U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1995
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to .
Commission file number 0-9385
Bull Run Corporation
(Exact name of registrant as specified in its charter)
Georgia 91-1117599
(State of incorporation (I.R.S. Employer
or organization) Identification No.)
4370 Peachtree Road, N.E., Atlanta, GA 30319
(Address of principal executive offices)
(404) 266-8333
(Issuer's telephone number)
Check whether issuer (1) filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter
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
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 22,156,727 shares of Common
Stock, par value $.01 per share, were outstanding as of October 31, 1995.
<PAGE>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
BULL RUN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 71,920 $ 824,207
Marketable securities 500,000
Accounts receivable 3,647,469 3,809,224
Inventories 4,422,530 2,608,850
Other 197,478 73,540
Total current assets 8,339,397 7,815,821
Property and equipment, net 2,481,905 2,358,403
Investment in affiliated companies 27,886,968 15,708,590
Goodwill 4,391,123 4,717,457
Other assets 230,511 156,174
$43,329,904 $30,756,445
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable $ 1,091,000 $
Current portion of long-term debt 225,000
Accounts payable 1,887,759 1,612,214
Accrued and other liabilities:
Salaries, wages and related taxes 299,477 281,292
Interest 184,569 2,833
Income taxes 464,696 244,047
Other 536,391 637,803
Total current liabilities 4,463,892 3,003,189
Long-term debt 13,500,000 2,775,000
Deferred income taxes 1,248,382 1,393,728
Stockholders' equity:
Common stock ($.01 par value, authorized
100,000,000 shares; issued 22,204,727 shares
as of September 30, 1995 and 22,136,727 shares
as of December 31, 1994) 222,047 221,367
Additional paid-in capital 20,471,862 20,403,136
Retained earnings 3,630,855 2,960,025
Treasury stock, at cost (88,000 shares) (207,134)
Total stockholders' equity 24,117,630 23,584,528
$43,329,904 $30,756,445
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
BULL RUN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenue from printer operations $ 6,097,082 $ $20,668,171 $
Cost of goods sold 4,255,512 14,394,513
Gross profit 1,841,570 6,273,658
Other operating revenue:
Royalties 1,136 60,683 1,031 186,646
Consulting fees 100,000 435,000 100,000
1,136 160,683 436,031 286,646
Operating expenses:
Research and development 498,931 1,407,169
Selling, general and administrative 1,024,165 158,568 3,704,250 478,883
1,523,096 158,568 5,111,419 478,883
Income (loss) from operations 319,610 2,115 1,598,270 (192,237)
Other income (expense):
Equity in earnings (losses) of affiliated
companies (38,620) 142,686 181,433 173,502
Interest, net (292,126) 359 (642,704) 1,601
Income (loss) before income taxes (11,136) 145,160 1,136,999 (17,134)
Income tax benefit (provision) 38,095 (48,372) (466,169) (272)
Net income (loss) 26,959 96,788 670,830 (17,406)
Retained earnings, beginning of period 3,603,896 2,630,189 2,960,025 2,744,383
Retained earnings, end of period $ 3,630,855 $2,726,977 $ 3,630,855 $2,726,977
========= ========= ========== =========
Earnings (loss) per share $ .00 $ .01 $ .03 $ (.00)
Weighted average number of common
shares outstanding 23,359,084 12,627,032 23,240,925 12,505,377
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BULL RUN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 670,830 $ (17,406)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 831,540 1,236
Equity in earnings of affiliated companies (181,433) (173,502)
Change in operating assets and liabilities:
Accounts receivable 161,755 (22,140)
Inventories (1,813,680)
Other current assets (123,938) (4,636)
Accounts payable and accrued expenses 365,565 (25,768)
Accrued income taxes 275,303 2,372
Deferred income taxes (2,100)
Net cash provided by (used in) operating activities 185,942 (241,944)
Cash flows from investing activities:
Sale of marketable securities 500,000
Capital expenditures (671,580) (5,169)
Investment in affiliated companies (12,161,958) (24,879)
Dividends received from affiliated companies 68,287
Net cash used in investing activities (12,265,251) (30,048)
Cash flows from financing activities:
Borrowings on line of credit 9,222,750
Repayments on line of credit (8,131,750)
Proceeds from long-term debt 13,500,000
Repayments on long-term debt (3,000,000)
Loan commitment fee (126,250)
Repurchase of common stock (207,134)
Exercise of incentive stock options 69,406
Net cash provided by financing activities 11,327,022
Net decrease in cash and cash equivalents (752,287) (271,992)
Cash and cash equivalents, beginning of period 824,207 291,604
Cash and cash equivalents, end of period $ 71,920 $ 19,612
======== ========
Supplemental cash flow disclosures:
Interest paid $ 404,310 $ 0
Income taxes paid 190,866 0
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
BULL RUN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In management's opinion, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments (consisting
solely of normal, recurring adjustments) necessary to present fairly
the financial position and results of operations for the interim
periods reported. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial
statements contained in the Annual Report on Form 10-KSB of Bull Run
Corporation ("Bull Run") for the year ended December 31, 1994.
