U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission file number 0-9385
Bull Run Corporation
(Name of small business issuer in its charter)
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Georgia 91-1117599
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
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4370 Peachtree Road, N.E., Atlanta, GA 30319
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (404) 266-8333
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
(Title of class)
Check whether the 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__
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X]
Total revenue for the issuer's most recent fiscal year was $27,153,000.
The aggregate market value of the voting stock, held by nonaffiliates
of the registrant (10,645,608 shares) on March 8, 1996 was $27,279,371, based
on the NASDAQ National Market System closing price.
As of March 8, 1996 there were 22,116,227 shares of Common Stock, par
value $.01 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference:
Documents Form 10-K Reference
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1995 Annual Report to Shareholders Part I, Item 1 and Part II, Items 6 and 7
Proxy Statement dated March 20, 1996 Part III, Items 10, 11 and 12
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BULL RUN CORPORATION
FORM 10-KSB INDEX
PART I
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Item 1. Description of Business................................................... 3
Item 2. Description of Property................................................... 7
Item 3. Legal Proceedings......................................................... 8
Item 4. Submission of Matters to a Vote of Security Holders....................... 8
PART II
Item 5. Market for Common Equity and Related Stockholder Matters................. 8
Item 6. Management's Discussion and Analysis or Plan of Operations................ 8
Item 7. Financial Statements...................................................... 8
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................... 9
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act....................... 9
Item 10. Executive Compensation.................................................... 9
Item 11. Security Ownership of Certain Beneficial Owners
and Management........................................................... 9
Item 12. Certain Relationships and Related Transactions............................ 9
PART IV
Item 13. Exhibits and Reports on Form 8-K.......................................... 10
Signatures................................................................ 13
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PART I
Item 1. Description of Business
General
Bull Run Corporation ("Bull Run"), a Georgia corporation, was
originally incorporated under the laws of the State of Washington under the name
of Bull Run Gold Mines, Ltd. Bull Run changed its name and state of
incorporation effective December 22, 1992, and relocated its corporate offices
to Atlanta. Bull Run was a mineral resource company which had been engaged in
the business of developing and mining in Nevada through a joint venture with
another mining company. Bull Run sold its interest in the joint venture in
November 1990 for, among other things, $6,000,000 in cash and the discharge of
its outstanding debt related to the joint venture.
In April 1993, Bull Run purchased approximately 43.6% of the
outstanding shares of common stock of Datasouth Computer Corporation
("Datasouth"). On November 29, 1994, the merger (the "Merger") of Datasouth into
BRC Acquisition Corporation ("BRC"), a newly-formed, wholly-owned subsidiary of
Bull Run, was consummated. Under the terms of the Merger, each outstanding share
of common stock of Datasouth (other than shares owned by Bull Run, which were
cancelled) was converted into the right to receive three shares of common stock,
par value $.01 per share ("Common Stock"), of Bull Run. Immediately following
the Merger, BRC changed its name to Datasouth Computer Corporation (also
referred to as "Datasouth"). Bull Run's investment in Datasouth was accounted
for under the equity method from May 1, 1993 through November 29, 1994. Since
the Merger, Datasouth has operated as a wholly-owned subsidiary of Bull Run.
Datasouth, located in Charlotte, North Carolina, designs, manufactures,
markets, and supports heavy-duty printers used primarily with multi-user micro,
mini and mainframe computers for heavy-duty, print-intensive applications.
Datasouth sells its products worldwide through distributors and value-added
resellers, and directly to large volume major accounts. Founded in 1977,
Datasouth has sold more than 220,000 printers.
In May 1993, Datasouth acquired for approximately $11,100,000 common
stock of Gray Communications Systems, Inc. ("Gray"), constituting approximately
21% of Gray's outstanding shares. In 1994, Datasouth purchased additional Gray
common stock for $969,000 and in 1995, acquired additional shares for $1,930,000
thereby increasing its interest in Gray to 27.3% of the outstanding shares as of
December 31, 1995. Based in Albany, Georgia, Gray operates: (i) three VHF,
NBC-affiliated television stations - WALB-TV in Albany, Georgia; WJHG-TV in
Panama City, Florida; and KTVE-TV in Monroe, Louisiana; (ii) two UHF,
CBS-affiliated television stations which were acquired by Gray in September 1994
- - WKYT-TV in Lexington, Kentucky and WYMT-TV in Hazard, Kentucky; and (iii) a
VHF, CBS-affiliated television station, WRDW-TV in Augusta, Georgia, which was
acquired by Gray in January 1996. Gray also operates three daily newspapers: (i)
The Albany Herald in Albany, Georgia; (ii) The Rockdale Citizen in Conyers,
Georgia, acquired by Gray in May 1994; and (iii) The Gwinnett Post-Tribune in
Lawrenceville, Georgia, acquired in January 1995; as well as four advertising
weekly shoppers in Southwest Georgia and North Florida. In December 1995, Gray
executed a definitive agreement to purchase the assets of WCTV-TV, a VHF,
CBS-affiliated television station in Tallahassee, Florida and WKXT-TV, a VHF,
CBS-affiliated television station in Knoxville, Tennessee, as well as a
communications and paging business operating in certain parts of the
southeastern United States. The transaction is expected to close by September
1996. J. Mack Robinson, Chairman of the Board of Bull Run, Robert S. Prather,
Jr., President and a director of Bull Run, and Hilton Howell, Vice President,
Secretary and a director of Bull Run, are members of Gray's Board of Directors.
In March 1995, Bull Run acquired, principally from General Electric
Capital Corporation, 50% of the outstanding common stock of Capital Sports
Properties, Inc. ("CSP") for a total purchase price of approximately $9.7
million. CSP's assets consist of 50,000 shares of 8% cumulative preferred stock
(representing all of the outstanding preferred stock) and warrants to purchase
447,002 shares of common stock (representing approximately 48% of the
outstanding
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shares assuming conversion of the warrants) of Host Communications, Inc.
("Host"). The warrants have a negligible exercise price. During 1995, Bull Run
also acquired approximately 8.7% of Host's currently outstanding common stock
for approximately $1,177,000. Host is a collegiate sports marketing company,
producing sports publications, syndicating radio and television broadcasts, and
producing audio/video marketing presentations.
In November 1995, Bull Run purchased, for $650,000, 65 shares of
convertible preferred stock of University Sports America, Inc. ("USA"),
representing 13.3% of USA's outstanding preferred shares. The preferred stock
owned by Bull Run is convertible into 65 shares of USA common stock,
representing approximately 3% of the outstanding common shares after giving
effect to such conversion. USA is a newly-formed entity which markets and
operates participatory sports events and provides collegiate sports marketing
services. Host owns approximately 33.8% of USA's outstanding common stock, which
Host received in exchange for its contribution to USA of certain of Host's
collegiate sports marketing business.
In January 1996, Bull Run entered into a Note Purchase Agreement with
Gray pursuant to which Bull Run purchased an 8% Subordinated Note issued by Gray
in the principal amount of $10,000,000 due in January 2005, with interest
payable quarterly beginning March 31, 1996. In connection with the Note Purchase
Agreement, Gray issued to Bull Run warrants to purchase up to 487,500 shares of
Gray common stock at $17.88 per share, warrants for 300,000 shares of which are
fully vested, with the remaining warrants vesting in five annual installments of
37,500 shares each beginning January 3, 1997, assuming the 8% Subordinated Note
remains outstanding. Vested warrants are exercisable after January 3, 1998 and
expire in January 2006. The note is subordinated to Gray's outstanding debt to a
bank and an institutional lender (collectively, "Senior Debt"), and any debt
refinancing or modifying Gray's Senior Debt. Bull Run financed the loan with a
$10,000,000 increase in its outstanding long-term borrowings from a bank.
Principal Products and Markets
The market for Datasouth's products is directly related to the market
for micro, mini and mainframe computers, because most computer systems include
one or more printers. Datasouth's impact printers compete in the medium and high
speed (i.e., 300 to 600 characters per second, or "cps") serial impact dot
matrix printer markets. Datasouth provides dot matrix printers for use in
applications where reliability, high duty cycles and/or thick forms printing are
required, such as in the printing of invoices, packing lists, hospital admission
forms, airline tickets, labels and checks, as well as data processing reports
and spreadsheets. Datasouth's dot matrix products distinguish themselves from
many lower priced printers in their ability to print forms and reports as thick
as nine parts and to withstand rugged duty cycles. Datasouth's business is not
seasonal to any significant degree.
Datasouth currently manufactures three dot matrix product families: the
Documax(TM), the Performax and the XL line. Documax(TM), a heavy-duty dot matrix
printer designed to provide maximum forms printing capabilities in a minimum
amount of space, was introduced in April 1993. Documax(TM) is a narrow carriage
printer intended for printing on demand industry specific documents such as
hotel bills, patient admissions/discharge forms, airline tickets, packing slips
and invoices. A multipath printer for multipart forms, Documax(TM) offers a
dual-tractor feature which allows the operator to switch automatically from one
form to another. The original Documax(TM) versions print at speeds up to 333 cps
and generate bar codes, OCR and industrial graphics as well. In 1995, Datasouth
introduced a 600 cps version of Documax(TM), with shipments scheduled to begin
in 1996. The Performax line is a family of high speed serial impact dot matrix
printers which operate at speeds up to 622 cps. A number of different print
styles and sizes may be selected depending on the application. Performax can
print on multipart forms having up to six parts and has a demand document
feature to allow immediate tear-off of each form as it is printed. The XL line
is a family of medium speed serial impact dot matrix printers which operate at
speeds ranging from 300 to 400 cps. It replaced Datasouth's DS line of medium
speed serial impact dot matrix printers, which was discontinued in 1992.
In 1994, Datasouth introduced the "FreeLiner(TM)," its first line of
portable thermal printers.
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The FreeLiner(TM) printer is used primarily for printing one label at a time for
various applications, such as packing and shipping labels. This line of printers
uses a new label stock which has no silicone coated liner. The "linerfree" stock
offers several advantages over conventional liner-backed labels, including more
printable labels per roll, superior print image and durability and elimination
of label liner waste. The "linerfree" stock also generally has a lower overall
cost than conventional label stock. Delivery of the FreeLiner(TM) printer began
in October 1994. Datasouth commenced shipments of a desktop version of the
printer, the "FreeLiner(TM) DT" in 1995.
In 1995, Datasouth announced the "WinLiner," its first internally
developed and manufactured thermal printer, a portable 2-inch wide printer
targeted at label and receipt applications. Datasouth expects to begin shipping
WinLiner units, which also take advantage of Datasouth's "linerfree" label
adaptations, in 1996.
Competition
Competition in the computer printer industry is generally quite intense
and some of Datasouth's competitors have greater financial and other resources
than Bull Run. As the printer market continues to segment by speed, applications
and technology, Bull Run believes its dot matrix products to be competitive in
the medium and high speed serial impact dot matrix printer markets for
applications requiring high performance output of text, graphics and bar codes,
and believes that its thermal printer products to be competitive in the portable
and desktop thermal printer markets. Bull Run believes that Datasouth's products
do not generally compete in "mass market" dot matrix and thermal printer
applications, but are focused in industrial vertical markets often avoided by
large Japanese and domestic printer manufacturers due to their size and the size
of the overall market.
Manufacturing and Quality Control
Datasouth's manufacturing operation assembles products in accordance
with its designs and specifications. It utilizes components and sub-assemblies
procured from outside suppliers, some of which produce parts from tooling
designed and owned by Datasouth. Most of the materials, components and
subassemblies are available from a variety of sources and are generally not
subject to significant price volatility. Although Datasouth has not experienced
any significant problems in obtaining materials, components or subassemblies,
future shortages could result in production delays which would adversely affect
its business.
Datasouth's approach to product design reflects an awareness of the
practical aspects of manufacturing high quality products. Commonality of
components and subassemblies across product lines provides efficiencies in
quality control, productivity, material cost and inventory control. Datasouth
verifies the quality of its products by thorough testing at various stages of
the assembly process.
Datasouth's production scheduling methodology makes use of Just-In-Time
manufacturing techniques, whereby final unit configuration is scheduled each
day -- not weeks or months in advance -- to meet changing order requirements.
All assemblies and raw materials are pulled through to replenish stock consumed,
thereby eliminating unnecessary inventories and scheduling. After configuration,
the units are burned-in and are available for shipment within 24 hours. As a
result, the product mix can be altered within hours, allowing Datasouth to
quote delivery in a much shorter period than many of its competitors. In
addition, Datasouth utilizes automated component insertion, wave soldering and
automated test equipment to reduce labor costs while maintaining high
quality.
Warranty and Service
Datasouth generally warrants its printers against defects in
workmanship for one year. In addition to providing in-house depot repair
service, distributors and national third party service organizations provide
on-site repair under service contracts. Datasouth has a technical support staff
accessible to all customers through a toll-free hotline.
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Datasouth's warranty experience over the past three years has ranged
from approximately .3% to .4% of revenue. Total warranty expense for 1995, 1994
and 1993 was $73,000, $78,000 $66,000, respectively.
Sales and Distribution
Datasouth sells its printers through an international network of
approximately 60 independent distributors and directly to large volume major
accounts, which consist of end-users and original equipment manufacturers.
During 1995, finished product sales to distributors represented 35% of total
revenue, and finished product sales to major accounts represented 44%, compared
to 40% and 38% in 1994, respectively.
Datasouth's distributors typically operate in nonexclusive territories
on a local, regional, national or international basis. The distributors carry
complementary lines of computers and peripheral products and may carry products
competitive with Datasouth's products. They sell principally to large industrial
companies, hospitals, banks, government agencies and educational institutions.
In 1993, Datasouth began to supply Documax(TM) printers to SABRE, a
division of American Airlines under a five year contract. The contract is,
however, cancelable at any time by American Airlines. Moreover, American
Airlines is under no contractual obligation to purchase any minimum number of
printers from Datasouth during the term of the contract. Sales to American
Airlines aggregated approximately $7,800,000 in 1995 and $4,800,000 in 1994,
representing 30% and 22% of Datasouth's total sales, respectively. For November
30, 1994 through December 31, 1994 (i.e., the 1994 period in which Datasouth's
results were consolidated with Bull Run's), sales to American Airlines
aggregated approximately $940,000, representing 34% of total operating revenue.
Datasouth intends to continue pursuing aggressively new major account
business in 1996, while maintaining and strengthening relationships with key
distributors.
Backlog
Datasouth sells its products to its customers pursuant to cancelable
purchase orders and, accordingly, does not require firm quantity commitments.
Datasouth's customers generally issue cancelable purchase orders with short
delivery lead times. The time lapse between receipt of a purchase order and
shipment of printers generally ranges from one to 90 days. For this reason,
Datasouth's production schedule is based substantially on anticipated releases,
and management does not regard the backlog of purchase orders at any one time to
be indicative of future trends in its revenue.
As of December 31, 1995, Datasouth had unfilled cancelable purchase
orders with an aggregate selling price of approximately $755,000, compared with
$3,150,000 and $1,688,000 as of December 31, 1994 and 1993, respectively.
Advertising and Promotion
Datasouth participates in numerous regional, national, and
international trade shows and actively promotes its products through direct
mail, telemarketing and co-op advertising arrangements with distributors.
Datasouth also advertises its products in publications such as "PC Week",
"Automatic ID News" and "Network Computing". Advertising costs were
approximately $198,000 and $244,000 in 1995 and 1994, respectively. For the 1994
period in which Datasouth's results were consolidated with Bull Run's (i.e.
November 30, 1994 to December 31, 1994), advertising costs were insignificant.
Research and Development
Datasouth employs over 20 engineers, technicians and support personnel
to engage in basic and applied research. In 1996, Datasouth released a new 600
cps version of its Documax(TM)
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printer, and plans to release an internally-developed portable thermal printer,
the "WinLiner." Current engineering efforts are focused on enhancement of
existing products to expand market penetration, customization of existing
products to meet special printing applications for specific customer needs, and
development of new thermal printers to complement those introduced by Datasouth
in 1995 and 1996. New markets and technology are also being explored in
conjunction with strategic business partners where Datasouth can conceivably add
value through design, manufacturing or distribution capabilities.
Total research and development expense incurred by Datasouth was
$1,872,000, $1,515,000 and $1,735,000 in 1995, 1994 and 1993, respectively. For
the 1994 period in which Datasouth's results were consolidated with Bull Run's
(i.e. November 30, 1994 to December 31, 1994), research and development expense
was $140,000.
Patents, Trademarks and Related Contracts
Datasouth's business is not dependent upon the existence of any
patents, trademarks or related contracts.
Employees
As of December 31, 1995, Bull Run had 130 full-time employees, most of
whom were located at Datasouth's administrative and manufacturing facility in
Charlotte, North Carolina. No employees are subject to collective bargaining
agreements, and there have been no work stoppages due to labor difficulties.
Management believes that its relationship with employees is good.
Export Sales
Datasouth sales to non-domestic customers, located principally in
Western Europe, Southeast Asia and Mexico, totaled approximately $2,361,000 in
1995, $1,700,000 in 1994 and $998,000 in 1993. For the 1994 period in which
Datasouth's results were consolidated with Bull Run's (i.e., November 30, 1994
to December 31, 1994), such sales were $209,000.
Item 2. Description of Property
Bull Run's executive offices are located in Atlanta, Georgia in
approximately 2,000 square feet of office space leased from Delta Life Insurance
Company, an affiliate of J. Mack Robinson, Chairman of the Board of Bull Run.
The lease expires on December 31, 2002, subject to several renewal options on
the part of Bull Run. Bull Run anticipates that its current office space will be
suitable for its anticipated needs for the foreseeable future.
