 31, 1996 and 1995, and the com- bined results of their operations and their cash flows for each of the three years in the period ended May 31, 1996 in conformity with generally accepted accounting principles. Page 14 As discussed in Note 1 to the combined financial statements, the Companies changed their method of accounting for income taxes effec- tive June 1, 1993. COOPERS & LYBRAND L.L.P. 2400 Eleven Penn Center Philadelphia, Pennsylvania July 26, 1996 PRICE RANGE OF COMMON SHARES AND DIVIDEND INFORMATION Prior to May 4, 1993, Blue Ridge Real Estate Company and Big Boulder Corporation common shares were listed and traded as unit certificates on the Over-the-Counter market and were quoted on the NASDAQ National Market System (Symbol: BLRGZ). Effective May 4, 1993, the Companies decided to discontinue their listing with NASDAQ. Subsequent to May 4, 1993, the Companies are aware of limited trades in their common stock; however, Management does not believe such limited activity constitutes an established public trading market. The following sets forth the high asked and low price quotations as reported on the monthly statistical reports of the National Association of Securities Dealers, Inc. for Fiscal Years 1996 and 1995. No dividends were paid on common stock in either Fiscal Year.
FISCAL YEAR HIGH LOW 1996 ASKED BID First Quarter 5.875 5.125 Second Quarter 6.250 5.500 Third Quarter 6.000 5.375 Fourth Quarter 6.750 5.375 FISCAL YEAR HIGH LOW 1995 ASKED BID First Quarter 6.750 5.750 Second Quarter 7.500 6.000 Third Quarter 6.875 4.500 Fourth Quarter 5.750 5.000
The reported quotations represent prices between dealers, do not reflect retail mark-ups, mark-downs or commissions and do not neces- sarily represent actual transactions. The approximate number of holders of record of common stock on May 31, 1996 was 759. BLUE RIDGE REAL ESTATE COMPANY AND SUBSIDIARIES AND BIG BOULDER CORPORATION AND SUBSIDIARIES COMBINED SUMMARY OF SELECTED FINANCIAL DATA (CAPTION> 1996 1995 1994 Revenues 15,308,986 12,244,490 13,423,910 Net income(loss) 43,263 (435,738) (163,884) Net income(loss)per combined share .02 (.21) (.08) Cash dividends per combined share 0 0 0 Weighted average number of combined shares outstanding 2,004,014 2,029,630 2,109,246 Total assets 23,209,690 23,663,671 25,232,780 Long-term debt 9,694,167 10,239,166 10,750,393 Shareholders' equity 9,613,462 9,570,199 10,615,830 Page 15 1993 1992 Revenues 13,370,007 13,671,296 Net income(loss) 130,214 180,449 Net income(loss)per combined share .06 .08 Cash dividends per combined share 0 0 Weighted average number of combined shares outstanding 2,144,442 2,162,308 Total assets 26,190,005 26,036,984 Long-term debt 11,262,128 10,093,341 Shareholders' equity 10,905,140 10,915,571 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Results of Operations FISCAL 1996 VERSUS FISCAL 1995 For Fiscal Year ended May 31, 1996, the Companies reported net income of $43,263 or $.02 per combined share as compared with a net loss of $435,768 or $(.21) per combined share for Fiscal 1995. Combined revenue of $15,308,986 represents an increase of $3,064,496 or 25% when compared to Fiscal 1995. Ski Operations increased $2,781,089 or 35%, and Real Estate Management Operations increased $283,407 or 6% when compared to Fiscal 1995. The Ski Operations had approximately 267,000 skiers visit our slopes compared to 220,000 skier visits last season. The increase of 47,000 skier visits represents a 21% increase. Revenue per skier was $40 compared to $36 last season for an increase of $4.00 or 11%. Tubing operations had approximately 64,000 tuber visits compared to 18,500 tuber visits last season. The increase of 45,500 tuber visits represents a 246% increase. Revenue per tuber was $9.63 compared to $9.99 last season for a decrease of $.36 or 3%. The ski areas operated for a combined total of 212 days compared to 167 days last season. The food and beverage operation at the ski area contributed revenue of $6.75 per skier visit. The retail shop operation at the ski area contributed revenue of $2.16 per skier visit compared to $.32 the previous season with a concessionaire. The Real Estate Management Operations increase is attributed