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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________________ to
__________________
Commission File Number 0-9385
Bull Run Corporation
(Exact name of registrant as specified in its charter)
Georgia 91-1117599
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4370 Peachtree Road, N.E., Atlanta, GA 30319
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (404) 266-8333
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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. [ X ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers in response to
Item 405 of Regulation S-K is not contained herein, and will not 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-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting and non-voting common equity held
by non-affiliates as of February 27, 1998 was $41,613,845, based on the closing
price thereof on The Nasdaq Stock Market.
The number of shares outstanding of the registrant's Common Stock, par
value $.01 per share, as of February 27, 1998, was 22,090,223.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference:
Documents Form 10-K Reference
1997 Annual Report to Shareholders Part II, Items 6, 7 and 8
Proxy Statement to be dated April 3, 1998 Part III, Items 10, 11, 12 and 13
BULL RUN CORPORATION
FORM 10-K INDEX
PART I
Page
----
Item 1. Business......................................................... 3
Item 2. Properties....................................................... 8
Item 3. Legal Proceedings................................................ 8
Item 4. Submission of Matters to a Vote of Security Holders.............. 8
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 9
Item 6. Selected Financial Data.......................................... 9
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 9
Item 8. Financial Statements and Supplementary Data...................... 9
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 10
PART III
Item 10. Directors and Executive Officers of the Registrant............... 10
Item 11. Executive Compensation........................................... 10
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 10
Item 13. Certain Relationships and Related Transactions................... 10
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K................................................. 11
Signatures....................................................... 14
2
PART I
Item 1. Business
General
Bull Run Corporation (the "Company"), a Georgia corporation, was originally
incorporated under the laws of the State of Washington under the name of Bull
Run Gold Mines, Ltd. The Company changed its name and state of incorporation in
December 1992, relocating its corporate office to Atlanta. Prior to selling its
interest in a joint venture in November 1990 for $6,000,000 in cash and the
discharge of its outstanding debt, the Company was a mineral resource company
which had been engaged in the business of developing and mining in Nevada
through the joint venture with another mining company.
In November 1994, the Company acquired by merger (the "Merger") Datasouth
Computer Corporation ("Datasouth"). Datasouth, located in Charlotte, North
Carolina, designs, manufactures and markets heavy-duty dot matrix and thermal
printers for vertical markets including transportation, distribution,
manufacturing and health care. Datasouth sells its products worldwide through
distributors and value-added resellers, and directly to large volume major
accounts. Since the Merger, Datasouth has operated as a wholly-owned subsidiary
of the Company.
In January 1998, Datasouth acquired all of the outstanding common stock and
membership interests of CodeWriter Industries, Inc. and its affiliate, CW
Technologies L.L.C. (collectively referred to as "CodeWriter). CodeWriter, which
was immediately merged into Datasouth, manufactures and sells thermal barcode
label printers used in industrial applications.
The Company, through Datasouth, owns approximately 17.0% of the class A
common stock ("Class A Common Stock") of Gray Communications Systems, Inc.
("Gray"), representing 27.6% of the voting interest in Gray, as of December 31,
1997. The Company also owns shares of series A and series B preferred stock of
Gray and warrants to purchase additional Gray Class A Common Stock. Parties
affiliated with the Company, including officers and directors of the Company and
companies of which they are principal shareholders and/or executive officers,
owned an additional 12.7% of Gray's outstanding Class A Common Stock as of
December 31, 1997, representing an additional 21.0% voting interest in Gray.