Datasouth's administrative offices and operations are located in
Charlotte, North Carolina in approximately 60,000 square feet of fully-utilized
leased facilities. Although present facilities are suitable and adequate for its
current needs, Datasouth owns approximately eight acres of land contiguous to
its main facility for future expansion, if necessary. Datasouth's main
administrative and manufacturing facility is leased through 1998 having a three
year renewal option, and additional office and warehousing space is leased
through 1997.
Following the sale of Bull Run's interest in the gold mining joint
venture, Bull Run retained a two and one-half percent net smelter royalty on
production outside of the recoverable reserves previously identified at the
joint venture's property. Bull Run earned royalty income of approximately $2,000
in 1995 and $223,000 in 1994 relating to gold processed in those years. Bull Run
believes that gold mined but not processed as of December 31, 1995 is
insignificant, therefore Bull Run does not anticipate that it will receive any
material amount of royalty income for the foreseeable future. The amount of
royalty income, if any, to be received by Bull Run in the future will be
dependent solely on factors outside the control of Bull Run, including the price
of gold and the costs of mining and processing gold from the property.
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Item 3. Legal Proceedings
Bull Run is not currently a party to any legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Market Information
The Common Stock is traded in the over-the-counter market on the NASDAQ
National Market System under the symbol "BULL." The following table sets forth
for each period indicated the high and low closing sale prices for the Common
Stock as reported on the NASDAQ National Market System. Such prices reflect
interdealer prices without adjustments for retail markups, markdowns or
commissions.
1994 High Low
First Quarter 1.91 1.25
Second Quarter 1.81 1.19
Third Quarter 1.69 1.28
Fourth Quarter 1.88 1.38
1995
First Quarter 2.56 1.63
Second Quarter 3.19 2.03
Third Quarter 4.25 2.75
Fourth Quarter 3.94 2.56
Holders
As of March 8, 1996, there were 3,257 holders of record of Common
Stock.
Dividends
It is the present policy of Bull Run's Board of Directors to retain all
earnings to finance the development and growth of Bull Run's businesses. Bull
Run has never declared or paid a cash dividend on its Common Stock. Bull Run's
future dividend policy will depend upon its earnings, capital requirements,
financial condition and other relevant factors.
Item 6. Management's Discussion and Analysis or Plan of Operations
The information required by this item is set forth under the captions
"Bull Run Corporation Management's Discussion and Analysis" and "Datasouth
Computer Corporation - Management's Discussion and Analysis" on pages 16, 17 and
29 in the Company's 1995 Annual Report, which
is incorporated herein by reference.
Item 7. Financial Statements and Supplementary Data
The financial statements required by this item are set forth on pages
18 through 27 and pages 30 through 32 in the Company's 1995 Annual Report, and
the supplementary data required by this item is set forth under the caption
"Selected Quarterly Financial Data (Unaudited)" on pages 9 and 28 in the
Company's 1995 Annual Report, which is incorporated herein by reference.
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Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act
Except for the information stated below, the information required by
this item is set forth under the caption "Election of Directors - General" on
page 3, and under the caption "Compliance with Section 16(a) of the Securities
Exchange Act of 1934" on page 7 of the Company's Proxy Statement dated March 20,
1996, which is incorporated herein by reference.
In addition to Messrs. Prather, Howell and Robinson listed above, Bull
Run has the following executive officer:
FREDERICK J. ERICKSON, 37, has been Vice President - Finance, Treasurer and
Chief Financial Officer of Bull Run since 1994 and has been Vice President -
Finance & Administration, Chief Financial Officer, Treasurer and Secretary of
Datasouth since 1993. He was employed by Coopers & Lybrand from 1981 to 1993 as
a certified public accountant.
Item 10. Executive Compensation
The information required by this item is set forth under the captions
"Executive Compensation", "Long Term Incentive Plans", "Employee Incentive
Plans" and "Employment Arrangements" on pages 5 through 6 of the Company's Proxy
Statement dated March 20, 1996, which is incorporated herein by reference.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is set forth under the caption
"Election of Directors" on pages 3 through 4 of the Company's Proxy Statement
dated March 20, 1996, which is incorporated herein by reference.
Item 12. Certain Relationships and Related Transactions
The information required by this item is set forth under the caption
"Certain Relationships and Related Transactions" on page 7 of the Company's
Proxy Statement dated March 20, 1996, which is incorporated herein by reference.
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PART IV
Item 13. Exhibits and Reports on Form 8-K
(a) List of Documents filed as part of this Report
(1) Financial Statements and Related Independent Auditors' Reports:
The following consolidated financial statements of Bull Run
Corporation and Independent Auditors' Report are incorporated
by reference in Item 7 from the Bull Run Corporation 1995
Annual Report:
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1995
and 1994
Consolidated Statements of Income for the
years ended December 31, 1995, 1994 and 1993
Consolidated Statements of Stockholders'
Equity for the years ended December 31, 1995,
1994 and 1993
Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Supplementary Data, Selected Quarterly Financial Data
(Unaudited)
The following consolidated financial statements of Datasouth
Computer Corporation and Independent Auditors' Report are
incorporated by reference in Item 7 from the Bull Run
Corporation 1995 Annual Report:
Consolidated Statements of Income for the period
January 1, 1994 through November 29, 1994 and
the year ended December 31, 1993
Consolidated Statements of Cash Flows for the period
January 1, 1994 through November 29, 1994 and
the year ended December 31, 1993
Notes to Consolidated Financial Statements
Supplementary Data, Selected Quarterly Financial Data
(Unaudited)
Independent Auditors' Report on the financial statements of
Capital Sports Properties, Inc. as of December 31, 1995 and
1994 and for each of the three years in the period ended
December 31, 1995 on page F-1 of this report
Independent Auditors' Report on the consolidated financial
Statements of Host Communications, Inc. as of and for the years
ended June 30, 1995 and 1994 on page F-2 of this report
(2) List of Executive Compensation Plans and Contracts
Employment Agreement - Robert S. Prather, Jr.
Employment Agreement - James W. Busby
Employment Agreement - K. Nick Waller
Employment Agreement - Frederick J. Erickson
1994 Long Term Incentive Program
Non-Employee Directors' 1994 Stock Option Plan
Datasouth Employee Incentive Plan
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(3) Exhibits
Page Number or
Exhibit Incorporation by
Numbers Description Reference to
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(2.1) Agreement and Plan of Merger dated June 6, 1994 (b)
(2.2) Certificate of Merger of Datasouth Computer Corporation into
Datasouth Computer Corporation (formerly, BRC Acquisition
Corporation) dated November 29, 1994 (b)
(3.1) Articles of Incorporation (b)
(3.2) Certificate of Amendment to Articles of Incorporation, filed
November 29, 1994 (b)
(3.3) By-laws of the Registrant (b)
(10.1) Employment Agreement - Robert S. Prather, Jr. (c)
(10.2) Employee Agreement - James W. Busby (e)
(10.3) Employee Agreement - K. Nick Waller (e)
(10.4) Employee Agreement - Frederick J. Erickson (e)
(10.5) 1994 Long Term Incentive Plan (b)
(10.6) Non-Employee Directors' 1994 Stock Option Plan (b)
(10.7) 1987 Non-Qualified Stock Option Plan (d)
(10.8) Employee Incentive Plans 14
(10.9) Lease Agreement between Delta Life Insurance Company and
Bull Run dated as of January 1, 1993 (a)
(10.10) Lease Agreements between Hans L. Lengers and Datasouth
Computer Corporation dated November 27, 1981 (e)
(10.11) Loan Agreement between Bull Run Corporation and Bank
South, N.A., dated March 29, 1995 (f)
(10.12) Revolving Credit Note dated March 29, 1995 (f)
(10.13) First Modification of Loan Agreement between Bull Run
Corporation and Bank South, N.A., dated January 3, 1996 (g)
(10.14) First Term Note dated January 3, 1996 (g)
(10.15) Second Term Note dated January 3, 1996 (g)
(10.16) Note Purchase Agreement between Bull Run Corporation and
Gray Communications Systems, Inc. dated January 3, 1996 (g)
(10.17) 8% Subordinated Note dated January 3, 1996 (g)
(10.18) Warrant to Purchase Common Stock dated January 3, 1996 (g)
(11) Computation of Earnings per Share 15
(13) 1995 Annual Report to Shareholders 16
(21) List of Subsidiaries of Registrant 17
(23.1) Consent of Ernst & Young LLP 18
(23.2) Consent of KPMG Peat Marwick LLP 19
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(23.3) Consent of KPMG Peat Marwick LLP 20
(27) Financial Data Schedule
(99) Proxy Statement dated March 20, 1996 21
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(a) Exhibit to Form 10-KSB Annual Report for the year ended December 31, 1992
(Commission file number 0-9385)
(b) Exhibit to Form S-4, Registration Statement, effective November 3, 1994
(c) Exhibit to Form 10-KSB Annual Report for the year ended December 31, 1993
(Commission file number 0-9385)
(d) Exhibit to Form 10-K Annual Report for the year ended December 31, 1988
(e) Exhibit to Form 10-KSB Annual Report for the year ended December 31,
1994 (Commission file number 0-9385)
(f) Exhibit to Form 8-K Current Report dated as of March 29, 1995 (Commission
file number 0-9385)
(g) Exhibit to Form 8-K Current Report dated as of January 3, 1996 (Commission
file number 0-9385)
(b) Reports on Form 8-K
Bull Run filed a Current Report on Form 8-K dated as of January 3, 1996
in connection with the following: (i) a modification in its Note Agreement with
a bank increasing the outstanding borrowings under two term notes from
$13,500,000 to $23,500,000, and (ii) the execution of a Note Purchase Agreement
with Gray pursuant to which Bull Run purchased a $10,000,000 8% Subordinated
Note due in January 2005, which additionally provided Bull Run warrants to
purchase up to 487,500 shares of Gray common stock at approximately $17.88 per
share under certain conditions.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 25, 1996.
BULL RUN CORPORATION
BY: /s/ Robert S. Prather, Jr.
Robert S. Prather, Jr.
President
Signature Title Date
/s/ Robert S. Prather, Jr. President and Director MARCH 25, 1996
Robert S. Prather, Jr. (Principal Executive
Officer)
/s/ Gerald N. Agranoff Director MARCH 25, 1996
Gerald N. Agranoff
/s/ James W. Busby Director MARCH 25, 1996
James W. Busby
/s/ Frederick J. Erickson Vice President and MARCH 25, 1996
Frederick J. Erickson Treasurer
(Principal Accounting
and Financial Officer)
/s/ Hilton H. Howell, Jr. Vice President, MARCH 25, 1996
Hilton H. Howell, Jr. Secretary and Director
/s/ Alex C. Ritchie Director MARCH 25, 1996
Alex C. Ritchie
/s/ J. Mack Robinson Director MARCH 25, 1996
J. Mack Robinson
13
<PAGE>
Independent Auditors' Report
The Board of Directors
Capital Sports Properties, Inc:
We have audited the balance sheets of Capital Sports Properties, Inc. as of
December 31, 1995 and 1994, and the related statements of earnings, changes
in stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1995, not separately presented herein. These
financial statements are the responsibility of the Company's management. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Capital Sports Properties, Inc.
as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1995, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
February 12, 1996
F-1
<PAGE>
KPMG Peat Marwick LLP
1600 PNC Center
201 East Fifth Street
Cincinnati, OH 45202
Dayton, OH
Independent Auditors' Report
The Board of Directors
Host Communications, Inc.:
We have audited the consolidated balance sheets of Host Communications, Inc.
and subsidiaries as of June 30, 1995 and 1994, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for the
years then ended, not separately presented herein. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Host
Communications, Inc. and subsidiaries at June 30, 1995 and 1994, and the
results of their operations and their cash flows for the years then ended
in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
September 11, 1995
F-2
<PAGE>
<PAGE>
EXHIBIT 10.8
EMPLOYEE INCENTIVE PLANS
DATASOUTH COMPUTER CORPORATION
INCENTIVE BONUS PLAN AND KEY EMPLOYEE BONUS PLAN
Incentive Bonus Plan
Eligibility - All employees of Datasouth Computer Corporation employed at least
ninety days as of each December 31 (with exception for reason of death, military
duty or layoff), except those individuals eligible for the Key Employee Bonus
Plan.
Bonus Pool - Datasouth's "Income from Operations" before bonus expense, less a
"Minimum Return", times 20%.
Minimum Return - Datasouth's "Stockholder's Equity" pertaining to the printer
operations ( i.e., excludes the investment in Gray Communications Systems, Inc.,
net of related liabilities) times a required rate of return (as determined by
the Bull Run Corporation Board of Directors)
Allocation of Bonus Pool - Based on an employee's pro rata share of "Bonus
Wages".
Bonus Wages - Equal to gross pay, less (i) sick pay; (ii) commissions; (iii)
bonuses; (iv) bereavement pay over 4 days; (v) overtime and overtime premium;
and (vi) first 90 day wages and first 20 day wages during the fiscal year for
new hires and rehires, respectively; plus, a disability or workers' compensation
adjustment, if applicable, as determined by management.
Payments - Annually, following completion of the audit of the Bull Run
consolidated financial statements, but no later than March 15. 3% of the
Incentive Bonus is contributed to the Datasouth Savings and Profit-Sharing Plan
on behalf of the Bonus recipient.
Key Employee Bonus Plan
Eligibility - Employees of Datasouth Computer Corporation determined by the Bull
Run Board of Directors.
Bonus Pool - Datasouth's "Income from Operations" before Key Employee Bonuses,
but after Incentive Bonuses, times a % determined by the Bull Run Board of
Directors.
Allocation of Bonus Pool - Specified % as determined by the Bull Run Board of
Directors. A portion of the Key Employee Bonus may be allocated for
discretionary bonuses to be paid to employees not specified as Key Employee
Bonus Plan participants. Allocation of discretionary bonuses is determined by
Datasouth's management.
Payments - Annually, following completion of the audit of the Bull Run
consolidated financial statements, but no later than March 15. 3% of the Key
Employee Bonus is contributed to the Datasouth Savings and Profit-Sharing Plan
on behalf of the Bonus recipient.
14
<PAGE>
EXHIBIT 11
BULL RUN CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(Dollars in thousands, except amounts per share)
<TABLE>
<CAPTION>
Years Ended December 31
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Primary:
Net income (loss).................................... $ 723 $ 216 $ 180
===== ===== =====
Primary shares:
Weighted average number of shares outstanding......... 22,127 13,350 12,377
Assuming exercise of options ........................ 1,109 184 126
-------- -------- --------
Weighted average number of shares outstanding,
as adjusted.......................................... 23,236 13,534 12,503
===== ===== =====
Primary earnings per share:
Net income (loss).................................... $ .03 $ .02 $ .01
Assuming full dilution:
Net income (loss).................................... $ 723 $ 216 $ 180
===== ===== =====
Fully diluted shares:
Weighted average number of shares outstanding....... 22,127 13,350 12,377
Assuming exercise of options......................... 1,151 197 145
------- -------- ---------
Weighted average number of shares outstanding,
as adjusted.......................................... 23,278 13,547 12,522
===== ===== =====
Fully diluted earnings per share:
Net income (loss).................................... $ .03 $ .02 $ .01
</TABLE>
15
<PAGE>
EXHIBIT 13
1995 ANNUAL REPORT
TO SHAREHOLDERS
16
<PAGE>
(Bull Run Corporation logo appears in the background of page)
BULL RUN
CORPORATION
1
DIVERSITY
2
LEADERSHIP
3
GROWTH
4
OPPORTUNITY
1995 ANNUAL REPORT
<PAGE>
(Bull Run Corporation logo appears in the background of page)
OBJECTIVE
Maximize shareholder value
1 DIVERSITY
through the acquisition and
2 LEADERSHIP
development of well managed
3 GROWTH
operating companies with
4 OPPORTUNITY
excellent growth potential.
<PAGE>
Fellow stockholders,
1995 was a banner year for Bull Run Corporation.
We made great strides to add value to our Company through asset diversification,
strengthened leadership, and operations growth. The accomplishments achieved in
1995 provide us the opportunity to further our efforts in 1996 and beyond.
DIVERSIFIED ASSET BASE--Early in 1995, Bull Run acquired a significant
investment in Host Communications, Inc., an outstanding company with
extraordinary growth potential through its unique blend of marketing, collegiate
sports syndication, printing, publishing and management services. Through the
exercise of warrants for HCI's common stock, Bull Run would become its largest
stockholder, owning nearly 30% of HCI's outstanding common shares, in addition
to owning 50% of HCI's 8% cumulative preferred stock acquired with the warrants.
With the addition of HCI, we now have a significantly influential investment
position in three operating companies, one of which, Datasouth Computer
Corporation, we own 100%. In 1995 our affiliate, Gray Communications Systems,
acquired a newspaper operation and executed two definitive purchase agreements
for the acquisition of three television stations. Gray now owns and operates six
television stations, three newspapers and four other print advertising
publishers.
STRONG LEADERSHIP--One quality we value highly when considering investment in a
business is the strength of its management team. We believe that within each of
our affiliated companies, we have a highly-qualified, industry-experienced
management team exemplified by their respective Chief Executive Officers --Jim
Busby at Datasouth, Ralph Gabbard at Gray, and most recently, Jim Host of Host
Communications. Strong leaders, when positioned in opportunistic environments,
breed success. In November 1994, you approved the addition of two new members to
our Board of Directors--Jim Busby and Hilton Howell, increasing the number of
Bull Run board members to six. We welcome them to our Board and appreciate their
valuable contributions during 1995.