to fewer vacancies in investment properties, festival revenues, leasing commissions in resort communities, fees for services provided to the Trust of the resort communities, and fishing and hunting leases. The increases were offset by a decrease in commissions for resale of homes in our resort communities. Disposition of properties occur sporadically and do not follow any pattern during the fiscal year. No major land sales occurred in Fiscal 1996 or Fiscal 1995. Operating costs associated with Ski Operations increased by $2,021,107 when compared to Fiscal 1995. This increase is attributed to more operating days, advertising costs, and associated personnel costs. Operating costs associated with Real Estate Management Operations increased by $430,449 when compared to Fiscal 1995. This increase is attributed to the write-off of $178,816 of costs, prior year's real estate development projects, advertising costs, and associated personnel costs. General and Administrative expenses decreased by $31,145 when compared to Fiscal 1995. The decrease is attributed to a reduction in supplies and services. Cost of properties disposed is directly related to land sold. Interest and Other Income increased by $5,104 compared to Fiscal 1995. This increase is attributed to interest earned from interest- bearing deposits. Interest expense decreased by $17,806 compared to Fiscal 1995. This decrease is attributed to reduction of debt obligation. The effective Tax Rate credit for Fiscal 1996 of 34% versus the Tax Rate credit of 38% for Fiscal 1995, was reduced by approximately $63,000 from the partial utilization of State net operating losses, which had been subject to valuation allowance in prior years. Page 16 FISCAL 1995 VERSUS FISCAL 1994 For Fiscal Year ended May 31, 1995, the Companies reported a net loss of $435,768 or $(.21) per combined share as compared with a net loss of $163,884 or $(.08) per combined share for Fiscal 1994. Combined revenue of $12,244,490 represents a decrease of $1,179,420 or 9% when compared to Fiscal 1994. Real Estate Management Operations increased $521,892 or 13% when compared to Fiscal 1994. Ski Operations decreased $1,701,312 or 18% when compared to Fiscal 1994. The Ski Operations had approximately 220,000 skiers visit our slopes compared to 270,000 skier visits last season. The decrease of 50,000 skier visits represents a 19% decrease. Revenue per skier was $36 compared to $35 last season for an increase of $1.00 or 3%. The ski areas operated for a combined total of 167 days compared to 200 days last season. The food and beverage operation at the ski areas contributed revenue of $6.82 per skier visit. The Real Estate Management Operations revenue increase is attri- buted to fees for services provided to the Trust of the resort communi- ties, fewer vacancies in investment properties, more campsites rented, increased festival revenue, commissions for resales of homes in our resort communities, fishing and hunting leases, and leasing commissions in resort communities. Disposition of properties occur sporadically and do not follow any pattern during the fiscal year. No major land sales occurred in Fiscal 1995 or Fiscal 1994. Operating costs associated with Ski Operations decreased by $625,314 when compared to Fiscal 1994. This decrease is attributed to personnel, advertising costs, and less operating days. Operating costs associated with Real Estate Management Operations decreased by $147,458 when compared to Fiscal 1994. This decrease is attributed to cost related to Real Estate Development projects. General and Administrative expenses decreased by $24,436 because of personnel and related benefits. Cost of properties disposed increased due to the sale of property this fiscal year. Interest and Other Income decreased by $22,961 compared to Fiscal 1994. This decrease was due to the disposition of certain assets in Fiscal 1994. Interest expense increased by $19,966 compared to Fiscal 1994. This increase is attributed to higher interest rates. The effective Tax Rate for Fiscal 1995 is a credit of 38% versus a credit of 39% for Fiscal 1994. Page 17 LIQUIDITY AND CAPITAL RESOURCES The Combined Statement of Cash flows reflects net cash