Gray is a communications company located in Albany, Georgia which currently
operates: (i) three NBC-affiliated television stations - WALB-TV in Albany,
Georgia; WJHG-TV in Panama City, Florida; WITN-TV, in the
Greenville-Washington-New Bern, North Carolina market, which was acquired during
1997; (ii) five CBS-affiliated television stations - WCTV-TV in Tallahassee,
Florida; WVLT-TV in Knoxville, Tennessee; WKYT-TV in Lexington, Kentucky;
WYMT-TV in Hazard, Kentucky; and WRDW-TV in Augusta, Georgia; (iii) three daily
newspapers, The Albany Herald in Albany, Georgia; The Rockdale Citizen in
Conyers, Georgia; and The Gwinnett Daily Post in Lawrenceville, Georgia; (iv)
two advertising weekly shoppers in Southwest Georgia and North Florida; (v)
Lynqx Communications, a satellite transmission and production services business,
which includes GulfLink Communications, Inc. in Baton Rouge, Louisiana, acquired
during 1997; and (vi) PortaPhone Paging, a communications and paging business in
the Southeast. Gray has also executed a definitive agreement to purchase all of
the outstanding common stock of Busse Broadcasting Corporation, the owner and
operator of KOLN-TV, a CBS affiliate in the Lincoln-Hastings-Kearney, Nebraska
market; its satellite station, KGIN-TV, a CBS affiliate in Grand Island,
Nebraska; and WEAU-TV, an NBC affiliate in the Eau Claire-La Crosse, Wisconsin
market. The acquisition is pending FCC approval. Gray reported revenue of $103.5
million in 1997 and had total assets of $345.0 million as of December 31, 1997.
J. Mack Robinson, the Company's Chairman of the Board, Robert S. Prather, Jr.,
the Company's President, chief executive officer and a director, and Hilton H.
Howell, Jr., the Company's Vice President, Secretary and a director, are members
of Gray's Board of Directors. Mr. Robinson is President and the chief executive
officer of Gray, and Mr. Prather is Executive Vice President - Acquisitions of
Gray. Frederick J. Erickson, the Company's Vice President - Finance and chief
financial officer, is the interim chief financial officer of Gray.
3
The Company owns 51.5% of the outstanding common stock of Capital Sports
Properties, Inc. ("CSP"). CSP's assets consist of all of the outstanding 8%
cumulative preferred stock of Host Communications, Inc. ("HCI") and
approximately 49.0% of HCI's outstanding common stock. Since 1995, the Company
has also acquired HCI common stock in a series of transactions, resulting in
direct ownership of approximately 5.0% of HCI's outstanding common stock as of
December 31, 1997. When combined with the Company's pro rata ownership of HCI
common stock through CSP, the Company has an aggregate ownership of 30.2% of HCI
common stock as of December 31, 1997, effectively making it HCI's largest
stockholder. HCI, based in Lexington, Kentucky, provides multimedia, promotional
marketing and event management services to universities, athletic conferences
and associations, the most prominent of which is the National Collegiate
Athletic Association ("NCAA (R)"). HCI's total revenue for its most
recently completed fiscal year ended June 30, 1997 was $40.0 million and
total assets were $25.7 million as of such date.
In 1995, the Company purchased, for $650,000, convertible preferred stock
of Universal Sports America, Inc. ("USA"), representing 13.3% of USA's
outstanding preferred stock. The preferred stock owned by the Company is
convertible into USA common stock, representing approximately 3% of USA's
outstanding common stock after giving effect to such conversion. USA offers
corporate sponsorships, advertising and other promotional opportunities
involving college athletics and participatory sporting events, such as the
Hoop-It-Up(TM) 3-on-3 basketball tournaments. HCI owns approximately 33.8%
of USA's outstanding common stock. Mr. Prather is a director of HCI, CSP and
USA.
In November 1997, the Company entered into an Investment Purchase Agreement
with Rawlings Sporting Goods Company, Inc. ("Rawlings"). Pursuant to this
agreement, the Company acquired warrants to purchase 925,804 shares of Rawlings'
common stock, and has the right, under certain circumstances, to purchase
additional warrants. The warrants have a four year term and an exercise price of
$12.00 per share, but are exercisable only if Rawlings' common stock closes at
or above $16.50 for 20 consecutive trading days during the four year term. In
addition, under the terms of the agreement, the Company purchased 10.4% of the
outstanding shares of Rawlings' common stock in the open market from November
1997 through January 1998, of which, 5.0% was acquired through December 31,
1997. Simultaneously with the execution of the Investment Purchase Agreement,
Rawlings and HCI entered into a five year strategic marketing alliance, under
which HCI and Rawlings will jointly market and sell Rawlings' products primarily
through corporate promotions, local events and international programs.