2. On November 29, 1994, Datasouth Computer Corporation ("Datasouth") was
merged (the "Merger") into BRC Acquisition Corporation ("BRC"), a
newly-formed wholly-owned subsidiary of Bull Run. As of the effective
date of the Merger, BRC changed its name to Datasouth Computer
Corporation (also referred to herein as "Datasouth"). The accompanying
condensed consolidated financial statements include the accounts of
Bull Run and, since November 30, 1994, Datasouth, after elimination of
intercompany accounts and transactions. From April 29, 1993 through
November 29, 1994, Bull Run owned 43.6% of the outstanding common stock
of Datasouth.
On March 29, 1995, Bull Run acquired 50% of the outstanding common
stock of Capital Sports Properties, Inc. ("CSP") for a total purchase
price of approximately $9,700,000. CSP's assets consist of 50,000
shares of 8% cumulative preferred stock of Host Communications, Inc.
("Host") having a stated value of $100 per share (representing all of
Host's outstanding preferred stock) and warrants to purchase 447,002
shares of Host common stock (representing approximately 48% of the
outstanding shares after giving effect to the exercise of all
outstanding warrants.) The warrants have a negligible exercise price.
Host is a collegiate sports marketing company, producing sports
publications, syndicating radio and television broadcasts, and
producing audio/video marketing presentations. In addition, Bull Run
acquired 30,200 shares of Host's outstanding common stock, representing
6.9% of Host's currently outstanding common shares, for $906,000 in
January 1995.
The following unaudited pro forma summary information presents the
consolidated results of Bull Run's operations for the nine months ended
September 30, 1995 and for the three months and nine months ended
September 30, 1994 as if the Merger and the investments in CSP and Host
had occurred on January 1, 1994, after giving effect to certain
adjustments, including elimination of Merger expenses, amortization of
goodwill, elimination of equity in earnings of Datasouth, pro forma
effects of Gray Communications Systems, Inc. ("Gray")'s business
acquisitions during 1994, and related income tax effects:
Nine Months Three Months Nine Months
Ended Ended Ended
Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1994
Revenue from printer operations $20,668,000 $5,457,000 $14,825,000
Other operating revenue 436,000 161,000 309,000
Net income 709,000 325,000 369,000
Earnings per share $ .03 $ .01 $ .02
<PAGE>
BULL RUN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
3. Inventories associated with the printer operations consist of the
following:
September 30, December 31,
1995 1994
Raw materials $2,894,397 $1,783,408
Work-in-process 765,599 644,052
Finished goods 762,534 181,390
$4,422,530 $2,608,850
========= =========
4. The purchases of CSP's common stock and Host's common stock were
primarily financed under bank term loans totaling $13,500,000 bearing
interest initially at the prime rate, with the principal amount thereof
due in monthly installments of $150,000 commencing May 1998, with all
remaining amounts due and payable by April 2002. The debt is
collateralized by the shares of Gray owned by Bull Run, as well as by
shares of Bull Run common stock held by a principal shareholder of Bull
Run. The loan requires adherence to certain financial covenants, the
most restrictive of which requires maintaining a minimum net worth of
$23,000,000. The $13,500,000 loans also refinanced Datasouth's then
existing $3,000,000 bank term loan.
5. Prior to the Merger, Bull Run's 43.6% investment in Datasouth common
stock was accounted for by the equity method. Since November 30, 1994
(the day after the effective date of the Merger), Bull Run has accounted
for its investment in Gray common stock, which was previously owned by
Datasouth, by the equity method. Based in Albany, Georgia, Gray owns:
(i) three VHF NBC-affiliated television stations, (ii) two UHF,
CBS-affiliated television stations, (iii) a daily newspaper, (iv) two
five day a week newspapers and (v) seven area advertising weekly
shoppers. The excess of Bull Run's investment over the underlying
equity of Gray is being amortized over forty years. The amortization
is reported as a reduction in Bull Run's equity in earnings of
affiliated companies. During the nine months ended September 30, 1995,
Bull Run acquired additional shares of Gray common stock for
$1,455,000. As of September 30, 1995, Bull Run owned 26.8% of the
outstanding shares of Gray common stock.
