UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended May 31, 2003 | ||
| OR | ||
| o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from ____________ to ____________. | ||
Commission file number 0-9385
Bull Run Corporation
(Exact name of registrant as specified in its charter)
| Georgia (State of incorporation or organization) |
58-2458679 (I.R.S. Employer Identification No.) |
4370 Peachtree Road, N.E., Atlanta, GA 30319
(Address of principal executive offices) (Zip Code)
(404) 266-8333
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required 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. Yes x No o
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 4,025,429 shares of Common Stock, par value $.01 per share, were outstanding as of June 30, 2003.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BULL RUN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in thousands)
| May 31, | August 31, | |||||||||
| 2003 | 2002 | |||||||||
ASSETS |
||||||||||
Current assets: |
||||||||||
Cash and cash equivalents |
$ | 387 | $ | 397 | ||||||
Accounts receivable, net of allowance of $810 and $514 as of
May 31, 2003 and August 31, 2002, respectively |
9,750 | 13,502 | ||||||||
Inventories |
494 | 1,005 | ||||||||
Prepaid costs and expenses |
2,198 | 1,559 | ||||||||
Net current assets of discontinued segment |
106 | |||||||||
Total current assets |
12,829 | 16,569 | ||||||||
Property and equipment, net |
4,476 | 5,171 | ||||||||
Investment in affiliated companies |
18,024 | 25,013 | ||||||||
Goodwill |
57,862 | 57,862 | ||||||||
Customer base and trademarks |
16,362 | 16,999 | ||||||||
Deferred income taxes |
20,302 | 21,381 | ||||||||
Other assets |
3,535 | 8,818 | ||||||||
| $ | 133,390 | $ | 151,813 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||
Current liabilities: |
||||||||||
Current portion of long-term debt |
$ | 84,522 | $ | 19,850 | ||||||
Accounts payable |
6,764 | 6,558 | ||||||||
Deferred revenue |
6,174 | 13,616 | ||||||||
Accrued and other liabilities |
13,496 | 8,797 | ||||||||
Total current liabilities |
110,956 | 48,821 | ||||||||
Long-term debt |
16,709 | 93,091 | ||||||||
Deferred income |
627 | 1,284 | ||||||||
Total liabilities |
128,292 | 143,196 | ||||||||
Commitments and contingencies |
||||||||||
Redeemable Series B convertible preferred stock, $.01 par value (authorized
100 shares; issued and outstanding 5.4 shares as of August 31, 2002) |
5,400 | |||||||||
Stockholders’ equity: |
||||||||||
Series C convertible preferred stock, $.01 par value (authorized 100 shares;
issued and outstanding 4.1 shares as of August 31, 2002) |
4,097 | |||||||||
Series D convertible preferred stock, $.01 par value (authorized 100 shares;
issued and outstanding 14.3 shares with $14,280 aggregate liquidation
value as of May 31, 2003) |
14,280 | |||||||||
Common stock, $.01 par value (authorized 25,000 shares; issued
4,018 and 3,855 shares as of May 31, 2003 and August 31, 2002,
respectively) |
40 | 39 | ||||||||
Additional paid-in capital |
79,474 | 79,447 | ||||||||
Treasury stock, at cost (54 shares as of August 31, 2002) |
(1,393 | ) | ||||||||
Other comprehensive accumulated loss |
(2,050 | ) | ||||||||
Retained earnings (accumulated deficit) |
(88,696 | ) | (76,923 | ) | ||||||
Total stockholders’ equity |
5,098 | 3,217 | ||||||||
| $ | 133,390 | $ | 151,813 | |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
BULL RUN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in thousands, except per share data)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| May 31, | May 31, | ||||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||||