OPERATIONAL, INVESTMENT AND MARKET VALUE GROWTh--We experienced considerable
growth in 1995--in operating revenue, total assets and market capitalization.
1995 was the second consecutive record revenue year for both Datasouth and Gray.
Datasouth's revenue increased 22% over 1994; Gray's 61%. We invested a combined
$11.6 million in HCI and an HCI-affiliated company in 1995, plus an additional
$1.9 million in Gray common stock, increasing our investment position in Gray
from 25.7% to 27.2%. Our market capitalization increased nearly 78% in 1995,
from $36 million as of December 31, 1994 to $64 million as of December 31, 1995.
FUTURE OPPORTUNITIES--We will strive to continue our rapid growth. Already in
1996, Gray has closed its acquisition of WRDW-TV in Augusta, Georgia and, in
connection with our purchase of a $10 million note from Gray, we have obtained
warrants for additional Gray common stock. Gray is also expecting to close its
previously-announced acquisition of two additional television stations and a
communications and paging business by September 1996. Datasouth has introduced
two new products which will begin contributing to its revenue and operating
profits in 1996, furthering the diversification of its printer product line. We
will continue the pursuit of other growth opportunities for Datasouth through
potential acquisitions or alliances. We are excited about HCI's recent
investment in University Sports America ("USA"). USA is a recently-formed entity
which will assume some of HCI's operations, complementing USA's marketing and
management of participatory amateur sporting events, such as the popular
"Hoop-It-Up" 3-on-3 basketball tournaments.
A new era for Bull Run Corporation began in July 1992.
A new direction. A new focus. Much has been accomplished since then, and much
more is to be achieved. We look forward to the challenges and opportunities
ahead.
Sincerely,
/s/ Robert S. Prather, Jr.
Robert S. Prather, Jr.
President and Chief Executive Officer
<PAGE>
BULL RUN CORPORATION
Bull Run Corporation, originally a mining resource company incorporated under
the name Bull Run Gold Mines, Ltd., sold its mining interests in November 1990
and changed its name upon reincorporating in Georgia in December 1992, following
the acquisition of approximately 30% of Bull Run by Robinson-Prather Partnership
in July 1992. In 1993, Bull Run began a series of acquisitions and investments
in undervalued, well-managed operating companies with excellent growth
potential.
DIVERSITY
(Datasouth logo) DATASOUTH COMPUTER CORPORATION
Datasouth Computer Corporation ("Datasouth"), Bull Run's wholly-owned
subsidiary, designs, manufactures and markets heavy-duty dot matrix and thermal
printers for industrial applications. Datasouth sells its products through a
network of approximately 60 distributors worldwide and direct to high volume
major accounts primarily in the transportation/travel, health care and
manufacturing/distribution industries.
Datasouth, based in Charlotte, NC, manufactures and markets three distinct dot
matrix printer product families--Performax, a cost effective alternative to the
line printer for high speed report printing; the mid-range XL series, for medium
volume forms printing applications; and Documax(TM), introduced in 1993 as
Datasouth's first narrow carriage printer, offering a dual tractor feature which
allows automatic switching from one form to another.
Datasouth also has developed a line of portable and desktop thermal printers,
the FreeLiner(TM) and, new in 1996, the WinLiner products. These are used
primarily for printing one packing or shipping label at a time, with the ability
to use a revolutionary new label stock which has no silicone coated liner. The
"linerfree" stock offers several advantages over conventional liner-backed
labels including more printable labels per roll, superior print image and
durability, and elimination of label liner waste, resulting in lower cost of use
and greater efficiency.
Datasouth's manufacturing capabilities provide a strategic advantage over most
competitors. Focusing on customer response time and high quality customer
service, Datasouth can provide quick, on-time product delivery while maintaining
low finished goods inventories by scheduling product configuration each day--
not weeks or months in advance--and configuring each unit to meet changing order
requirements. All assemblies, including PC boards assembled by Datasouth, and
raw materials are pulled through to replenish stock consumed, thereby
eliminating unnecessary inventories and scheduling. Datasouth's warranty expense
is well under 1% of revenue, evidencing Datasouth's quality workmanship and
designs. Datasouth's staff of product engineers are currently focusing on
enhancements to existing products, as well as furthering the Company's strategic
efforts in thermal printing technology.
2
<PAGE>
(Gray Communications Systems, Inc. logo) GRAY COMMUNICATIONS SYSTEMS, INC.
Gray Communications Systems, Inc. ("Gray"), a 27.2%-owned equity investee of
Bull Run, is a 99-year old company based in Albany, Georgia, founded to publish
The Albany Herald, the second oldest newspaper in Georgia. Gray's common stock
is traded on the New York Stock Exchange under the symbol "GCS".
Gray operates six NBC and CBS affiliated television stations--WALB-TV, an NBC
affiliate established over 40 years ago, maintaining a dominant position in the
Albany, Georgia market; WJHG-TV, an NBC affiliate, currently the Panama City,
Florida market leader; KTVE-TV, an NBC affiliate currently ranked second in the
Monroe, Louisiana - El Dorado, Arkansas market; WKYT-TV, the CBS affiliate in
Lexington, Kentucky and the exclusive station for University of Kentucky sports,
ranked number one in its market for the past 18 years; WYMT-TV, a CBS affiliate
located in Hazard, Kentucky acquired by Gray along with WKYT-TV in September
1994, ranked number one in its market; and, WRDW-TV, a CBS affiliate located in
Augusta, Georgia acquired in January 1996, currently its market leader.
Gray also operates three daily newspapers--The Albany Herald, established in
1891, a Southwest Georgia daily newspaper having a circulation of approximately
30,000 Monday through Saturday and approximately 40,000 on Sundays; The Rockdale
Citizen, acquired by Gray in May 1994, a Conyers, Georgia daily newspaper
established in 1953 having circulation of approximately 10,000 and a unique
distinction of having a ratio of paid subscribers per number of households in a
suburban county of approximately 48%; and, The Gwinnett Post-Tribune, acquired
by Gray in January 1995 as a three-day a week newspaper in Lawrenceville,
Georgia having a circulation of 13,000 in the fast growing Gwinnett County
market, converted to a five-day a week newspaper in 1995. In addition, Gray
publishes four area advertising weekly shoppers in Southwest Georgia and North
Florida.
In December 1995, Gray executed a definitive agreement to purchase the assets of
WCTV-TV, a CBS affiliate located in Tallahassee, Florida and WKXT-TV, a CBS
affiliate in Knoxville, Tennessee, as well as a communications and paging
business located in the Southeast. The transaction is expected to close by
September 1996.
(Host Commmications, Inc. logo) HOST COMMUNICATIONS, INC.
Privately-held Host Communications, Inc. ("HCI"), based in Lexington, Kentucky,
provides media and marketing services to universities, athletic conferences
and the National Collegiate Athletic Association ("NCAA"). On a fully-diluted
basis, Bull Run owns 29.7% of HCI's common stock and 50% of HCI's outstanding
preferred stock. In 1995, HCI contributed certain of its collegiate sports
marketing operations, representing approximately 50% of HCI's revenue,
for a 33.8% interest in the common stock of University Sports America, Inc.
("USA"), a newly-formed company which also markets and operates amateur
participatory sporting events. Bull Run also directly invested in USA preferred
stock convertible to approximately 3% of USA common stock. Prior to its
investment in USA, HCI generated approximately $50 million in annual revenue
providing its unique blend of services.
3
<PAGE>
HCI's present operations include:
SPORTS--The NCAA, an HCI client since 1975, benefits from the company's
management and production of five national radio broadcasts and nationally
televised "NCAA Today" show on ESPN. HCI manages the NCAA Corporate Partner
Program which features blue chip companies such as American Airlines, American
Express, Frito Lay, Gillette, Hershey's, Oldsmobile, Pepsi-Cola and Sears. HCI
has also been integral to the development of The Great Games that showcase
Football Alliance member collegiate football teams in bowl games.
AUDIO / VIDEO SERVICES--HCI's MainStreet Productions operates recording studios
equipped to handle live broadcast productions and soundtracks for radio, video
and multi-range presentations, producing captivating and persuasive video
presentations from concept to completion, often using pre-existing script or
video footage. This unit can be seen at work during "NCAA Today" broadcasts on
ESPN, and behind the scenes arranging television and radio network clearances
and distribution agreements.
PUBLISHING AND PRINTING--Among the 300-plus annual publications produced by HCI
are NCAA basketball championship programs, including the high-profile NCAA Men's
and Women's Final Four programs. HCI's electronic publishing system provides
creative flexibility and immediate response capabilities, and its printing
operation offers the newest technological advances in print production,
including computerized typesetting, cameras and stripping equipment,
complemented by its bindery procedures. HCI provides services ranging from
graphic design, typesetting and image assembly to printing and binding, to over
600 clients annually.
ASSOCIATION MANAGEMENT--HCI manages the affairs of the National Tour
Association, a leading group of travel and tour professionals, by providing
services in the areas of marketing, publishing, government lobbying, business,
education and membership growth. HCI also offers customized association
management services ranging from full service management to specialized
consulting.
(University Sports America logo) UNIVERSITY SPORTS AMERICA, INC.
Effective July 1, 1995, HCI and Streetball Sports Ventures Partners, L.P.
("Streetball") joined forces by forming USA, thereby offering corporate sponsors
and advertisers the broadest array ever of sponsorship and promotional
opportunities involving college athletics and participatory sporting events. HCI
and Streetball contributed operations, while others contributed cash, for common
and/or convertible preferred stock in USA.
USA's operations include the following:
COLLEGIATE SPORTS--USA provides management and marketing services to athletic
departments and conferences, including the development and marketing of
corporate sponsor programs; providing print, publication, and video production
services (generally outsourced to HCI).
EVENTS--Building on the established success of Streetball's national
"Hoop-It-Up" 3-on-3 basketball tournaments, USA manages and/or operates
participatory sporting events on the local, collegiate, national and
international levels.
PROPERTIES--USA develops and markets trademarks that currently include the
Historically Black Collegiate Coalition ("HBCC"), "Pepito Ball", "Women's Sports
America" and Tradition Bowls, such as the Dr Pepper Red River Shoot-out, the
annual football contest between the University of Texas and the University of
Oklahoma.
4
<PAGE>
LEADERSHIP
Strong, experienced leadership is and will be a vital element in the growth and
profitability of Bull Run and its affiliates, due at least in part to the
autonomous nature of the operations.
(Bull Run logo appears here) ROBERT S. PRATHER, JR.--Bull Run's President
and CEO since July 1992, Bob Prather was a Vice President with Fuqua
Industries ("Fuqua") from 1971 through 1980, primarily responsible for the
search, analysis and negotiation of approximately 35 Fuqua acquisitions.
He acquired his own business in 1980, a steel fabricator, growing it
internally from $4 million in sales in 1980 to over $75 million in 1992, with
10 years of profitable earnings.
(Bull Run logo appears here) J. MACK ROBINSON--Bull Run's Chairman of the
Board and since July 1992, a Director, Mack Robinson is Chairman and
President of Delta Life Insurance Company, Chairman of Atlantic American
Corporation, an insurance holding company, and is a director emeritus of
Wachovia Corporation. Over his illustrious career, he has started or controlled
more than 20 community banks, a chain of over 100 consumer lending offices, the
Paris fashion house of Yves St. Laurent, the Rhodes Inc. furniture chain, life
and casualty insurance companies, lumber mills, a pest control company and a
thoroughbred race horse breeding farm.
(Datasouth logo appears here) JAMES W. BUSBY--One of Datasouth's founders in
1977, Jim Busby has been its President since 1984, heading an organization
which has manufactured an installed base of over 215,000 printers in a
highly competitive and rapidly changing market. As a 20-year veteran of the
computer printer industry, he has been a frequent speaker at various printer
industry events.
(Gray Communications System, Inc. logo appears here) RALPH W. GABBARD--Gray's
President since December 1995, and President of Gray's Broadcast Group from
1994 until November 1995, Ralph Gabbard is a 30-year media executive. He is
recognized nationally as an industry leader, currently serving as Chairman
of the CBS affiliates body as well as Chairman of the National Association
of Broadcasters Television Board of Directors.
(HCI Logo appears here) W. JAMES HOST--HCI's Chairman and CEO since founding
the Company in 1971, Jim Host is a recognized leader in the collegiate
sports marketing field. He is currently a delegate to the White House
Conference on Travel & Tourism and a board member of the Tourism Works for
America Council of Washington, D.C.
5
<PAGE>
GROWTH
Since the investment of Robinson-Prather Partnership in July 1992, Bull Run and
its affiliates have grown through a series of acquisitions and investments,
achieving tremendous growth in operating revenue and market value.
JULY 1992
Robinson-Prather Partnership
acquires 30% of Bull Run
APRIL 1993
Bull Run acquires 43.6%
of Datasouth for $7.5 million
AUGUST 1993
Datasouth acquires 21.1% of
Gray for $11.1 million
MAY 1994
Gray acquires The Rockdale
Citizen, a daily
newspaper, for $4.8 million
SEPTEMBER 1994
Gray acquires 2 CBS-affiliated TV
stations in Kentucky for $38 million
OCTOBER 1994
Gray acquires 4 weekly
shoppers in SW Georgia for
$1.5 million
NOVEMBER 1994
Bull Run acquires remaining 56.4% of
Datasouth through a merger
JANUARY 1995
Bull Run acquires 6.9% of HCI's
outstanding common stock; Gray
acquires the Gwinnett Post-Tribune,
then a 3-day a week newspaper,
for $3.3 million
MARCH 1995
Bull Run acquires 50% of Capital
Sports Properties, which owns all
of HCI's preferred stock and
warrants to acquire 48% of HCI
common stock for $9.7 million
APRIL 1995
Gray signs a definitive agreement
to acquire a CBS-affiliated TV station
in Augusta, Georgia for $35
million (closed in January 1996)
NOVEMBER 1995
Bull Run acquires preferred stock of USA
convertible to 3% of USA's common stock
DECEMBER 1995
Gray signs a definitive agreement
to acquire CBS affiliated TV
stations in Knoxville and
Tallahassee
INVESTMENTS AND ACQUISITIONS--Since 1993, Bull Run has consummated several of
its own investments and acquisitions, as well as functioned as a provider of
services, including candidate identification, evaluation and analysis, and
transaction negotiation, in connection with investments and acquisitions made by
its affiliates.
TOTAL INVESTMENTS AND ACQUISITIONS
(Total Investments and Acquisitions chart appears here. Plot points are below)
BULL RUN CORPORATION
1993 $7.5 million
1994 $15.2 million
1995 $11.6 Million
DATASOUTH COMPUTER CORPORATION
1993 $11.1 Million
1994 $1.2 million
1995 $1.9 million
GRAY COMMUNICATIONS SYSTEMS, INC.
1993 $1.5 million
1994 $44.3 million
1995 $3.3 million
1996 $35.0 million
(as of March 1, 1996)
6
<PAGE>
OPERATING REVENUE--Since Bull Run's investment in Datasouth and Gray in 1993,
operating revenue of each of the companies has steadily increased.
OPERATING REVENUE
(Operating Revenue chart appears here. Plot points are below)
DATASOUTH COMPUTER CORPORATION
1991 $15.5 million
1992 $15.4 million
1993 $16.9 Million
1994 $21.7 million
1995 $26.4 million
GRAY COMMUNICATIONS SYSTEMS, INC.
1991 $22.5 million
1992 $24.6 million
1993 $25.1 million
1994 $36.5 million
1995 $58.6 million
ADJUSTED ALLOCABLE EARNINGS--Bull Run's aggregate allocable share of its
investees' undistributed earnings, based on Bull Run's economic ownership of
each investee as of the end of each year, has risen rapidly. The calculation
of allocable undistributed earnings eliminates the impact of goodwill
amortization recognized by Bull Run as required by generally accepted
accounting principles, as well as the after-tax impact of unusual charges
recognized by the investees which can distort the comparability of their
results.
ADJUSTED ALLOCABLE EARNINGS
BULL RUN CORPORATION
(Adjusted Allocable Earnings chart appears here. Plot points are below)
DATASOUTH COMPUTER GRAY COMMUNICATIONS HOST
CORPORATION SYSTEMS, INC. COMMUNICATIONS, INC.
Initial Investment: 1993 Initial Investment: 1993 Initial Investment: 1995
Bull Run's ownership as of December 31
1993 43.6% 1993 9.2% 1993 N/A
1994 100% 1994 25.7% 1994 N/A
1995 100% 1995 27.2% 1995 29.7% (2)
Bull Run's allocable share of undistributed
earnings (in 000's) (1)
1993 $(15) 1993 $126 1993 N/A
1994 $1,021 1994 $634 1994 N/A
1995 $1,492 1995 $159 1995 $384
1993 = $111
1994 = $1,655
1995 = $2,035
(1) calculated based on Bull Run's ownership as of December 31 of each year
(2) includes Bull Run's warrants for HCI's common stock exercisable at $.01 per
share, assuming exercise of all outstanding warrants
7
<PAGE>
Market Value--Since the investment in Bull Run by Robinson-Prather
Partnership in 1992, market value per share and market capitalization has
increased dramatically.