Rawlings, headquartered near St. Louis, Missouri is a leading supplier of
team sports equipment in North America, operating eight manufacturing facilities
throughout the United States, Canada and Latin America, as well as distribution
centers in the United States and Canada. Rawlings' total revenue for its most
recently completed fiscal year ended August 31, 1997 was $147.6 million and
total assets were $101.3 million as of such date.
As of December 31, 1997, Datasouth represented 18.8% of the Company's total
assets; investments in Gray represented 56.9%; investments in HCI, CSP and USA,
collectively represented 15.7%; and investments in Rawlings represented 7.6%.
Principal Products and Markets
The Company, through Datasouth, designs, manufactures and markets
heavy-duty dot matrix and thermal printers for industrial applications,
generally selling under the "Datasouth" name. It has historically targeted the
heavy-duty, multipart forms segment of the serial matrix impact printer market
in vertical markets such as transportation/travel, healthcare and
manufacturing/distribution, but has also entered the industrial thermal printer
market through the development of a new Automated Ticket / Boarding Pass version
2 ("ATB2") printer for the travel industry, as well as the thermal barcode label
printer market, through its line of portable and desktop printers, some of which
were added as a result of the acquisition of Codewriter in January 1998. The
printer business is not seasonal to any significant degree.
4
The Company'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'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. These printers are used primarily for
forms such as invoices, purchase orders, bills of lading, customs documents,
insurance documents, travel documents and patient admission forms. Datasouth
currently manufactures two dot matrix product families: Documax and the XL line.
A third line, Performax, was discontinued in 1997. Documax, a heavy-duty dot
matrix printer designed to provide maximum forms printing capabilities in a
minimum amount of space, 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 offers a dual-tractor feature
which allows the operator to switch automatically from one form to another. The
original Documax versions print at speeds up to 333 cps and generate bar codes,
OCR and industrial graphics as well. In 1996, the Company began shipping a 600
cps version of Documax. "Documax" is a registered trademark of Datasouth. The XL
line is a family of medium speed wide carriage serial impact dot matrix printers
which operate at speeds ranging from 300 to 400 cps.
The Company also has provided a line of portable and desktop thermal
printers since 1994, with the introduction of the 4-inch wide portable
"FreeLiner", and added a desktop version of the printer, the "FreeLiner DT" in
1995. The Company has filed a trademark application for "FreeLiner". In 1996,
the Company began shipments of the "WinLiner," its first internally developed
and manufactured thermal printer, a portable 2-inch wide printer targeted at
label and receipt applications which also take advantage of "liner-free" label
adaptations. "Liner-free" labels has no silicone coated liner, offering 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. In January
1998, Datasouth acquired CodeWriter, which designs and manufactures a line of
direct thermal and thermal transfer desktop and portable bar code label
printers. CodeWriter's product line includes the new 4500 Series of 4.25" print
width desktop thermal / thermal transfer barcode printers, and a 4.1" print
width portable thermal / thermal transfer barcode printer. Datasouth will
continue to market CodeWriter's products under the "CodeWriter" name, which is a
registered trademark of the Company.
The Company was awarded a contract by The SABRE Group in February 1997 to
develop and manufacture a new ATB2 airline ticket printer. In December 1997, the
Company began shipping to The SABRE Group the resulting product, "Journey", for
which the Company has filed a trademark application. This printer, which uses
thermal printing technology, was designed to be small, easy to use, and to have
a simpler design than currently available airline ticket printers, with features
such as a jam free paper path and a simpler method to load ticket stock.
Additional information concerning the Company's airline ticket printer is set
forth under the caption "Sales and Distribution" below in this Item 1.
Competition
Competition in the computer printer industry is generally quite intense and
some of the Company's competitors have greater financial and other resources. As
the printer market continues to segment by speed, application and technology,
the Company 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 its
thermal printer products to be competitive in the portable and desktop thermal
printer markets, and in the airline ticket printer market. The Company believes
that its products do not generally compete in "mass market" dot matrix and
thermal printer applications. The Company's products are intended for use in
industrial markets often avoided by large Japanese and domestic printer
manufacturers, which may not deem these markets large enough to pursue.