Revenue from services rendered |
$ | 18,154 | $ | 32,416 | $ | 66,889 | $ | 92,163 | |||||||||||
Operating costs and expenses: |
|||||||||||||||||||
Direct operating costs for services rendered |
11,873 | 29,404 | 42,718 | 75,954 | |||||||||||||||
Selling, general and administrative |
6,715 | 7,770 | 19,449 | 23,392 | |||||||||||||||
Amortization of acquisition intangibles |
304 | 311 | 912 | 968 | |||||||||||||||
Total operating costs and expenses |
18,892 | 37,485 | 63,079 | 100,314 | |||||||||||||||
Income (loss) from operations |
(738 | ) | (5,069 | ) | 3,810 | (8,151 | ) | ||||||||||||
Other income (expense): |
|||||||||||||||||||
Equity in earnings (losses) of affiliated companies |
40 | (200 | ) | (153 | ) | (2,034 | ) | ||||||||||||
Net change in value of certain derivative instruments |
155 | (446 | ) | (1,708 | ) | (3,305 | ) | ||||||||||||
Loss on issuance of shares by affiliate |
(2,339 | ) | |||||||||||||||||
Gain (loss) on investment dispositions and
investment valuation adjustments |
(1,650 | ) | (2,572 | ) | (2,627 | ) | 492 | ||||||||||||
Interest expense |
(1,882 | ) | (2,267 | ) | (6,213 | ) | (6,963 | ) | |||||||||||
Debt issue cost amortization |
(585 | ) | (648 | ) | (1,739 | ) | (2,190 | ) | |||||||||||
Other income, net |
1 | 51 | 24 | 258 | |||||||||||||||
Loss before income taxes and cumulative
effect adjustment |
(4,659 | ) | (11,151 | ) | (10,945 | ) | (21,893 | ) | |||||||||||
Income tax benefit |
3,755 | 7,749 | |||||||||||||||||
Loss before cumulative effect adjustment |
(4,659 | ) | (7,396 | ) | (10,945 | ) | (14,144 | ) | |||||||||||
Proportionate share of affiliate’s cumulative effect
of accounting change |
(2,620 | ) | |||||||||||||||||
Net loss |
(4,659 | ) | (7,396 | ) | (10,945 | ) | (16,764 | ) | |||||||||||
Preferred dividends |
(288 | ) | (121 | ) | (828 | ) | (309 | ) | |||||||||||
Net loss available to common stockholders |
$ | (4,947 | ) | $ | (7,517 | ) | $ | (11,773 | ) | $ | (17,073 | ) | |||||||
Loss per share available to common stockholders,
basic and diluted: |
|||||||||||||||||||
Loss available to common stockholders before
cumulative effect adjustment |
$ | (1.25 | ) | $ | (2.03 | ) | $ | (3.03 | ) | $ | (3.96 | ) | |||||||
Cumulative effect of accounting change |
(0.72 | ) | |||||||||||||||||
Net loss available to common stockholders |
$ | (1.25 | ) | $ | (2.03 | ) | $ | (3.03 | ) | $ | (4.68 | ) | |||||||
Weighted average number of common shares
outstanding, basic and diluted |
3,971 | 3,697 | 3,890 | 3,648 | |||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
BULL RUN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE
PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (Unaudited)
(Amounts in thousands)
| Redeemable | ||||||||||||||||||||
| Series B | Series C | Series D | Common Stock | |||||||||||||||||
| Preferred | Preferred | Preferred | ||||||||||||||||||
| Stock | Stock | Stock | Shares | Amount | ||||||||||||||||
As of September 1, 2002 |
$ | 5,400 | $ | 4,097 | $ | 3,855 | $ | 39 | ||||||||||||
Issuance of Series C preferred stock |
3,000 | |||||||||||||||||||
Conversion of Series B and Series C preferred
stock and debt to Series D preferred stock |
(5,400 | ) | (7,097 | ) | 14,280 | |||||||||||||||
Issuance of common stock |
217 | 2 | ||||||||||||||||||
Cancellation of treasury stock |
(54 | ) | (1 | ) | ||||||||||||||||
As of May 31, 2003 |
$ | — | $ | — | $ | 14,280 | 4,018 | $ | 40 | |||||||||||
| Other | Retained | |||||||||||||||||||