HIGH/LOW/CLOSING MARKET PRICE PER SHARE
(High/Low/Closing Market Price Per Share chart appears here. Plot
points are below)
BULL RUN CORPORATION
As of and for the years ended December 31
High $0.53 $1.31 $1.94 $1.91 $4.25
Closing $0.38 $1.19 $1.56 $1.63 $2.89
Low $0.38 $0.38 $0.78 $1.19 $1.63
1991 1992 1993 1994 1995
TOTAL MARKET VALUE
(Total Market Value chart appears here. Plot points are below)
BULL RUN CORPORATION
1991 $3.4 MILLION As of December 31
1992 $12.7 MILLION
1993 $19.5 MILLION
1994 $36.0 MILLION
1995 $64.0 MILLION
OPPORTUNITY
In 1996 and beyond, Bull Run and its affiliates are poised to take advantage of
their recent investment and operational accomplishments. Each company has
positioned itself for future growth, expansion and profitability. New product
offerings from Datasouth, both in the dot matrix and thermal printer categories,
are expected to solidify, strengthen and enhance its position in the industrial
printer market. Gray is expected to again increase its operating revenue and
operating cash flow by virtue of its acquisition of WRDW-TV in Augusta, Georgia
and its pending acquisition of WCTV-TV in Tallahassee, Florida and WKXT-TV in
Knoxville, Tennessee. Assuming completion of the pending transaction, the number
of Gray television stations would increase to eight, six of which are currently
number one in their respective markets. HCI is expected to continue its business
growth through increasing participation in the NCAA Corporate Partner Program,
increased emphasis on its publishing and printing operations, the development of
the "Football Alliance" and extension of its association management services.
Bull Run and HCI will also benefit from the newly-formed University Sports
America ("USA"), which will develop and market the Historically Black Collegiate
Coalition ("HBCC"), college football's "Tradition Bowls" and enhancements in
women's collegiate sports, as well as USA's enormously popular "Hoop-It-Up"
3-on-3 amateur basketball tournaments and similar participatory events and
tournaments. In addition, Bull Run and its affiliated companies will continue to
pursue acquisitions and strategic alliances as opportunities arise.
8
<PAGE>
BULL RUN CORPORATION
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(Dollars and shares in thousands, except per share amounts)
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS FOR THE
YEAR ENDED:
Revenue from printer operations $26,432 $ 2,751
Cost of goods sold 18,649 1,853
Gross profit 7,783 898
Consulting fees 719 100 $ 250
Royalty income 2 223 214 $ 146 $ 53
Operating expenses (6,764) (1,174) (595) (710) (519)
Income (loss) from operations 1,740 47 (131) (564) (466)
Equity in earnings of affiliated companies 107 266 243
Interest income (expense), net (944) (11) 116 294 383
Income (loss) before income taxes 903 302 228 (270) (83)
Income tax (provision) benefit (180) (86) (48) 54 17
Net income (loss) $ 723 $ 216 $ 180 $ (216) $ (66)
Earnings (loss) per share $ .03 $ .02 $ .01 $ (.02) $ (.01)
Weighted average shares 23,236 13,534 12,503 9,993 9,563
FINANCIAL POSITION AS OF
DECEMBER 31:
Working capital $ 3,739 $ 4,813 $ 400 $6,173 $5,356
Investment in affiliated companies 29,246 15,709 7,798
Total assets 44,300 30,756 8,250 6,297 5,389
Long-term obligations 14,896 2,775
Stockholders' equity 24,079 23,584 8,151 6,176 5,362
Current ratio 1.9 2.6 8.9 51.9 201.4
Book value per share $ 1.09 $ 1.07 $ 0.65 $ 0.58 $ 0.59
</TABLE>
The changes in financial position from 1994 to 1995 were due to Bull Run's
investments in CSP, HCI and USA. The changes in financial position from 1992 to
1993 to 1994, and the changes in operating results from 1993 to 1994 to 1995,
were due to the investment in a 43.6% interest in Datasouth in April 1993 and
merger with Datasouth in November 1994. No dividends were declared or paid
during the periods presented.
SELECTED QUARTERLY
FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
<S> <C> <C> <C> <C>
1995:
Revenue from printer operations $ 7,439 $ 7,132 $ 6,097 $ 5,764
Gross profit 2,278 2,154 1,842 1,509
Other operating revenue 83 351 1 286
Net income 268 376 27 52
Earnings per share .01 .02 .00 .00
1994:
Revenue from printer operations $ 2,751
Gross profit 898
Other operating revenue $ 62 $ 64 $ 161 36
Net income (loss) (40) (73) 96 233
Earnings (loss) per share (.00) (.01) .01 .01
1993:
Operating revenue $ 17 $ 55 $ 71 $ 321
Net income (loss) (57) (140) 49 328
Earnings (loss) per share (.00) (.02) .00 .03
</TABLE>
9
<PAGE>
(The Datasouth logo appears here with DATASOUTH spelled out beside it. It
runs across pages 10 and 11)
<PAGE>
(A Photo of three people working appears here)
(A Photo of computer printers appears here)
(A Photo of the Datasouth building appears here)
(A Photo of a person with a computer printer on their side appears here)
<PAGE>
(Logo of Gray Communications Systems, Inc. appears here)
<PAGE>
(A Photo of satellite dishes appears here)
(A Photo of a television news anchor crew appears here)
(A Photo of a building appears here)
(A Photo of the breakfast table with a newspaper appears here)
(A Photo of a TV station control panel appears here)
<PAGE>
(Host Communications, Inc. Logo appears here)
(University Sports America, Inc. Logo appears here)
(The Notre Dame University Logo appears here)
(The University of Kentucky Logo appears here)
(The NCAA Logo appears here)
(The Southeastern Conference Logo appears here)
(The University of South Carolina Logo appears here)
<PAGE>
(Four photos appear on this page depicting people in a recording studio,
a person playing basketball with the words HOOP-IT-UP, football players
and the cover of a magazine labeled INSIDE OUTSIDE, A Behind the Scenes Look
at Kentucky Basketball)
<PAGE>
BULL RUN CORPORATION
MANAGEMENT'S DISCUSSION
AND ANALYSIS
RESULTS OF OPERATIONS
In April 1993, Bull Run purchased approximately 43.6% of the outstanding shares
of the common stock of Datasouth Computer Corporation ("Datasouth"). On November
29, 1994, Datasouth was merged into a newly-formed, wholly-owned subsidiary of
Bull Run as a result of the exchange of three shares of Bull Run common stock
for each share of outstanding Datasouth common stock which Bull Run did not then
own. Immediately following the merger, the wholly-owned subsidiary changed its
name to Datasouth Computer Corporation (also referred to as "Datasouth"). Prior
to the merger, Bull Run accounted for its investment in Datasouth under the
equity method of accounting whereby Bull Run's proportionate share of
Datasouth's operating results were reported in the Statement of Income under the
caption "Equity in earnings of affiliated companies". Therefore, whereas in 1995
Datasouth's operating results are consolidated with Bull Run's, only Datasouth's
results for the period November 30, 1994 through December 31, 1994 are similarly
consolidated in 1994.
Revenue from printer operations of $26,432,000 in 1995 represented a 22%
increase over Datasouth's revenue in 1994 of $21,746,000, $2,751,000 of which
was realized in 1994 subsequent to the merger. The increase was largely
attributable to an increase in sales to the SABRE Travel Information Network
("SABRE"), a division of American Airlines, from approximately $4,400,000 in
1994 to approximately $7,800,000 in 1995, and a similar increase in demand for
Datasouth's DOCUMAX (TM) printer from other airlines and travel networks.
Bull Run earned $719,000 in consulting fees in 1995, compared to $100,000 and
$250,000 in 1994 and 1993, respectively, for management assistance to Gray
Communications Systems, Inc. ("Gray") relative to acquisitions and debt
financing. There is no assurance that consulting fees, if any, will be earned in
the future.
Royalties, attributable to an interest in mining properties which was sold in
1990, were earned by Bull Run based on quantities of gold processed. Royalty
income was insignificant in 1995, having decreased from $223,000 in 1994 and
$214,000 in 1993. The amount of royalty income, if any, to be received in the
future will be solely dependent on factors outside Bull Run's control.
Bull Run's consolidated operating expenses of $6,764,000 in 1995 represents a
$650,000, or 11%, increase over the combined operating expenses of Bull Run and
Datasouth in 1994, $283,000 of which resulted from an increase in goodwill
amortization attributable to the merger. The remaining increase is due to the
cost of Datasouth's research and development efforts in 1995, much of which was
incurred for the design of two new printer lines introduced in the first quarter
of 1996. Only Datasouth's operating expenses for the period November 30, 1994
through December 31, 1994 are reflected in Bull Run's consolidated operating
expenses in 1994.
Equity in earnings of affiliated companies, totaling $107,000 in 1995, includes
Bull Run's proportionate share of the earnings of Gray, Host Communications,
Inc. ("HCI") and Capital Sports Properties, Inc. ("CSP"), net of goodwill
amortization totaling $378,000, whereas the amounts presented in 1994 and 1993
of $266,000 and $243,000, respectively, include Bull Run's equity in the
earnings of Datasouth prior to the merger.
Interest income of $116,000 in 1993 was a result of temporary cash investments
on hand prior to the investment in Datasouth common stock in April of that year.
Interest expense of $984,000 in 1995 resulted from borrowings to finance
investments in Gray, HCI, CSP and University Sports America, Inc. ("USA").
In 1995, Bull Run utilized a $101,000 research and development credit which was
carried forward from prior years. As of December 31, 1995, Bull Run has
Alternative Minimum Tax ("AMT") credit carryforwards totaling $430,000 to reduce
regular Federal tax liabilities in the future, of which, $131,000 will serve to
reduce goodwill when realized. As a result of recognizing approximately $58,000
in AMT credits in 1995, and a change in judgment regarding the realizability of
remaining AMT credit carryforwards, the valuation allowance on deferred tax
assets was reduced in the fourth quarter of 1995 thereby reducing the 1995
income tax provision by approximately $250,000.
16
<PAGE>
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", which requires recognition of impairment losses on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Bull Run will adopt Statement No. 121 in
the first quarter of 1996 and, based on current circumstances, does not believe
the effect of adoption will be material.
LIQUIDITY AND CAPITAL RESOURCES
Investments in HCI and CSP, totaling $10,942,000 in 1995, were financed
primarily with $13,500,000 in bank term loans, which also served to refinance an
existing $3,000,000 bank term loan and $900,000 outstanding on a line of credit.
Investments in Gray and USA, totaling $2,580,000 in 1995, were financed
primarily with borrowings under Bull Run's bank line of credit and revolving
bank credit facility. Investments in Datasouth were financed with available cash
and short-term investments of $309,000 in 1994 and $7,555,000 in 1993, a private
issuance of Bull Run's common stock for $1,751,000 in January 1993, and the
issuance of Bull Run common stock valued at $15,217,000 to Datasouth's former
shareholders in connection with the November 1994 merger.
In January 1996, Bull Run entered into a Note Purchase Agreement with Gray
pursuant to which Bull Run purchased a certain 8% Subordinated Note issued by
Gray in the principal amount of $10,000,000 due in January 2005, with interest
payable quarterly beginning March 31, 1996. In connection with the Note Purchase
Agreement, Gray issued to Bull Run warrants to purchase up to 487,500 shares of
Gray common stock at approximately $17.88 per share. Warrants for 300,000 of the
487,500 shares are fully vested, with the remaining warrants vesting in five
annual installments of 37,500 shares each beginning January 3, 1997, assuming
the 8% Subordinated Note remains outstanding. Vested warrants are exercisable
after January 3, 1998 and expire in January 2006. The Note is subordinated to
Gray's outstanding debt to a bank and an institutional lender. Bull Run financed
the purchase with a $10,000,000 increase to its outstanding bank term loan
borrowings. The bank term loans totaling $23,500,000, subsequent to the January
1996 transactions, are payable in monthly installments of $200,000 beginning
February 1999, and currently bear interest at the London Interbank Offer Rate
("LIBOR") plus 1.75%, which was 7.554% as of December 31, 1995.
In November 1994, Bull Run announced that its Board of Directors had authorized
the repurchase of up to 2,000,000 shares of Bull Run's common stock. During
1995, 123,000 shares were repurchased at a cost of $330,000. 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.
Working capital has decreased to $3,739,000 as of December 31, 1995 from
$4,813,000 as of December 31, 1994 as a result of borrowings under a line of
credit to finance the purchase of additional shares of Gray. The increase in
working capital during 1994 of $4,413,000 was attributable to the merger with
Datasouth, whose working capital at the effective date of the merger was
$4,803,000, and the decrease in working capital in 1993 of $5,773,000 was due to
the use of cash and short-term investments as part of the initial investment in
Datasouth.
Inventories have increased to $3,755,000 as of December 31, 1995 from $2,609,000
as of December 31, 1994 due to the fulfillment of significant purchase
commitments in 1995 and the addition of raw materials to be used in the
manufacture of Datasouth's new printer product lines in 1996. As of December 31,
1995, Datasouth had purchase commitments totaling approximately $5,800,000,
primarily for raw materials inventories.
Bull Run has an available bank line of credit of $3,000,000 expiring April 30,
1996, limited to 80% of eligible accounts receivable, and a revolving bank
credit facility providing up to $1,500,000 of available credit, due April 1,
1997. The limitation on the $3,000,000 line was $2,741,000 as of December 31,
1995. As of December 31, 1995, $1,285,000 was outstanding under the $3,000,000
line and $1,396,000 was outstanding under the $1,500,000 revolver. The
facilities bear interest at the banks' prime rate, which was 8.5% as of December
31, 1995.
Capital spending for 1996 is expected to be approximately $650,000. Bull Run
believes that its current working capital, cash flow from operations and funds
available under its line of credit and revolving credit facility will be
sufficient to fund its debt service, working capital requirements and capital
spending requirements for the next 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.
17
<PAGE>
BULL RUN CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 146 $ 824
Marketable securities 500
Accounts receivable 3,909 3,809
Inventories 3,755 2,609
Other 185 74
Total current assets 7,995 7,816
Property and equipment, net 2,512 2,358
Investment in affiliated companies 29,246 15,709
Goodwill 4,314 4,717
Other assets 233 156
$44,300 $30,756
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable and current portion of long-term debt $ 1,285 $ 225
Accounts payable 1,591 1,612
Accrued and other liabilities:
Employee compensation and related taxes 569 652
Income taxes 393 244
Other 418 270
Total current liabilities 4,256 3,003
Long-term debt 14,896 2,775
Deferred income taxes 1,069 1,394
Stockholders' equity:
Common stock ($.01 par value; authorized 100,000 shares; issued 22,280 and 22,137 shares as
of December 31, 1995 and 1994, respectively) 223 221
Additional paid-in capital 20,503 20,403
Treasury stock, at cost, 123 shares (330)
Retained earnings 3,683 2,960
Total stockholders' equity 24,079 23,584
$44,300 $30,756
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONSOLIDATED FINANCIAL STATEMENTS.
18
<PAGE>
BULL RUN CORPORATION
CONSOLIDATED STATEMENTS
OF INCOME
(Dollars and shares in thousands, except per share amounts)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1995 1994 1993
<S> <C> <C> <C>
Revenue from printer operations $26,432 $ 2,751
Cost of goods sold 18,649 1,853
Gross profit 7,783 898
Other operating revenue:
Consulting fees 719 100 $ 250
Royalties 2 223 214
721 323 464
Operating expenses:
Research and development 1,872 140
Selling, general and administrative 4,892 1,034 595
6,764 1,174 595
Income (loss) from operations 1,740 47 (131)
Other income (expense):
Equity in earnings of affiliated companies 107 266 243
Interest income 40 10 116
Interest expense (984) (21)
(837) 255 359
Income before income taxes 903 302 228
Income tax provision 180 86 48
Net income $ 723 $ 216 $ 180
Earnings per share $ .03 $ .02 $ .01
Weighted average number of common shares outstanding 23,236 13,534 12,503
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONSOLIDATED FINANCIAL STATEMENTS.
19
<PAGE>
BULL RUN CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON STOCK PAID-IN TREASURY RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL STOCK EARNINGS EQUITY
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1993 10,654 $107 $ 3,505 $ 0 $2,564 $ 6,176
Purchase of treasury stock (2) (2)
Retirement of treasury stock (2) 0 (2) 2 0
Exercise of stock options 100 1 49 50
Tax benefit from exercise of stock
options 17 17
Issuance of shares 1,753 17 1,713 1,730
Net income 180 180
Balances, December 31, 1993 12,505 125 5,282 0 2,744 8,151
Issuance of shares in connection with
merger 9,632 96 15,121 15,217
Net income 216 216
Balances, December 31, 1994 22,137 221 20,403 0 2,960 23,584
Purchase of treasury stock (330) (330)
Exercise of stock options 143 2 100 102
Net income 723 723
Balances, December 31, 1995 22,280 $223 $ 20,503 $ (330) $3,683 $ 24,079
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONSOLIDATED FINANCIAL STATEMENTS.
20
<PAGE>
BULL RUN CORPORATION
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 723 $ 216 $ 180
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Provision for bad debts 58 5
Depreciation and amortization 1,124 92 1
Equity in earnings of affiliated companies (107) (266) (243)
Tax benefit from exercise of non-qualified stock options 17
Change in operating assets and liabilities:
Accounts receivable (158) (217) (90)
Inventories (1,146) (93)
Other current assets (111) 20
Accounts payable and accrued expenses 34 349 (70)
Accrued income taxes 204 38 48
Deferred income taxes (211) 63 48
Net cash provided by (used in) investing activities 410 207 (109)
Cash flows from investing activities:
Cash and cash equivalents acquired in merger 632
Sale of marketable securities 500
Capital expenditures (920) (25)
Investment in affiliated companies (13,586) (309) (7,555)
Dividends received from affiliate 92 27
Net cash provided by (used in) investing activities (13,914) 325 (7,555)
Cash flows from financing activities:
Borrowings under lines of credit 12,014
Repayments on lines of credit (10,729)
Proceeds from long-term debt 15,152 3,000
Repayments on long-term debt (3,257) (3,000)
Loan commitment fees (126)
Issuance of common stock 102 1,781
Repurchase of common stock (330) (2)
Net cash provided by financing activities 12,826 0 1,779
Net increase (decrease) in cash and cash equivalents (678) 532 (5,885)
Cash and cash equivalents, beginning of year 824 292 6,177
Cash and cash equivalents, end of year $ 146 $ 824 $ 292
Supplemental cash flow disclosures:
Interest paid $ 794 $ 153 $ 0
Income taxes paid (recovered), net 187 (14) 12
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONSOLIDATED FINANCIAL STATEMENTS.
