<PAGE>
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 March 31, 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: 22,136,727 shares
of Common Stock, par value $.01 per share, were outstanding as of April
28, 1995.
<PAGE>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
BULL RUN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . .$ 25,789 $ 824,207
Marketable securities . . . . . . . . . . . . . 500,000 500,000
Accounts receivable . . . . . . . . . . . . . . 3,939,569 3,809,224
Inventories . . . . . . . . . . . . . . . . . . 3,499,350 2,608,850
Other . . . . . . . . . . . . . . . . . . . . . 111,418 73,540
Total current assets . . . . . . . . . 8,076,126 7,815,821
Property and equipment, net . . . . . . . . . . . 2,256,629 2,358,403
Investment in affiliated companies . . . . . . . 26,544,124 15,708,590
Goodwill . . . . . . . . . . . . . . . . . . . . 4,442,936 4,717,457
Other assets . . . . . . . . . . . . . . . . . . 527,089 156,174
$41,846,904 $30,756,445
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable . . . . . . . . . . . . . . . . . $ 256,750 $
Current portion of long-term debt . . . . . . . 225,000
Accounts payable . . . . . . . . . . . . . . . 1,954,217 1,612,214
Accrued and other liabilities:
Salaries, wages and related taxes . . . . . 294,854 281,292
Income taxes . . . . . . . . . . . . . . . . 216,661 244,047
Other . . . . . . . . . . . . . . . . . . . 523,997 640,636
Total current liabilities . . . . . . . 3,246,479 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 22,136,727
shares) . . . . . . . . . . . . . . . . . . 221,367 221,367
Additional paid-in capital . . . . . . . . . . 20,403,136 20,403,136
Retained earnings . . . . . . . . . . . . . . . 3,227,540 2,960,025
Total stockholders' equity . . . . . . 23,852,043 23,584,528
$41,846,904 $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 March 31
1995 1994
<S> <C> <C>
Revenue from printer operations . . . . $7,439,031 $
Cost of goods sold . . . . . . . . . . 5,160,829
Gross profit . . . . . . . . . . . . . 2,278,202
Other operating revenue:
Royalties . . . . . . . . . . . . . . 8,833 61,563
Consulting fees . . . . . . . . . . . 75,000
83,833 61,563
Operating expenses:
Research and development . . . . . . 449,223
Selling, general and administrative . 1,381,566 165,282
1,830,789 165,282
Income (loss) from operations . . . . . 531,246 (103,719)
Other income (expense):
Equity in earnings of affiliated companies 21,392 57,440
Interest, net . . . . . . . . . . . . (70,138) 540
Income (loss) before income taxes . . . 482,500 (45,739)
Income tax (provision) benefit . . . . (214,985) 4,900
Net income (loss) . . . . . . . . . . . 267,515 (40,839)
Retained earnings, beginning of period 2,960,025 2,744,383
Retained earnings, end of period . . . $3,227,540 $2,703,544
======== ========
Earnings (loss) per share $ .01 $ (.00)
Weighted average number of
common shares outstanding . . . . . . 23,071,214 12,505,377
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
BULL RUN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . $ 267,515 $ (40,839)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization . . . . . . . . . . . 265,869 326
Equity in earnings of affiliated companies . . . . (21,392) (57,440)
Change in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . (130,345) 79,139
Inventories . . . . . . . . . . . . . . . . . (890,500)
Other current assets . . . . (37,879) (7,588)
Accounts payable and accrued expenses . . . . 238,926 (12,186)
Accrued income taxes . . . . . . . . . . . . . 27,268 (20,600)
Deferred income taxes . . . . . . . . . . . . 15,700
Net cash used in operating activities . . . . . . (280,538) (43,488)
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . . (359,238)
Investment in affiliated companies . . . . . . . . . (10,835,366)
Dividends received from affiliated companies . . . . 21,224
Net cash used in investing activities . . . . . . (11,173,380)
Cash flows from financing activities:
Borrowings on line of credit . . . . . . . . . . . . 1,162,750
Repayments on line of credit . . . . . . . . . . . . (906,000)
Proceeds from long-term debt . . . . . . . . . . . . 13,500,000
Repayments on long-term debt . . . . . . . . . . . . (3,000,000)
Loan commitment fee . . . . . . . . . . . . . . . . . (101,250)
Net cash provided by financing activities . . . . 10,655,500
Net decrease in cash and cash equivalents . . . . . . . (798,418) (43,488)
Cash and cash equivalents, beginning of period . . . . 824,207 291,604
Cash and cash equivalents, end of period . . . . . . . $ 25,789 $ 248,116
======== ========
Supplemental cash flow disclosures:
Interest paid . . . . . . . . . . . . . . . . . . . . $ 86,387 $ 0
Income taxes paid . . . . . . . . . . . . . . . . . . 187,717 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
presented as an exhibit to the Bull Run Corporation 1994 Annual
Report on Form 10-KSB.
