SBJ/May 28 - June 3, 2001/This Weeks Issue

Host: NCAA deal on track

Financial problems at Host Communications parent Bull Run shouldn't imperil Host's pending deal with CBS Sports to become the NCAA's sponsorship sales agency for another 11 years, said Jim Host, CEO of Host Communications.

Last week, Bull Run Corp. said that after uncovering accounting irregularities at a subsidiary, its loss for the nine-month period ended March 31, 2000, ballooned more than $12.5 million from what had been previously reported. As a result, Bull Run is in violation of terms of more than $100 million of loans.

The findings come as the NCAA is set to review the Host deal. CBS bought all marketing and TV rights from the NCAA in 1999. Host is believed to have offered up to $600 million for sponsorship sales rights.

Jim Host, who founded Host Communications and sold the collegiate sports marketer to Bull Run in 1999, said the accounting errors and fallout would not affect the CBS transaction.

"Based on what we know, it will have no impact whatsoever," he said. "This is an issue of the past. It doesn't impact our future cash flow or our future earnings."

Because of the accounting problems, Bull Run restated the amount of money it lost in the nine months ended March 31, 2000, from $258,000 to $12.8 million. The company has yet to restate the earnings for the three quarters from April 1, 2000, to Dec 31, 2000. The company lost $420,000 in the first three months of 2001.

The problems arose from how expenses were accounted for in the Streetball unit, which organized sporting events such as the NBA Hoop-It-Up 3-on-3 basketball tournament, said Bull Run CFO Fred Erickson, who discovered the problem.

The Streetball unit was part of Universal Sports America, which Bull Run bought in December 1999. Erickson said the accounting problems occurred before the acquisition.

Bull Run paid $117 million for Universal and Host, which also owned 34 percent of Universal. Jim Host and Bull Run chief executive Bob Prather sat on Universal's board before it was acquired and when the accounting problems occurred. Universal and Streetball are now part of Host.

Bull Run wouldn't comment on whether there would be changes made in the acquisition price. The company has hired an outside legal adviser to examine how the Universal accounting errors occurred.

Jim Host insisted that the NCAA deal would survive. Bull Run's chairman is Mack Robinson, who owns half of Gray Communications, which owns several CBS affiliates. Robinson also increased his personal guarantee of the Bull Run bank loans from $75 million to $100 million. (Host himself has guaranteed $10 million.)

The bank group is led by Bank of America and includes First Union, Bank One and Wachovia. Robinson is a large Wachovia shareholder. Bull Run is negotiating with the group over a waiver on the loan terms and has already obtained a six-month extension of the loan through June 2002, Erickson said.

CBS wouldn't comment, and NCAA executives could not be reached for comment.

Bull Run's restated earnings
For nine months ended March 31,
2000 (in 000s)
Category
Restated
Previously
reported
Net income
($12,786)
($258)
Operating income
$1,145
$3,246
Loss per share
6 cents
2 cents
Source: Bull Run Corp.
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