21
<PAGE>
BULL RUN CORPORATION
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION -- On November 29, 1994, Datasouth Computer
Corporation ("Datasouth") was merged (the "Merger") into a newly-formed
wholly-owned subsidiary of Bull Run Corporation ("Bull Run"), which changed its
name to Datasouth Computer Corporation (also referred to herein as "Datasouth")
immediately following the Merger. The accompanying consolidated financial
statements include the accounts of Bull Run and, as of December 31, 1995 and
1994, for the year ended December 31, 1995 and the period November 30, 1994
through December 31, 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.
USE OF ESTIMATES -- The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS -- Cash equivalents are composed of all highly liquid
investments with an original maturity of three months or less.
MARKETABLE SECURITIES -- Marketable securities, primarily commercial paper, are
stated at cost, which approximates market value.
ACCOUNTS RECEIVABLE -- Bull Run through its wholly-owned subsidiary, Datasouth,
sells computer printers and provides service worldwide to distributors,
value-added resellers and large volume end users. Bull Run performs ongoing
credit evaluations of its customers' financial condition and generally requires
no collateral from its customers. In addition, Bull Run receives consulting fees
generally payable in monthly installments from Gray Communications Systems, Inc.
("Gray"), an investee, for the performance of services in connection with Gray's
acquisitions. As of December 31, 1995, fees of $670 were receivable from Gray.
The allowance for doubtful accounts was $50 as of December 31, 1995 and $60 as
of December 31, 1994.
INVENTORIES -- Inventories are associated with the printer operations and are
stated at the lower of cost, determined on the first-in, first-out method, or
market.
PROPERTY AND EQUIPMENT -- Property and equipment is stated at cost less
depreciation computed under the straight-line method over the estimated useful
life of the asset, generally from 3 to 7 years. When assets are disposed, the
associated cost and accumulated depreciation are eliminated from the respective
accounts and any resulting gain or loss is reflected in income. Expenditures for
maintenance, repairs and minor renewals are charged to expense. Depreciation
expense was $783 in 1995, $67 in 1994 and $1 in 1993.
INVESTMENT IN AFFILIATED COMPANIES -- Bull Run's investment in Datasouth, 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
Datasouth's investment in Gray by the equity method. Bull Run accounts for its
investments in Host Communications, Inc. ("HCI") and Capital Sports Properties,
Inc. ("CSP") by the equity method, and its investment in University Sports
America, Inc. ("USA") by the cost method. The excess of Bull Run's investment
over the underlying equity of Gray and HCI, totaling $14,991 and $7,501,
respectively, as of December 31, 1995, is being amortized over 40 years. The
equity in earnings of HCI is recognized by Bull Run on a six month lag basis, in
order to align HCI's fiscal year ending each June 30 with Bull Run's fiscal
year.
GOODWILL AND OTHER LONG-LIVED ASSETS -- Goodwill associated with Bull Run's
initial acquisition of Datasouth's common stock in 1993 and acquisition of the
remaining Datasouth common stock as a result of the Merger in 1994 is being
amortized over 15 years. The carrying value of goodwill, as well as other
long-lived assets, are reviewed if the facts and circumstances suggest that they
may be impaired. If this review indicates that the assets will not be
recoverable, as determined based on undiscounted estimated cash flows over the
remaining amortization period, the carrying value of the assets would be reduced
to their estimated fair value. Goodwill amortization was $309 in 1995 and $25 in
1994, and accumulated amortization was $334 and $25 as of December 31, 1995 and
1994, respectively.
WARRANTY COSTS -- An estimated allowance for future warranty costs of the
printer operations, based on past experience, is recorded as a charge to cost of
goods sold. Included in other accrued liabilities is $65 and $80 for future
warranty costs as of December 31, 1995 and 1994, respectively.
RESEARCH AND DEVELOPMENT -- Research and development costs of the printer
operations, including the costs of software developed internally, are expensed
as incurred.
22
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
INCOME TAXES -- Income taxes are recognized in accordance with Statement of
Accounting Standards No. 109, "Accounting for Income Taxes," whereby deferred
income tax liabilities or assets at the end of each period are determined using
the tax rate expected to be in effect when the taxes are actually paid or
recovered. Accordingly, income tax expense will increase or decrease in the same
period in which a change in tax rates is enacted. A valuation allowance is
recognized on certain deferred tax assets whose realization is not reasonably
assured.
STOCK-BASED COMPENSATION -- Bull Run grants stock options for a fixed number of
shares to employees with an exercise price equal to the fair value of the shares
at the date of grant. In accordance with APB Opinion No. 25, "Accounting for
Stock Issued to Employees," no compensation expense is recognized for such
grants. In the future, Bull Run will continue to account for stock options under
APB Opinion No. 25.
EARNINGS PER SHARE -- Earnings per share is based on the weighted average number
of shares of Bull Run common stock and common stock equivalents (i.e., stock
options) outstanding during the period, computed in accordance with the treasury
stock method. In periods where they are anti-dilutive, common stock equivalents
were excluded from the calculation.
2. MERGER AND INVESTMENTS
Immediately following the approval of Bull Run's and Datasouth's shareholders on
November 29, 1994, Datasouth was merged into a newly-formed wholly-owned
subsidiary of Bull Run through the exchange of three shares of Bull Run common
stock for each share of Datasouth common stock which Bull Run did not then own.
The acquisition was accounted for by the purchase method of accounting, and
accordingly, the purchase price was allocated to the assets acquired and the
liabilities assumed based on the estimated fair values at the merger date. The
excess of purchase price over the estimated fair values of the net assets
acquired was recorded as goodwill. The estimated fair values of assets and
liabilities acquired are summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Cash and marketable securities $ 1,132
Receivables 3,457
Inventories 2,516
Other current assets 76
Property and equipment 2,387
Investment in Gray 15,733
Goodwill 4,743
Other assets 166
Current liabilities assumed (2,340)
Long-term debt assumed (3,000)
Deferred income taxes (1,283)
23,587
Less: Investment in 43.6% of Datasouth immediately prior to the merger (8,370)
Value of shares of Bull Run common stock issued $15,217
</TABLE>
From April 29, 1993 (the date Bull Run acquired its initial 43.6% ownership in
Datasouth) through November 29, 1994 (the date of the Merger), Bull Run
accounted for its investment in Datasouth by the equity method. In connection
with its initial investment in Datasouth, Bull Run sold 1,751,058 shares of Bull
Run common stock to a shareholder and certain of the shareholder's affiliates in
January 1993 for $1,751.
Datasouth operating results for the periods January 1, 1994 through November 29,
1994 and May 1, 1993 through December 31, 1993 follow:
<TABLE>
<CAPTION>
JANUARY 1, 1994 MAY 1, 1993
THROUGH THROUGH
NOVEMBER 29, 1994 DECEMBER 31, 1993
<S> <C> <C>
Revenue $18,995 $12,750
Gross profit 5,659 3,717
Income from operations 718 491
Net income 719 590
Bull Run's equity in earnings of
Datasouth $ 294 $ 243
</TABLE>
Bull Run, through Datasouth, owns approximately 27.2% of Gray's outstanding
common stock. Based in Albany, Georgia, Gray owns and operates three NBC and
three CBS affiliated television stations (a definitive agreement to purchase two
more television stations, plus a communications and paging business, has been
executed), three newspapers and other print advertising publications. Bull Run
recognized consulting fee income from Gray of $719, $100 and $250 in 1995, 1994
and 1993, respectively, for services rendered in connection with Gray's
acquisitions. As of December 31, 1995, income from additional consulting fees of
$266 have been deferred and will be recognized as Gray amortizes goodwill
associated with the acquisitions.
23
<PAGE>
2. MERGER AND INVESTMENTS -- CONTINUED
In January 1995, Bull Run acquired a 6.9% interest in the outstanding common
stock of HCI for $906. In March 1995, Bull Run acquired 50% of the outstanding
common stock of CSP for approximately $9,700. CSP's assets consist of all of the
outstanding HCI 8% cumulative preferred stock with a stated value of $5,446 and
warrants to purchase HCI common stock at $.01 per share, effectively providing
Bull Run an economic interest in 50% of HCI's outstanding preferred stock and a
28.7% interest in HCI's common stock assuming conversion of all outstanding
warrants. Later in 1995, Bull Run increased its ownership in HCI to 9.0% of the
currently outstanding common shares, and 29.7% of the "fully converted" total
common shares, through acquisitions of HCI common stock for $329. HCI provides
media and marketing services to universities, athletic conferences and the
National Collegiate Athletic Association ("NCAA").
In November 1995, Bull Run invested $650 in preferred stock of USA, which is
convertible to 3.0% of USA's total common shares, assuming conversion of all USA
preferred stock.
The summarized aggregate financial information of affiliated companies follows:
AGGREGATE FINANCIAL POSITION (REFLECTING GRAY AND CSP AS OF DECEMBER 31, 1995
AND 1994, COMBINED WITH HCI AS OF JUNE 30, 1995 AND 1994):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Current assets $ 30,822 $28,071
Property and equipment 22,050 21,377
Total assets 103,593 98,005
Current liabilities 29,118 26,316
Long-term debt 51,718 53,704
Total liabilities 87,940 87,244
Stockholders' equity 15,653 10,761
</TABLE>
AGGREGATE OPERATING RESULTS (REFLECTING GRAY AND CSP FOR THE YEARS ENDED
DECEMBER 31, 1995, 1994, AND 1993, COMBINED WITH HCI FOR THE YEARS ENDED JUNE
30, 1995, 1994 AND 1993):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Operating revenue $105,726 $85,260 $72,679
Income from operations 9,441 9,901 5,809
Net income 2,196 4,641 2,561
</TABLE>
Gray's stock is publicly traded on the New York Stock Exchange (symbol: GCS). As
of December 31, 1995, the value of Gray shares owned by Bull Run was
approximately $21,500, based on the per share value of the Gray shares as quoted
on the New York Stock Exchange. The value of Bull Run's investments in
privately-held HCI, CSP and USA, based on the cost of acquiring the investments
during 1995, was approximately $11,600 as of December 31, 1995.
The operating results of Datasouth are included in Bull Run's consolidated
results of operations from November 29, 1994 (the date of the Merger). The
equity in earnings of HCI and CSP are included in Bull Run's consolidated
results of operations from March 29, 1995 (the date of the CSP acquisition). The
following unaudited pro forma summary presents the consolidated results of
operations for the years ended December 31, 1995, 1994 and 1993 as if the Merger
had occurred on January 1, 1993 and the CSP acquisition had occurred on January
1, 1994, after giving effect to certain adjustments, including elimination of
Merger expenses, amortization of goodwill, elimination of interest income on
funds used for the original investment in Datasouth, addition of interest
expense associated with investment financing, elimination of equity in earnings
in Datasouth, pro forma effects of Gray's business acquisitions and related
income tax effects. These pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of what would have occurred
had the Merger and the CSP acquisition been effective as of those dates or of
results which may occur in the future.
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Revenue from printer operations $26,432 $21,746 $16,906
Other operating revenue 721 323 464
Net income (loss) 374 44 (463)
Earnings (loss) per share $ .02 $ .00 $ (.02)
</TABLE>
3. INVENTORIES
Inventories related to the printer operations consist of the following as of
December 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Raw materials $2,489 $1,784
Work-in-process 617 644
Finished goods 649 181
$3,755 $2,609
</TABLE>
24
<PAGE>
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of December 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land $ 750 $ 750
Production equipment 1,991 1,413
Research and development equipment 219 107
Office furniture and equipment 414 167
3,374 2,437
Accumulated depreciation and amortization (862) (79)
$2,512 $2,358
</TABLE>
Bull Run's executive offices are leased from a company affiliated with a
principal stockholder and director of Bull Run under an operating lease expiring
in 2002. Datasouth leases its main facility for printer operations under an
operating lease expiring in 1998, having a renewal option for an additional
three year period, and leases additional office and warehouse space under an
operating lease expiring in 1997. Bull Run's total consolidated rental expense,
which includes Datasouth's rental expense in 1995 and the period November 30,
1994 through December 31, 1994, was $317, $38 and $27 in 1995, 1994 and 1993,
respectively. The minimum annual rental commitments under these and other leases
with an original lease term exceeding one year are approximately $294 for each
of the years 1996 and 1997, $217 for 1998, $17 for 1999 and 2000, and $35
thereafter.
5. LONG-TERM DEBT AND NOTE PAYABLE
As of December 31, 1995, long-term debt consists of two term loans provided
under a Loan Agreement with a bank executed in March 1995 totaling $13,500, plus
outstanding borrowings of $1,396 under a revolving bank credit facility. As of
December 31, 1994, long-term debt consisted of a $3,000 term note payable to a
bank, which was refinanced as a result of executing the term notes in March
1995. The $3,000 note was executed in December 1993 and served to refinance
$3,000 in 8% subordinated debentures payable to insurance companies affiliated
with a principal shareholder of Bull Run.
As further discussed in Note 11, Bull Run and the bank modified the Loan
Agreement in January 1996, executing two term loans totaling $23,500 which
replaced the March 1995 term loans. The new term loans are payable in aggregate
monthly installments of $200 commencing February 1999, with all remaining
amounts due in January 2002. The loans are collateralized by common shares of
Gray owned by Bull Run, an 8% subordinated note receivable from Gray (discussed
further in Note 11), warrants to purchase Gray's common stock held by Bull Run
(also discussed further in Note 11) and 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
current ratio of at least 1.5 to 1.0.
The revolving bank credit facility provides available borrowings of up to $1,500
until April 1, 1997, and bears interest at the bank's prime rate, which was 8.5%
as of December 31, 1995. The revolver is subject to the terms and conditions of
the modified Loan Agreement discussed above. In addition, Bull Run has an
available line of credit for up to $3,000, limited to 80% of eligible accounts
receivable, bearing interest at the prime rate. The line is collateralized by
accounts receivable and expires April 30, 1996. As of December 31, 1995, the
limitation on the $3,000,000 line was $2,741,000, of which $1,285,000 was
outstanding. There were no amounts outstanding under the revolver or the line of
credit as of December 31, 1994 or 1993.
6. INCOME TAXES
The income tax provision for the years ending December 31 consists of the
following:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current:
Federal $ 300 $21 $ 0
State 91 2 0
Total 391 23 0
Deferred (211) 63 48
Total $ 180 $86 $48
</TABLE>
25
<PAGE>
6. INCOME TAXES -- CONTINUED
Deferred tax liabilities (assets) are comprised of the following as of December
31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Property and equipment $ 202 $ 150
Investment in affiliated companies 1,416 1,566
Gross deferred tax liabilities 1,618 1,716
Deferred consulting fee income (90)
Allowance for doubtful accounts (18) (22)
Inventory costs and reserves (124) (111)
Employee benefits (34) (30)
Warranty reserve (24) (29)
Alternative Minimum Tax credit carryforwards (432) (473)
Business credit carryforwards (101)
Other, net (5) (29)
Gross deferred tax assets (727) (795)
Valuation allowance 178 473
Total deferred taxes, net $1,069 $1,394
</TABLE>
A valuation allowance is provided principally to offset all of the deferred tax
asset associated with Alternative Minimum Tax ("AMT") credit carryforwards as of
December 31, 1994, and a portion of such deferred tax asset as of December 31,
1995, the realization of which is uncertain. If realized, $131 of the AMT credit
carryforward will reduce goodwill.
The principal differences between the federal statutory tax rate and the
effective tax rate are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Federal statutory tax rate 34.0% 34.0% 34.0%
Realization of Alternative Minimum Tax credit
carryforwards (6.4)
Reduction in valuation allowance (28.1)
Goodwill amortization 11.6
Benefit of net operating loss, net of Alternative
Minimum Tax (7.7)
Depletion (3.7) (5.2)
State income taxes, net of federal tax benefit 6.7
Other, net 2.1 (1.8) (0.4)
Effective tax rate 19.9% 28.5% 21.1%
</TABLE>
7. STOCK OPTIONS
In November 1994, Bull Run adopted the 1994 Long Term Incentive Plan (the "1994
Plan") under which 2,500,000 shares of Bull Run common stock have been reserved
for issuance of stock options, restricted stock awards and stock appreciation
rights. Under terms of the Merger with Datasouth, all outstanding stock options
to purchase Datasouth common stock were converted to Bull Run stock options
under the 1994 Plan.