provided by operating activities of $1,961,557, $1,660,235,and $2,076,510 in Fiscal 1996, 1995 and 1994, respectively. No major capital investments were made in Fiscal 1996. The additions to building and equipment at both ski areas were general in nature. During Fiscal 1996, the Companies borrowed against their $2,000,000 line of credit for a period of one month in varying amounts with a maximum of $900,000. During Fiscal 1995, the Companies borrowed against their $2,000,000 line of credit for a period of one month in varying amounts with a maximum of $1,075,000. The Companies have a combined working capital of $1,238,877 at May 31, 1996, versus $789,356 at May 31, 1995. MOVING FORWARD Capital expenditures for Fiscal 1997 include expansion of our tubing hill at Jack Frost Mountain and doubling the size of our tubing facility at Big Boulder Ski Area. We also plan to add additional CFM of air to our snowmaking system at Jack Frost Mountain. The Companies plan to finance the air expansion through a bank and fund the tubing facilities expansion with internal funds. The Companies continue to develop activities to generate profit during the non-ski season with increased festivals and the introduc- tion in Fiscal 1997 of in-line skate and board park. CHANGE IN FISCAL ACCOUNTING PERIOD: At the July 24, 1996 Board of Directors meetings, a change in the fiscal year end was approved from May 31 to March 31. This change will be effective for each of the Companies 1997 Fiscal Year. The purpose is to have the fiscal reporting period coincide with the operating periods of the profit centers initiated over the last several years. BOARD OF DIRECTORS Kieran E. Burke Chairman, Chief Executive Officer and Director Premier Parks, Inc. Milton Cooper Chairman, Kimco Realty Corporation; Director, Getty Petroleum Corp.; Director, Kimco Realty Corporation Michael J. Flynn Chairman of the Board of the Companies; Vice Chairman and Director, Kimco Realty Corporation Allen J. Model Private Investor, Model Entities J. Anthony V. Townsend Managing Director, Finsbury Asset Management Ltd; Director, Rea Brothers Group, Plc. Wolfgang Traber Chairman of the Board, Hanseatic Corporation & Co.-N.Y. The above Directors serve both Companies. Page 18 OFFICERS Michael J. Flynn Chairman of the Board Gary A. Smith President Melanie A. Murphy Vice President of Operations Lois K. McCurdy Secretary Alisa J. O'Brien Assistant Secretary Russell S. Mollath Controller The above Officers serve both Companies. TRANSFER AGENT Summit Bank, Hackensack, New Jersey INDEPENDENT ACCOUNTANTS Coopers & Lybrand L.L.P., Philadelphia, Pennsylvania NOTICE OF ANNUAL MEETINGS The Annual Meetings of Shareholders of Blue Ridge Real Estate Company and Big Boulder Corporation will be held simultaneously at the Summit Lodge at Jack Frost Mountain, Kidder Township, Carbon County, Pennsyl- vania on Monday, October 7, 1996 at 11:00 am local time. FORM 10-K AVAILABLE The Companies will furnish to any shareholder, without charge, a copy of their Fiscal Year 1996 Annual Report as filed with the Securities and Exchange Commission on Form 10-K. Written requests should be directed to the attention of the Secretary, Blue Ridge Real Estate Company, P. O. Box 707, Blakeslee, PA 18610-0707 CORPORATE PROPERTIES Resorts in the Pocono Mountains Big Boulder Ski Area Jack Frost Mountain Fern Ridge Campground Investment Properties Dreshertown Plaza Shopping Center Dresher, Montgomery County, Pennsylvania Wal-Mart Store, Laurens, South Carolina Blue Heron Grille, Lake Harmony, Pennsylvania Land Holdings Blue Ridge 18,852 acres of land, held for investment Big Boulder 929 acres of land, held for investment Northeast Land Company 103 acres of land Recreational Areas "The Stretch" on the Tunkhannock Porter Run Hunting Preserve Splatter (Paintball game) Wheels, In-Line Skate and Board Park Page 20
EX-27 3 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 12-MOS MAY-31-1996 MAY-31-1996 1,958,963 293,588 334,397 0 123,257 3,487,796 47,647,746 27,999,628 23,209,690 2,248,919 0 2,004,014 0 0 0 23,209,690 15,308,986 15,308,986 0 14,572,346 0 0 866,262 (778,202) (84,825) 0 0 0 0 43,263 .02 0
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