5
Manufacturing and Quality Control
The Company believes that its printer manufacturing capabilities provide a
strategic advantage over most competitors. Focusing on customer response time
and high quality customer service, the Company's goal is to provide quick,
on-time product delivery while maintaining low finished goods inventories.
Product configurations are scheduled daily based on customer orders. Raw
materials and manufactured assemblies, including PC boards assembled by the
Company, are transferred to work-in-process as materials and assemblies are
consumed in the manufacturing process, 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 the Company to deliver its products more quickly
than many of its competitors.
The Company assembles products in accordance with the Company's designs and
specifications. The Company utilizes components and sub-assemblies procured from
outside suppliers, some of which produce parts from tooling designed and owned
by the Company. Most of the materials, components and subassemblies are
available from a variety of sources and are generally not subject to significant
price volatility. Although the Company 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.
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. The Company utilizes automated component
insertion, wave soldering and automated test equipment to reduce labor costs
while maintaining high quality. The Company verifies the quality of its products
by thorough testing at various stages of the assembly process.
Warranty and Service
The Company warrants its printers against defects in workmanship, generally
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. The Company has a technical support staff
accessible to all customers through a toll-free telephone number, as well as
through the Company's Internet Website.
The Company's warranty experience over the past three years has ranged from
approximately .3% to .6% of revenue. Total warranty expense for 1997, 1996 and
1995 was approximately $124,000, $104,000, and $88,000, respectively.
Sales and Distribution
Printers, parts, accessories and consumables are sold 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 1997, finished product sales to distributors
represented 28% of total revenue, and finished product sales to major accounts
represented 48%, compared to 31% and 46% in 1996, respectively.
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 the Company's products. The distributors sell principally to large
industrial companies, hospitals, banks, government agencies, educational
institutions, airlines, rental car companies and travel agencies.
Since 1993, the Company has been supplying Documax printers to The SABRE
Group under a five year contract. The contract is, however, cancelable at any
time by The SABRE Group. Moreover, The SABRE Group is under no contractual
obligation to purchase any minimum number of printers from Datasouth during the
term of the contract. Sales to The
6
SABRE Group were approximately $7,200,000 in 1997, $7,200,000 in 1996 and
$7,800,000 in 1995, representing 33%, 30% and 30% of total sales of Datasouth,
respectively.
As mentioned above under "Principal Products and Markets," in 1997 the
Company completed the development of a new ATB2 airline ticket printer,
"Journey". As the travel market embraces a number of new technologies, such as
Internet reservation booking and electronic ticketing, the Company believes that
travel agencies will require more cost-effective equipment. Priced at less than
$2,000, Journey will provide an attractively priced alternative to traditional
ATB2 printers and will be affordable for even small travel agencies.
Additionally, the Company intends to promote the use of this printer for
satellite ticket printing applications in remote locations, such as corporate
offices and hotels/motels. The SABRE Group has the exclusive right to Journey
through June 1998, after which time the Company will be entitled to sell the
product to other Computer Reservation Systems ("CRSs"), airlines and selected
distributors.
The Company intends to continue aggressively pursuing new major account
business in 1998, while maintaining and strengthening relationships with key
distributors.
Backlog
The Company sells its products to its customers pursuant to cancelable
purchase orders and, accordingly, does not require firm quantity commitments.
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, the Company'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, 1997, the Company had unfilled cancelable purchase
orders with an aggregate selling price of approximately $1,724,000, compared
with $1,821,000 and $755,000 as of December 31, 1996 and 1995, respectively.
Advertising and Promotion
The Company participates in numerous regional, national and international
trade shows and actively promotes its products through direct mail,
telemarketing and co-operative advertising arrangements with distributors. It
also advertises its products in publications serving the industrial markets
targeted by its products. Advertising costs were approximately $130,000,
$227,000 and $198,000 in 1997, 1996, and 1995, respectively.