Also in November 1994, Bull Run adopted the Non-Employee Directors' 1994 Stock
Option Plan (the "1994 Directors' Plan") under which 350,000 shares of Bull Run
common stock have been reserved for issuance of stock options. Options under the
1994 Directors' Plan are fully vested when granted.
Information with respect to Bull Run's stock option plans follows:
<TABLE>
<CAPTION>
OPTION OPTION PRICE
SHARES RANGE
<S> <C> <C>
Outstanding at January 1, 1993 325,000 $ 0.42-$0.75
Exercised (100,000) $ 0.42-$0.75
Outstanding at December 31, 1993 225,000 $ 0.42-$0.75
Grants as a result of Datasouth merger 1,194,000 $ 0.88-$0.96
Other grants 375,000 $ 1.34-$1.66
Outstanding at December 31, 1994 1,794,000 $ 0.42-$1.66
Exercised (143,000) $ 0.42-$0.88
Cancelled (10,000) $ 0.88
Outstanding at December 31, 1995 1,641,000 $ 0.42-$1.66
Options exercisable at December 31, 1995 930,000 $ 0.42-$1.66
</TABLE>
26
<PAGE>
8. RETIREMENT PLANS
Effective with the Merger, Bull Run adopted the Datasouth Savings and
Profit-Sharing Plan (the "401(k) Plan"), whereby employees of Bull Run and
Datasouth may contribute 1% to 15% of their gross pay to the 401(k) Plan subject
to limitations set forth by the Internal Revenue Service. The companies may make
matching and/or discretionary contributions to the employees' accounts in
amounts to be determined annually. Total company contributions to the 401(k)
Plan were $255 for year ended December 31, 1995 and $40 for the period November
30, 1994 through December 31, 1994.
9. GEOGRAPHIC DATA AND SIGNIFICANT CUSTOMER
Revenue from printer sales to non-domestic customers, located principally in
Western Europe, Southeast Asia and Mexico were $2,361 in 1995 and $209 in 1994.
A significant amount of revenue from printer operations is derived from one
customer. In 1995 and 1994, 30% and 34% of such revenue was attributable to this
customer, respectively.
10. SUBSEQUENT EVENTS
In January 1996, Bull Run entered into a Note Purchase Agreement with Gray
pursuant to which Bull Run purchased a certain 8% Subordinated Note issued by
Gray in the principal amount of $10,000,000 due in January 2005, with interest
payable quarterly beginning March 31, 1996. In connection with the Note Purchase
Agreement, Gray issued to Bull Run warrants to purchase up to 487,500 shares of
Gray common stock at approximately $17.88 per share. Warrants for 300,000 of the
487,500 shares are fully vested, with the remaining warrants vesting in five
annual installments of 37,500 shares each beginning January 3, 1997, assuming
the 8% Subordinated Note remains outstanding. Vested warrants are exercisable
after January 3, 1998 and expire in January 2006. The Note is subordinated to
Gray's outstanding debt to a bank and an institutional lender. Bull Run financed
the purchase with a $10,000,000 increase to its outstanding bank term loan
borrowings. The bank term loans totaling $23,500,000, subsequent to the January
1996 transactions, are payable in aggregate monthly installments of $200,000
beginning February 1999, and currently bear interest at the London Interbank
Offer Rate ("LIBOR") plus 1.75%, which was 7.554% as of December 31, 1995.
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
BULL RUN CORPORATION
Atlanta, Georgia
We have audited the accompanying consolidated balance sheets of Bull Run
Corporation as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits. The
financial statements of Host Communications, Inc. ("HCI") and Capital Sports
Properties, Inc. ("CSP") have been audited by other auditors whose reports have
been furnished to us; insofar as our opinion on the consolidated financial
statements relates to data included for HCI and CSP, it is based solely on their
reports. In the consolidated financial statements, the Company's investment in
HCI and CSP is stated at $11,165,000 at December 31, 1995 and the Company's
equity in the net income of HCI and CSP is stated at $245,000 for the year then
ended.
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 and the reports of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and, for 1995, the reports of other
auditors, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Bull
Run Corporation at December 31, 1995 and 1994, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Atlanta, Georgia
February 22, 1996
27
<PAGE>
DATASOUTH COMPUTER CORPORATION
SELECTED FINANCIAL DATA
(Dollars in thousands)
<TABLE>
<CAPTION>
*1994 1993 1992 1991
<S> <C> <C> <C> <C>
OPERATING RESULTS FOR THE
YEAR ENDED:
Revenue from printer operations $18,995 $16,906 $15,369 $15,495
Cost of goods sold 13,336 12,117 10,830 11,638
Gross profit 5,659 4,789 4,539 3,857
Operating expenses 4,941 5,031 4,492 4,681
Income (loss) from operations 718 (242) 47 (824)
Equity in earnings of affiliated company 376 108
Interest income (expense), net (148) 166 590 651
Income (loss) before income taxes 946 32 637 (173)
Income tax provision (227) (31)
Net income (loss) $ 719 $ 32 $ 606 $ (173)
</TABLE>
* Operating results for the period January 1, 1994 through November 29, 1994,
the effective date of the merger of Datasouth into a wholly-owned subsidiary
of Bull Run. Subsequent to November 29, 1994, Datasouth's operating results
are consolidated with Bull Run's.
<TABLE>
<S> <C> <C> <C>
FINANCIAL POSITION AS OF
DECEMBER 31:
Working capital $ 4,999 $13,322 $12,906
Investment in affiliated company 11,218
Total assets 21,140 16,933 16,812
Long-term obligations 3,000
Stockholders' equity 15,935 15,908 15,302
Current ratio 3.3 14.0 9.5
</TABLE>
The changes in financial position from 1992 to 1993 were the result of funding
the acquisition of a 21% interest in Gray with cash and short-term investments
totaling $8,162,000 and borrowings of $3,000,000 in long-term debt.
SELECTED QUARTERLY
FINANCIAL DATA (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
<S> <C> <C> <C> <C>
1994:
Revenue $ 5,140 $ 4,228 $ 5,457 $ 4,170(a)
Gross profit 1,530 1,145 1,690 1,294(a)
Net income (loss) 144 (49) 340 284(a)
1993:
Revenue $ 2,967 $ 4,092 $ 4,611 $ 5,236
Gross profit 777 1,116 1,420 1,476
Net income (loss) (350) (403) 289 496
</TABLE>
(a) For the period October 1, 1994 through November 29, 1994.
28
<PAGE>
DATASOUTH COMPUTER CORPORATION
MANAGEMENT'S DISCUSSION
AND ANALYSIS
ACQUISITION BY BULL RUN CORPORATION
In April 1993, Bull Run acquired a 43.6% interest in Datasouth from The Cold
Heading Company and related individuals. On November 29, 1994, the remaining
56.4% of Datasouth was acquired by Bull Run as a result of the merger of
Datasouth into a newly-formed, wholly-owned subsidiary of Bull Run. Under the
terms of the merger, each outstanding share of common stock of Datasouth (other
than shares owned by Bull Run, which were cancelled) was converted into the
right to receive three shares of Bull Run's common stock. Since the merger,
Datasouth has operated as a wholly-owned consolidated subsidiary of Bull Run
under the name "Datasouth Computer Corporation."
RESULTS OF OPERATIONS
Revenue of $18,995,000 for the period January 1, 1994 through November 29, 1994
represented a 12% increase over revenue for the year ended December 31, 1993 of
$16,906,000. The principal factor contributing to the favorable difference was
an increase in sales to the SABRE Travel Information Network ("SABRE"), a
division of American Airlines, from approximately $600,000 in 1993 to
approximately $3,900,000 in the period ended November 29, 1994.
Gross profit as a percentage of revenue was 30% in the period ended November 29,
1994 and 28% in 1993. The improvement is principally due to absorption of fixed
overhead costs over greater unit volume during 1994.
Equity in earnings of Gray was $376,000 for the period ended November 29, 1994,
reflecting Datasouth's proportionate share of Gray's reported net income less
$224,000 in goodwill amortization.
Operating expenses were $4,941,000 for the period ended November 29, 1994
compared to $5,031,000 for 1993. At 26% of total revenue in 1994 compared to 30%
in 1993, the 1994 operating expenses represented a favorable change principally
due to nonrecurring advertising and product development expenses incurred in
1993 related to the DOCUMAX (TM) printer line introduction. Operating expenses
in 1994 included $344,000 of costs associated with the merger.
Interest income decreased to $80,000 in the period ended November 29, 1994 from
$267,000 in 1993 due to a reduction in short-term investments. Interest expense
of $228,000 in 1994 and $101,000 in 1993 resulted primarily from the issuance of
8% nonconvertible subordinated debentures totaling $3,000,000, issued to
insurance companies affiliated with Bull Run in May 1993 in connection with
Datasouth's initial investment in Gray.
LIQUIDITY AND CAPITAL RESOURCES
Datasouth acquired Gray common stock in May 1993 for $11,162,000, constituting
approximately 21% of Gray's outstanding shares. In the period January 1, 1994
through November 29, 1994, Datasouth purchased additional shares of Gray common
stock for $939,000, thereby increasing its interest in Gray to 25.7%.
Datasouth periodically borrowed from a $2,000,000 available uncollateralized
revolving line of credit bearing interest at the bank's prime lending rate.
Operations and investment income were Datasouth's principal sources of cash.
Datasouth invested excess cash in highly-liquid temporary investments and
marketable securities, in addition to its Gray common stock. Datasouth did not
pay a dividend since its inception.
29
<PAGE>
DATASOUTH COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
JANUARY 1, 1994 YEAR ENDED
THROUGH DECEMBER 31,
NOVEMBER 29, 1994 1993
<S> <C> <C>
Revenue $18,995 $ 16,906
Cost of goods sold 13,336 12,117
Gross profit 5,659 4,789
Operating expenses:
Research and development 1,375 1,735
Selling, general and administrative 3,566 3,296
4,941 5,031
Income (loss) from operations 718 (242)
Other income (expense):
Equity in earnings of affiliated company 376 108
Interest income 80 267
Interest expense (228) (101)
228 274
Income before income taxes 946 32
Provision for income taxes 227
Net income $ 719 $ 32
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
JANUARY 1, 1994 YEAR ENDED
THROUGH DECEMBER 31,
NOVEMBER 29, 1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net income $ 719 $ 32
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Provision for bad debts 2 12
Depreciation and amortization 686 648
Equity in earnings of affiliated company (376) (108)
Change in operating assets and liabilities:
Accounts receivable (505) (1,160)
Inventories 401 (1,211)
Other current assets 12 39
Accounts payable (457) 1,033
Accrued and other current liabilities 630 147
Net cash provided by (used in) operating activities 1,112 (568)
Cash flows from investing activities:
Sales of marketable securities 500 5,451
Capital expenditures (294) (781)
Investment in affiliated company (939) (11,162)
Dividends received from affiliated company 41 52
Net cash used in investing activities (692) (6,440)
Cash flows from financing activities:
Borrowings under line of credit 4,424 918
Repayments on line of credit (4,424) (918)
Proceeds from long-term debt 3,000
Advances to affiliated company (53)
Repayments by affiliated company 15
Issuance of common stock 5
Repurchase of common stock (5)
Net cash provided by (used in) financing activities (33) 2,995
Net increase (decrease) in cash and cash equivalents 387 (4,013)
Cash and cash equivalents, beginning of period 245 4,258
Cash and cash equivalents, end of period $ 632 $ 245
Supplemental cash flow disclosures:
Interest paid $ 249 $ 1
Income taxes paid (recovered), net 7 (78)
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
30
<PAGE>
DATASOUTH COMPUTER CORPORATION
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Dollars in thousands)
1. ACQUISITION BY BULL RUN CORPORATION
Immediately following the approval of the shareholders of Datasouth Computer
Corporation ("Datasouth") and Bull Run Corporation ("Bull Run") on November 29,
1994, Datasouth was merged (the "Merger") into a newly-formed, wholly-owned
subsidiary of Bull Run (which immediately changed its name to "Datasouth
Computer Corporation") through the exchange of three shares of Bull Run common
stock for each share of Datasouth common stock which Bull Run did not then own.
Prior to the Merger, Bull Run owned approximately 43.6% of the Datasouth
outstanding common stock. The accompanying financial statements present the
results of operations and cash flows for the 1994 period prior to the Merger and
for the year ended December 31, 1993. Subsequent to the Merger, Datasouth
operates as a wholly-owned subsidiary of Bull Run and its results are
consolidated with those of Bull Run.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION -- The accompanying consolidated financial
statements include the accounts of Datasouth and its wholly-owned subsidiary,
Datasouth International Sales Corporation, after elimination of intercompany
accounts and transactions.
ACCOUNTS RECEIVABLE -- Datasouth sells computer printers and provides service
worldwide to distributors, value-added resellers and large volume end users.
Datasouth performs ongoing credit evaluations of its customers' financial
condition and generally requires no collateral from its customers. The allowance
for doubtful accounts was $64 as of November 29, 1994.
INVENTORIES -- Inventories are stated at the lower of cost, determined on the
first-in, first-out method, or market.
PROPERTY AND EQUIPMENT -- Property and equipment is stated at cost less
depreciation computed under the straight-line method over the estimated useful
life of the asset, generally from 3 to 7 years. Expenditures for maintenance,
repairs and minor renewals are charged to expense.
INVESTMENT IN AFFILIATED COMPANY -- Datasouth's investment in an affiliated
company is accounted for by the equity method. The excess of Datasouth's
investment over the underlying equity of the investee, totaling $10,099 as of
November 29, 1994, was being amortized over 40 years.
WARRANTY COSTS -- An estimated allowance for future warranty costs based on past
experience is recorded as a charge to cost of goods sold.
RESEARCH AND DEVELOPMENT -- Research and development costs, including the costs
of software developed internally, are expensed as incurred.
INCOME TAXES -- Income taxes are recognized in accordance with Statement of
Accounting Standards No. 109, "Accounting for Income Taxes," whereby deferred
income tax liabilities or assets at the end of each period are determined using
the tax rate expected to be in effect when the taxes are actually paid or
recovered. A valuation allowance is recognized on net deferred tax assets whose
realization is not reasonably assured.
3. OPERATING LEASES
Datasouth leases its main facility under a seven-year operating lease expiring
in 1998 having a renewal option for an additional three year period, and leases
additional office and warehouse space under an operating lease expiring in 1997.
Total rental expense was $277 for the period January 1, 1994 through November
29, 1994, and $302 for 1993.
4. INVESTMENT IN AFFILIATED COMPANY
Datasouth's investment in affiliated company represents its interest in the
common stock of Gray Communications Systems, Inc. ("Gray") initially acquired
July 30, 1993. Based in Albany, Georgia, Gray owned three VHF NBC-affiliated
television stations, two CBS-affiliated television stations and two daily
newspapers as of November 29, 1994.
Summarized operating results of Gray follow:
<TABLE>
<CAPTION>
JANUARY 1, 1994 JULY 30, 1993
THROUGH THROUGH
NOVEMBER 30, 1994 DECEMBER 31, 1993
<S> <C> <C>
Operating revenue $32,073 $11,091
Operating expenses 26,265 8,620
Income from operations 5,808 2,471
Net income 2,781 1,002
</TABLE>
Gray's stock is publicly traded on the New York Stock Exchange (symbol: GCS). As
of November 29, 1994, the fair value of Gray shares owned by Datasouth was
approximately $15,733, based on an independent appraisal of Gray performed by an
investment banking firm.
Datasouth's initial investment in Gray was partially financed with $3,000 in
subordinated debentures payable to insurance companies affiliated with Bull Run.
Interest expense associated with this related party financing was $238 in the
period January 1, 1994 through November 29, 1994 and $101 in 1993.
31
<PAGE>
5. INCOME TAXES
Income taxes for the period January 1, 1994 through November 29, 1994 were
provided for currently payable federal income taxes. No tax provision was
necessary for 1993.
As of November 29, 1994, Datasouth had available a $101 research and development
credit carryforward available to offset future federal tax liabilities, expiring
in 2005. A valuation allowance of $131 was provided to offset net deferred tax
assets, the realization of which was uncertain.
The principal differences between the federal statutory tax rate and the
effective tax rate were as follows:
<TABLE>
<CAPTION>
JANUARY 1, 1994 YEAR ENDED
THROUGH DECEMBER 31,
NOVEMBER 29, 1994 1993
<S> <C> <C>
Federal statutory tax rate 34.0% 34.0%
Nondeductible business expenses 0.6 7.1
Nondeductible merger expenses 8.4
Increase in valuation allowance (40.7)
Tax benefit of net operating loss and tax credit carryforward (21.5)
Other, net 2.5 (0.4)
Effective tax rate 24.0% 0.0%
</TABLE>
6. RETIREMENT PLANS
Effective January 1, 1994, Datasouth adopted the Datasouth Savings and
Profit-Sharing Plan (the "401(k) Plan"), whereby employees could contribute 1%
to 15% of their gross pay to the 401(k) Plan subject to limitations set forth by
the Internal Revenue Service. Datasouth made matching and discretionary
contributions to the employees' accounts totaling $199 in the period January 1,
1994 through November 29, 1994. Prior to 1994, Datasouth had a Simplified
Employee Pension Plan ("SEP") in which principally all employees were eligible
to participate. The SEP was funded solely by company contributions which
amounted to $198 in 1993.
7. STOCK OPTIONS
Datasouth adopted the 1993 Incentive Stock Option Plan (the "Plan") under which
options were granted to officers and employees, exercisable at the fair market
value of the shares at the date of grant. The options vested 20% per year over 5
years from the date of grant and were exercisable over a period not to exceed 10
years. As of November 29, 1994, 398,000 shares granted under the Plan were
outstanding. Options for 2,000 shares were exercised in 1994 prior to November
29, 1994. No options under the Plan were exercised or cancelled in 1993. In
connection with the Merger, all outstanding options under the Plan were
converted into options under Bull Run's 1994 Long-Term Incentive Plan.
8. GEOGRAPHIC DATA AND SIGNIFICANT CUSTOMERS
Sales to non-domestic customers, located principally in Western Europe,
Southeast Asia and Mexico, totaled $1,491 for the period January 1, 1994 through
November 29, 1994 and $998 in 1993.