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 Corporation ("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.
The following unaudited pro forma summary presents the
consolidated results of Bull Run's operations for the quarter
ended March 31, 1994 as if the Merger 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:
Revenue from printer operations $5,140,000
Other operating revenue 62,000
Net income 13,000
Earnings per share $ .00
3. Inventories associated with the printer operations consist
of the following:
March 31, December 31,
1995 1994
Raw materials $2,337,814 $1,783,408
Work-in-process 650,584 644,052
Finished goods 510,952 181,390
$3,499,350 $2,608,850
========== ==========
4. 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. Host's
assets consist of 50,000 shares of 8% cumulative preferred
stock of Host Communications, Inc. ("Host") stated at $100
per share (representing all of Host's outstanding preferred
stock) and warrants to purchase
<PAGE>
BULL RUN CORPORATION NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
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 for
$906,000 in January 1995. The purchases of CSP's common stock and
Host's common stock were principally 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 1999, 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
significant shareholder. 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. Bull Run's 43.6% investment in Datasouth common stock, prior
to the Merger, 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 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) two daily
newspapers, (iv) a three-day a week newspaper, and (v) a
five-day a week newspaper. Bull Run also accounts for its
investment in CSP by the equity method. 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 quarter ended March 31, 1995, Bull Run acquired
additional shares of Gray common stock for approximately
$266,000. As of March 31, 1995, Bull Run owned 25.5% of the
outstanding shares of Gray common stock.
Summarized operating results of Gray for the three months ended
March 31, 1995 are as follows:
Operating revenue $13,154,000
Income from operations 1,991,000
Net income 404,000
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 $7,439,000 in
revenue for the quarter ended March 31, 1995, with a gross profit of
30.6%. Datasouth's revenue, which was $5,140,000 in the quarter
ended March 31, 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 is largely attributable to an increase in printer sales to the
SABRE Travel Information Network ("SABRE"), a division of
American Airlines, to approximately $2.3 million in the first quarter
of 1995 from $800,000 in the first quarter 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 $3.6 million for the first quarter of 1995 and
$1.9 million for the first quarter of 1994. Finished product sales
through Datasouth's network of distributors and resellers were $2.4
million and $2.1 million for the first quarter of 1995 and 1994,
respectively. Increases in finished product sales through all channels
are 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 first quarter of 1995 from $1.1 million in 1994.
Bull Run recognizes royalty income from mining properties sold in
1990 based on quantities of gold processed. Royalty income decreased to
$9,000 for the quarter ended March 31, 1995 from $62,000 for the quarter
ended March 31, 1994. 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 also recognized consulting fees from Gray
of $75,000 in 1995 for management assistance to Gray relative to
their acquisition of a newspaper publishing operation. There is no
assurance that consulting fees, if any, will be earned in the future.
Operating expenses were $1,831,000 for the quarter ended March
31, 1995 compared to $165,000 for the same period in 1994. The increase
was due to the consolidation of Datasouth operating results in 1995,
and the recognition in 1995 of amortization amounting to $75,000
associated with goodwill resulting from the Merger. Datasouth's
operating expenses were $1,308,000 for the quarter ended March 31,
1994.
Equity in earnings of affiliated companies relates, in 1995,
to Bull Run's investments in Gray and CSP, and in 1994, to Bull Run's
43.6% investment in Datasouth.
Bull Run recognized interest expense, net of interest
income, of $70,000 in 1995 as a result of Datasouth's interest expense
on its $3 million bank term loan and borrowings on its lines of credit.
As a result of the realization of the benefits from tax net
operating loss carryforwards in 1994 and nondeductible goodwill
amortization expense in 1995, Bull Run's effective tax rate increased
to 44.6% for the quarter ended March 31, 1995 compared to 10.7% for the
quarter ended March 31, 1994.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, continued
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 principally 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 1999, 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 $266,000 in the quarter ended
March 31, 1995 for 15,000 shares of Gray common stock, increasing its
ownership to 26.3% of Gray's outstanding shares.
Bull Run's working capital was approximately $4.8 million as of
March 31, 1995 and December 31, 1994.
Bull Run has available lines of credit of $2.0 and $1.5
million, expiring April 30, 1996 and January 1, 1996, respectively.
The company anticipates that its current working capital, funds
available under the lines of credit and cash flow from Datasouth
operations will be sufficient to fund its debt service and working
capital requirements for the remainder of the year. Any capital
required for potential additional business acquisitions would have to
be funded by issuing additional securities or by entering into other
financial arrangements.
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.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
Bull Run Corporation filed a Form 8-K
Current Report dated March 29, 1995 disclosing the
purchase of 50% of the outstanding common stock of
Capital Sports Properties, Inc. Required financial
statements will be filed as an amendment to Form 8-K by
June 12, 1995.
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: May 10, 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.)