Research and Development
The Company employs over 20 engineers, technicians and support personnel to
engage in basic and applied research. In 1997, the Company's engineering team
developed and released the new ATB2 airline ticket printer, "Journey". In 1998,
the Company's primary product development focus will be on complementary
products to Journey, and additional products to broaden the "CodeWriter" line
acquired in January 1998. In addition, engineering efforts are focused on
enhancement of existing products to expand market penetration and customization
of existing products to meet special printing applications for specific customer
needs. As opportunities arise, new markets and technologies will also be
explored in conjunction with strategic business partners, where the Company
believes it can add value through design, manufacturing or distribution
capabilities.
Total research and development expense was $2,417,000, $1,568,000 and
$1,872,000 in 1997, 1996 and 1995, respectively.
7
Patents, Trademarks and Related Contracts
The Company's business is not dependent upon the existence of any patents,
trademarks or related contracts.
Employees
As of December 31, 1997, the Company had 123 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 its employees is good.
Export Sales
Sales to non-domestic customers, located principally in Western Europe and
South America, totaled $2,497,000 in 1997, $2,954,000 in 1996, and $2,361,000 in
1995.
Item 2. Properties
The Company'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, the Company's Chairman of the Board.
The lease expires in December 2002, subject to several renewal options on the
part of the Company.
Datasouth's administrative offices and operations are located in Charlotte,
North Carolina in approximately 74,000 square feet of fully-utilized leased
facilities. Although present facilities are suitable and adequate for its
current needs, the Company owns approximately eight acres of land contiguous to
its Charlotte facility for future expansion, if necessary. Datasouth's main
administrative and manufacturing facility is leased through December 1998 having
a three year renewal option, and additional office and warehousing space is
leased through December 2000. The Company expects that the lease expiring in
1998 will be renewed on terms similar to the existing lease. Datasouth acquired
CodeWriter in January 1998. CodeWriter currently operates in a 19,584 square
foot fully-utilized facility in Vista, California leased from CodeWriter's
former shareholders on a month-to-month basis. Upon moving CodeWriter's printer
manufacturing operation to Charlotte, Datasouth will relocate its remaining west
coast operation to smaller space in the Vista, California area.
Item 3. Legal Proceedings
The Company is not currently a party to any legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
None
8
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Market Information
The Company's common stock, par value $.01 per share (the "Common Stock"),
trades on The Nasdaq Stock Market under the symbol "BULL." The following table
sets forth for each period indicated the high and low sale prices for the Common
Stock as reported by The Nasdaq Stock Market. Such prices reflect interdealer
prices without adjustments for retail markups, markdowns or commissions.
High Low
---- ---
1996
First Quarter 2.94 2.44
Second Quarter 3.44 2.44
Third Quarter 2.88 2.13
Fourth Quarter 2.81 2.06
1997
First Quarter 3.06 2.00
Second Quarter 2.75 2.13
Third Quarter 2.84 2.25
Fourth Quarter 3.84 2.56
Holders
As of March 6, 1998, there were 2,798 holders of record of Common Stock.
Dividends
It is the present policy of the Company's Board of Directors to retain all
earnings to finance the development and growth of the Company's business. The
Company has never declared or paid a cash dividend on its Common Stock. The
Company's future dividend policy will depend upon its earnings, capital
requirements, financial condition and other relevant factors.
Item 6. Selected Financial Data
The information required by this item is set forth under the caption
"Selected Financial Data" in the Company's 1997 Annual Report, which is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this item is set forth under the caption
"Management's Discussion and Analysis" in the Company's 1997 Annual Report,
which is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
Financial statements of the Company required by this item are set forth in
the Company's 1997 Annual Report, and the supplementary data required by this
item is set forth under the caption "Selected Quarterly Financial Data
(Unaudited)" in the Company's 1997 Annual Report, which is incorporated herein
by reference. Financial statements and the
9
financial statement schedule of Gray as of December 31, 1997 and 1996 and for
the three years in the period ended December 31, 1997 are included on pages F-1
through F-32 of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable
PART III
Item 10. Directors and Executive Officers of the Registrant
Except for the information stated below, the information required by this
item is set forth under the caption "Election of Directors - General" in the
Company's Proxy Statement to be dated April 3, 1998, which is incorporated
herein by reference.