For the period January 1, 1994 through November 29, 1994, approximately 20% of
total revenue was derived from one customer. No individual customer accounted
for 10% or more of total revenue in 1993.
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
DATASOUTH COMPUTER CORPORATION
Charlotte, North Carolina
We have audited the accompanying consolidated statements of income and cash
flows of Datasouth Computer Corporation for the period January 1, 1994 through
November 29, 1994 and the year ended December 31, 1993. These financial
statements are the responsibility of the Company's management. 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 consolidated statements of income and cash flows for the
period January 1, 1994 through November 29, 1994 and the year ended December 31,
1993 present fairly, in all material respects, the consolidated results of
operations and cash flows of Datasouth Computer Corporation for the period
January 1, 1994 through November 29, 1994 and the year ended December 31, 1993
in conformity with generally accepted accounting principles.
Atlanta, Georgia
February 22, 1995
/s/ Ernst & Young LLP
32
<PAGE>
DIRECTORS
J. MACK ROBINSON--Chairman of the Board of Bull Run Corporation; Chairman and
President of Delta Life Insurance Company since 1958; Chairman of Atlantic
American Corporation, an insurance holding company, since 1974, and its
President from 1988 to May 1995; director emeritus of Wachovia Corporation;
director of Gray Communications Systems, Inc.
GERALD N. AGRANOFF--Affiliated with Plaza Securities Company and Arbitrage
Securities Company, investment firms, since 1982, and currently General Counsel
and a general partner; director of Canal Capital Corporation, Datapoint
Corporation and Atlantic Gulf Communities Corporation; trustee of the Management
Assistance Inc. Liquidating Trust.
JAMES W. BUSBY--President of Datasouth Computer Corporation since 1984; one of
Datasouth's founders in 1977.
HILTON H. HOWELL, JR.--President of Atlantic American Corporation since May 1995
and previously its Executive Vice President since 1992; Executive Vice President
and General Counsel of Delta Life and Delta Fire & Casualty Insurance Companies
since 1991; director of Gray Communications Systems, Inc.
ROBERT S. PRATHER, JR.--President and Chief Executive Officer of Bull Run
Corporation; director of Gray Communications Systems, Inc., Host Communications,
Inc. and University Sports America, Inc.
ALEX C. RITCHIE--Director of Silver Standard Resources, Inc., a mining company,
from which he retired as President in 1984.
OFFICERS
J. MACK ROBINSON--Chairman of the Board
ROBERT S. PRATHER, JR.--President and Chief Executive Officer
HILTON H. HOWELL, JR.--Vice President and Secretary
FREDERICK J. ERICKSON--Vice President - Finance, Treasurer and Chief
Financial Officer
STOCKHOLDER INFORMATION
CORPORATE HEADQUARTERS
Bull Run Corporation
4370 Peachtree Road, N.E.
Atlanta, GA 30319
phone (404) 266-8333
fax (404) 261-9607
TRANSFER AGENT & REGISTRAR
TranSecurities International, Inc.
2510 N. Pines Road
Spokane, WA 99206-7624
(509) 927-1255
INDEPENDENT AUDITORS
Ernst & Young LLP
Suite 2800
600 Peachtree Street
Atlanta, GA 30308-2215
SUBSIDIARIES & AFFILIATES
Datasouth Computer Corporation
4216 Stuart Andrew Boulevard
Charlotte, NC 28217
(704) 523-8500
Gray Communications Systems, Inc.
126 N. Washington Street
Albany, GA 31702
(912) 888-9390
Host Communications, Inc.
546 East Main Street
Lexington, KY 40596
(606) 226-4678
STOCK EXCHANGE
Bull Run's common stock is listed
on the Nasdaq exchange under
the symbol "BULL"
Gray's common stock is listed on the
New York Stock Exchange under the
symbol "GCS"
FORM 10-KSB
A copy of the Bull Run's Annual Report on
Form 10-KSB submitted to the Securities
and Exchange Commission may be obtained
by contacting Investor Relations at Bull
Run's Corporate Headquarters.
<PAGE>
BULL RUN CORPORATION
(Bull Run logo appears here)
4370 Peachtree Road, N.E. Altanta, GA 30319 404-266-8333
<PAGE>
<PAGE>
EXHIBIT 21
BULL RUN CORPORATION
LIST OF SUBSIDIARIES
Datasouth Computer Corporation, a Delaware corporation
Datasouth International Sales Corporation, a U.S. Virgin Islands
corporation, and a subsidiary of Datasouth Computer Corporation
17
EXHIBIT 23.1
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-91296) pertaining to the Bull Run Corporation 1994 Long Term
Incentive Plan and the Registration Statement (Form S-8 No. 33-91298) pertaining
to the Bull Run Corporation Non-Employee Directors' 1994 Stock Option Plan
of our reports dated February 22, 1996 with respect to the consolidated
financial statements of Bull Run Corporation and our reports dated February 22,
1995 with respect to the consolidated financial statements of Datasouth Computer
Corporation incorporated by reference in the Annual Report (Form 10-KSB) of Bull
Run Corporation for the year ended December 31, 1995, filed with the Securities
and Exchange Commission.
/S/ ERNST & YOUNG LLP
Atlanta, Georgia
March 25, 1996
18
Independent Auditors' Consent
The Board of Directors
Bull Run Corporation:
We consent to the incorporation by reference in the Registration Statements
(Nos. 33-91296 and 33-91298) on Form S-8 of Bull Run Corporation of our
report dated February 12, 1996 with respect to the balance sheets of Capital
Sports Properties, Inc. as of December 31, 1995 and 1994, and the related
statements of earnings, changes in stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1995, which
report appears in the December 31, 1995 annual report on Form 10-KSB of Bull
Run Corporation.
/S/ KPMG PEAT MARWICK LLP
Stamford, Connecticut
March 25, 1996
19
Independent Auditors' Consent
The Board of Directors
Bull Run Corporation:
We consent to the incorporation by reference in the Registration Statements
(Nos. 33-91296 and 33-91298) on Form S-8 of Bull Run Corporation of our report
dated September 11, 1995 with respect to the consolidated balance sheets of
Host Communications, Inc. and subsidiaries as of June 30, 1995 and 1994, and
the related consolidated statements of earnings, stockholders' equity,
and cash flows for the years then ended, which report appears in the December
31, 1995 annual report on Form 10-KSB of Bull Run Corporation.
/S/ KPMG PEAT MARWICK LLP
Cincinnati, Ohio
March 25, 1996
20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 145,867
<SECURITIES> 0
<RECEIVABLES> 3,958,802
<ALLOWANCES> 50,000
<INVENTORY> 3,755,443
<CURRENT-ASSETS> 7,330,997
<PP&E> 3,374,065
<DEPRECIATION> 862,379
<TOTAL-ASSETS> 44,300,404
<CURRENT-LIABILITIES> 4,256,206
<BONDS> 0
222,797
0
<COMMON> 0
<OTHER-SE> 23,856,069
<TOTAL-LIABILITY-AND-EQUITY> 44,300,404
<SALES> 26,432,253
<TOTAL-REVENUES> 27,153,981
<CGS> 18,649,649
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,871,564
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 984,464
<INCOME-PRETAX> 795,520
<INCOME-TAX> 180,000
<INCOME-CONTINUING> 723,068
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 723,068
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
<PAGE>
</TABLE>
EXHIBIT 99
PROXY STATEMENT DATED MARCH 20, 1996
21
<PAGE>
BULL RUN CORPORATION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(x ) Filed by the Registrant
( ) Filed by a Party other than the Registrant
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, for Use of the Commission Only (as permitted by
Rule 14a-b(e)(2))
(x ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to (section mark)240.14a-11(c) or
(section mark)240.14a-12
Bull Run Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement If Other Than Registrant)
PAYMENT OF FILING FEE (Check the appropriate box):
(x ) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
( ) $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: *
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
(Set forth the amount on which the filing fee is calculated and state how
it was determined)
( ) Fee previously paid with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
BULL RUN CORPORATION
4370 Peachtree Road, N.E.
Atlanta, Georgia 30319
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Bull Run Corporation, a
Georgia corporation ("Bull Run"), will be held at the offices of Bull
Run Corporation, 4370 Peachtree Road, N.E., Atlanta, Georgia, on April
23, 1996 at 10:00 A.M. (local time) for the following purposes:
1. to elect directors;
2. to consider and act upon a proposal to confirm the appointment
of Ernst & Young LLP as the independent auditors of the Company for
the year ending December 31, 1996; and
3. to transact any such other business as may properly come
before the meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on March
8, 1996 as the record date for determining shareholders entitled to
notice of and to vote at the meeting.
By Order of the Board of Directors,
ROBERT S. PRATHER, JR.
PRESIDENT
March 20, 1996
YOUR VOTE IS IMPORTANT
PLEASE MARK, SIGN, AND DATE THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED SELF-ADDRESSED, STAMPED ENVELOPE.
<PAGE>
BULL RUN CORPORATION
4370 Peachtree Road, N.E.
Atlanta, Georgia 30319
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is being furnished to the shareholders of Bull Run
Corporation (the "Company") in connection with the solicitation of proxies by
the Board of Directors of the Company for use at the annual meeting of
shareholders ("Annual Meeting") of the Company to be held on April 23, 1996 at
10:00 a.m., local time, at the offices of the Company, 4370 Peachtree Road,
N.E., Atlanta, Georgia and any adjournment or adjournments thereof. This Proxy
Statement, the attached Notice, and the enclosed proxy card are first being
mailed to shareholders of the Company on or about March 22, 1996.
VOTING AND PROXIES
The Board of Directors of the Company has fixed the close of business on
March 8, 1996 as the record date for the determination of shareholders entitled
to notice of and to vote at the Annual Meeting. Accordingly, only holders of
record of shares of common stock, $.01 par value ("Common Stock"), of the
Company at the close of business on that date will be entitled to notice of and
to vote at the Annual Meeting or any adjournment or adjournments thereof. At the
close of business on such date, there were 22,116,227 shares of Common Stock
outstanding.
Each holder of record of shares of Common Stock on the record date is
entitled to cast one vote per share, in person or by properly executed proxy, on
any matter that may properly come before the Annual Meeting. The presence, in
person or by properly executed proxy, of the holders of a majority of the shares
of Common Stock outstanding on the record date is necessary to constitute a
quorum at the Annual Meeting. The affirmative vote of the holders of a majority
of the shares of Common Stock present and voting, represented in person or by
properly executed proxy, at the Annual Meeting is required to elect directors
and confirm the appointment of Ernst & Young LLP as the independent auditors of
the Company for the year ending December 31, 1996.
PROXY VOTING, REVOCATION, AND ABSTENTIONS
All proxies received pursuant to this solicitation will be voted except as
to matters where authority to vote is specifically withheld and, where a choice
is specified as to the proposal, they will be voted in accordance with such
specification. If no instructions are given, the persons named in the proxy
solicited by the Board of Directors of the Company intend to vote for the
election of directors listed herein and for the confirmation of the appointment
of Ernst & Young LLP as the independent auditors of the Company. Abstentions and
broker non-votes are not counted as votes cast on any matter to which they
relate.
The Board of Directors does not know of any matters, other than the matters
described in this Proxy Statement, which are expected to be presented for
consideration at the Annual Meeting. If any other matters are properly presented
at the Annual Meeting, the persons named in the accompanying proxy will have
discretion to vote on such matters in accordance with their best judgment.
Shareholders who execute proxies may revoke them by giving written notice
to the Secretary of the Company at any time before such proxies are voted.
Attendance at the Annual Meeting will not have the effect of revoking a proxy
unless the shareholder so attending, in writing, so notifies the Secretary of
the Annual Meeting at any time prior to the voting of the proxy.
SOLICITATION
Proxies are being solicited by and on behalf of the Company's Board of
Directors. The Company will bear the expenses of this solicitation, including
the expenses of preparing, printing and mailing this Proxy Statement. In
addition to solicitation by mail, directors, officers and regular employees of
the Company (who will not specifically be compensated for such services) may
solicit proxies by telephone or otherwise. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries to forward
proxies and proxy material to their principals, and the Company will reimburse
them for their expenses. Mackenzie Partners, Inc. will be paid approximately
$3,000, plus out-of-pocket expenses, to solicit and tabulate proxies for the
Company.
1
<PAGE>
PRINCIPAL STOCKHOLDERS
Information regarding persons or groups known by the Company to be the
beneficial owners of more than five percent of the outstanding shares of Common
Stock as of January 31, 1996 is shown in the following table. Information
concerning such security holdings has been furnished by the holders thereof to
the Company.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER (1) OWNERSHIP CLASS
<S> <C> <C>
Robert S. Prather, Jr.............................................. 2,810,598 (2)(3) 12.6%
J. Mack Robinson................................................... 6,238,656 (3)(4) 28.0%
Robinson-Prather Partnership....................................... 2,660,598 (3) 12.0%
Harriet J. Robinson................................................ 6,238,656 (3)(4) 28.0%
Harriet J. Robinson, Trustee
Robin M. Robinson Trust.......................................... 3,060,598 (3) 13.8%
Harriet J. Robinson, Trustee
Jill E. Robinson Trust........................................... 3,060,598 (3) 13.8%
Gulf Capital Services, Ltd......................................... 2,660,598 (3) 12.0%
James W. Busby..................................................... 3,209,192 (5) 14.4%
William M. Hammock................................................. 2,087,150 9.4%
</TABLE>
(1) The address of each of these shareholders is 4370 Peachtree Road, N.E.,
Atlanta, Georgia 30319, except for James W. Busby, whose address is 4216
Stuart Andrew Blvd., Charlotte, North Carolina 28217, and William M.
Hammock, whose address is 12661 Kelly Palm Drive, SW, Fort Myers, Florida
33908.
(2) Includes 150,000 shares which Mr. Prather has the right to acquire through
the exercise of currently exercisable options.
(3) Includes 2,660,598 shares owned by Robinson-Prather Partnership.
Robinson-Prather Partnership is a Georgia general partnership, the general
partners of which are Robert S. Prather, Jr., President, Chief Executive
Officer and a director of the Company; J. Mack Robinson, a director of the
Company; Harriett J. Robinson (the wife of Mr. Robinson); Harriett J.
Robinson, as trustee for Robin M. Robinson Trust (the "RMR Trust"); Harriett
J. Robinson, as trustee for Jill E. Robinson Trust (the "JER Trust"); and
Gulf Capital Services, Ltd. The partnership agreement among the general
partners provides that Messrs. Prather and Robinson have the exclusive
control of the day-to-day operations of the partnership. Each general
partner disclaims beneficial ownership of the shares of Common Stock owned
by Robinson-Prather Partnership, except to the extent of his pecuniary
interest in such shares of Common Stock, which is less than the amount
disclosed.
(4) Includes as to each of J. Mack Robinson and his wife, Harriett J. Robinson:
886,058 shares owned directly by Mr. Robinson; 192,000 shares owned directly
by Mrs. Robinson; 150,000 shares which Mr. Robinson has the right to acquire
through the exercise of currently exercisable options; 800,000 shares owned
by the RMR Trust and JER Trust, of each of which Mrs. Robinson is the
trustee; and an aggregate of 1,550,000 shares owned by Delta Fire & Casualty
Insurance Co. ("Delta Fire"), Delta Life Insurance Company ("Delta Life"),
Atlantic American Life Insurance Co. ("Atlantic American"), Bankers Fidelity
Life Insurance Co. ("Bankers Fidelity Life") and Georgia Casualty & Surety
Co. ("Georgia Casualty"), Georgia corporations of each of which Mr. Robinson
is Chairman of the Board, President and/or principal stockholder (or the
subsidiaries of the same). Each of Mr. and Mrs. Robinson disclaims
beneficial ownership of the shares of Common Stock owned by Jill E.
Robinson, the RMR Trust, the JER Trust, Delta Fire, Delta Life, Atlantic
American, Bankers Fidelity Life, Georgia Casualty and each other.
(5) Includes 16,548 shares owned by Mr. Busby's wife; 22,748 shares owned by
each of his two children; and 90,000 shares which Mr. Busby has the right to
acquire through the exercise of currently exercisable options.
Except as noted in the footnotes above, (i) none of such shares is known by
the Company to be shares with respect to which such beneficial owner has the
right to acquire beneficial ownership and (ii) the Company believes that the
beneficial owners above have sole voting and investment power regarding the
shares shown as being beneficially owned by them.
2
<PAGE>
ELECTION OF DIRECTORS
GENERAL
At the Annual Meeting, six directors are to be elected to hold office
(subject to the Company's by-laws) until the next Annual Meeting of Shareholders
and until their successors have been elected and qualified. In case any nominee
listed in the table below should be unavailable for any reason, which management
has no reason to anticipate, the proxy will be voted for any substitute nominee
or nominees who may be selected by management prior to or at the Annual Meeting
or, if no substitute is selected by management prior to or at the Annual
Meeting, for a motion to reduce the membership of the Board to the number of
nominees available. Set forth below is certain information concerning each of
the nominees.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
YEAR OWNERSHIP OF
FIRST COMMON
PRINCIPAL OCCUPATION DURING THE PAST ELECTED STOCK AS OF PERCENT
FIVE YEARS, ANY OFFICE HELD WITH THE A JANUARY 31, OF
NAME AGE COMPANY AND OTHER DIRECTORSHIPS DIRECTOR 1995 CLASS
<S> <C> <C> <C> <C> <C>
J. Mack Robinson 72 Chairman of the Board since 1994 and 1992 6,238,656 (2)(4) 28.0%
Secretary and Treasurer of the Company in
1994; Chairman of the Board and
President of Delta Life since 1958;
President of Atlantic American
Corporation, an insurance holding
company, from 1988 to May 1995, and
Chairman of the Board of Atlantic American
Corporation since 1974; director of Gray
Communications Systems, Inc. ("Gray")
since 1993; director EMERITUS of Wachovia
Corporation
Gerald N. Agranoff 49 General counsel to and a general partner 1990 115,000 (1) (3)
of Plaza Securities Company and
Arbitrage Securities Company (investment
firms), having been affiliated with such
companies since 1982; director of Canal
Capital Corporation, Datapoint Corporation,
and Atlantic Gulf Communities Corporation;
trustee of the Management Assistance Inc.