Since March 29, 1995 (the date Bull Run acquired its investment in
CSP), Bull Run has accounted for its investments in CSP and Host by the
equity method.
Summarized operating results of affiliated companies for the three
months and nine months ended September 30, 1995 are as follows:
Three Months Ended Nine Months Ended
September 30, 1995 September 30, 1995
Operating revenue $26,785,000 $73,006,000
Income from operations 2,713,000 8,620,000
Net income 716,000 2,149,000
6. Earnings (loss) per share is based on the weighted average number of
common shares and dilutive common share equivalents outstanding during
the period, computed in accordance with the treasury stock method.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Datasouth's printer operations contributed $6,097,000 in revenue for
the quarter and $20,668,000 for the nine months ended September 30, 1995, with
a gross profit of 30.2% and 30.4%, respectively. Datasouth's revenue, which
was $5,457,000 for the quarter ended September 30, 1994 and $14,825,000 for
the nine months ended September 30, 1994, is not included in Bull Run's
consolidated financial statements prior to November 29, 1994, the date of the
Merger. Datasouth's increase in revenue from the same period last year was
largely attributable to an increase in printer sales to the SABRE Travel
Information Network ("SABRE"), a division of American Airlines, to
approximately $1.7 million for the third quarter and $6.4 million for the
first nine months of 1995 from $1.1 million for the third quarter and $2.5
million for the first nine months of 1994. Total finished product sales to
Datasouth's major account customers, which consist of SABRE and other end
users and original equipment manufacturers, were $2.3 million and $9.4 million
for the quarter and nine months ended September 30, 1995, respectively, and
$2.4 million and $5.4 million for the same respective periods of 1994.
Finished product sales through Datasouth's network of distributors and
resellers were $2.4 million and $7.0 million for the quarter and nine months
ended September 30, 1995, respectively, and $1.8 million and $6.1 million for
the same respective periods of 1994. Increases in finished product sales
through all channels were a direct result of increases in unit sales of
Documax, Datasouth's newest printer family, introduced in mid-1993.
Datasouth's parts, accessories and service revenue also increased to $1.4
million in the third quarter and $4.3 million in the first nine months of 1995
from $1.3 million and $3.3 million, respectively, in 1994.
Bull Run received royalty income from mining properties sold in 1990
based on quantities of gold processed. Royalty income has been immaterial in
1995, and Bull Run does not foresee any significant amount of royalty income
to be received in the future. The amount of the royalty income, if any, to be
received in the future will be solely dependent on factors outside Bull Run's
control. Bull Run recognized consulting fees from Gray of $435,000 in 1995
for management assistance relative to Gray's pending acquisition of a CBS-
affiliated television station and their acquisition of a newspaper publishing
operation. There can be no assurance that Bull Run will recognize any
consulting fees in the future.
Operating expenses were $1,523,000 for the quarter and $5,111,000 for
the nine months ended September 30, 1995 compared to $159,000 and $479,000 for
the same respective periods in 1994. The increase was due to the
consolidation of Bull Run and Datasouth operating results in 1995, and the
recognition in 1995 of goodwill amortization resulting from the Merger
amounting to $77,000 for the third quarter and $232,000 for the year to date.
Datasouth's operating expenses were $1,327,000 for the quarter and $3,885,000
for the nine months ended September 30, 1994.
Equity in earnings of affiliated companies relates, in 1995, to Bull
Run's investments in Gray, Host and CSP, and in 1994 (prior to November 29,
1994, the date of the Merger), to Bull Run's 43.6% investment in Datasouth.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, continued
Bull Run had interest expense, net of interest income, of $292,000 for
the quarter and $643,000 for the nine months ended September 30, 1995 as a
result of its $13.5 million term loans dated March 29, 1995, Datasouth's
interest expense on its former $3 million bank term loan, and borrowings on
its lines of credit.
The effective income tax rate of 41% for the nine months ended
September 30, 1995 exceeds the federal statutory rate of 34% due
principally to nondeductible goodwill amortization and state income taxes.
The income tax provision for the nine months ended September 30, 1994 was
insignificant due to the utilization of tax net operating loss
carryforwards.