In addition to Messrs. Prather, Howell and Robinson, listed in the
Company's Proxy Statement to be dated April 3, 1998, which is incorporated
herein by reference, the Company has the following executive officer:
FREDERICK J. ERICKSON, 39, has been Vice President - Finance, Treasurer and
Chief Financial Officer of the Company since 1994; Executive Vice President -
Finance & Administration of Datasouth since March 1997; Vice President - Finance
& Administration of Datasouth from 1993 to March 1997; Chief Financial Officer,
Treasurer and Secretary of Datasouth since 1993; and interim Chief Financial
Officer of Gray since March 1998. He was employed by Coopers & Lybrand from 1981
to 1993 as a certified public accountant.
Item 11. Executive Compensation
The information required by this item is set forth beginning under the
caption "Executive Compensation" in the Company's Proxy Statement to be dated
April 3, 1998, which is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is set forth under the caption
"Election of Directors General" in the Company's Proxy Statement to be dated
April 3, 1998, which is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information required by this item is set forth under the caption
"Certain Relationships and Related Transactions" in the Company's Proxy
Statement to be dated April 3, 1998, which is incorporated herein by reference.
10
PART IV
Item 14. Exhibits, Financial Statement Schedules 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 the Company and
Report of Independent Auditors are incorporated by reference in Item 8
from the Company's 1997 Annual Report, set forth as Exhibit 13 to this
report:
Report of Independent Auditors
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Operations for
the years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Supplementary Data, Selected Quarterly Financial Data (Unaudited)
The following consolidated financial statements of Gray Communications
Systems, Inc. and Report of Independent Auditors are included on pages
F-1 through F-32 of this report:
Report of Independent Auditors
Consolidated Balance Sheets as of December 31, 1997
and 1996
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Report of Independent Auditors on Financial Statement Schedule
Schedule II - Valuation and qualifying accounts
Independent Auditors' Report on the financial statements of Capital
Sports Properties, Inc. as of June 30, 1996 and December 31, 1995, and
the six months ended June 30, 1996 and the year ended December 31,
1995 on page F-33 of this report
Independent Auditors' Report on the consolidated financial statements
of Host Communications, Inc. as of and for the year ended June 30,
1996 and 1995 on page F-34 of this report
(2) The following financial statement schedule of Bull Run Corporation and
subsidiaries is included in Item 14(d):
Schedule II - Valuation and qualifying accounts
The following financial statement schedule of Gray Communications
Systems, Inc. and subsidiaries is included in Item 14(d):
Schedule II - Valuation and qualifying accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable and
therefore have been omitted.
11
(b) Reports on Form 8-K
The Company filed a Form 8-K Current Report dated November 21, 1997
regarding its announcement relating to the execution of an Investment
Purchase Agreement between the Company and Rawlings Sporting Goods Company,
Inc.
(c) Exhibits
Exhibit
Numbers Description
------- -----------
(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. (f)
(10.2) Employee Agreement - Frederick J. Erickson (d)
(10.3) 1994 Long Term Incentive Plan (b)
(10.4) Non-Employee Directors' 1994 Stock Option Plan (b)
(10.5) 1987 Non-Qualified Stock Option Plan (c)
(10.6) Datasouth Key Employee Bonus and Employee Incentive Bonus
Plan (e)
(10.7) Lease Agreement between Delta Life Insurance Company and
Bull Run Corporation dated as of January 1, 1993 (a)
(10.8) Lease Agreements between Hans L. Lengers and Datasouth
Computer Corporation dated November 27, 1981 (d)
(10.9) $10,000,000 Amended and Restated Credit Agreement dated as
of February 20, 1998 between Datasouth Computer Corporation
and Wachovia Bank, N.A. (h)
(10.10) Gray Communications Systems, Inc. Warrant dated September
24, 1996 (487,500 shares) (f)
(10.11) Gray Communications Systems, Inc. Warrant dated September
24, 1996 (250,000 shares) (f)
(10.12) Investment Purchase Agreement dated November 21, 1997 by and
between Rawlings Sporting Goods Company, Inc. and Bull Run
Corporation (g)
(10.13) Common Stock Purchase Warrant dated November 21, 1997 issued
by Rawlings Sporting Goods Company, Inc. to Bull Run
Corporation (g)
(10.14) Standstill Agreement dated November 21, 1997 by and between
Rawlings Sporting Goods Company, Inc. and Bull Run
Corporation (g)
(10.15) Registration Rights Agreement dated November 21, 1997 by and
between Rawlings Sporting Goods Company, Inc. and Bull Run
Corporation (g)
(13) 1997 Annual Report to Shareholders (h)
(21) List of Subsidiaries of Registrant (e)
(23.1) Consent of Ernst & Young LLP - Bull Run Corporation (h)
(23.2) Consent of Ernst & Young LLP - Gray Communications Systems,
Inc. (h)
12
Exhibit
Numbers Description
------- -----------
(23.3) Consent of KPMG Peat Marwick LLP - Capital Sports
Properties, Inc. (h)
(23.4) Consent of KPMG Peat Marwick LLP - Host Communications, Inc.