Liquidating Trust
James W. Busby 41 President of Datasouth Computer Corporation 1994 3,209,192 (1)(5) 14.4%
("Datasouth") since 1984; one of the
founders of Datasouth in 1977, serving as
Secretary from 1977 until 1984
Hilton H. Howell, Jr. 34 President of Atlantic American Corporation 1994 75,000 (1)(6) (3)
since May 1995 and Executive Vice
President of its insurance subsidiaries,
Atlantic American Life Insurance Co.,
Bankers Fidelity Life Insurance Co. and
Georgia Casualty & Surety Co., since 1992;
Executive Vice President of Atlantic
American Corporation from 1992 to May
1995; Executive Vice President and General
Counsel of Delta Life and Delta Fire since
1991; practiced law in Houston, Texas with
the firm of Liddell, Sapp, Zivley, Hill &
LaBoon from 1989 to 1991; director of Gray
since 1993
Robert S. Prather, Jr. 51 President and Chief Executive Officer 1992 2,810,598 (1)(2) 12.6%
of the Company since 1992; Chairman of the
Board of Phoenix Corporation, a steel
service center, from 1980 to 1992; director
of Gray since 1993
Alex C. Ritchie 79 Retired; director of Silver Standard 1980 200,000 (1)(4) (3)
Resources, Inc.
</TABLE>
3
<PAGE>
(1) Includes, as to each of Messrs. Agranoff, Howell and Ritchie, 75,000 shares
of Common Stock; as to Mr. Prather, 150,000 shares of Common Stock; and as
to Mr. Busby, 90,000 shares of Common Stock; which each had the right to
acquire through exercise of currently exercisable options.
(2) Includes 2,660,598 shares owned by Robinson-Prather Partnership.
Robinson-Prather Partnership is a Georgia general partnership, the general
partners of which are Robert S. Prather, Jr., President, Chief Executive
Officer and a director of the Company; J. Mack Robinson, a director of the
Company; Harriett J. Robinson (the wife of Mr. Robinson); Harriett J.
Robinson, as trustee for the RMR Trust; Harriett J. Robinson, as trustee for
the JER Trust; and Gulf Capital Services, Ltd. The partnership agreement
among the general partners provides that Messrs. Prather and Robinson have
the exclusive control of the day-to-day operations of the partnership,
including the power to vote or dispose of the shares of Common Stock owned
by Robinson-Prather Partnership. Each general partner disclaims beneficial
ownership of the shares of Common Stock owned by Robinson-Prather
Partnership, except to the extent of his pecuniary interest in such shares
of Common Stock, which is less than the amount disclosed. The address of
Robinson-Prather Partnership and its general partners is 4370 Peachtree
Road, NE, Atlanta, Georgia 30319.
(3) Less than 1%.
(4) Includes: 886,058 shares owned directly by Mr. Robinson; 150,000 shares
which Mr. Robinson has the right to acquire through the exercise of
currently exercisable options; 192,000 shares owned directly by Harriet J.
Robinson, Mr. Robinson's wife; an aggregate of 800,000 shares owned by the
RMR Trust and JER Trust, of each of which Mrs. Robinson is the trustee; and
an aggregate of 1,550,000 shares owned by Delta Fire, Delta Life, Atlantic
American, Bankers Fidelity Life and Georgia Casualty, of each of which Mr.
Robinson is Chairman of the Board, President and/or principal stockholder.
Each of Mr. and Mrs. Robinson disclaims beneficial ownership of the shares
of Common Stock owned by the RMR Trust, the JER Trust, Delta Fire, Delta
Life, Atlantic American, Bankers Fidelity Life, Georgia Casualty and each
other.
(5) Includes 16,548 shares owned by Mr. Busby's wife and 22,748 shares owned by
each of his two children.
(6) Mr. Howell is married to Robin M. Howell, Mr. Robinson's daughter and a
beneficiary of the RMR Trust, which is a general partner of Robinson-Prather
Partnership. Mr. Howell disclaims beneficial ownership of the shares of
Common Stock owned by Robinson-Prather Partnership or the RMR Trust.
Except as noted in the footnotes above, (i) none of such shares is known by
the Company to be shares with respect to which such beneficial owner has the
right to acquire such shares and (ii) the Company believes that the beneficial
holders listed above have sole voting and investment power regarding the shares
shown as being beneficially owned by them.
As of January 31, 1996, all directors and executive officers of the Company
as a group (seven persons) owned 12,103,619 shares of Common Stock, representing
53.2% of the outstanding shares (including 633,000 shares purchasable on or
within 60 days from such date pursuant to the exercise of stock options).
4
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid or accrued to all
executive officers earning $100,000 or more for the years ended December 31,
1995, 1994 and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
OTHER RESTRICTED PAYOUTS
ANNUAL STOCK LTIP
PRINCIPAL COMPENSATION AWARDS OPTIONS PAYOUTS
NAME POSITION YEAR SALARY($) BONUS($) ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert S. Prather, Jr.... President of Bull Run 1995 $ 266,538 $100,000 $ 7,361(1) -- -- --
1994 $254,774 $50,000 $ 7,361(1) -- 75,000 shares --
1993 $166,667 -- $ 19,696(1) -- -- --
James W. Busby........... President of Datasouth 1995 $ 134,049 $46,172 -- -- -- --
1994 $ 126,510 $32,440 -- -- 225,000 shares (3) --
1993 $ 116,313 -- -- -- -- --
Frederick J. Erickson.... Vice President 1995 $ 96,231 $33,086 -- -- -- --
-- Finance, Bull Run 1994 $ 87,298 $16,220 -- -- 90,000 shares (3) --
and Datasouth 1993 $ 48,000 (4) -- -- -- -- --
Samuel P. Davis, Jr...... Vice President 1994 $ 25,000 -- $ 75,000(5) -- -- --
-- Finance, Bull Run 1993 $ 100,000 -- -- -- -- --
<CAPTION>
ALL OTHER
COMPENSATION
NAME ($)
<S> <C>
Robert S. Prather, Jr.... $ 9,000(2)
$ 9,000(2)
--
James W. Busby........... $ 9,000(2)
$ 7,591(2)
$ 6,123(2)
Frederick J. Erickson.... $ 6,747(2)
$ 5,238(2)
$ 1,425(2)
Samuel P. Davis, Jr...... --
--
</TABLE>
(1) Consists of automobile allowances and related expenses provided by the
Company.
(2) Consists of employer contributions to the defined contribution retirement
plans.
(3) Options to acquire Common Stock were granted at the effective date of the
Merger in exchange for then outstanding options to acquire Datasouth shares.
The Datasouth options were originally granted in 1993.
(4) Mr. Erickson was hired as Datasouth's Vice President -- Finance on May 18,
1993, and was not affiliated previously with Bull Run or Datasouth.
(5) Mr. Davis was paid a consulting fee of $75,000 for services rendered in 1994
following his resignation effective March 31, 1994.
There were no stock options granted by the Company in 1995. The following
table sets forth stock options exercised in 1995 by executive officers earning
$100,000 or more, and the number and value of all unexercised options held by
such executive officers as of December 31, 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END (#)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
<S> <C> <C> <C> <C>
Robert S. Prather, Jr............................................ -- -- 150,000/-0- $266,484/$-0-
James W. Busby................................................... -- -- 90,000/135,000 $173,531/$260,297
Frederick J. Erickson............................................ 18,000 $ 38,250 18,000/54,000 $36,281/$108,844
</TABLE>
(1) The closing price of the Common Stock on December 31, 1995 was $2.89 per
share.
LONG TERM INCENTIVE PLANS
Under the Bull Run Corporation 1994 Long Term Incentive Plan (the "1994
Plan"), 2,500,000 shares of Common Stock are reserved for issuance of stock
options, restricted stock awards and stock appreciation rights. Plan awards are
issued by the Management Compensation and Stock Option Committee (the
"Compensation Committee") of the Board of Directors at prices it determines.
Officers and employees of the Company who, in the opinion of the Compensation
Committee, are in a position to have a significant effect upon the Company's
business and operations, are eligible to receive options. As of December 31,
1995, options for a total of 1,341,000 shares were issued and outstanding under
the 1994 Plan with an exercise
5
<PAGE>
price ranging from $.88 to $1.66 per share. Of the 1,341,000 shares issuable
upon the exercise of outstanding options, 1,116,000 vest in 20% annual
increments beginning one year following the date of grant and are exercisable
over a period not to exceed five to 10 years, and 225,000 were fully vested at
the date of grant. Options for 68,000 shares were exercised in 1995.
The Company's 1987 Non-Qualified Stock Option Plan (the "1987 Plan")
terminated in 1992. There are currently outstanding options to purchase 150,000
shares of Common Stock at an exercise price of $.75 per share.
EMPLOYEE INCENTIVE PLANS
The Company's wholly-owned subsidiary, Datasouth Computer Corporation
("Datasouth") has employee incentive plans covering substantially all Datasouth
employees. Payments made to individual employees pursuant to these plans, if
any, will vary from year to year as they will be based on "defined operating
profits" (income before income taxes, investment income and interest
income/expense) of Datasouth. The plans include one for certain key employees
and one for all other eligible employees. Total incentive plan compensation was
approximately $323,000 in 1995.
The incentive pool for the plan covering certain key employees is
calculated as a percentage (8.5% in 1995) of "defined operating profits" (as
defined above) less the incentive pool referred to above.
EMPLOYMENT ARRANGEMENTS
Robert S. Prather, Jr. is party to an employment agreement with the Company
expiring in December 1996. Pursuant to this agreement, Mr. Prather agrees to
serve as President and Chief Executive Officer of the Company. Mr. Prather's
employment agreement provides that during the term of the agreement Mr. Prather
will receive an annual salary of $250,000, subject to increase at the discretion
of the Board of Directors, and will be furnished with an automobile.
Datasouth has entered into employment agreements dated March 31, 1994 with
James W. Busby, Datasouth's President, K. Nick Waller, Datasouth's Executive
Vice President -- Operations, Frederick J. Erickson, Datasouth's Vice
President -- Finance & Administration, Chief Financial Officer, Treasurer and
Secretary. The agreements are for terms of three years and obligate Datasouth to
pay the executive 100% of his annual base salary for a 12-month period in the
event employment is terminated within 12 months of a change in control of
Datasouth. "Change of control" means (i) acquisition by any person, corporation,
or group of associated persons, excluding affiliates of Datasouth, of beneficial
ownership of an aggregate of more than forty-one percent (41%) of the then
outstanding shares of voting stock of Datasouth or (ii) a merger or
consolidation to which Datasouth is a party and pursuant to which Datasouth is
not a surviving or continuing entity; or (iii) any sale of Datasouth's operating
assets that may affect the employment of such individuals. Furthermore, the
agreements obligate Datasouth to provide medical and dental benefits and life
insurance in effect for a period of one year following termination.
DIRECTORS' COMPENSATION
Robert S. Prather, Jr. and James W. Busby, directors who are also employees
of the Company and Datasouth, respectively, receive no fees for their services
as directors. Directors who are not employees of the Company or Datasouth are
paid a fee of $750 per month for their services as directors and are reimbursed
for their expenses for each meeting attended. Directors who are not officers or
employees of the Company or Datasouth are eligible to receive stock options
under the Company's Non-Employee Directors' 1994 Stock Option Plan (the "1994
Non-Employee Directors' Plan"). In 1994, each of Messrs. Agranoff and Ritchie,
directors of the Company, was granted an option to purchase up to 75,000 shares
of Common Stock at an exercise price of $1.34 per share (the market value of the
Common Stock on the date of grant) under the 1994 Non-Employee Directors' Plan.
In 1994, each of Messrs. Howell, Prather and Robinson, directors of the Company,
was granted an option under the 1994 Incentive Plan to purchase up to 75,000
shares of Common Stock at an exercise price of $1.66, $1.48 and $1.48 per share,
respectively, the market value of the Common Stock on the date of grant (except
for Messrs. Prather and Robinson, whose exercise price is equal to 10% above
such market value).
BOARD COMMITTEES AND MEMBERSHIP
The Company's Board of Directors has an Audit Committee, the purpose of
which is to review and evaluate the results and scope of the audit and other
services provided by the Company's independent auditors, as well as the
Company's accounting principles and system of internal accounting controls, and
to review and approve any transactions between the Company and its directors,
officers, or significant shareholders. The Audit Committee held one meeting
during 1995. The members of the Audit Committee are Messrs. Agranoff and
Ritchie.
6
<PAGE>
The Company's Board of Directors has a Management Compensation and Stock
Option Committee (the "Compensation Committee"), the purpose of which is to set
the compensation of the Company's President and Chief Executive Officer and
review executive job performance, as well as the overall management compensation
program. The Compensation Committee held one meeting in 1995. The members of the
Compensation Committee are Messrs. Agranoff, Ritchie and Robinson.
The Company does not have a nominating committee. The Board of Directors
held two meetings during 1995. During 1995, all of the directors attended at
least 75% of the aggregate of (i) the total number of meetings of the Board of
Directors and (ii) the total number of meetings of all committees of the Board
on which such director served.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases office space from Delta Life, a company of which J. Mack
Robinson, a director of the Company, is Chairman of the Board and principal
stockholder. The term of the lease is for 10 years beginning January 1, 1993 and
requires total basic rent payments of $164,976 over the 10-year term, plus a pro
rata share of expenses.
In 1995, the Company under its previously announced Stock Repurchase
Program, purchased 35,000 shares of its Common Stock from Mr. Gerald N.
Agranoff, a director of the Company, for $3.50 per share, the market price of
the Common Stock on the date of the purchase.
CONFIRMATION OF APPOINTMENT OF AUDITORS
The Board of Directors of the Company recommends that the shareholders
confirm the appointment of Ernst & Young LLP to audit the books and accounts of
the Company for the fiscal year ending December 31, 1996.
Representatives of Ernst & Young LLP are expected to be available at the
Annual Meeting to respond to appropriate questions and will be given the
opportunity to make a statement if they so desire.
ANNUAL MEETING INFORMATION AND SHAREHOLDER PROPOSALS
The Company has not held a meeting of its shareholders since November 29,
1994. At that meeting, the shareholders of the Company addressed the business
that would ordinarily have been covered at the 1995 Annual Meeting of
Shareholders. Among other things, the shareholders of the Company elected
directors and ratified the appointment of the Company's independent auditors. In
order to save the attendant costs of an annual meeting and since the business
purposes thereof had been addressed approximately five months previously, the
Company decided not to hold its Annual Meeting in 1995, which ordinarily would
have taken place in April 1995. The NASDAQ Stock Market has admonished the
Company for its decision not to hold the 1995 Annual Meeting.
Shareholders of the Company wishing to include proposals in the proxy
material in relation to the Annual Meeting of Shareholders to be held in 1997
must submit the same in writing so as to be received at the executive office of
the Company prior to December 15, 1996. Such proposals must also meet the other
requirements of the rules of the Securities and Exchange Commission relating to
shareholders' proposals.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Common Stock, to file with the Securities and Exchange Commission initial
reports of ownership (Form 3) and reports of changes in ownership (Forms 4 and
5) of Common Stock.
To management's knowledge, based solely on review of the copies of such
reports furnished to the Company and representations that no other reports were
required, during the fiscal year ended December 31, 1995, all Section 16(a)
filing requirements applicable to the Company's officers, directors and greater
than ten percent beneficial owners were met.
7
******************************************************************************
APPENDIX
<PAGE>
BULL RUN CORPORATION
PROXY
The undersigned appoints Robert S. Prather, Jr. and J. Mack Robinson, and
either of them, with power of substitution, to represent and to vote on behalf
of the undersigned all of the shares of Bull Run Corporation (the "Company")
which the undersigned is entitled to vote at the Annual Meeting of Shareholders
to be held at the offices of the Company, 4370 Peachtree Rd., N.E., Atlanta,
Georgia on April 23, 1996 at 10:00 A.M., and at any adjournment or adjournments
thereof, hereby revoking all proxies heretofore given with respect to such
stock, upon the following proposals more fully described in the notice of, and
proxy statement relating to, the meeting (receipt whereof is hereby
acknowledged).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR (1) AND (2).
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
[ ] FOR all nominees listed below except [ ] WITHHOLD AUTHORITY to vote
as marked to the contrary below for all nominees listed below
</TABLE>
Gerald N. Agranoff, James W. Busby, Hilton H. Howell, Jr., Robert S. Prather,
Jr., Alex C. Ritchie, and J. Mack Robinson
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
2. PROPOSAL TO CONFIRM THE APPOINTMENT OF ERNST & YOUNG LLP as the
independent auditors of the Company
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
3. In their discretion upon such other matters as may properly come before
the meeting.
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
Please sign exactly as your name appears on your stock certificates. When
shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee, or guardian, please give full title as such.
If a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
DATED: , 1996
Signature
Signature if held jointly
PLEASE RETURN IN THE ENCLOSED
POSTAGE PAID ENVELOPE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