Liquidity and Capital Resources
As discussed more fully in the Notes to Condensed Consolidated
Financial Statements, Bull Run acquired 50% of the outstanding common stock
of CSP on March 29, 1995 for a total purchase price of approximately
$9,700,000, and in January 1995, Bull Run acquired 30,200 shares of Host's
outstanding common stock for $906,000. The purchases of CSP's common stock
and Host's common stock were primarily financed under bank term loans
totaling $13,500,000 bearing interest initially at the prime rate, with the
principal amount thereof due in monthly installments of $150,000 commencing
May 1998, with all remaining amounts due and payable by April 2002. The
$13,500,000 loans also refinanced Datasouth's then existing $3,000,000 bank
term loan.
Bull Run invested an additional $1,455,000 in the nine months ended
September 30, 1995 to purchase shares of Gray common stock, increasing its
ownership to 26.8% of Gray's outstanding shares. Gray's common stock is
traded on the New York Stock Exchange under the symbol "GCS".
Bull Run has available lines of credit of $2,000,000 and $1,500,000,
expiring April 30, 1996 and April 1, 1997, respectively. Bull Run
anticipates that its current working capital, funds available under the
lines of credit and cash flow from Datasouth's operations will be
sufficient to fund its debt service and working capital requirements for at
least the next twelve months. Any capital required for potential
additional business acquisitions would have to be funded by issuing
additional securities or by entering into other financial arrangements.
Bull Run's working capital was approximately $3.9 million as of
September 30, 1995 and $4.8 million as of December 31, 1994. The decrease
was primarily attributable to borrowings under its lines of credit to fund
additional investments in Gray.
In November 1994, Bull Run announced that its Board of Directors
authorized the repurchase of up to 2,000,000 shares of its common stock.
Repurchases may be made from time to time in the open market or directly
from shareholders at prevailing market prices, and may be discontinued at
any time. During the quarter and nine months ended September 30, 1995,
Bull Run repurchased 18,000 and 88,000 shares, respectively, of its common
stock for approximately $54,000 and $207,000, respectively.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Computation of Earnings (Loss) Per Share
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
BULL RUN CORPORATION
Date: November 2, 1995 By: /s/ FREDERICK J. ERICKSON
Frederick J. Erickson
Vice President-Finance, Treasurer
and Assistant Secretary
(Mr. Erickson is the Chief Financial Officer and
has been duly authorized to sign on behalf of
the registrant.)
<PAGE>
EXHIBIT 11
BULL RUN CORPORATION
COMPUTATION OF EARNINGS (LOSS) PER SHARE
(Dollars in thousands, except amounts per share)
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
Primary:
Net income (loss) . . . $ 27 $ 97 $ 671 $ (17)
Primary shares:
Weighted average number of shares
outstanding . . . . . . 22,099 12,505 22,120 12,505
Assuming exercise of operations 1,260 122 1,121
Weighted average number of shares
outstanding, as adjusted 23,359 12,627 23,241 12,505
Primary earnings per share:
Net income (loss) . . . $ .00 $ .01 $ .03 $ (.00)
Assuming full dilution:
Net income (loss) . . . $ 27 $ 97 $ 671 $ (17)
Fully diluted shares:
Weighted average number of shares
outstanding 22,099 12,505 22,120 12,505
Assuming exercise of options . . . . 1,287 140 1,288
Weighted average number of shares
outstanding, as adjusted 23,386 12,645 23,408 12,505
Fully diluted earnings per share:
Net income (loss) . . . $ .00 $ .01 $ .03 $ (.00)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-13-1995
<PERIOD-END> SEP-30-1995
<CASH> 71,920
<SECURITIES> 0
<RECEIVABLES> 3,697,469
<ALLOWANCES> 50,000
<INVENTORY> 4,422,530
<CURRENT-ASSETS> 8,339,397
<PP&E> 3,138,148
<DEPRECIATION> 656,243
<TOTAL-ASSETS> 43,329,904
<CURRENT-LIABILITIES> 4,463,892
<BONDS> 0
<COMMON> 222,047
0
0
<OTHER-SE> 23,895,583
<TOTAL-LIABILITY-AND-EQUITY> 43,329,904
<SALES> 20,668,171
<TOTAL-REVENUES> 21,104,202
<CGS> 14,394,513
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,407,169
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 677,978
<INCOME-PRETAX> 955,566
<INCOME-TAX> 466,169
<INCOME-CONTINUING> 670,830
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 670,830
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