(h)
(27.1) Financial Data Schedule - 1997 (h)
(27.2) Financial Data Schedule - 1996 Restated (h)
(a) Filed as an exhibit to Form 10-KSB Annual Report for the year ended
December 31, 1992 and incorporated by reference herein
(b) Filed as an exhibit to Registration Statement on Form S-4
(Registration No. 33-81816), effective November 3, 1994 and
incorporated by reference herein
(c) Filed as an exhibit to Form 10-K Annual Report for the year ended
December 31, 1988 and incorporated by reference herein
(d) Filed as an exhibit to Form 10-KSB Annual Report for the year ended
December 31, 1994 and incorporated by reference herein
(e) Filed as an exhibit to Form 10-KSB Annual Report for the year ended
December 31, 1995 and incorporated by reference herein
(f) Filed as an exhibit to Form 10-KSB Annual Report for the year ended
December 31, 1996 and incorporated by reference herein
(g) Filed as an exhibit to Form 8-K Current Report dated as of November
21, 1997 and incorporated by reference herein
(h) Filed herewith
(d) Financial Statement Schedules
The response to this section is submitted as part of Item 14(a)(1) and Item
14(a)(2).
13
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 27, 1998.
BULL RUN CORPORATION
BY: /s/ ROBERT S. PRATHER, JR.
-------------------------------------
Robert S. Prather, Jr.
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ ROBERT S. PRATHER, JR. President, Chief March 27, 1998
- -------------------------------------- Executive Officer and
Robert S. Prather, Jr. Director
(Principal Executive
Officer)
/s/ GERALD N. AGRANOFF Director March 27, 1998
- --------------------------------------
Gerald N. Agranoff
/s/ JAMES W. BUSBY Director March 27, 1998
- --------------------------------------
James W. Busby
/s/ FREDERICK J. ERICKSON Vice President - Finance March 27, 1998
- -------------------------------------- and Treasurer
Frederick J. Erickson (Principal Accounting and
Financial Officer)
/s/ HILTON H. HOWELL, JR. Director March 27, 1998
- --------------------------------------
Hilton H. Howell, Jr.
/s/ J. MACK ROBINSON Chairman of the Board March 27, 1998
- --------------------------------------
J. Mack Robinson
14
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of Bull Run
Corporation as of December 31, 1997 and 1996, and for each of the three years in
the period ended December 31, 1997, and have issued our report thereon dated
February 10, 1998 (except for Note 5, for which the date is March 20, 1998). Our
audits also included the financial statement schedule of Bull Run Corporation
listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
February 10, 1998
15
BULL RUN CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions
-------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description Of Period Expenses Accounts Deductions* Period
- ----------- --------- ---------- ---------- ----------- ----------
Year ended December 31, 1997
Allowance for doubtful accounts $ 45,000 $ 27,000 $ 0 $ 17,000 $ 55,000
Year ended December 31, 1996
Allowance for doubtful accounts $ 50,000 $ 1,000 $ 0 $ 6,000 $ 45,000
Year ended December 31, 1995
Allowance for doubtful accounts $ 60,000 $ 58,000 $ 0 $ 68,000 $ 50,000
* "Deductions" represent write-offs of amounts not considered collectible
16