| Additional | Comprehensive | Earnings | Total | |||||||||||||||||
| Paid-In | Treasury | Accumulated | (Accumulated | Stockholders' | ||||||||||||||||
| Capital | Stock | Loss | Deficit) | Equity | ||||||||||||||||
As of September 1, 2002 |
$ | 79,447 | $ | (1,393 | ) | $ | (2,050 | ) | $ | (76,923 | ) | $ | 3,217 | |||||||
Issuance of Series C preferred stock |
3,000 | |||||||||||||||||||
Conversion of Series B and Series C preferred
stock and debt to Series D preferred stock |
7,183 | |||||||||||||||||||
Issuance of common stock |
1,419 | 1,421 | ||||||||||||||||||
Other comprehensive income (loss) |
2,050 | 2,050 | ||||||||||||||||||
Preferred dividends |
(828 | ) | (828 | ) | ||||||||||||||||
Cancellation of treasury stock |
(1,392 | ) | 1,393 | — | ||||||||||||||||
Net loss |
(10,945 | ) | (10,945 | ) | ||||||||||||||||
As of May 31, 2003 |
$ | 79,474 | $ | — | $ | — | $ | (88,696 | ) | $ | 5,098 | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
BULL RUN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
| Nine Months Ended | ||||||||||
| May 31, | ||||||||||
| 2003 | 2002 | |||||||||
Cash flows from operating activities: |
||||||||||
Net loss |
$ | (10,945 | ) | $ | (16,765 | ) | ||||
Adjustments to reconcile net loss to net cash used in operations: |
||||||||||
Cumulative effect of accounting change |
2,620 | |||||||||
Provision for bad debts |
416 | 248 | ||||||||
Depreciation and amortization |
3,563 | 4,337 | ||||||||
Equity in (earnings) losses of affiliated companies |
153 | 2,034 | ||||||||
Dividends received from affiliated company |
122 | 122 | ||||||||
Gain (loss) on dispositions of investments and valuation adjustments |
2,682 | (492 | ) | |||||||
Net change in value of certain derivative instruments |
1,708 | 3,305 | ||||||||
Loss on issuance of shares by affiliate |
2,339 | |||||||||
Deferred income taxes |
(7,749 | ) | ||||||||
Change in operating assets and liabilities: |
||||||||||
Accounts receivable |
800 | 14,901 | ||||||||
Inventories |
511 | (12 | ) | |||||||
Prepaid costs and expenses |
(482 | ) | 1,335 | |||||||
Accounts payable and accrued expenses |
(3,707 | ) | (5,727 | ) | ||||||
Other long-term liabilities |
(572 | ) | (1,159 | ) | ||||||
Net cash used in continuing operations |
(3,412 | ) | (3,002 | ) | ||||||
Net cash provided by (used in) discontinued operations |
106 | (168 | ) | |||||||
Net cash used in operating activities |
(3,306 | ) | (3,170 | ) | ||||||
Cash flows from investing activities: |
||||||||||
Capital expenditures |
(216 | ) | (342 | ) | ||||||
Proceeds on sale of investments |
11,885 | 16,803 | ||||||||
Investment in affiliated companies |
(455 | ) | ||||||||
Decrease (increase) in other assets |
(551 | ) | (106 | ) | ||||||
Net cash provided by continuing operation investing activities |
11,118 | 15,900 | ||||||||
Net cash used in discontinued operation investing activities |
(5 | ) | (153 | ) | ||||||
Net cash provided by investing activities |
11,113 | 15,747 | ||||||||
Cash flows from financing activities: |
||||||||||
Borrowings from revolving lines of credit |
175 | 20,750 | ||||||||
Repayments on revolving lines of credit |
(15,350 | ) | ||||||||
Repayments on long-term debt |
(10,000 | ) | (19,743 | ) | ||||||
Debt issue costs |
(992 | ) | (220 | ) | ||||||
Issuance of preferred stock |
3,000 | 2,400 | ||||||||
Issuance of common stock |
350 | |||||||||
Net cash used in financing activities |
(7,817 | ) | (11,813 | ) | ||||||
Net increase (decrease) in cash and cash equivalents |
(10 | ) | 764 | |||||||
Cash and cash equivalents, beginning of period |
397 | |||||||||